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

[Jurgis]

Hah, I guess I should have followed my own suggestion and lightened up. ;)

 

Well if you guys loved the prefs at ~35% par, you should buy by the bushel at ~25% par...  8)

[orthopa]

I added more FNMAH at 6.10.

 

Like i said before my belief is that Mnunchin holds the fate of Freddie and Fannie in his hands. Court opinions could have sweetened or unsweetened the deal.

 

Lets not forget the man has said they need to get out of govt control, he wants a solution quickly, and according to Cohn was already at work on them.

 

In the end if the man fucks me he fucks me and all of his billionaire buddies etc. I wasnt looking at the courts for a solution.

 

Remember when Mnuchin said he wasnt aware of the court cases? Me too.

[Midas79]

I wasnt looking at the courts for a solution.

 

Remember when Mnuchin said he wasnt aware of the court cases? Me too.

 

Just curious: have you always thought this or only after Trump was elected? For me it's the latter. If Clinton was elected I would have seen the courts as the only path to victory.

 

Imagine this ruling under a Clinton administration. I think I'd have to bail at a substantial loss; the commons would be under $1 and FNMAS would be sub $3.

[Guest cherzeca]

not totally surprised here. like it or not, lamberth's narrow reading of hera's anti injunction bar is not an invalid one, as demonstrated here. but brown's judicially activist reading isn't invalid either. judge g was the toss up for me and now we know

 

millett wrote the opinion i thought she would write, and so did brown.

 

i am shocked that ginsburg joined millett. 

 

now, we are on mnuchin watch. 

[muscleman]

So is the case back to Lamberth's hand now? How will Lamberth change his mind and rule for the plantiffs?

[Flynnstone5]

not totally surprised here. like it or not, lamberth's narrow reading of hera's anti injunction bar is not an invalid one, as demonstrated here. but brown's judicially activist reading isn't invalid either. judge g was the toss up for me and now we know

 

millett wrote the opinion i thought she would write, and so did borwn.

 

i am shocked that ginsburg joined millett. 

 

now, we are on mnuchin watch.

 

Anything regarding an administrative record or is that not even in there? Anything in this that leads you to believe Lambert changes his mind or is this basically a weak take a second look?

[orthopa]

I wasnt looking at the courts for a solution.

 

Remember when Mnuchin said he wasnt aware of the court cases? Me too.

 

Just curious: have you always thought this or only after Trump was elected? For me it's the latter. If Clinton was elected I would have seen the courts as the only path to victory.

 

Imagine this ruling under a Clinton administration. I think I'd have to bail at a substantial loss; the commons would be under $1 and FNMAS would be sub $3.

 

Agree Clinton administration, ie different treasurer much different assesment and I would not have added like I did.

[orthopa]

Has anyone here bought since the election/mnunchin comments on TV based on this court case/opinion? I sure as hell did not, I guess i will see one day how foolish I am in my thinking.

 

Was anyone here buying/speculating on this court case outcome and then how lamberth would rule in say 6 months to a year?

[undervalued]

Has anyone here bought since the election/mnunchin comments on TV based on this court case/opinion? I sure as hell did not, I guess i will see one day how foolish I am in my thinking.

 

Was anyone here buying/speculating on this court case outcome and then how lamberth would rule in say 6 months to a year?

 

I started buying after the election. I am a speculator and I just bought more. This is now 10% position. I doubt I know more than some of the members who regularly posted here.

[Midas79]

not totally surprised here. like it or not, lamberth's narrow reading of hera's anti injunction bar is not an invalid one, as demonstrated here. but brown's judicially activist reading isn't invalid either. judge g was the toss up for me and now we know

 

millett wrote the opinion i thought she would write, and so did borwn.

 

i am shocked that ginsburg joined millett. 

 

now, we are on mnuchin watch.

 

Anything regarding an administrative record or is that not even in there? Anything in this that leads you to believe Lambert changes his mind or is this basically a weak take a second look?

 

The only mention I saw of an administrative record was in this footnote on page 33:

 

12 We grant the plaintiffs’ various motions to supplement the record

with evidence of what FHFA and Treasury officials knew about the

Companies’ predicted financial performance and when. That

evidence does not affect our analysis, and we see no need to remand

the claims for the district court to consider a fuller administrative

record because the Recovery Act simply does not impose upon

FHFA the precise duties that the institutional plaintiffs’ factual

arguments suppose.

