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

[Guest cherzeca]

govt reply to perry second motion for judicial notice:  http://www.glenbradford.com/wp-content/uploads/2016/06/14-5243-1618181.pdf

[Steve_Berk]

well this is one case where I think you'll have a strong indication of what the outcome will be based on what you hear during the oral arguments. Get ready folks--this one's gonna be very interesting....

 

I know it's unhealthy to be speculating, but given he's so eager and ready to rule, I think it means that he must feel strongly about the issue one way or another.

 

So the question is, is it possible to feel strongly in favor of the Govt? I suppose so - John Carney does. Lamberth did, but then Lamberth didn't have the benefit of the unsealed documents from Sweeney which obviously favor the plaintiffs. And like you said, cherzeca, Lamberth refused to have oral arguments whereas Thapur is willing to.

 

Again just speculation but it seems to me that he's leaning towards us.

 

i would agree with you.  however, what i think it really means is that he had already done his research (or read his clerk's) and did not see that it would take long to write opinion.  but yes, if i had to guess, i would say he would deny MTD.  after all, i have a bias...:>)

[Mephistopheles]

govt reply to perry second motion for judicial notice:  http://www.glenbradford.com/wp-content/uploads/2016/06/14-5243-1618181.pdf

 

Plaintiffs also reiterate their mistaken assertion that the Third Amendment

allowed taxpayers to “reap massive, windfall profits.” Pls. Mot. 5. The facts again

show otherwise. Between 2008 and 2011, Treasury invested $187.5 billion in the

GSEs. J.A. 2411 (TR4351). Through the first quarter of 2016, Treasury has received

$245.6 billion in dividends, which equates to an annual rate of return of around 7.5%.

Given the size and risk of Treasury’s investment into the failing enterprises—an

investment private investors were unwilling to make—a 7.5% annual return is far

from a windfall. Indeed, a 7.5% annual return is below what plaintiffs have

historically earned for their investors. See The Fairholme Fund Facts (Mar. 31, 2016),

USCA Case #14-5243 Document #1618181 Filed: 06/08/2016 Page 6 of 9

7

at 1 (stating the Fairholme Fund has earned a 9.47% annualized return since its

inception);3

James Palmer, Looking Back at Perry Capital’s Credit Fund Pitch, Absolute

Return, 2014 WLNR 37475078 (Aug, 19, 2014) (stating that the “onshore” version of

Perry Capital’s flagship fund has produced a net annualized return of 12.58% since its

inception, while the “offshore” version has produced 11.65% annual returns).

 

It seems to me that they aren't including any future returns and simply counting the $187.5 invested vs the $245.6 dividends to date.

 

What a bunch of garbage. Are plaintiffs allowed to file another brief in order to reply to this nonsense?

 

It's easy for us to notice the obvious error but I fear that non-finance people (the judges) will only see this at face value!

[hardincap]

govt reply to perry second motion for judicial notice:  http://www.glenbradford.com/wp-content/uploads/2016/06/14-5243-1618181.pdf

 

"The Fairholme Funds plaintiffs had access to these additional materials before they filed their first motion. At no point do they explain why they waited until after briefing and oral argument to expand their original request to supplement the record."

 

this is strange. if they had access to these materials why didnt they give judicial notice earlier?

 

 

[morningstar]

govt reply to perry second motion for judicial notice:  http://www.glenbradford.com/wp-content/uploads/2016/06/14-5243-1618181.pdf

 

Plaintiffs also reiterate their mistaken assertion that the Third Amendment

allowed taxpayers to “reap massive, windfall profits.” Pls. Mot. 5. The facts again

show otherwise. Between 2008 and 2011, Treasury invested $187.5 billion in the

GSEs. J.A. 2411 (TR4351). Through the first quarter of 2016, Treasury has received

$245.6 billion in dividends, which equates to an annual rate of return of around 7.5%.

Given the size and risk of Treasury’s investment into the failing enterprises—an

investment private investors were unwilling to make—a 7.5% annual return is far

from a windfall. Indeed, a 7.5% annual return is below what plaintiffs have

historically earned for their investors. See The Fairholme Fund Facts (Mar. 31, 2016),

USCA Case #14-5243 Document #1618181 Filed: 06/08/2016 Page 6 of 9

7

at 1 (stating the Fairholme Fund has earned a 9.47% annualized return since its

inception);3

James Palmer, Looking Back at Perry Capital’s Credit Fund Pitch, Absolute

Return, 2014 WLNR 37475078 (Aug, 19, 2014) (stating that the “onshore” version of

Perry Capital’s flagship fund has produced a net annualized return of 12.58% since its

inception, while the “offshore” version has produced 11.65% annual returns).

 

It seems to me that they aren't including any future returns and simply counting the $187.5 invested vs the $245.6 dividends to date.

 

What a bunch of garbage. Are plaintiffs allowed to file another brief in order to reply to this nonsense?

 

It's easy for us to notice the obvious error but I fear that non-finance people (the judges) will only see this at face value!

