FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[valuecfa]

FNMAS: $5.10 today. Preferred Series S Fixed to Floating Rate

FNMAI: $4.37 today.  Preferred Series Q. 6.75%

FNMAJ: $4.50 today. Preferred Series R 7.625%

 

Is the difference purely due to the int rate or do you all think FNMAS is just the most noted one in the media?

 

FNMAK and FNMAP are even much cheaper than the above today.

[gokou3]

FNMAS: $5.10 today. Preferred Series S Fixed to Floating Rate

FNMAI: $4.37 today.  Preferred Series Q. 6.75%

FNMAJ: $4.50 today. Preferred Series R 7.625%

 

Is the difference purely due to the int rate or do you all think FNMAS is just the most noted one in the media?

 

FNMAK and FNMAP are even much cheaper than the above today.

 

Are they (the preferred issues) all ranked pari passu?

[valuecfa]

FNMAS: $5.10 today. Preferred Series S Fixed to Floating Rate

FNMAI: $4.37 today.  Preferred Series Q. 6.75%

FNMAJ: $4.50 today. Preferred Series R 7.625%

 

Is the difference purely due to the int rate or do you all think FNMAS is just the most noted one in the media?

 

FNMAK and FNMAP are even much cheaper than the above today.

 

Are they (the preferred issues) all ranked pari passu?

 

yes, excluding treasury's senior prefs

[twacowfca]

FNMAS: $5.10 today. Preferred Series S Fixed to Floating Rate

FNMAI: $4.37 today.  Preferred Series Q. 6.75%

FNMAJ: $4.50 today. Preferred Series R 7.625%

 

Is the difference purely due to the int rate or do you all think FNMAS is just the most noted one in the media?

 

FNMAK and FNMAP are even much cheaper than the above today.

 

Are they (the preferred issues) all ranked pari passu?

 

yes, excluding treasury's senior prefs

 

 

Yes. . . . But in the rare event that the dividends on these are restored, those with a higher dividend rate would be worth more.  In a reorganization, they should be worth the same.

[valuecfa]

FNMAS: $5.10 today. Preferred Series S Fixed to Floating Rate

FNMAI: $4.37 today.  Preferred Series Q. 6.75%

FNMAJ: $4.50 today. Preferred Series R 7.625%

 

Is the difference purely due to the int rate or do you all think FNMAS is just the most noted one in the media?

 

FNMAK and FNMAP are even much cheaper than the above today.

 

Are they (the preferred issues) all ranked pari passu?

 

yes, excluding treasury's senior prefs

 

 

Yes. . . . But in the rare event that the dividends on these are restored, those with a higher dividend rate would be worth more.  In a reorganization, they should be worth the same.

 

Exactly. I think a restructuring is far more likely.

 

Though, if these were cumulative it would obviously be a no brainer which ones to choose. Sadly they are not.

[Sunrider]

FYI - Here is a chart showing all of the FNMA and FMCC Preferred issues that are generally traded on the pink sheets.  :)

 

Hi there - for some reason it says "attachment not found" when I try to download it.

 

Could you please re-attach or point me to a site/other source where I can find a list of all the issues? I'm having trouble with their Investor Relation's website (not sure if it really lists all issues) and Quantumonline.com also doesn't seem to have all information.

 

Second question - at least for Freddie Mac, a lot of the series seem to be non-cumulative. Doesn't the case rest primarily on receiving what is being owed for the cumulative series? Are you buying the non-cumulative ones in the hope that they'll appreciate in price as soon as any payments to non-government preferred stock starts?

 

Thank you very much!

 

C.

[LC]

Freddie's prefs are on their investor page. Fannies list of prefs is on this page http://www.fanniemae.com/portal/about-us/investor-relations/stock-information.html

 

No tickers though

[Sunrider]

Freddie's prefs are on their investor page. Fannies list of prefs is on this page http://www.fanniemae.com/portal/about-us/investor-relations/stock-information.html

 

No tickers though

 

I went to Freddie's investor page - Quantum lists more issues, hence my statement that I'm not sure whether their page is complete. Thus, I thought I'd go to a better source (here). I wouldn't have asked if I didn't think what was in the thread previously would be better than what I can find on their homepage :)

 

C.

[nkp007]

Been buying for a couple days. I can't imagine any major funds buying these in quantity unless they approach major holders (regions banks, other funds, etc) directly.

