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

[fareastwarriors]

http://www.bloomberg.com/news/2014-03-17/fannie-mae-wind-down-deemed-threat-to-home-recovery-mortgages.html

 

 

Fannie Mae Wind-Down Deemed Threat to Home Recovery

[onyx1]

 

"The bill aims to establish the new system within five years of enactment, though it provides a series of possible extensions, raising the prospect that Fannie and Freddie could continue to operate for at least another decade while the new infrastructure is built."

 

http://online.wsj.com/news/articles/SB10001424052702303287804579443601120329542?mod=WSJ_hps_sections_markets&mg=reno64-wsj

 

Its a long shot, but even if the bill does become law the GSEs will be around for years and years.

[fareastwarriors]

More Trouble Ahead for Investors in Fannie Mae and Freddie Mac

 

Hedge funds took a gamble on the shares of the former mortgage giants—a gamble they're likely to lose. 

 

 

More_Trouble_Ahead_for_Investors_in_Fannie_Mae_and_Freddie_Mac.pdf

[brker_guy]

Here is another well written article by Richard Bove, whom along with Berkowitz I consider amongst the best analysts of financial companies.

 

http://www.valuewalk.com/2014/03/fannie-mae-freddie-mac-crapo/

 

[Mephistopheles]

Maybe a lawyer can answer this, but what happens if shareholders win the case but the companies are put into wind down? Do shareholders still have a claim on past taken profits? Or only future ones?

[fareastwarriors]

Fannie Mae and Freddie Mac must not die

 

 

 

http://www.cnbc.com/id/101522658

[BargainValueHunter]

http://www.ritholtz.com/blog/2014/04/have-gses-fully-repaid-the-treasury/

 

Have GSEs Fully Repaid the Treasury?

 

http://www.frbatlanta.org/assets/images/cenfis/pubscf/nftv_140324.jpg

 

What we can observe in the chart is that the 10 percent rate set in the senior preferred stock agreement is rather favorable to the GSEs over this period. The bond rate was over 15 percent at the time the GSEs were being put into conservatorship and the rate was being set on the senior preferred stock. The rate subsequently spiked at around 40 percent, and dropped below 10 percent only for brief periods prior to the latter part of 2013. [Author's note: Epstein points out that the GSEs also granted a warrant for the purchase of 79.9 percent of their common shares for a minimal price to the Treasury. However, at the time these warrants were granted, the GSEs were in financial distress and could not have survived without assistance. Thus, it is not clear these warrants had much value when granted.]

 

Thus, looking at the value of Treasury’s contribution relative to the GSEs’ pre-conservatorship business, we find that Treasury’s $188 billion senior preferred stock holdings understate the value of its contribution by attributing no dividends to Treasury in 2012−14, by ignoring the value of Treasury’s promise to absorb all of the GSEs’ losses, and by using a senior preferred stock dividend rate that likely provided inadequate compensation for the risk Treasury bore as a creditor.

 

 

[fareastwarriors]

Housing Bill Threatened by Rift on Help for Disadvantaged

 

http://www.bloomberg.com/news/2014-04-08/housing-bill-threatened-by-rift-on-help-for-disadvantaged.html

[fareastwarriors]

Housing industry asks $5 trillion question: what does Watt want?

 

 

http://www.cnbc.com/id/101581037

[phil_Buffett]

http://www.valuewalk.com/2014/04/imco-joins-chorus-against-fannie-mae-freddie-mac/

[indythinker85]

Tilson had 'secret' position in Fannie Mae since November http://www.valuewalk.com/2014/04/tilson-hlf-call-soda-fannie-mae/

[fareastwarriors]

 

 

Fannie, Freddie Say Overhaul Would Boost Mortgage Rates

 

Companies Outline Concerns on Senate Bill to Replace Them

 

 

http://online.wsj.com/news/articles/SB10001424052702304788404579524093755984248?mod=U.S._newsreel_3

[Guest wellmont]

 

 

Fannie, Freddie Say Overhaul Would Boost Mortgage Rates

 

Companies Outline Concerns on Senate Bill to Replace Them

 

 

 

http://online.wsj.com/news/articles/SB10001424052702304788404579524093755984248?mod=U.S._newsreel_3

 

I totally forgot about the incentives of the employees of fannie and freedie. of course they don't want change. of course they want status quo. Of course they don't want to have to worry about a wind down and finding a position at a new company.  People don't like change. They want to stay in their comfort zone. I know I do. It makes total sense that they are saying that "disaster" will strike without fannie and freddie!

