Mephistopheles

http://finance.yahoo.com/news/fannie-mae-settles-shareholder-lawsuit-204627878.html $170 million settlement for misleading shareholders. So where does this money go? To the Government?

It would be weird to go from mattress section to tools section....what kind of weirdo stuff were you planning.. Hahahahaha The two sections were right next to each other. As an aside, they said they were going to expand their mattress section because it was doing well, FWIW.

My friend and I went once for scuttlebutting. We walked around, asked questions in the mattress section, then went to the tools section. A couple of the employees gave us weird looks, I'm not joking. I guess they're not used to having customers who are younger than 80. Or they're not used to having customers.

The leverage re the litigation. I think the government wants to keep the current state as it is forever, but that seems impossible. They cannot exercise their 79% warrants on the common because then they will have to account for the trillions of liabilties on the national debt. But they can't just let this 79% value go away. That would be too stupid either. What will they do then? Letting the warrants expire and then keep taking all profits each month from Fannie and Freddie? Is that their plan? I believe as long as they own less than 80%, they don't have to take on the liabilities. That's what I'm afraid of too, keeping the status quo. Govt continues to make money to waste on earmarks and they get political bragging rights for taking the evil financial company money for the "benefit of taxpayers". Such a shame that our country has gotten to this point. I suppose it's normal for post-crisis eras.

That clip was totally unrealistic. I mean it showed shoppers at the Sears. No way that happens in real life. Believe it or not, Sears is still an actual company. They have locations and employees (and presumably) some customers. I just don't know what they are going to do when their customer base (over 70, no internet access, still has a rotary dial land line phone with a 25 ft cord and answering machine with a tape as the only way to get in touch with them, and sometimes uses their phones to order from catalogs) dies off? You've seen these people. They are the women with white hair that are always in the grocery store line in front of you trying to pay with a check then take 25 minutes to back out of their parking space in the parking lot. They own K-Mart too, but I think it has been about 10-12 years since I've seen an actual K-Mart store, so I'm not sure if those still exist. They do exist, about 1200 of them. They're closing down but IMO it can't happen fast enough.

(1) is correct. (3) also will not count -- I checked with my accountant about this last week. (2), on the other hand, I'm not sure about. I don't know if it's substantially the same or not. Thanks, Merkhet. If #3 is okay (swapping from one series of Pfd to another), then I feel like #2 (common to pfd) should most certainly be okay given that common and pfd are less "same" than 2 series of pfd.

I know I've asked this before but am still not clear on the answer: 1. If I swap from FNMA common to FMCC common, I know the wash sale rule doesn't count. 2. If I swap from FNMA common to FNMA preferred, I am pretty sure it doesn't count. 3. If I swap from FNMA preferred to another series of FNMA preferred, I am not as sure. Does anyone know #2 & 3 for sure? The SEC website's description is a bit vague.

But wouldn't there be a long appeals process? I feel like this is one of those cases that lasts many years and ends up in the Supreme Court.

Here's to hoping it continues. Would love to roll my common shares into preferred and hoping this difference in momentum continues to maximize my preferred exposure. Theres been 50% difference in the performance between the twp since the drop. Fannie Mae common: On 09/30: $2.69 On 10/14: $2.49 Fannie Mae Preferred S: On 09/30: $9.20 On 10/14: $4.25 I can't imagine a scenario where the preferred gets screwed but the common comes out unscathed. I thought about this. I think one reason the common have outperformed is because when Lamberth threw out the possibility of immediate injunctive relief, it meant that any positive outcome will take longer than expected, whether it be a year, 2 years, 5 years, whatever. The prefs have a ceiling on their value, while the common will continue to increase in value. It wouldn't matter so much if we won in a year, but the longer it is expected to take, the more of a differential in value there should be.

Wow, the common have come back nicely since the case was tossed out. I sold all my common for the tax loss and switched to prefs which also happened to be down more, but they haven't recovered nearly as much. :(

Dumb question, but why is the NAV at $2.7 billion ($24.41), and they say the stock is selling at NAV, but at the same time it also has a market cap of $6 billion?

