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

[investorG]

Muscleman -- I'm guessing you're out there -- well done.  you kept your composure and call in the face of unnecessary hostility and were proven correct. 

 

The team appears to have lazily punted.  The summer articles about this issue being too-hot-to-handle politically pre-election were likely correct.

 

I believe the shares represent great value. but it's not our time for a positive resolution.  good luck!

We are actually at a buying point. Similar to Nov 2017 and 3 more instances.

 

Possibly but likely will take a lot more shareholder turnover before any confidence in a bottom.  There are plenty of hedge fund holders who probably aren't interested in waiting on the new timeline and/or courts.

[Guest cherzeca]

Muscleman -- I'm guessing you're out there -- well done.  you kept your composure and call in the face of unnecessary hostility and were proven correct. 

 

The team appears to have lazily punted.  The summer articles about this issue being too-hot-to-handle politically pre-election were likely correct.

 

I believe the shares represent great value. but it's not our time for a positive resolution.  good luck!

We are actually at a buying point. Similar to Nov 2017 and 3 more instances.

 

Possibly but likely will take a lot more shareholder turnover before any confidence in a bottom.  There are plenty of hedge fund holders who probably aren't interested in waiting on the new timeline and/or courts.

 

some HFs are long and strong, though impatient.  some HFs who are looking for a quickie are bailing.  price will be choppy but you are either steady as she goes or you cant take the heat.

 

timeframe may or may not have shifted but thesis/merits haven't

[onyx1]

FWIW

 

Tim Howard called this weeks ago.

 

And for those who may have missed it, at a speech Calabria made on Monday at a conference put on by the Structured Finance Association he said he would “soon be announcing whether the capital rule will be re-proposed and under what terms.” If FHFA weren’t intending to re-prepose at least part of the rule, there would have been no reason for Calabria to have mentioned terms.

 

-- Nov 6 2019

[SnarkyPuppy]

Everyone needs to calm down.

 

- If capital rules come out in Q1 nothing about the timelines change. It’s highly likely Calabria knows what the rule looks like already. 

- it’s been known for a month now that the risk-based requirements would be re proposed.  How was the market not aware of this...?

 

Thesis hasn’t changed.  Practical constraints involved in setting capital requirements, resolving liquidation preference to raise private capital, outstanding shareholder litigation, etc

 

Maybe some year end selling for those who wanted P&L on their year end statements from a PSPA amendment but for those playing a different game- no change and potentially positive news if to cherz point there is a financial advisor involved in affirming to practicality of capital requirements

[TwoCitiesCapital]

Muscleman -- I'm guessing you're out there -- well done.  you kept your composure and call in the face of unnecessary hostility and were proven correct. 

 

The team appears to have lazily punted.  The summer articles about this issue being too-hot-to-handle politically pre-election were likely correct.

 

I believe the shares represent great value. but it's not our time for a positive resolution.  good luck!

We are actually at a buying point. Similar to Nov 2017 and 3 more instances.

 

Possibly but likely will take a lot more shareholder turnover before any confidence in a bottom.  There are plenty of hedge fund holders who probably aren't interested in waiting on the new timeline and/or courts.

 

On this note, I added today. Not a ton - but increased my position by ~ 5% @ $16 for FMCCJ

[rros]

Muscleman -- I'm guessing you're out there -- well done.  you kept your composure and call in the face of unnecessary hostility and were proven correct. 

 

The team appears to have lazily punted.  The summer articles about this issue being too-hot-to-handle politically pre-election were likely correct.

 

I believe the shares represent great value. but it's not our time for a positive resolution.  good luck!

We are actually at a buying point. Similar to Nov 2017 and 3 more instances.

 

Possibly but likely will take a lot more shareholder turnover before any confidence in a bottom.  There are plenty of hedge fund holders who probably aren't interested in waiting on the new timeline and/or courts.

In reality, it's all a moving target. Been that for as long as I can remember and things can change in a dime. They did with Obama. They will with Trump. With Watt and Calabria and with Geithner and Mnuchin, same thing. Don't despair. Could be a double by March/April next year.

[onyx1]

Muscleman -- I'm guessing you're out there -- well done.  you kept your composure and call in the face of unnecessary hostility and were proven correct. 

 

The team appears to have lazily punted.  The summer articles about this issue being too-hot-to-handle politically pre-election were likely correct.

