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

[blackcoffee]

@cherzeca after losing so many court cases, the thesis shifted from legal resolution to political. The former is generally simpler and easier to handicap, so in that regard it makes sense to me that it is trading less than pre perry ruling. Politicians are fickle and the political landscape can change disorientingly quickly

 

ok, except the thesis is now both legal and political

 

are we all finally figuring out that those two things are basically the same?

 

I still believe in checks and balances. Looking forward to both spheres of influence righting this wrong.

 

what you know, that just ain't so.

[Eye4Valu]

@cherzeca after losing so many court cases, the thesis shifted from legal resolution to political. The former is generally simpler and easier to handicap, so in that regard it makes sense to me that it is trading less than pre perry ruling. Politicians are fickle and the political landscape can change disorientingly quickly

 

ok, except the thesis is now both legal and political

 

are we all finally figuring out that those two things are basically the same?

 

I still believe in checks and balances. Looking forward to both spheres of influence righting this wrong.

 

what you know, that just ain't so.

 

what you write, that just ain't right.

[muscleman]

I am completely sold out. As I said in another thread, after all these years' of ups and downs, i no longer believe in value investing. I am reading some concerns through my technical analysis in the last few trading days, so I unloaded. This is extremely puzzling because if I rely 100% on fundamentals, I should have been buying hand over fist right here. Let's see what happens next. Maybe I am missing a large chunk of profits here.  ::)

[allnatural]

For what it's worth, congratulations on a successfull trade! At 20-25% of par you were paying for extremely cheap optionality that over the last month got rerated. No one ever lost money taking profits!

 

I am completely sold out. As I said in another thread, after all these years' of ups and downs, i no longer believe in value investing. I am reading some concerns through my technical analysis in the last few trading days, so I unloaded. This is extremely puzzling because if I rely 100% on fundamentals, I should have been buying hand over fist right here. Let's see what happens next. Maybe I am missing a large chunk of profits here.  ::)

[SnarkyPuppy]

...i no longer believe in value investing

 

I am reading some concerns through my technical analysis in the last few trading days

 

 

[rros]

Little OT, if I may... Could anyone share Seth Klarman's last letter to shareholders if been able to access it, please?

[rros]

I am completely sold out. As I said in another thread, after all these years' of ups and downs, i no longer believe in value investing. I am reading some concerns through my technical analysis in the last few trading days, so I unloaded. This is extremely puzzling because if I rely 100% on fundamentals, I should have been buying hand over fist right here. Let's see what happens next. Maybe I am missing a large chunk of profits here.  ::)

Good luck.

 

Before we know it, we will be adding 1 page per week to this thread. Instead of 3 a day.

[Luke 532]

I am completely sold out. As I said in another thread, after all these years' of ups and downs, i no longer believe in value investing. I am reading some concerns through my technical analysis in the last few trading days, so I unloaded. This is extremely puzzling because if I rely 100% on fundamentals, I should have been buying hand over fist right here. Let's see what happens next. Maybe I am missing a large chunk of profits here.  ::)

Good luck.

 

Before we know it, we will be adding 1 page per week to this thread. Instead of 3 a day.

 

True, because when it's at par many of us will sell and leave.  ;)

[rros]

I am completely sold out. As I said in another thread, after all these years' of ups and downs, i no longer believe in value investing. I am reading some concerns through my technical analysis in the last few trading days, so I unloaded. This is extremely puzzling because if I rely 100% on fundamentals, I should have been buying hand over fist right here. Let's see what happens next. Maybe I am missing a large chunk of profits here.  ::)

Good luck.

 

Before we know it, we will be adding 1 page per week to this thread. Instead of 3 a day.

 

True, because when it's at par many of us will sell and leave.  ;)

Oh, well... it's going to be Emily and me then... discussing what to do with our dividends :)

[Guest cherzeca]

while I expected GSEs to trade down before collins decision and admin plan revealed, did I miss any news that is causing current downdraft?

[Luke 532]

while I expected GSEs to trade down before collins decision and admin plan revealed, did I miss any news that is causing current downdraft?

 

Just a Mark Zandi hit piece floating around out there.

[hardincap]

@cherzeca hard for me to believe treasury & en banc judges + staff can keep things a secret until release date. if there is high volume persistent selling id have to think there was a leak of an adverse ruling/development...(just like pre-lamberth)

[DRValue]

while I expected GSEs to trade down before collins decision and admin plan revealed, did I miss any news that is causing current downdraft?

 

No new news and a psychological $3 resistance.

[rros]

This looks to me still like a high level consolidation, no? Before moving higher... like 4Q16.

[Guest cherzeca]

@cherzeca hard for me to believe treasury & en banc judges + staff can keep things a secret until release date. if there is high volume persistent selling id have to think there was a leak of an adverse ruling/development...(just like pre-lamberth)

 

you would think so.  as for admin staff, unless otting is way wrong, it seems a lot of work has already been done on that without a lot of leaking...may be a small group.

 

as for collins, try this:  on 1/24 the All American case (arguing the CFPB is unconstitutionally structured) was calendared by 5th circuit for oral argument en banc (to be argued 3/12). All American had requested an original hearing en banc, which is highly unusual, and the 5th circuit just granted it the day after the Collin en banc oral argument. 

 

did the 5th circuit collins en banc hold a conference after the oral argument on 1/23 and decide to rule only on the collins APA claim and not the constitutional claim (if so, necessarily in favor of Ps on APA claim if not deciding the collins constitutional claim)? and decide to defer any constitutional adjudication to an en banc hearing of All American?  in certain ways, all American is a "cleaner" case to rule on.  why hear all American const. claim en banc in an original hearing if you just heard collins const. claim en banc and anticipated ruling on it?  if collins en banc ruling on const. claim comes out, then an all American merits panel would have been bound by it...no need for it to be en banc.

