nkp007

"Hedge funds take over F+F at massive profits...American voters go ballistic" Not politically palatable, but it shows the investors are at least putting some pressure on the process. Not that Congress is capable of reacting. The underlying note in this news: par is a thing of the past. The biggest holders are fighting for a MULTIPLE of par.

Fannie Mae Fixed-to-Fltg Rate Non Cum. Pfd. Series S OBB: FNMAS GO Countdown to close $8.29 Change +8.29 +Infinity Volume 450,000 Nov 7, 2013 9:20 a.m. Quotes are delayed by 20 min Previous close Day low Day high $7.98 $8.50

Preferreds have been on quite the ride lately with all the legal victories... is there any news on the Bruce B/Perry Capital litigation? No update on that yet.

I guess nothing is going on... ;D F+F both reported earnings today. Literally on the cusp of payback. One more quarter should do it, not that it matters now because that's obvious to everyone so functionally it is assumed.

Sickeningly true. It seems to compound capital, you need to do your best to avoid purchasing real estate.

Given the open terms of Fairfax's initial deal, I am surprised by how many people were confidently betting on a deal closing. Lot more than I expected. I guess that explains the anger.

Around 15%, but can't wait for $AIG $BAC $CHK to reach fair value so I can increase cash. Too many weird things going on.

Go Caaaaaaards! Freese's performance will normalize. You just wait.

My rough notes from the Zillow conference. I took scattered notes at interesting points...not all encompassing...or precise by any means Video at http://www.zillow.com/education/HousingForum/ -Bob Ryan at 115:00 -Millstein at 350:40 [Thanks to Zillow / BPC for putting on this great, free event with tons of food / drinks / good people] The first panel discussion was fantastic (especially Bob Ryan). If you watch anything, it should be this panel and the Millstein panel. Panel 1 -Probability of a vote on housing reform in Congress in the next year?...Senate Banking committee making great strides, but very unlikely. Senate and House are very far apart -Putting emphasis on private capital will eventually mean increased borrowing costs. When is a good time to increase borrowing costs? Real estate industry will say never. [Later on, Warner of Corker Warner says he estimates his plan will increase costs by 60bps, seems like a deal killer right there considering that's probably a lowball estimate] -The strength of U.S. housing is yet to occur Bob Ryan, Wells Fargo, brilliant moment. Top two comment in the conference [this and Millstein's]. Bob says, here's how you fix housing: -Let's start from the premise that there are a lot of parts of the current system that work very well. -Put 4-5% capital requirement on F+F, have regulator, not legislature, make the rules. Make guarantee explicit, get rid of government guaranteed investment portfolios, have one securitization platform (no need to have both F + F) -The essence of the crisis, across the board, was bad underwriting. The crux of success is good underwriting. -So guys, what happens in the next downturn when private capital flees? Securitization will not replace F+F demand. -The need to eliminate is a political need, not a practical need. The public in 2008 demanded something different. Today, maybe you should just change the names [because the public really wants the 30-year mortgage] -Bob Ryan, Wells Fargo: It's difficult to give mortgages without capital relief. It will be very tough if banks have to keep all the exposure to the mortgage loans we underwrite. -When you most need it, private capital will abandon you -Skin in the game will limit lenders...increase costs. -The 30-year mortgage is foundational to the American experience. It is institutionalized. Changing it has dire consequences. This is even though only 50.8% of people stay in homes after 10 years, only 26% after 20 years Senator Warner Let me take an aside here. Senator Warner means well. He really does. He saw what happened in 2008 and saw that the pendulum of risk swung too drastically on the side of the taxpayer. The taxpayer was exposed to risk that he should have never been exposed to and Warner wants to prevent that from happening again by moving pendulum back to the middle (sharing risk with private capital). Unfortunately, my opinion is that he is far outmatched. Moving materially to private capital will significantly increase expenses and the vested interests (realtors, home builders, mortgage lenders...homeowners) will annihilate his plan -Warner: lots of voices went into Corker Warner. We are interested in getting things down right. -Warner: 10% capital buffer even though 5% or 6% was all that is necessary for 2008. I'd rather err on the side of caution and have Wall Street "tranche it out" [what?]. -Warner: All-in, 40 to 60 basis points increase in interest rates because of our bill [this is the moment the Corker-Warner bill died in my mind] -5 to 10 year transition -[Throughout Warner's talk, it was obvious that he was very uncertain how much the private market would step up. He supports the concept wholeheartedly, but I think he's out of his element in terms of execution of an entirely new mortgage plan given the most important implications are unknown] -Warner: predictability once bill is put into place will attract more private capital -Warner after angry Q+A with audience: I worked in investing before. If I was the government in 2008, I would have at least demanded a 2 times return on my investment Jim Millstein -[OK boys, all this theoretical stuff is fun and all but let me tell you what is, and how we should fix it elegantly so that we capitalize on what is good and change the big things that are bad] -Everything I've heard today starts with the premise of winding down F+F -Today, F+F is 3/5 of new mortgages. -You're telling me there's a $10 trillion of appetite without a government guarantee? (half a trillion with Corker Warner plan) -Ed Demarco (director FHFA) singlehandedly kept the private mortgage insurers alive by feeding them business. All but one is non-investment grade. -F+F produce $25B in FCF. Let them RECAPITALIZE themselves with future cash flow. -"Let's take reality as we find it, not as we wish it to be" Just watch Millstein in the video. I was too focused to take many notes. My takeaways: -An interesting dynamic emerged throughout the conference. One of theory vs. reality. A lot of very smart people are trying to create a new housing system that limits the government role and hopes the private market steps in (which undoubtedly they will to some extent). However, the theory approach has a lot of unknowns that I don't think most people will be OK with given that you're talking about reforming a multi-trillion dollar market I view it akin to trying to build an airplane at cruising altitude Those rooted in hoping for a significantly different system have some thorough plans, but it all comes back to how much the private sector will step up. This is where I think all their new plans fall apart (versus just adjusting what exists) because you cannot have that as a variable. The housing industry (entrenched interests) will not accept that Forgot who said this, "Tell Congress this is what the housing market will look like in the next downturn...and they won't be reelected" https://twitter.com/crowdturtle/status/393397907711619072/photo/1 -Congress as a whole sees very little urgency to act on this at the moment considering F+F can continue to operate close to normal -The endgame is very unclear. I say, though, with a high-probability view, that we aren't going to create a new system / eliminate the existing one. There was a narrow window to do so in 2008 by putting F+F into receivership. And even then, in that time of crisis, it couldn't be done. The entrenched interests have come roaring back.