I don't mind the mistakes so much. Everybody makes mistakes and in this case he's right far more often than he's wrong. It's the inaccurate track record that bothers me.

I love Ackman, but I have to agree with this. Let's not forget the failed golf course investment in his old fund, which was closed down, and replaced by Pershing Square - which included a fresh new track record.

Thanks that helped. I made a spreadsheet with all the tickers that I found and their discount to par linked to the internet, if anyone is interested. I know someone had this on Google spreadsheets but I've just updated to include all relevant tickers and delete the ones that are not traded. Let me know if there are any errors. GSE_Tickers.xlsx

Thanks. So am I right to assume that "Series T" corresponds to FNMAT, "Series S" to FNMAS, etc.? I was thrown off by the $5 price, so I assumed it was a cheap selling $50 one, but I guess it's a really expensive $25 one. Great, thanks.

Does anyone know what the terms are for the FNMA preferred stock symbol "FNMAT"? It has consistently traded well below the other preferred shares. It's currently selling for $4.74, and I'm assuming it's par value is $50. I was under the assumption that all of the preferred shares are pari passu. I looked in the 10-k but they don't show what tickers correspond to what classes, and neither do the offering circulars that they offer in the investor relations section.

Thanks!

Merkhet, do you know what the conference idea is for Epstein's call?

Except, thus far, no one has indicated that this is an acceptable goal -- I can't recall anyone in either party who wants there to be a giant nationalized mortgage insurance arm. Remember, this would mean that the government is explicitly the backstop for all mortgages in the country. That's true, but they have every incentive to keep them nationalized - a) guarantees a reasonable 30 year mortgage for their constituents and b) brings big money into Government coffers for earmarks. Right now, given the crisis is still fresh on peoples mind, any Congressman or Senator that talks about shutting Fannie and Freddie down scores political points, since getting rid of these "big bad financial companies that caused the housing bubble" appeals to people. But in a few years people will forget, and then Congress will see this big money producing duopoly. IMO the sensible thing (for them) would be to keep the status quo.

They would go to zero. They're not paying any dividends and there is no guarantee for them or the common.

Just quoting you here to make it easier: "(1) Can Fannie & Freddie continue to provide their services as a nationalized entity? Well, sure, but that means that there's no probably no shot of private capital coming in to fill the hole. Think about it this way, if I'm a bank, do I want to own F&F securitized loans with the, at this point, explicit backing of the federal government? Or do I want to own Private JoeCo securitized loans? I'm probably going to want to own the F&F securitized loans -- and the only way that JoeCo can compete is by doing what insurance companies do -- under-reserving and/or pricing incorrectly." This is what I'm afraid of. Shareholders lose all cases. And yes, private capital won't come in, but does it need to? F+F would be effectively nationalized, Govt will secure massive profits for the rest of eternity, it'll help their budget issues, and they'll technically only own 79.9% so no need to place the debt on the balance sheet. So in this case perpetual nationalized mortgage insurance would work, right?

The fact still remains that if the government wants the whole company how do they deal with holding the liabilities on the government balance sheet without triggering their debt ceilings. They need the zombie shareholders to continue this schizophrenic charade this is unsustainable.... So what happens if shareholders lose all the cases? Someone would still have to own the 20.1% stake at the end, and it doesn't have to be the Government. Can't they simply not do anything and continue collecting the profits ad infinitum?

I think it was implemented partially for political reasons, as you say to screw "hedge funds and wall street", you know, those people who destroyed our economy. But I also think it was to help pay the bills in Washington which has some serious budget issues. I think everyone has an incentive to keep F+F alive, so I don't think they will be killed. But in terms of the Government's incentive, they'd much rather own 100% (which they do now) vs. 79.9% minus whatever goes to junior prefs (if they lose the case). And hence they'd end up in a worse position if they lose, and that's why it's taking so long.

Ladies, a/l??

I think she's good to look at, so I watch her either way. Here's a gift for you: Haha thanks, have already seen that though :D