 

It appears to me that the administrative record doesn't matter to Ginsburg or Millett either. Bad news in that case.

 

It's hard to tell what Lamberth will do, but I can't place much faith in a reversal because he seems to read the law at least as narrowly as Ginsburg and Millett.

[Flynnstone5]

This Bloomberg article notes:

 

"Some Fannie Mae and Freddie Mac investors still have a shot at money damages, based on when they acquired their shares and whether they did so before or after the Federal Housing Finance Agency was created and then imposed its control over Fannie Mae and Freddie Mac."

 

https://www.bloomberg.com/news/articles/2017-02-21/fannie-freddie-net-worth-sweep-case-affirmed-in-part-on-appeal

 

Anyone have a clear understanding on this?

 

[Guest cherzeca]

essentially this investment has come down to mnuchin saying that even though obama administration may have had power to do what it did with nws, we dont believe that is the proper basis upon which the GSEs should be organized and capitalized going forward.

 

now, what way forward mnuchin sees is anyone's guess really

[hardincap]

@cherz, do u see sweeney following this ruling in the ct of claims? does the breach of k claims have legs?

[tylerdurden]

I have a very small FNMAS position. Isn't this now a coin toss type of "investment" then? If what mnuchin thinks is anyone's guess and the outcome of the investment is totally dependent on it, this is like going to roulette table playing black or red I guess. No investment at all, pure speculation...?

[Guest cherzeca]

@cherz, do u see sweeney following this ruling in the ct of claims? does the breach of k claims have legs?

 

taking analysis is very different than perry claims, but to extent perry affirmed the pref contract claims, that is good for sweeney.

 

 

[Jurgis]

essentially this investment has come down to mnuchin saying that even though obama administration may have had power to do what it did with nws, we dont believe that is the proper basis upon which the GSEs should be organized and capitalized going forward.

 

Wow, so pretty much a single court opinion changed the tone of this thread from "100% illegal" to "obama administration may have had power to do what it did with nws". I thought you guys had way more arguments for legal victory.

 

OK, so now the investment is at Mnuchin decision only?

[Jurgis]

I have a very small FNMAS position. Isn't this now a coin toss type of "investment" then? If what mnuchin thinks is anyone's guess and the outcome of the investment is totally dependent on it, this is like going to roulette table playing black or red I guess. No investment at all, pure speculation...?

 

This as always been "coin toss type of investment". You made some kind of estimate of probability of court win and/or administration settling/etc., you calculated market-assigned probability and you compared the two for investing or not investing.

 

Edit: For prefs Kelly's threshold probability has now dropped to ~0.25.

[tylerdurden]

I have a very small FNMAS position. Isn't this now a coin toss type of "investment" then? If what mnuchin thinks is anyone's guess and the outcome of the investment is totally dependent on it, this is like going to roulette table playing black or red I guess. No investment at all, pure speculation...?

 

This as always been "coin toss type of investment". You made some kind of estimate of probability of court win and/or administration settling/etc., you calculated market-assigned probability and you compared the two for investing or not investing.

 

Yeah I agree. That's why I speculated with a very small position, which also allows me to monitor where this is going. Having said that, before it was depending on the probability of the court outcomes and obviously some legal expertise could help to assign particular probabilities on different outcomes. Now based on what I just heard on this board, at least some believe this is now dependent on what mnuchin wants to do and who knows what he wants to do. I don't think you can even assign probabilities on that with any degree of confidence. To me it is totally gambling now, if we are only following mnuchin going forward...

[Guest cherzeca]

I have a very small FNMAS position. Isn't this now a coin toss type of "investment" then? If what mnuchin thinks is anyone's guess and the outcome of the investment is totally dependent on it, this is like going to roulette table playing black or red I guess. No investment at all, pure speculation...?

 

This as always been "coin toss type of investment". You made some kind of estimate of probability of court win and/or administration settling/etc., you calculated market-assigned probability and you compared the two for investing or not investing.

 

Yeah I agree. That's why I speculated with a very small position, which also allows me to monitor where this is going. Having said that, before it was depending on the probability of the court outcomes and obviously some legal expertise could help to assign particular probabilities on different outcomes. Now based on what I just heard on this board, at least some believe this is now dependent on what mnuchin wants to do and who knows what he wants to do. I don't think you can even assign probabilities on that with any degree of confidence. To me it is totally gambling now, if we are only following mnuchin going forward...