 

Even a pretty generous assumption about the gov'ts future returns (say, that their current preferred is worth face and their warrants are worth the stock price) gets you a total return not inconsistent with equities over the period - I don't know that a group of hedge fund plaintiffs want to spend time arguing about what constitutes a windfall.

[Mephistopheles]

Even a pretty generous assumption about the gov'ts future returns (say, that their current preferred is worth face and their warrants are worth the stock price) gets you a total return not inconsistent with equities over the period - I don't know that a group of hedge fund plaintiffs want to spend time arguing about what constitutes a windfall.

 

Without the NWS you have 10% + whatever the 80% stake is, which would certainly be higher than the current stock price. Or even with the NWS in which case the Junior Prefs are zero and assuming they can raise guarantee fees and hold little capital, that number is significantly more than 7.5%. I'd argue it would be better than market returns because imo they are above average businesses.

 

But that's a separate topic. I just find it awful that they can blatantly mislead Federal judges and get away with it.

[Guest cherzeca]

I thought the govt's assertion re rate of return was embarrassing. I do expect Ps to follow up. Tho not sure local rules permit.

[Guest cherzeca]

govt reply to perry second motion for judicial notice:  http://www.glenbradford.com/wp-content/uploads/2016/06/14-5243-1618181.pdf

 

Plaintiffs also reiterate their mistaken assertion that the Third Amendment

allowed taxpayers to “reap massive, windfall profits.” Pls. Mot. 5. The facts again

show otherwise. Between 2008 and 2011, Treasury invested $187.5 billion in the

GSEs. J.A. 2411 (TR4351). Through the first quarter of 2016, Treasury has received

$245.6 billion in dividends, which equates to an annual rate of return of around 7.5%.

Given the size and risk of Treasury’s investment into the failing enterprises—an

investment private investors were unwilling to make—a 7.5% annual return is far

from a windfall. Indeed, a 7.5% annual return is below what plaintiffs have

historically earned for their investors. See The Fairholme Fund Facts (Mar. 31, 2016),

USCA Case #14-5243 Document #1618181 Filed: 06/08/2016 Page 6 of 9

7

at 1 (stating the Fairholme Fund has earned a 9.47% annualized return since its

inception);3

James Palmer, Looking Back at Perry Capital’s Credit Fund Pitch, Absolute

Return, 2014 WLNR 37475078 (Aug, 19, 2014) (stating that the “onshore” version of

Perry Capital’s flagship fund has produced a net annualized return of 12.58% since its

inception, while the “offshore” version has produced 11.65% annual returns).

 

It seems to me that they aren't including any future returns and simply counting the $187.5 invested vs the $245.6 dividends to date.

 

What a bunch of garbage. Are plaintiffs allowed to file another brief in order to reply to this nonsense?

 

It's easy for us to notice the obvious error but I fear that non-finance people (the judges) will only see this at face value!

 

Even a pretty generous assumption about the gov'ts future returns (say, that their current preferred is worth face and their warrants are worth the stock price) gets you a total return not inconsistent with equities over the period - I don't know that a group of hedge fund plaintiffs want to spend time arguing about what constitutes a windfall.

 

disagree mstar

 

litigation is often called a liar's game because counsel try to stretch the truth when it doesnt fall to your side.  judges are looking to see if the lawyers are making credible arguments, both on the basis of the law (which they can check readily), and on the basis of the facts (upon which judges rely on counsel unless the case goes to trial and testimony is heard, at which point the judge/jury can decide for self).

 

to have the treasury make such a faulty assertion regarding the nws investment return, which any cfa could point out was in error, goes to the credibility of treasury, which is already at issue given the death spiral narrative.

 

i would hammer in a reply brief.  now, since all of this is already beyond the point when the appeal is submitted, i dont know how much of this the appeals ct will want to read.

[merkhet]

Not that it matters that much, IMHO, but for comparison's sake:

 

S&P 500 from September 7, 2008 to now is +68.34%

Net Worth Sweep return from '08 to now is +130.99%

 

I calculated Net Worth Sweep the way that the Treasury currently does by adding the $245.6 billion in dividends purely as a return on capital and then $187.5 billion as a return of capital.

[doughishere]

Not that it matters that much, IMHO, but for comparison's sake:

 

from September 7, 2008 to now is +68.34%

Net Worth Sweep return from '08 to now is +130.99%

 

I calculated Net Worth Sweep the way that the Treasury currently does by adding the $245.6 billion in dividends purely as a return on capital and then $187.5 billion as a return of capital.

 

someone should fast forward that post to the lawyers and journos...a picture of that that should be posted the business section right next to every article talking about fannie and freddie.......Nice return, Hank. Whose the real MVP? As a tax payer, I think we should slice off a cut for Hank and the whole administration that made that possible. IMO. Could you imagine the fees the whole team would get if they weren't working for the govt. 

 

 

 

Everyone wants to make the biggest deal in finance and that folks is a whopper....whats it look like w/o the sweep?

 

 

2x the S&P 500 is basically twice as good as everyone else....well the collective average of everyone else.