[Sunrider]

Been buying for a couple days. I can't imagine any major funds buying these in quantity unless they approach major holders (regions banks, other funds, etc) directly.

 

Hiya

 

Which series have you been buying? I saw a reference earlier in the thread about 17c/$1 but I can't tie this back to the quotes or price appreciation I can see over the last 1.5 months?

 

Thank you - C.

[LC]

Been buying for a couple days. I can't imagine any major funds buying these in quantity unless they approach major holders (regions banks, other funds, etc) directly.

 

Hiya

 

Which series have you been buying? I saw a reference earlier in the thread about 17c/$1 but I can't tie this back to the quotes or price appreciation I can see over the last 1.5 months?

 

Thank you - C.

 

FNMAS and FNMAJ trade at about 20% of par

 

For Freddie: FMCKJ, FMCKL-M-N all trade in the $4-$5 dollar range.

[valuecfa]

Been buying for a couple days. I can't imagine any major funds buying these in quantity unless they approach major holders (regions banks, other funds, etc) directly.

 

Hiya

 

Which series have you been buying? I saw a reference earlier in the thread about 17c/$1 but I can't tie this back to the quotes or price appreciation I can see over the last 1.5 months?

 

Thank you - C.

 

FNMAP traded at .154c/$1 today.

[Sunrider]

Doh!

 

Clearly I can't calculate right. Sorry guys & thanks for the response.

 

What's your thesis though - most of these are non cumulative so are you speculating that they will appreciate substantially to par if that law isn't passed or Perry & Berkowitz win their case?

 

Thanks - C.

 

 

Been buying for a couple days. I can't imagine any major funds buying these in quantity unless they approach major holders (regions banks, other funds, etc) directly.

 

Hiya

 

Which series have you been buying? I saw a reference earlier in the thread about 17c/$1 but I can't tie this back to the quotes or price appreciation I can see over the last 1.5 months?

 

Thank you - C.

 

FNMAP traded at .154c/$1 today.

[valuecfa]

Counsel for Perry Capital: http://online.wsj.com/article/SB10001424127887323309404578617451897504308.html

[BargainValueHunter]

http://www.investingdaily.com/17960/the-case-for-investing-in-fannie-and-freddie/

 

The Supreme Court has recently sided with claimants against the federal government in a couple of prominent takings cases. In December, it rejected an appeals court ruling against the Arkansas Game and Fish Commission. The state agency had claimed that periodic flooding of its land by the Army Corps of Engineers amounted to a taking, and the Supreme Court ruled that the temporary nature of the flooding didn’t preclude this claim. And just last month the Supreme Court backed a Florida developer who argued that an agency’s refusal to issue a permit amounted to a taking as well.

 

The following quote from the majority opinion in the Arkansas case ought to be of particular interest in regards to Fannie and Freddie claims, as well as arguments that the government did what it had to do to save the financial system and that’s that:

 

“Time and again in Takings Clause cases, the Court has heard the prophecy that recognizing a just compensation claim would unduly impede the government’s ability to act in the public interest. We have rejected this argument when deployed to urge blanket exemptions from the Fifth Amendment’s instruction.”

 

It’s hard to fathom how a court could see a taking in temporary flooding or a permit dispute but not in government plans to dispossess preferred share owners by regularly stripping the companies under its conservatorship of their net worth, under terms cooked up long after the crisis has passed. And even allowing for the vagaries of constitutional jurisprudence, the odds of a ruling against the government seem a lot better than 4:1 against.

[dcollon]

From Barron's

Fannie_Mae_Freddie_Mac_Will_Fade_Away_-_Barrons.pdf

[berkshiremystery]

 

Bernanke AIG Testimony Should Cheer Fannie, Freddie Plaintiffs

2013-07-13 TheStreet

 

http://www.thestreet.com/story/11992156/1/bernanke-aig-testimony-should-cheer-fannie-freddie-plaintiffs.html?puc=yahoo&cm_ven=YAHOO

[constructive]

It seems to me that the government's case is pretty easy to prove.

 

Have people really forgotten that Fannie and Freddie were placed in conservatorship because they were insolvent? If the intrinsic value of the securities was $0 in 2008, there was nothing to "take". It's only now, as a result of an accounting mirage, that they appear to be valuable.

[nkp007]

It seems to me that the government's case is pretty easy to prove.

