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


twacowfca

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Guest cherzeca

Mnuchin calling BS on the title of the hearing (attached)...

 

Hearing: The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America

Tuesday 10:00am (Eastern), live link:

 

maxine and Mnuchin must see tv; popcorn optional. 

 

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Guest cherzeca

is the official deadline for the government to appeal the Collins APA decision to the Supreme Court next week or 90 days from the en banc ruling?

 

I am not sure, but this is what I think.  Mandate issue date is 10/29/2019 per the docket.  so in 7 days the federal district court will receive an order to implement the holding of the en banc.  as far as I know, once that mandate is issued, judge atlas must saddle up and proceed, probably first with a initial scheduling conference.  moreover, since the APA holding is not a final judgment, I dont believe any petition by fhfa for cert would be accepted by scotus.  there likely won't be a petition by treasury either since this would be done by the solicitor general, who as normal practice doesn't file cert petitions on interlocutory orders.

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imo the antagonism today regarding shareholders from some dem congresspersons (and the responses from Calabria / mnuchin) suggests a) avoiding some discount to par for jr pref is probably unrealistic (as the current share prices suggest) and b) a potential 4th amendment likely has to accompany (at the same time) some private capital raise so that the administration has some cover on why certain adjustments were required.

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imo the antagonism today regarding shareholders from some dem congresspersons (and the responses from Calabria / mnuchin) suggests a) avoiding some discount to par for jr pref is probably unrealistic (as the current share prices suggest) and b) a potential 4th amendment likely has to accompany (at the same time) some private capital raise so that the administration has some cover on why certain adjustments were required.

 

Why?  Shareholders will have to agree to any discount, whereas congress has no practical ability to insert if there is no discount.

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imo the antagonism today regarding shareholders from some dem congresspersons (and the responses from Calabria / mnuchin) suggests a) avoiding some discount to par for jr pref is probably unrealistic (as the current share prices suggest) and b) a potential 4th amendment likely has to accompany (at the same time) some private capital raise so that the administration has some cover on why certain adjustments were required.

 

Why?  Shareholders will have to agree to any discount, whereas congress has no practical ability to insert if there is no discount.

 

many reasons.  there is still geniune hope to work with congress and so their opinions matters a small bit at least.  whether fair or not there is a visible conflict regarding paulson and his admin relationship.  mnuchin's responses and tone today suggests a serious negotiating posture.  and (hopefully) the large power players aren't greedy and would accept some discount to par to help the process move along. 

 

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Guest cherzeca

imo the antagonism today regarding shareholders from some dem congresspersons (and the responses from Calabria / mnuchin) suggests a) avoiding some discount to par for jr pref is probably unrealistic (as the current share prices suggest) and b) a potential 4th amendment likely has to accompany (at the same time) some private capital raise so that the administration has some cover on why certain adjustments were required.

 

Why?  Shareholders will have to agree to any discount, whereas congress has no practical ability to insert if there is no discount.

 

many reasons.  there is still geniune hope to work with congress and so their opinions matters a small bit at least.  whether fair or not there is a visible conflict regarding paulson and his admin relationship.  mnuchin's responses and tone today suggests a serious negotiating posture.  and (hopefully) the large power players aren't greedy and would accept some discount to par to help the process move along.

 

This was one democratic rep who wants to wipe out shareholders. Yawn

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imo the antagonism today regarding shareholders from some dem congresspersons (and the responses from Calabria / mnuchin) suggests a) avoiding some discount to par for jr pref is probably unrealistic (as the current share prices suggest) and b) a potential 4th amendment likely has to accompany (at the same time) some private capital raise so that the administration has some cover on why certain adjustments were required.

 

Why?  Shareholders will have to agree to any discount, whereas congress has no practical ability to insert if there is no discount.

 

many reasons.  there is still geniune hope to work with congress and so their opinions matters a small bit at least.  whether fair or not there is a visible conflict regarding paulson and his admin relationship.  mnuchin's responses and tone today suggests a serious negotiating posture.  and (hopefully) the large power players aren't greedy and would accept some discount to par to help the process move along.