 

or is all this a coincidence?

 

[hardincap]

woudnt you have to assume all judges come to agreement on APA within hours of oral hearing? seems far fetched to me, and more likely that judges want to hear the oral arg on constitutional claim to inform them on how to proceed with collins

 

re admin staff: yes alot of work already done, but id imagine they need to pull in more staff members to finalize. perhaps give heads up to their friends (pull a hank paulson)

[undervalued]

https://www.marketwatch.com/story/as-fannie-freddie-reform-gets-underway-here-are-the-three-big-questions-for-the-housing-market-2019-01-29?siteid=yhoof2&yptr=yahoo

 

The 2008 law that put Fannie and Freddie into conservatorship in the first place specifies that the two companies must technically be liquidated if they are to exit government control, according to Karen Shaw Petrou, who runs financial services advisory Federal Financial Analytics. But as to what happens next, and whether the housing finance system is still underpinned by the powerful twins, is the biggest question facing the market right now.

[Guest cherzeca]

"woudnt you have to assume all judges come to agreement on APA within hours of oral hearing?"

 

9 judges, or 8 more than willets who wrote the APA dissent in the merits panel.  en banc courts just like scotus hold conferences right after oral argument and take preliminary votes and assign opinion writing duties...otherwise there would be chaos given the number of judges.  not far fetched at all.  though scheduling all American en banc in an original hearing may just have been coincidental.

[allnatural]

It never ceases to amazes me how offbase these "experts" are. Do you really believe the only way an entity can exit conservatorship is via liquidation?... She is confusing receivership with conservatorship.

 

 

https://www.marketwatch.com/story/as-fannie-freddie-reform-gets-underway-here-are-the-three-big-questions-for-the-housing-market-2019-01-29?siteid=yhoof2&yptr=yahoo

 

The 2008 law that put Fannie and Freddie into conservatorship in the first place specifies that the two companies must technically be liquidated if they are to exit government control, according to Karen Shaw Petrou, who runs financial services advisory Federal Financial Analytics. But as to what happens next, and whether the housing finance system is still underpinned by the powerful twins, is the biggest question facing the market right now.

[Luke 532]

*TRUMP ADMIN TO UNVEIL FANNIE, FREDDIE OVERHAUL PLAN SOON: DJ

*DJ CITES WHITE HOUSE SPOX ON FANNIE, FREDDIE PLANS: DJ

*WHITE HOUSE TO WORK WITH CONGRESS ON FANNIE, FREDDIE CHANGES:DJ

[Wiggins]

Why is the prospect of receivership so far fetched?

The administration could tweak required capital levels or fiddle with some other controls of the GSEs in such a way that mandatory receivership is invoked under HERA, which would then give them authority to sell the core business to a clean LLC. That intention could be announced Friday.

The preferred shareholders could continue to fight it in court, and if they won 100% of their claims it would amount to ~33 billion, a capped liability for FHFA/Treasury.

 

To me, this is the greatest threat. I would love to be told I am wrong.  I see it as unlikely and yet as a distinct possibility.

[DRValue]

*TRUMP ADMIN TO UNVEIL FANNIE, FREDDIE OVERHAUL PLAN SOON: DJ

*DJ CITES WHITE HOUSE SPOX ON FANNIE, FREDDIE PLANS: DJ

*WHITE HOUSE TO WORK WITH CONGRESS ON FANNIE, FREDDIE CHANGES:DJ

 

Source? DJ?

[Guest cherzeca]

so we now wait for plan release.

 

question to me is whether "working with congress" presents a policy content issue or a timing issue.  there may be a few things in the plan that require congressional approval (mbs gtee)

[Midas79]

Why is the prospect of receivership so far fetched?

 

This doesn't comport with Otting's statement about going from $6B in capital to $150-200B. While yes, the new companies would have to be capitalized after receivership, they wouldn't start with $6B because that money would flow to equity holders in the current companies.

 

The administration could tweak required capital levels or fiddle with some other controls of the GSEs in such a way that mandatory receivership is invoked under HERA, which would then give them authority to sell the core business to a clean LLC.

 

All it would take is setting capital standards and then declaring FnF critically undercapitalized.

 

The preferred shareholders could continue to fight it in court, and if they won 100% of their claims it would amount to ~33 billion, a capped liability for FHFA/Treasury.

 

To me, this is the greatest threat. I would love to be told I am wrong.  I see it as unlikely and yet as a distinct possibility.

 

I agree in that it's not completely off the table yet. Just about all of Mnuchin's and Otting's words can be twisted to support a receivership narrative. A Moelis-like plan, though, fits with all of them, especially Otting's $150-200B capital requirement.

 

The prefs are still at least worth 2/3 of par in receivership by a back-of-the-envelope calculation: $6B in capital now plus $16.1B from overpayments past the 10% moment. If there is a Moelis-like resolution the pref plaintiffs won't bother contesting the $16.1B (they would get around par anyway), but in receivership the gloves will come off.

 

 

What has me frustrated here is the announcement that the White House will work with Congress. When will this administration ever learn?? There is absolutely zero point in talking about a plan that the White House, Treasury, Otting, and Calabria have signed off on if they're going to bother to get Congress involved. What can Congress even do, short of passing a law that might not give Trump exactly what he wants? Craziness.

[Luke 532]

so we now wait for plan release.

 

question to me is whether "working with congress" presents a policy content issue or a timing issue.  there may be a few things in the plan that require congressional approval (mbs gtee)

 

My thoughts exactly.  I bet Otting still stops the sweep in the plan that will soon be revealed, but Admin works with Congress on some of the other details.