 

this decision is bad, dont get me wrong.  but if mnuchin still thinks it is crazy for the feds to own and control GSEs, then this decision doesnt affect that judgment.  now of course, how mnuchin goes about getting to private ownership can very well be affected by this decision, but i dont think this decision makes mnuchin decide that maybe the feds should continue to own the GSEs. 

[Jurgis]

Yeah I agree. That's why I speculated with a very small position, which also allows me to monitor where this is going. Having said that, before it was depending on the probability of the court outcomes and obviously some legal expertise could help to assign particular probabilities on different outcomes. Now based on what I just heard on this board, at least some believe this is now dependent on what mnuchin wants to do and who knows what he wants to do. I don't think you can even assign probabilities on that with any degree of confidence. To me it is totally gambling now, if we are only following mnuchin going forward...

 

Well, apparently legal expertise was either outcome biased or the dice just fell on "low probability" scenario. ;)

 

I mostly agree with you. :)

I still hold position, but might trim/sell depending.

[Flynnstone5]

I sold all my common for a decent gain although not as good as this morning. I'm keeping my prfd at this point.

 

I am surprised the prfd's have sold off as much given contracts is only thing to have survived, still have breach with Sweeney and the major players around Trump/Mnuchin are prfd. Doesn't seem to add up to down nearly 30% in FNMAS?

[racemize]

Well, honestly, the court outcome never seemed like a strong bet to me in the first place--courts have a way of not coming out the way you think it should, as it just did.  I think Mnuchin is the reason this thing became much more compelling.  He's basically the same type of guy that would hold these things, and he wants the government to get out.  If he wants the government out, he needs private shareholders to be at the table.  If he kills all these shareholders, then they aren't coming to the table.

 

But maybe someone can throw out an interpretation where Mnuchin can get it out of government control, replace it with something else, and still kill the value of the companies?  He could liquidate, but that doesn't seem like the language he's using.  If he isn't liquidating, then there needs to be some public value to the companies for them to exist.

[JRH]

I have a small position, and am sitting here going back and forth, trying to decide which of the following is true (assuming Mnuchin wants the enterprises privately owned):

 

1) The lawsuits were leverage for Preferred/Common stockholders to get X+Y amount of the re-privatized enterprises, instead of X amount. Therefore, this meaningfully reduced their value.

2) The lawsuits don't really matter because of the mechanisms of re-privatization: maximizing gov't warrant price still entails maximizing common stock price, and re-starting common dividends still entails preferred dividends.

 

 

REALLY simplified, obviously, but I need some means by which to model a decision.

[Guest cherzeca]

Well, honestly, the court outcome never seemed like a strong bet to me in the first place--courts have a way of not coming out the way you think it should, as it just did.  I think Mnuchin is the reason this thing became much more compelling.  He's basically the same type of guy that would hold these things, and he wants the government to get out.  If he wants the government out, he needs private shareholders to be at the table.  If he kills all these shareholders, then they aren't coming to the table.

 

But maybe someone can throw out an interpretation where Mnuchin can get it out of government control, replace it with something else, and still kill the value of the companies?  He could liquidate, but that doesn't seem like the language he's using.  If he isn't liquidating, then there needs to be some public value to the companies for them to exist.

 

this is exactly the analysis i am thinking through.

 

congress will be emboldened to propose again some wind down scenario, on the notion that the courts have upheld nws, which was a step taken by the obama administration in the direction of wind down.

 

if mnuchin changes his mind and doesnt want a reasonably "fast solution" then we are back into the whole wind down debate.

 

but my guess is that mnuchin doesnt want to go down that path, which is not fast and not investor friendly, and i think he wants to remain investor friendly, though the investors' leverage is diminished a whole lot

[tylerdurden]

Even if Mnuchin wants the solution that shareholders want, how much power will this guy have anyways? I mean he is the Treasury Secretary right not President. Sometimes even being the President is not enough in DC. With all the other priorities they have ahead (tax reform, infrastructure spending, some stupid trade war? etc) I am not sure how much this guy can accomplish even if he is on our side. I'd appreciate if everyone keep updating the board with respective buy/sell decisions. I'll totally admit that I have no clue where this investment going now:-)