 

This was one democratic rep who wants to wipe out shareholders. Yawn

 

the market's not yawning with some jr pref @ 40pct of par.  Even with all of the justifications offered, the market is clearly saying -- despite the en banc ruling and a major pause in the sweep -- that the potential upside target price during this administration is somewhere below par.

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imo the antagonism today regarding shareholders from some dem congresspersons (and the responses from Calabria / mnuchin) suggests a) avoiding some discount to par for jr pref is probably unrealistic (as the current share prices suggest) and b) a potential 4th amendment likely has to accompany (at the same time) some private capital raise so that the administration has some cover on why certain adjustments were required.

 

Why?  Shareholders will have to agree to any discount, whereas congress has no practical ability to insert if there is no discount.

 

many reasons.  there is still geniune hope to work with congress and so their opinions matters a small bit at least.  whether fair or not there is a visible conflict regarding paulson and his admin relationship.  mnuchin's responses and tone today suggests a serious negotiating posture.  and (hopefully) the large power players aren't greedy and would accept some discount to par to help the process move along.

 

This was one democratic rep who wants to wipe out shareholders. Yawn

 

the market's not yawning with some jr pref @ 40pct of par.  Even with all of the justifications offered, the market is clearly saying -- despite the en banc ruling and a major pause in the sweep -- that the potential upside target price during this administration is somewhere below par.

 

The market is not always efficient in the short term.  Either that or you're correct - but you have to acknowledge the fact that the market has been wrong on this to date and here's plenty of reason at this point to suggest Par is coming in the next 1-3 years.

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Not only are the markets irrational, but they have a lot of help being irrational -especially with this investment:

https://www.bloomberg.com/news/articles/2019-10-22/fannie-watchdog-willing-to-wipe-out-shareholders-if-necessary?srnd=premium

 

yawn indeed (except for that author who gets a bonus based on stock price movement)

 

Here's to the administration and the courts doing their work.

 

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Guest cherzeca

" market is clearly saying...that the potential upside target price during this administration is somewhere below par."

 

the market is really incapable of assessing this outcome with any confidence under conditions of significant uncertainty. under these conditions the market applies a generous haircut. no kidding. if you think the market is understating risk/reward probabilities then you are in this investment.  the more you study this investment, the more questions you will have, which is good since I dont think the market is really willing to engage until risk is shed. if you have no idea what to ask, or which questions are most important, then you shouldn't be in this investment.  really simple.

 

@IG. you seem to be consistently letting the market do your thinking for you (or at least be the basis for your posting).  which makes sense with investing generally.  the market is always right...eventually.  but if you want to play in this sandbox, you really must think for yourself.

 

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To add to @cherzeca's point, while it is important to figure out what the price of the stock is implying as the eventual outcome, I think it is also important - especially in an event-driven investment like this - to also think about what would need to occur for the market to change its assessment. Said another way, what would need to happen for the market to agree that this is worth around par?

 

Given the en banc hearing, capital retention agreement, etc. this is something I have been thinking quite a bit about - what convinces the market to agree with me? While selecting an IBank, and final capital rule will be constructive in terms of moving the narrative along of the recap and also helping to value the equity, IMO we don't get to par until it is clear that there is a 4th Amendment/settlement. So I think, if you are owning the preferred today you believe that settlement will be done at par or close to it and in a reasonable time frame and if you are selling/agreeing with the current market price you think there are too many risks that it doesn't happen or that the preferred get materially less than par.

 

" market is clearly saying...that the potential upside target price during this administration is somewhere below par."

 

the market is really incapable of assessing this outcome with any confidence under conditions of significant uncertainty. under these conditions the market applies a generous haircut. no kidding. if you think the market is understating risk/reward probabilities then you are in this investment.  the more you study this investment, the more questions you will have, which is good since I dont think the market is really willing to engage until risk is shed. if you have no idea what to ask, or which questions are most important, then you shouldn't be in this investment.  really simple.

