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Is it just me or are there actually two forums on this site?


cameronfen
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There is the regular CoBF forum with investment ideas, strategy and even politics, and then there is the  Fannie Mae and Freddie Mac 10 bagger thread and I think most people keep to either the Fannie thread or the Rest of CoBF and don’t really co-mingle. 

 

Sorry this is spam, but just my observation. 

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Guest cherzeca

There is the regular CoBF forum with investment ideas, strategy and even politics, and then there is the  Fannie Mae and Freddie Mac 10 bagger thread and I think most people keep to either the Fannie thread or the Rest of CoBF and don’t really co-mingle. 

 

Sorry this is spam, but just my observation.

 

if I owned the other names discussed on this site I would post on them more. 

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There is the regular CoBF forum with investment ideas, strategy and even politics, and then there is the  Fannie Mae and Freddie Mac 10 bagger thread and I think most people keep to either the Fannie thread or the Rest of CoBF and don’t really co-mingle. 

 

Sorry this is spam, but just my observation.

 

That's an interesting observation! And applies to me.  ;D

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If anything, I wish there were more threads like FNMA, you can learn an awful lot just by reading the thread and following the links.

 

I try to read all of the non politics threads.  If you cut out politics/general discussion there are actually not that many posts.

 

No I wasn’t criticizing the thread, just thought it was interesting there were some people that just came to CoBF to post there and people like me who after a brief dalliance don’t look at that thread at all. 

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FNMAS are the best risk adjusted reward I'm aware of right now - and as another user mentioned the thread is consistently active and engaging.  I think the dichotomy comes from the fact that other users have long passed on FNMAS and for a variety of reasons (length of thread, extrapolating length of time passed into a never-ending saga, perceived complexity, perceived risk) refuse to take a look again / take a closer look.  For those who are acutely aware of the details of FNMAS, it's difficult to find a special situation with this setup with such obvious reasons for mispricing. 

 

Within the first few hours of research it's likely people come away from FNMAS thinking that there is a decent probability of 100% loss and/or think there are unknowns which can't be solved for - it took me a while to look at the situation from a different perspective which changed my mind in how I initially perceived this to be a highly speculative special situation consistent of legal/political unknowns to a highly attractive low probability of permanent loss of capital situation. 

 

None of this is bad - just my thoughts from someone who actively reads across the both of the main sections of the forum.  And I could also be wrong:  1) There are almost definitely other opportunities out there better than FNMAS  2) Thesis on why FNMAS has low probability of loss could be entirely wrong.

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FNMAS is hard to handicap, as it is basically a political bet. It could be anything from a zero to a 3 bagger. It appeals to a certain type of investors but not others.

 

This is certainly one perspective shared by many who aren't involved and one of the many reasons the opportunity exists.  I wouldn't be involved if I thought it was reliant on a political outcome. 

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Guest cherzeca

FNMAS is hard to handicap, as it is basically a political bet. It could be anything from a zero to a 3 bagger. It appeals to a certain type of investors but not others.

 

intersection of many variables. legal, political, finance, restructuring, common sense etc.  looking at the companies' operations and cash flows, and forgetting about shareholder rights/value for a moment, these are about the most profitable/best business model companies one could possibly hope for.

 

but since there is already one thread dedicated to it, I will desist here...

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Ya I had some ethical issues with investing in it.  But I ultimately made the plunge some time ago.  However I just think there are so many other people that are better at handicapping legal and political ramifications, I felt like even if I felt strongly that it was undervalued, if anything changes, I would likely be the patsy at the table.  So I ultimately exited with no real gain/loss. 

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Guest cherzeca

Ya I had some ethical issues with investing in it.  But I ultimately made the plunge some time ago.  However I just think there are so many other people that are better at handicapping legal and political ramifications, I felt like even if I felt strongly that it was undervalued, if anything changes, I would likely be the patsy at the table.  So I ultimately exited with no real gain/loss.

 

my lord, what were the ethical issues? 

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Ya I had some ethical issues with investing in it.  But I ultimately made the plunge some time ago.  However I just think there are so many other people that are better at handicapping legal and political ramifications, I felt like even if I felt strongly that it was undervalued, if anything changes, I would likely be the patsy at the table.  So I ultimately exited with no real gain/loss.

 

Ethical issues? Do you mean shorting the GSE preferreds alone side Senator Bob Corker?  ::)

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Ya I had some ethical issues with investing in it.  But I ultimately made the plunge some time ago.  However I just think there are so many other people that are better at handicapping legal and political ramifications, I felt like even if I felt strongly that it was undervalued, if anything changes, I would likely be the patsy at the table.  So I ultimately exited with no real gain/loss.

