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

[james22]

Berkowitz went into these lawsuits hearing that it was going to be a brutal fight but even he underestimated how bad it would be:

One lawyer told me, 'Before this is over, you'll be bleeding from every orifice.' I just had a fundamental believe in a great country. I was sure the courts would come around. I remember having a conversation with a major player in investment banking - the guy used to be an assistant secretary of the Treasury. I told him, 'This isn't right.' He looked at me and said, 'Grow up. This is the big leagues.' It's like, what does right and wrong have to do with anything? I guess I was naive.

https://seekingalpha.com/article/4417293-tim-pagliara-stands-tall-gse-shareholder-golden-era

Tooth Fairy, Santa Claus, Rule of Law...

[TwoCitiesCapital]

Common is up 40% from its lows in February. Preferreds have been making small moves in the past few days. What does the market know about upcoming information? 

[orthopa]

Good question. Volume has been on the low side so maybe just some people who don't want to miss out early in the expected SCOTUS window. The market of course has the uncanny ability of pricing things in so maybe the SCOTUS will be good. The price was so low though that even a mildly positive decision would have bumped the price from where it was. 

The latest in the rumor mill was David Thompson was doing some calls. Not sure about what means specifically but maybe some action from that. 

 

[muscleman]

23 hours ago, orthopa said:

Good question. Volume has been on the low side so maybe just some people who don't want to miss out early in the expected SCOTUS window. The market of course has the uncanny ability of pricing things in so maybe the SCOTUS will be good. The price was so low though that even a mildly positive decision would have bumped the price from where it was. 

The latest in the rumor mill was David Thompson was doing some calls. Not sure about what means specifically but maybe some action from that. 

 

Hard to say. The whole stock market is set up for a straight line blow up move into August. FNMAS may just be getting lifted by the tide. Or maybe some insiders know something and started buying.

 

[TwoCitiesCapital]

So anyone have any update or thoughts on timing for SCOTUS now that early April has come and gone? 

[COBFInfinity]

On 4/13/2021 at 10:45 PM, TwoCitiesCapital said:

So anyone have any update or thoughts on timing for SCOTUS now that early April has come and gone? 

Don't know, but SCOTUS will release opinion(s) on at least one case next Thursday. Watch this calendar: https://www.scotusblog.com/events/

[TwoCitiesCapital]

On 4/16/2021 at 3:27 PM, COBFInfinity said:

Don't know, but SCOTUS will release opinion(s) on at least one case next Thursday. Watch this calendar: https://www.scotusblog.com/events/

If no Opinions are scheduled for May/June, does that mean this is dead in the water for at least another two months? Or does the calendar get updated with some frequency to suggest we might have a response sooner? 

[allnatural]

17 hours ago, TwoCitiesCapital said:

If no Opinions are scheduled for May/June, does that mean this is dead in the water for at least another two months? Or does the calendar get updated with some frequency to suggest we might have a response sooner? 

The calendar gets updated week of, to announce opinion dates. So expect no opinions this week, but nothing to read into for rest of May. June 30th is latest (57 days remaining and counting).

[MrSwankyPants]

23 hours ago, allnatural said:

The calendar gets updated week of, to announce opinion dates. So expect no opinions this week, but nothing to read into for rest of May. June 30th is latest (57 days remaining and counting).

Opinions will now be released on Mondays now that orals are over. So watch for announcements on Monday and Thursdays as opinions are written and released. 

[MrSwankyPants]

Some thoughts from today's SCTOUS opinions. Looks like December opinions were issued by Kavanaugh and Kagan this morning (Edwards and CIC). 

That leaves Barrett, Gorsuch, Thomas, Breyer, and Alito without any opinions from December's conferences. I very much believe Alito is very busy working on Fulton from November, and therefore I don't see him working on a major case like Collins as well (two huge cases back to back). The reason i believe this is that Fulton is a major religious liberties case, which Roberts tends to assign Alito to. 

 

So I'm guessing either Barrett, Gorsuch, Thomas, or Breyer will be the author of our case. Breyer hasn't written since October, so his schedule is open... 

 

Of course, there's no rule that a justice can't write two opinions each month, but looking at the trend for the term, it looks like Roberts has been handing things out fairly evenly (outside of October where Barrett didn't get any assignments). 

Would love to see Gorsuch or Thomas write Collins.... 

[MrSwankyPants]

Any ideas why this opinion is taking so long? 

[sholland]

This message board has been unusually quiet lately. Am I the only one trembling with greed with the prospect of SCOTUS agreeing with the 9 of the 16 5th Circuit judges that the NWS was an ultra vires action?

 

I noticed that the 5th Circuit has 10 judges appointed by Reagan, Bush, or Trump and 6 judges appointed by Clinton or Obama.

 

9 of the 10 consecutive judges agreed that the NWS was an ultra vires action. 

All 6 six of the liberal judges disagreed.

 

Doesn’t this mean that we can expect SCOTUS to rule 6-3 or 5-4 along party lines that the NWS was ultra vires?

[typicalvalue]

On 5/29/2021 at 11:18 PM, sholland said:

This message board has been unusually quiet lately. Am I the only one trembling with greed with the prospect of SCOTUS agreeing with the 9 of the 16 5th Circuit judges that the NWS was an ultra vires action?

 

I noticed that the 5th Circuit has 10 judges appointed by Reagan, Bush, or Trump and 6 judges appointed by Clinton or Obama.

 

9 of the 10 consecutive judges agreed that the NWS was an ultra vires action. 

All 6 six of the liberal judges disagreed.

 

Doesn’t this mean that we can expect SCOTUS to rule 6-3 or 5-4 along party lines that the NWS was ultra vires?