When you say newest one, do you mean "Creating and Growing Real Estate Wealth: The 4 Stages to a Lifetime of Success" from 1999? Or does he have a new book out? I just realized I didn't have one of his books, "The Real Estate Challenge: Capitalizing on Change". Has anyone read it? I just ordered it for a penny. Since this is a general RE thread, has anyone been involved in RE development? It seems to be filled with uncertainty and significant pressure to get space leased or face serious CF problems (you start from 0% occupancy!). The main benefits of developing over buying are that you get exactly what you want where you want it and it's cheaper? Does anyone know what percentage of developments fail compared to buying and managing? I just bought all three of his books. I am completely turned off by real estate given how much money my family has lost speculating in it over the years in South Florida. However, there's nothing more I'd love then buying cheap, panick-priced real estate during a future crisis. The $35 investment for the three books will probably pay off at some point in my life.

Live-stream: The full-day forum will be live-streamed here: http://www.zillow.com/education/HousingForum/ http://online.wsj.com/article/PR-CO-20131022-906411.html

Maybe this?: http://seekingalpha.com/currents/post/1347762 Ranieri pulls plug on nonagency MBS offering There's more evidence Fannie (FNMA +6.8%) and Freddie (FMCC +7.6%) aren't going anywhere anytime soon as Shellpoint Partners - led by mortgage kingpin Lew Ranieri - pulls a planned MBS offering for the 2nd time this month, citing soft demand. The company had restructured the bond issue - backed by jumbo residential mortgages - by removing some of the riskier loans in exchange for better agency ratings, but it still wasn't able to get the prices it wanted.Issuance of nonagency paper had flown earlier this year, but has ground to a halt since interest rates began rising this spring. Additionally, Frannie has begun offering a new security more tied to credit than rates, thus sapping some demand for nonagency bonds.Trying to break into the nonagency issuance market, PennyMac Mortgage Investment Trust (PMT +0.2%) last month had to cut prices at least twice on its debut offering. Redwood Trust (RWT -0.6%) - which pretty much had the nonagency field to itself not long ago - has struggled mightily since the spring.

Panel 2: Fannie Mae, Freddie Mac, and Admiistrative Law This was hugely informative. Great analysis of the 2012 takings and whether a court could uphold it. If you want to full education...: http://www.nyujlb.org/2013/08/1184/

I'd go as well if it were on a Friday or Saturday. Just checked my calendar and unfortunately it's a no go for me. I'll take notes and post them here. Zillow said there is a webcast as well.

Just booked my flight!

Please be patient. There is a team working on it. All top notch people. They will prepare a report and revert back as soon as possible. While they are working on it, is there anything else you need? Yeah. The invoice.

In / around DC? This sounds very informative to attend (free): https://zillow-bpc-housing-forum.eventbrite.com

I'm sure she's doing fine. Business is a messy process and sometimes things get messy. Then you fix it.

The most powerful undercurrent is the real estate industry. They'd much rather have no change than risk a new system with unintended consequences. I bet their lobbying outweighs everyone else's.

This can't be sustainable.

Tone changing? http://mobile.businessweek.com/news/2013-10-15/fannie-mae-survival-back-on-table-as-lawmakers-sketch-new-system

Agreed. You can't make ~30% compounded for an extended period of time by buying "great companies at fair prices" (I assume fair means ~10x earnings). If he had only $1 or $2 million, I guarantee you he wouldn't be wasting capital by allocating it to just "fair" opportunities.

Yes, I am taking a look. Thanks for the heads up!

I never understood hedging. Instead of hedging, just buy less of whatever it is you're buying. Why complicate things.

Bruce is going to be one of the best hedge fund managers. It's much more difficult to run a mutual fund, especially for those inclined to concentration.