[fareastwarriors]

 

$190 Billion in Losses at Fannie Mae, Freddie Mac in Severe Downturn

 

http://www.bloombergview.com/articles/2014-04-30/fannie-and-freddie-would-only-lose-190-billion-in-another-crisis

[Guest wellmont]

silly article. that's because they haven't been recapped to provide way more capital, or changed their business plan yet to mitigate losses in a downturn.

[phil_Buffett]

http://www.valuewalk.com/2014/05/ackman-talks-fannie-mae-freddie-mac/

 

ackman said conservative value 23$

 

http://blogs.wsj.com/moneybeat/2014/05/05/live-blogging-the-sohn-investment-conference/?mod=WSJ_LatestHeadlines

[phil_Buffett]

http://www.valuewalk.com/2014/05/ackman-cnbc-alternative-fannie-freddie/

[phil_Buffett]

http://www.valuewalk.com/2014/05/fannie-mae-freddie-mac-bill-ackman-ira-sohn-112-page-slides/

[fareastwarriors]

Diagnosing Fannie and Freddie’s Condition

 

http://blogs.wsj.com/moneybeat/2014/05/05/diagnosing-fannie-and-freddies-condition/

[Guest wellmont]

Diagnosing Fannie and Freddie’s Condition

 

http://blogs.wsj.com/moneybeat/2014/05/05/diagnosing-fannie-and-freddies-condition/

 

Speaking at a Milken Institute conference last week, Freddie Mac chief Donald Layton explained that after one-time and temporary items are excluded, “our core earnings are a mere fraction of what has been recently reported.”

 

he has an incentive to say that-  he wishes to maintain the status quo. and this is what a caretaker CEO who, along with his friends, is destined to replaced in any overhaul, is bound to say. I don't believe the earnings are one time. I believe he is referring to loss reserves coming off.

[fareastwarriors]

It’s Time to Get Off Our Fannie

Pershing Square Capital Management, L.P.

 

 

Ira Sohn Conference

May 5, 2014

 

 

 

 

 

only 111 slides.

Fannie-Freddie_-_Ira_Sohn_Conference_-_Pershing_Square_-5-5-2014.pdf

[Packer16]

I was reading the 1949 edition of the Intelligent Investor and Graham points to a Lazarus-type rising from the dead situation in the Cotton Belt railroad.  The railroad was in bankruptcy and the common shareholder protested the fact that they were not a part of the plan all the way to the Supreme Court.  This took 12 years after declaring bankruptcy and by then the railroad had accumulated enough cash to pay off all creditors and resume operations by exiting bankruptcy with the common shareholders in tact.  I know FRE/FNM have more politics surrounding them but this has happened before.

 

Packer

[Guest]

I was reading the 1949 edition of the Intelligent Investor and Graham points to a Lazarus-type rising from the dead situation in the Cotton Belt railroad.  The railroad was in bankruptcy and the common shareholder protested the fact that they were not a part of the plan all the way to the Supreme Court.  This took 12 years after declaring bankruptcy and by then the railroad had accumulated enough cash to pay off all creditors and resume operations by exiting bankruptcy with the common shareholders in tact.  I know FRE/FNM have more politics surrounding them but this has happened before.

 

Packer

 

 

Yeah, I remember reading about Kao from  Akanthos talking a bit about the possible similarities there from the 2011 Value Investing Congress, I think.

[Mephistopheles]

I was reading the 1949 edition of the Intelligent Investor and Graham points to a Lazarus-type rising from the dead situation in the Cotton Belt railroad.  The railroad was in bankruptcy and the common shareholder protested the fact that they were not a part of the plan all the way to the Supreme Court.  This took 12 years after declaring bankruptcy and by then the railroad had accumulated enough cash to pay off all creditors and resume operations by exiting bankruptcy with the common shareholders in tact.  I know FRE/FNM have more politics surrounding them but this has happened before.

 

Packer

 

Let's say the GSEs have a similar outcome, and it takes 12 years as well. It wouldn't be that great of a return for the preferreds. And the dividends I believe are non-cumulative so those wouldn't be paid either, right?

[Guest wellmont]

I was reading the 1949 edition of the Intelligent Investor and Graham points to a Lazarus-type rising from the dead situation in the Cotton Belt railroad.  The railroad was in bankruptcy and the common shareholder protested the fact that they were not a part of the plan all the way to the Supreme Court.  This took 12 years after declaring bankruptcy and by then the railroad had accumulated enough cash to pay off all creditors and resume operations by exiting bankruptcy with the common shareholders in tact.  I know FRE/FNM have more politics surrounding them but this has happened before.

 

Packer

 

It wouldn't be that great of a return for the preferreds.

 

holders of the preferred could swap for common shares. this is essentially the fairholme plan in a nutshell. it's also mentioned in the Ackman slide deck.