 

my lord, what were the ethical issues?

 

I talked about this on the Fannie Mae thread before but everyone yelled at me lol, but I’ll try again.  I see the trade an opportunistic way for a bunch of hedge funds to steal money from US taxpayers.  While investors may or may not have the letter of the law on there side, I see this as clearly violating the spirit of the law.  Government bailed out the two companies when no one else would.  When you bail out a company that no one else wants to bail out you own the company and even if you make a profit, it’s still your company.  In fact if we made it so the government couldn’t make a profit on the companies it was forced to nationalize that seems like a huge kneecapping of the federal government especially after this action helped save a lot of wall street’s ass.  Again the funds that are investing in Fannie Mae may not be the same wall street people, but it leaves a bad taste in my mouth when the government saves your ass in the Great Recession and then you turn around and try to extract as much money from the government as possible. 

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Ya I had some ethical issues with investing in it.  But I ultimately made the plunge some time ago.  However I just think there are so many other people that are better at handicapping legal and political ramifications, I felt like even if I felt strongly that it was undervalued, if anything changes, I would likely be the patsy at the table.  So I ultimately exited with no real gain/loss.

 

my lord, what were the ethical issues?

 

I talked about this on the Fannie Mae thread before but everyone yelled at me lol, but I’ll try again.  I see the trade an opportunistic way for a bunch of hedge funds to steal money from US taxpayers.  While investors may or may not have the letter of the law on there side, I see this as clearly violating the spirit of the law.  Government bailed out the two companies when no one else would.  When you bail out a company that no one else wants to bail out you own the company and even if you make a profit, it’s still your company.  In fact if we made it so the government couldn’t make a profit on the companies it was forced to nationalize that seems like a huge kneecapping of the federal government especially after this action helped save a lot of wall street’s ass.  Again the funds that are investing in Fannie Mae may not be the same wall street people, but it leaves a bad taste in my mouth when the government saves your ass in the Great Recession and then you turn around and try to extract as much money from the government as possible.

 

I suppose on some level this is consistent with what I wrote above - people who have only spent maybe 1-2 hours on this come away significantly misinformed.  You must not be invested in any of the large banks for similar reasons?  And you must also feel that all of the large bank shareholders should be wiped today, despite paying back the governments loan including interest? 

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Ya I had some ethical issues with investing in it.  But I ultimately made the plunge some time ago.  However I just think there are so many other people that are better at handicapping legal and political ramifications, I felt like even if I felt strongly that it was undervalued, if anything changes, I would likely be the patsy at the table.  So I ultimately exited with no real gain/loss.

 

my lord, what were the ethical issues?

 

I talked about this on the Fannie Mae thread before but everyone yelled at me lol, but I’ll try again.  I see the trade an opportunistic way for a bunch of hedge funds to steal money from US taxpayers.  While investors may or may not have the letter of the law on there side, I see this as clearly violating the spirit of the law.  Government bailed out the two companies when no one else would.  When you bail out a company that no one else wants to bail out you own the company and even if you make a profit, it’s still your company.  In fact if we made it so the government couldn’t make a profit on the companies it was forced to nationalize that seems like a huge kneecapping of the federal government especially after this action helped save a lot of wall street’s ass.  Again the funds that are investing in Fannie Mae may not be the same wall street people, but it leaves a bad taste in my mouth when the government saves your ass in the Great Recession and then you turn around and try to extract as much money from the government as possible.

 

I suppose on some level this is consistent with what I wrote above - people who have only spent maybe 1-2 hours on this come away significantly misinformed.  You must not be invested in any of the large banks for similar reasons?  And you must also feel that all of the large bank shareholders should be wiped today, despite paying back the governments loan including interest?

 

Yes that has been a consideration.  The idea is not so much that they paid back the loan, insomuch as if any private entity bailed out the banks or Fannie Mae they would have taken ownership of the company outright, but because it was the government, shareholders got a better deal because a) Wall Street is a rich constituent for pols, b.) nationalization of some industry would have made free market types freak out for no reason.  The banks it’s not as bad, because you don’t have the active biting the hand that feeds you for your own profit.  Fannie Mae investments is more like buying stock in like Hank Greenberg which would be worse than buying BAC. 