Added a bit on post Jan dip, this one represent 90% of my portfolio, so have few room to add more. Agree on your arguments, thats my base case right now. This month we will se how this ends.

[muscleman]

22 hours ago, typicalvalue said:

Added a bit on post Jan dip, this one represent 90% of my portfolio, so have few room to add more. Agree on your arguments, thats my base case right now. This month we will se how this ends.

90% of your portfolio? That's insane! You seem to have high confidence on law and order, which hasn't happened for such a long time.

[james22]

Looks like we might get a SCOTUS ruling 10am ET tomorrow.

*fingers crossed*

[sholland]

18 hours ago, muscleman said:

90% of your portfolio? That's insane! You seem to have high confidence on law and order, which hasn't happened for such a long time.

While I would never encourage anyone to make this a 90% position, I wouldn’t call it insane if someone has a high risk tolerance.  If SCOTUS agrees with 9 of the 16 5th circuit judges that the NWS is an ultra vires action then the stock goes up bigly this month.  If SCOTUS rules that the NWS is within FHFA’s statutory authority, then the plantiffs will be asking for liquidation preferences + interest @ around 9% per annum in the other court cases.  Only Receivership can take away the preferred shareholders’ liquidation preferences.  Receivership is extremely unlikely because Receivership will cause nearly $6T to be added to the national debt.

[gfp]

I haven't followed this closely as you folks have, but it appears no opinion out of SCOTUS today.  correct?

[Sunrider]

48 minutes ago, gfp said:

I haven't followed this closely as you folks have, but it appears no opinion out of SCOTUS today.  correct?

Seems like it - only one opinion published.

@cherzeca - has it happened before that opinion only arrives in next term?

[james22]

Elusive.

[TwoCitiesCapital]

4 hours ago, james22 said:

Elusive.

The wait that never ends

[typicalvalue]

On 6/3/2021 at 11:54 AM, sholland said:

While I would never encourage anyone to make this a 90% position, I wouldn’t call it insane if someone has a high risk tolerance.  If SCOTUS agrees with 9 of the 16 5th circuit judges that the NWS is an ultra vires action then the stock goes up bigly this month.  If SCOTUS rules that the NWS is within FHFA’s statutory authority, then the plantiffs will be asking for liquidation preferences + interest @ around 9% per annum in the other court cases.  Only Receivership can take away the preferred shareholders’ liquidation preferences.  Receivership is extremely unlikely because Receivership will cause nearly $6T to be added to the national debt.

Thats my rationale. There is only a low possibility that kills me (recievership).  This a perpetual option with strike at par when restructuring kicks in and many ways to win through judicial action if admin is not keen to recap the GSES. Willing to handle vol. Know many investors involved that are betting big, not just me (other than Glen Bradford ofc). Having said that huge concentration is risky.

Also think that the amount of brain damage and work that this trade requires is not worthy if you don't make this at least 20% of your portfolio. 

Edited June 4, 2021 by typicalvalue

[TwoCitiesCapital]

3 hours ago, typicalvalue said:

Thats my rationale. There is only a low possibility that kills me (recievership).  This a perpetual option with strike at par when restructuring kicks in and many ways to win through judicial action if admin is not keen to recap the GSES. Willing to handle vol. Know many investors involved that are betting big, not just me (other than Glen Bradford ofc). Having said that huge concentration is risky.

Also think that the amount of brain damage and work that this trade requires is not worthy if you don't make this at least 20% of your portfolio. 

Started off as a 10-15% position for me. Has receded over the years as my opportunistic adds have not kept up with my overall portfolio growth in other positions. 

Quite honestly, the brain damage for me would have been worse if it had been larger. It's been frustrating watching this languish and do nothing for ~10-years.

Obviously I'll regret not having more of it IF we get the outcome we want, but I have to ask myself at what cost? I would feel way worse if I had 30% of my portfolio in this for the last 10-years instead of 10-15%. And while resolution seems around the corner and I did add a hair recently, it's ALWAYS seemed like resolution was around the corner for the last 10-years and we've been wrong the whole way so far. What matters is the outcome, but you have to survive the journey too!

[typicalvalue]

23 minutes ago, TwoCitiesCapital said:

Started off as a 10-15% position for me. Has receded over the years as my opportunistic adds have not kept up with my overall portfolio growth in other positions. 

Quite honestly, the brain damage for me would have been worse if it had been larger. It's been frustrating watching this languish and do nothing for ~10-years.

Obviously I'll regret not having more of it IF we get the outcome we want, but I have to ask myself at what cost? I would feel way worse if I had 30% of my portfolio in this for the last 10-years instead of 10-15%. And while resolution seems around the corner and I did add a hair recently, it's ALWAYS seemed like resolution was around the corner for the last 10-years and we've been wrong the whole way so far. What matters is the outcome, but you have to survive the journey too!

Understand the frustation, started the journey on dec 2019, I've been holding for less than 2 years so not as burnt as many of you that've been holding for 10 years+ in an endless bull market. IRR on this investment has been awful and with so many headaches on the journey. My base case is that in 8 year timeframe if we reach par/exchange I get market beating returns on my portfolio (+15% IRR). Could be very well wrong and end this will continue to be an endless purgatory, but paying 20 cents on the dollar does not seem demanding. Also SCOTUS could be the catalyst we are waiting to force restructuring.

Edited June 4, 2021 by typicalvalue

[james22]

Same here.

Initially 10% back in early 2019, half that now.

Think of doubling bet again as we seem so close, but my faith in the Rule of Law has been sorely tested of late.

 

[james22]

Opinions on Mon and Thurs next week.