 

I believe the shares represent great value. but it's not our time for a positive resolution.  good luck!

We are actually at a buying point. Similar to Nov 2017 and 3 more instances.

 

Possibly but likely will take a lot more shareholder turnover before any confidence in a bottom.  There are plenty of hedge fund holders who probably aren't interested in waiting on the new timeline and/or courts.

In reality, it's all a moving target. Been that for as long as I can remember and things can change in a dime. They did with Obama. They will with Trump. With Watt and Calabria and with Geithner and Mnuchin, same thing. Don't despair. Could be a double by March/April next year.

 

 

I've owned continuously since 2011 and my observation is GSE investors overreact to all government developments, good and bad.

[Guest cherzeca]

this is a rip van winkle stock.  best to wake up this time next year unless you think you can read tea leaves like mr. MM

[DRValue]

this is a rip van winkle stock.  best to wake up this time next year unless you think you can read tea leaves like mr. MM

 

Realistic timeline on sweeney ruling and appeals etc.?

[Guest cherzeca]

this is a rip van winkle stock.  best to wake up this time next year unless you think you can read tea leaves like mr. MM

 

Realistic timeline on sweeney ruling and appeals etc.?

 

I want to listen to the mp3 of the arg first

[DRValue]

this is a rip van winkle stock.  best to wake up this time next year unless you think you can read tea leaves like mr. MM

 

Realistic timeline on sweeney ruling and appeals etc.?

 

I want to listen to the mp3 of the arg first

 

Oh nice forgot about that. Will be a good listen. If you find a link can you post please?

[investorG]

For those still excited about the near term outlook -- what specific catalyst do you see? 

 

The only ones I can identify are a) valuation and b) the SC response (which could be good or bad I guess).

 

I see no visible 1H 2020 positive solution on: Capital plan finalization (long process), sr pref adjustment, Sweeney / lamberth.  If the SC doesn't take Collins then any potential positive from Atlas seems headed for appeals delay.

 

Base case, to me: everything slow played until election.  Trump wins, execute a plan in 2021.  Trump loses, hope for some lame duck action on consent decree or PSPA adjustment.

[Guest cherzeca]

For those still excited about the near term outlook -- what specific catalyst do you see? 

 

The only ones I can identify are a) valuation and b) the SC response (which could be good or bad I guess).

 

I see no visible 1H 2020 positive solution on: Capital plan finalization (long process), sr pref adjustment, Sweeney / lamberth.  If the SC doesn't take Collins then any potential positive from Atlas seems headed for appeals delay.

 

Base case, to me: everything slow played until election.  Trump wins, execute a plan in 2021.  Trump loses, hope for some lame duck action on consent decree or PSPA adjustment.

 

you are overthinking it

[TonyG]

F and F still need sufficient capital on their books before raising equity. Even if this pushes the rule until spring 2020 they weren't going to market most likely before then while still building equity capital. So I see it as no harm no foul and let's them get the right capital amount (hopefully)

 

It is slightly annoying though that Calabria could have re-proposed this a few months ago instead of going to a different conference once a week

[SnarkyPuppy]

Moments like this make it explicitly clear why this opportunity exists and why there is a mispricing.

[Luke 532]

For those still excited about the near term outlook -- what specific catalyst do you see? 

 

The catalyst I see is the only one that really matters to pref holders: settlement.  Can happen at any moment without warning.

[Jcmeg35]

It is slightly annoying though that Calabria could have re-proposed this a few months ago instead of going to a different conference once a week

 

I also find it a bit odd given how Calabria has been talking for weeks now - hinting that there will be tweaks rather than a full new rule. In my mind, this would make sense if they had already selected an advisor. One could then imply that they were told that it needs to be lower in order to get this thing done. @cherzeca has discussed this a bit. Perhaps it is wishful thinking to think that this process has been completed but not yet announced, and FHFA was told to bring down the capital level?