 

@IG. you seem to be consistently letting the market do your thinking for you (or at least be the basis for your posting).  which makes sense with investing generally.  the market is always right...eventually.  but if you want to play in this sandbox, you really must think for yourself.

 

 

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Guest cherzeca

@jc

 

I would only add that I dont think getting to par will happen at settlement/4th A since I dont expect any govt/GSE offer of cash to take out juniors, only an exchange offer into common (which I do expect to be valuing the juniors at par).  so even at settlement I expect there to be some smallish discount.  an exchange offer should be tax free so if you ride the exchanged -for common off into the horizon somewhat, then there may (or may not) be additional value

 

also it is @cherzeca

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agreed on potential small discount.

 

my mistake, didn't proof read closely enough!

 

@jc

 

I would only add that I dont think getting to par will happen at settlement/4th A since I dont expect any govt/GSE offer of cash to take out juniors, only an exchange offer into common (which I do expect to be valuing the juniors at par).  so even at settlement I expect there to be some smallish discount.  an exchange offer should be tax free so if you ride the exchanged -for common off into the horizon somewhat, then there may (or may not) be additional value

 

also it is @cherzeca

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Instead of a long contribution my final observations boiled down to mainly 2. 

 

1. This was a political show and the 3 head honchos pandered to the crowd quite well.

 

2. I still see the biggest risk of this investment as time. I wouldn't let a couple hours in front of a bunch of politically motivated retards sway anyones thoughts. I think the show these idiots put on shows this. Even though they are helpless they can still throw a couple insults on the way out.

 

Obviously the capital rule and the 4th amendment are the next big steps. In light of what I find to be the biggest risk above is who knows when this will happen.

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People are likely going to freak out over the "wipe out shareholders" headlines, but if one listens to the context of this exchange it seems like nothing. 

 

"in 2008..."

"if we have to..."

 

Starts around 4-minute mark: https://www.c-span.org/video/?c4824072/affordable-housing-hearing-10222019-foster-calabria-exchange

 

 

This is the exact reason why the receivership bullet was put in the Administrations plan. Easy fall back for this bullshit in front of the freak show.

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Guest cherzeca

" I still see the biggest risk of this investment as time."

 

agreed.  when I got involved some 5 years ago, I thought it might take 5 years...and I thought I was being conservative

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" I still see the biggest risk of this investment as time."

 

agreed.  when I got involved some 5 years ago, I thought it might take 5 years...and I thought I was being conservative

agreed.  when I got involved some 9 years ago, I thought it might take 3 years...and I thought I was being conservative.
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Guest cherzeca

" I still see the biggest risk of this investment as time."

 

agreed.  when I got involved some 5 years ago, I thought it might take 5 years...and I thought I was being conservative

agreed.  when I got involved some 9 years ago, I thought it might take 3 years...and I thought I was being conservative.

 

I may want to trade you 4 years of waiting time for your entry price

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" I still see the biggest risk of this investment as time."

 

agreed.  when I got involved some 5 years ago, I thought it might take 5 years...and I thought I was being conservative

agreed.  when I got involved some 9 years ago, I thought it might take 3 years...and I thought I was being conservative.

 

I may want to trade you 4 years of waiting time for your entry price

Ahh.. :)
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Guest cherzeca

@IG

 

more to my point.

 

apparently GSEs are down big today because market believes that there is a material risk that the GSEs will go into receivership (based upon throw away lines from calabria and mnuchin to hostile questioning at HFSC hearing yesterday, and amplified by Bloomberg reporting).  I disagree with this assessment.  here imo is a perfect example of how current pricing by mr. market is something to take advantage of, rather than take instruction from.

 

I of course may be wrong, but I do believe that a commitment to a GSE investment requires an almost overweening skepticism of market pricing of GSEs

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... but I do believe that a commitment to a GSE investment requires an almost overweening skepticism of market pricing of GSEs

and of most news...  and of most articles, commentaries... and of any technical signals... and of

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