 

 

Edits: 

 

I guess I should enphasize, because it was the government they granted old preferred holders and shareholders some protection when they didn’t need to.  Like I said any private entity would have had no competition if they wanted to bail out Fannie and Freddie and would have owned the company outright.  And then you take advantage of the protection government offers you when it really didn’t have to to profit at its expense.  In my mind it’s Wall Street at its worse.  Notice my argument is not legal in any way so citing what the contract states would not change my view.  If you could find somewhere that the government signed the contract and negotiated as tough as a private company and not a entity which is trying to win an election, and even through fierce negotiation would have granted former holders those rights, I could be convinced.  But if you say, the contract says this and the government is violating that, I’m just going to respond with of course the government gave existing shareholders some protections, they didn’t have to but if they didn’t the same Wall Street conservatives would flood the airwaves saying the government is nationalizing businesses and meddling with free markets.  I would also refer you to the Estate of Lehman vs Barclays case. 

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if any private entity bailed out the banks or Fannie Mae they would have taken ownership of the company outright

But if any private entity would have bailed out banks or Fannie Mae they would have required share holder approval and/or go through a bankruptcy process where bond holders, perf holders and equity would have had some say in the outcome.

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The position at that point was limited to 80% only because otherwise, FRE and FNM would have to be consolidated on  the governments balance sheet, which would ave cracked the debt ceiling (at least that’s what I recall).

 

Anyways, I have spent more than 2 h on this and still don’t know what to make of it. I think it’s basically a political bet and if the political wind blows in a different direction going forward before it is privatized, I think the status remains as is, which pretty much would be the best for any stakeholder (government, homeowner) but the current shareholders.

 

That’s why this is an “oddball” and not a regular value investment, imo.

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Guest cherzeca

@Cameron

 

ouch.  dont know where to start, so I wont

 

Ya not saying I know much about the stock but those were my impressions reading the news.  The position in it was a starter to incentivize diligence.

 

all good...though reading the news can get you into trouble

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The position at that point was limited to 80% only because otherwise, FRE and FNM would have to be consolidated on  the governments balance sheet, which would ave cracked the debt ceiling (at least that’s what I recall).

 

Anyways, I have spent more than 2 h on this and still don’t know what to make of it. I think it’s basically a political bet and if the political wind blows in a different direction going forward before it is privatized, I think the status remains as is, which pretty much would be the best for any stakeholder (government, homeowner) but the current shareholders.

 

That’s why this is an “oddball” and not a regular value investment, imo.

 

Sure that could have been the stated reason, but I think they could have raised the ceiling if they wanted to.  IMO and maybe it’s not valid for Fannie Mae, but for the US government to nationalize a business is basically a third rail in 2007.  That’s likely why they didn’t bother.

 

if any private entity bailed out the banks or Fannie Mae they would have taken ownership of the company outright

But if any private entity would have bailed out banks or Fannie Mae they would have required share holder approval and/or go through a bankruptcy process where bond holders, perf holders and equity would have had some say in the outcome.

 

Where you alive during the Great Recession?  (Jk) Bondholders would have accepted massive haircuts would have happily accepted a expedited bankruptcy process and equity holders would surely have no say (and wiped clean) in the bankruptcy of banks nor Fannie and Freddie.  No way anyone would have argued with a white knight as people thought like the world was ending.  Instead bondholders were made whole and equity holders still maintained some ownership share. 

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if any private entity bailed out the banks or Fannie Mae they would have taken ownership of the company outright

But if any private entity would have bailed out banks or Fannie Mae they would have required share holder approval and/or go through a bankruptcy process where bond holders, perf holders and equity would have had some say in the outcome.

 

Where you alive during the Great Recession?  (Jk) Bondholders would have accepted massive haircuts would have happily accepted a expedited bankruptcy process and equity holders would surely have no say (and wiped clean) in the bankruptcy of banks nor Fannie and Freddie.  No way anyone would have argued with a white knight as people thought like the world was ending.  Instead bondholders were made whole and equity holders still maintained some ownership share. 

During the GFC I was happily playing poker without looking at the stock market at all ;).

 

But sure, probably plenty of bond holders would have accepted a big haircut at that time and be happy that they got anything at all. But the thing is, they didn't go bankrupt. And there would be no way of telling what would have happened if they did. There is no such thing as an expedited bankruptcy process, and if you look at how long for example the process of the Lehman Brothers bankruptcy is taking (it is still in progress as far as I know!!!) it is certainly possible that by the time they started selling assets the value of those assets recovered.

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