[Guest cherzeca]

there are a lot of issues at play, legal, finance, govtal/regulatory policy, valuation, etc.  so we have a system of multiple variables and, as usual with such systems, nonlinear rationality. if you step back a step you will see that nothing has happened today (except perhaps in Sweeney's courtroom...we await the mp3). and so a price drop is welcome if you have more to allocate to the name.  if you are fully invested in name, then nothing happened today.  and as Luke intimates, anything can happen at anytime. though I am betting later rather than sooner

[TonyG]

I promised myself that I would stay at the position level I was at for the rest of this trade but man is it ever tempting

[Guest cherzeca]

I promised myself that I would stay at the position level I was at for the rest of this trade but man is it ever tempting

 

there is far more uncertainty than risk here...meaning you can try to measure variables (risk), but there is a lot of unpredictable resistant to measurement (uncertainty).  so it is wise to limit exposure to something tolerable in the event of loss.  to really abstract at 30,000 feet however, we learned what happened when the banks all went to single digits in GFC....they retraced back up because they were essential.  in 2017-202(3?), I expect the same thing will happen to GSEs, which are also essential and, finally, we have govtal actors who understand that they are (as opposed to the Obama/corker fools).  but this is a long game, which is why I resisted investorG and his short term inquiry.  if you cant play the long game (for whatever reason) then this is the wrong game. and while calabria gives too many talks and is too slow, doing a recalibration of the capital rule with a financial advisor on board makes a whole lot of sense

[Midas79]

and while calabria gives too many talks and is too slow, doing a recalibration of the capital rule with a financial advisor on board makes a whole lot of sense

 

Has FHFA hired its financial advisor yet?

[Guest cherzeca]

and while calabria gives too many talks and is too slow, doing a recalibration of the capital rule with a financial advisor on board makes a whole lot of sense

 

Has FHFA hired its financial advisor yet?

 

I have been looking for announcement since I am curious, but haven't seen it...should be soon

[investorG]

For those still excited about the near term outlook -- what specific catalyst do you see? 

 

The catalyst I see is the only one that really matters to pref holders: settlement.  Can happen at any moment without warning.

 

Thanks, Luke.  Sure, it's possible.  But not likely over the near term.  First, there's waiting for the SC ruling on whether it takes Collins.  Second, why slow play the capital rule finalization (post comments) until 2h 2020+ if you intend to settle in 1h 2020?  Calabria's more talented than taking 15 months from his start to get the capital rule in place -- it's clear to me that he's been told to slow play. 

 

Trump probably sided with the Kudlow and political wing during the summer.  I'm guessing Calabria is sympathetic to us and has tried to soften the timing delay announcements over the past 2 weeks by a) including consent decree statement last week and b) scheduling the capital rule disappointment on same day of what he perhaps hoped was a good day with Sweeney. 

 

Our response due to the SC in Collins next Friday should be interesting.  I wonder if our lawyers have tilted towards the higher risk higher potential reward outcome of directly or indirectly asking the SC to take the APA (and constitutional).

[SnarkyPuppy]

For those still excited about the near term outlook -- what specific catalyst do you see? 

 

The catalyst I see is the only one that really matters to pref holders: settlement.  Can happen at any moment without warning.

 

Thanks, Luke.  Sure, it's possible.  But not likely over the near term.  First, there's waiting for the SC ruling on whether it takes Collins.  Second, why slow play the capital rule finalization (post comments) until 2h 2020+ if you intend to settle in 1h 2020?  Calabria's more talented than taking 15 months from his start to get the capital rule in place -- it's clear to me that he's been told to slow play. 

 

Trump probably sided with the Kudlow and political wing during the summer.  I'm guessing Calabria is sympathetic to us and has tried to soften the timing delay announcements over the past 2 weeks by a) including consent decree statement last week and b) scheduling the capital rule disappointment on same day of what he perhaps hoped was a good day with Sweeney. 

 

Our response due to the SC in Collins next Friday should be interesting.  I wonder if our lawyers have tilted towards the higher risk higher potential reward outcome of directly or indirectly asking the SC to take the APA (and constitutional).

 

Can you help me understand why any of this matters in the end?  Maybe it gets addressed in 2021 instead of 2020.  Has anything about the end game changed?  Maybe I’m missing something.  Obviously sooner the better but the IRR at current prices is attractive under essentially any timeline. 

 

The only tangible risk of delay that seems reasonable to me is the passage of time increases a risk of an acute downturn in credit markets which impacts IPO process

[allnatural]

Bloomberg analyst attended the Sweeney hearing yesterday. He thinks shareholders are favored and the case will most likely proceed on multiple claims (flipped his view from last time) and we could see a ruling as soon as year end as Sweeney said she already had a draft ruling ready. https://m.imgur.com/a/ek0S9Q8