 

Have people really forgotten that Fannie and Freddie were placed in conservatorship because they were insolvent? If the intrinsic value of the securities was $0 in 2008, there was nothing to "take". It's only now, as a result of an accounting mirage, that they appear to be valuable.

 

That's not a legal argument though.

 

It was placed in conservatorship, not receivership.  Government received preferred security with 10% dividend and effectively 79.99% of the common.

 

Then in 2012 things went haywire. The takings issue.

[constructive]

Well I'm not a lawyer but I think it's a perfectly good legal argument.

 

Conservatorship is more of an ad hoc framework. Some people think it implies a return for shareholders, but it doesn't say that anywhere.

[merkhet]

constructive,

 

The argument isn't that The Takings Clause was implicated when the government placed the companies into conservatorship -- the argument is that The Takings Clause was implicated when the government amended the agreement to sweep the entire amount of the preferred stock's value.

[constructive]

constructive,

 

The argument isn't that The Takings Clause was implicated when the government placed the companies into conservatorship -- the argument is that The Takings Clause was implicated when the government amended the agreement to sweep the entire amount of the preferred stock's value.

 

I suspect the shareholder lawsuits will claim both events were unlawful takings.

 

But if anything, public shares were worth less in 2012 than in 2008. (Hard to be worth less than $0 though.) The government had to shovel in billions of equity to make up for losses in those years.

[merkhet]

constructive,

 

I've read both pleadings (posted here) and if memory serves me correctly, they are only arguing as to the legality of the amendment for the sweep.  Perry is arguing lack of exceeding administrative legal powers and Berkowitz is arguing Takings.  Those two are different.

 

I don't understand why you think that the [preferred] shares are worth less in 2012 than in 2008. The company is much more profitable now than in 2008. Can you clarify?

[constructive]

constructive,

 

I've read both pleadings (posted here) and if memory serves me correctly, they are only arguing as to the legality of the amendment for the sweep.  Perry is arguing lack of exceeding administrative legal powers and Berkowitz is arguing Takings.  Those two are different.

 

I don't understand why you think that the [preferred] shares are worth less in 2012 than in 2008. The company is much more profitable now than in 2008. Can you clarify?

 

Well, they certainly appear profitable now. But that's only in the context of the Treasury's enormous financial support over the last 5 years, in exchange for the preferred shares. Take the Treasury's support away at any point between 2008 and 2012 and the companies would have immediately imploded.

 

What do you think public shares were worth in 2012 before the preferred share amendment? I don't think the math ever worked out to a positive value, with the 10% dividend.

 

I haven't read all the shareholder lawsuits, but here's one that claims placing the companies in conservatorship in 2008 was an unlawful taking.

http://dealbook.nytimes.com/2013/06/17/lawsuit-tries-creative-approach-against-fannie-and-freddie-bailout/?_r=0

[merkhet]

 

Well, they certainly appear profitable now. But that's only in the context of the Treasury's enormous financial support over the last 5 years, in exchange for the preferred shares. Take the Treasury's support away at any point between 2008 and 2012 and the companies would have immediately imploded.

 

 

The government was issued Government Preferred Shares. Perry Capital and Fairholme Fund own Private Sector Preferred Stock.

 

You and I don't disagree that the government provided aid to the companies in 2008 -- the point is that they were provided with compensation for that aid via the Government Preferred Shares and Government Warrants (amounting to 79.9% of the company's common stock).

 

 

What do you think public shares were worth in 2012 before the preferred share amendment? I don't think the math ever worked out to a positive value, with the 10% dividend.

 

 

In 2012, Fannie & Freddie were both solvent & had a combined net income of $27 billion -- that amount being more than enough to pay the 10% dividend on the liquidation preference of the Government Preferred Stock. (Correct me if I'm wrong, but I think the liquidation preference is something like $188 billion.) Based on the capital structure, it would seem like the residual would cause the Private Sector Preferred Stock to be worth a positive number that I'm going to say might even approach par.

 

 

I haven't read all the shareholder lawsuits, but here's one that claims placing the companies in conservatorship in 2008 was an unlawful taking.

http://dealbook.nytimes.com/2013/06/17/lawsuit-tries-creative-approach-against-fannie-and-freddie-bailout/?_r=0

 

 

I think that particular lawsuit has very little substance to it -- read the complaints for Perry Capital and Fairholme Fund -- those have to do with the amendment to sweep 100% of profits.