 

 

Berkshire Hathaway is up about +84%

 

[Guest cherzeca]

Not that it matters that much, IMHO, but for comparison's sake:

 

S&P 500 from September 7, 2008 to now is +68.34%

Net Worth Sweep return from '08 to now is +130.99%

 

I calculated Net Worth Sweep the way that the Treasury currently does by adding the $245.6 billion in dividends purely as a return on capital and then $187.5 billion as a return of capital.

 

just a quick and dirty calculation, that ignores that treasury reaped huge dividends early on in the investment. $245MM divided by 188MM=131% total return, divided by 7.5 years= 17.5% simple annual return.

 

the 7.5% annual return cited by treasury is impossible to justify.  why would you assume that the principal is worthless where fnma generate $11B per annum available for future dividends.

[Mephistopheles]

Not that it matters that much, IMHO, but for comparison's sake:

 

S&P 500 from September 7, 2008 to now is +68.34%

Net Worth Sweep return from '08 to now is +130.99%

 

I calculated Net Worth Sweep the way that the Treasury currently does by adding the $245.6 billion in dividends purely as a return on capital and then $187.5 billion as a return of capital.

 

just a quick and dirty calculation, that ignores that treasury reaped huge dividends early on in the investment. $245MM divided by 188MM=131% total return, divided by 7.5 years= 17.5% simple annual return.

 

the 7.5% annual return cited by treasury is impossible to justify.  why would you assume that the principal is worthless where fnma generate $11B per annum available for future dividends.

 

You can't justify it because it's a straight up lie. Also, the government the whole time has been arguing that the NWS are dividends on the $187.5 principle. In fact Ugoletti had the nerve to say in his deposition that the companies have made no payments towards the principal. So then how can they calculate a rate of return that assumes it's been paid back?

[Eye4Valu]

Based on everything the Treasury has done and alleged, I wouldn't count on anything being truthful in their motions, briefs, etc.

[Guest cherzeca]

http://seekingalpha.com/article/3981338-u-s-treasury-flunks-finance-101-gse-litigation

[colinwalt]

http://seekingalpha.com/article/3981338-u-s-treasury-flunks-finance-101-gse-litigation

 

+1

[Luke 532]

http://seekingalpha.com/article/3981338-u-s-treasury-flunks-finance-101-gse-litigation

 

Nice work!

[doughishere]

 

Chapman:

 

The government delivered a fresh Declaration to Judge Sweeney this afternoon, and a copy of that Declaration is attached to this e-mail message.

 

Nicholas L. McQuaid, Deputy White House Counsel, tells Judge Sweeney that the presidential communications privilege appropriately attaches to two documents and the redacted portions of two other documents the government has withheld from Fairholme.

 

13-465-0333.pdf

[SnarkyPuppy]

You should tag the SA article with @FNMA for visibility.

[SnarkyPuppy]

I actually think it would consistent with Trump's theme of pointing out "corruption" and timely given Obama's recent endorsement to highlight some high-level facts about the GSE fiasco and draw parallels to Obama->Clinton.  Simply could point out hiding 12,000 documents, can point to @joshrosner work "implying" (as trump does so well) that the government took FNMA to fund Obamacare, etc. 

 

I think summarized in a very succinct way, he could use this to his advantage as further direct evidence of his "corruption" theme.  Question is - how aware is he / what is the best way to increase visibility?

 

Of course, I'm thinking about this for selfish reason and may be having some bias on its true weight. 

[doughishere]

The real question becomes this 1) Even if they thought they correctly calculated the return...do you want them running things with the ineptitude in a basic calculation?....or 2) are they being dishonest and deceitful in the returns that they have gotten......in which case do you really want them running things if they are disingenuous?

 

 

These are Treasury officials....if they cant correctly calculate the return they get back then they really should hand their degrees back to the universities that gave it to them.

[Guest cherzeca]

OT but worth a read imo:  http://fooledbyrandomness.com/AUBCommencement.pdf

 

(i find nassim to be very relevant to investing in GSEs, more os than buffett, marks, etc)

 

[doughishere]

OT but worth a read imo:  http://fooledbyrandomness.com/AUBCommencement.pdf

 

(i find nassim to be very relevant to investing in GSEs, more os than buffett, marks, etc)

 

If  someone  wonders  who  are  the  Stoics  I’d  say Buddhists  with  an  attitude  problem

[merkhet]

http://thehill.com/blogs/congress-blog/economy-budget/283271-why-we-need-to-move-past-recap-and-release

[Guest cherzeca]

http://thehill.com/blogs/congress-blog/economy-budget/283271-why-we-need-to-move-past-recap-and-release

 

as per stevens:  "The hedge funds promoting recap and release have initiated a cynical, expensive PR and lobbying campaign to divide and conquer us, trying to peel off certain vulnerable groups with distorted rhetoric and pie in the sky promises."

 

cynical and expensive lobbying, stevens would know.  peeling off vulnerable groups with pie in the sky promises? what's this, if not condescending reference to poor and minorities who dont know better.

 

more he writes, the better i like it.

[merkhet]

I think what's interesting is the following:

 

Perhaps more importantly, were FHFA Director Mel Watt to act unilaterally, the political backlash from Capitol Hill could put housing at even greater risk.

 

Is there chatter that Mel Watt is thinking about acting unilaterally?