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

[stevevri]

The dividend comment was definitely negative. He said he talked to Watt and said they expect the dividend and hope to receive it.

 

However that was after saying he was committed to working with congress and he again wouldn't rule out acting alone (more explicitly then in his confirmation hearing).

 

For the most part he is trying to punt as much as he can and say he is focused on tax reform and that this is a 2nd half of the year thing. A lot of questions aren't related.

[stevevri]

No good news so far. He made clear that he wants the payments to continue per agreement.

 

He also said he has a strong preference to working with Congress on this issue. 

 

Did anybody catch the quote for the 75 day thing?  Corker said something about 75 days...

 

I think he was trying to talk about when the next sweep payment was due?

[investorG]

No good news so far. He made clear that he wants the payments to continue per agreement.

 

i'm satisfied so far. he left open the door for admin action if needed. and he's playing by the book on the dividend, his view is clearly now (nws) and in the future (fees), the treasury needs to get paid for their backstop / guarantee.  he's way smarter than you or me, he's playing the long game not trying to pump up the security prices in the near term (and piss off our enemies) when his power doesn't pick up for 8 months.  so the key here is what's his real end game goal -- I have my view but it's just a guess.

 

[Luke 532]

No good news so far. He made clear that he wants the payments to continue per agreement.

 

With him saying he wants payments to continue and wants to work with Congress, he might be trying to slow down the Corker's and Warner's of the world from trying to push something through legislatively.  It just seems odd that Watt did a 180 and wants to retain capital when coupled with Mnuchin's comments.  If Mnuchin came out and said that he agrees with Watt and the capital needs to be retained then Corker, Warner, etc. would likely be in a much bigger hurry to push things through.  Just a thought, could be off-base and perhaps Mnuchin really does want the payments to continue.

[Luke 532]

Did anybody catch the quote for the 75 day thing?  Corker said something about 75 days...

 

I think he was trying to talk about when the next sweep payment was due?

 

That would be about 40-45 days from now (end of June).

[investorG]

No good news so far. He made clear that he wants the payments to continue per agreement.

 

He also said he has a strong preference to working with Congress on this issue. 

 

Did anybody catch the quote for the 75 day thing?  Corker said something about 75 days...

 

he's suggesting the june30 payment is going through and so the next decision point is early august when they report 2q earnings. 

 

[investorG]

No good news so far. He made clear that he wants the payments to continue per agreement.

 

With him saying he wants payments to continue and wants to work with Congress, he might be trying to slow down the Corker's and Warner's of the world from trying to push something through legislatively.  It just seems odd that Watt did a 180 and wants to retain capital when coupled with Mnuchin's comments.  If Mnuchin came out and said that he agrees with Watt and the capital needs to be retained then Corker, Warner, etc. would likely be in a much bigger hurry to push things through.  Just a thought, could be off-base and perhaps Mnuchin really does want the payments to continue.

 

agree. he's got a plan which is: it's not good to piss off the congress Repubs at this moment.  Watt can do this on his own, and from corker's comments watt is firm in his view.

[Guest cherzeca]

i think you have to ask yourself if mnuchin has a pro forma senior preferred payoff calculation in his mind.  most that i have read think the payoff isnt reached until 1q div is paid on june 30.  it might be cleaner for mnuchin to start talking seriously once he can say the senior pref has been paid off as per the original deal.  watt has different issues.

[rros]

No good news so far. He made clear that he wants the payments to continue per agreement.

 

With him saying he wants payments to continue and wants to work with Congress, he might be trying to slow down the Corker's and Warner's of the world from trying to push something through legislatively.  It just seems odd that Watt did a 180 and wants to retain capital when coupled with Mnuchin's comments.  If Mnuchin came out and said that he agrees with Watt and the capital needs to be retained then Corker, Warner, etc. would likely be in a much bigger hurry to push things through.  Just a thought, could be off-base and perhaps Mnuchin really does want the payments to continue.

 

agree. he's got a plan which is: it's not good to piss off the congress Repubs at this moment.  Watt can do this on his own, and from corker's comments watt is firm in his view.

I found it strange Corker did not specifically brought up "recap and release".  Instead, he referred to it indirectly by asking Mnuchin if he agreed with Watt that reform was Congress' jurisdiction and the only way to find a solution.

 

I also noted Mnuchin used the word "credit" as opposed to "capital" when he said he would like to see enough credit in front of a paid-for government guarantee. The word "capital" would have been more appropriate and I am not sure why he avoided it. Unless he was thinking on a backstop.

[Luke 532]

Mnuchin on a question about giving direction to Congress on GSE reform in 2nd half of year: "We'll give a clear outline what our recommendation would be... we will come back with a specific suggestion."

 

It's likely he already knows what he wants to do, he's just biding his time.  Whether his plans are good or bad for us remains to be seen.

[Luke 532]

Brown: "Are you and FHFA/Watt working together to prevent another draw by GSE's?"

Mnuchin: "No.  My conversations with him are on the dividend... And conversations that we're willing to work with him and Congress on housing reform."

[Desert_Rat]

Would someone familiar with law answer this question?

 

if the context of 3rd's language is changed by the existence of a capital reserve amount does that affect the contract in any way? Like, would it mandate an amendment or will the language work as is?

 

For each Dividend Period from January 1, 2013, through and including

December 31, 2017, the "Dividend Amount" for a Dividend Period means the amount, if

any, by which the Net Worth Amount at the end of the immediately preceding fiscal

quarter, less the Applicable Capital Reserve Amount, exceeds zero. For each Dividend

Period from January 1, 2018, the "Dividend Amount" for a Dividend Period means the

amount, if any, by which the Net Worth Amount at the end of the immediately preceding

fiscal quarter exceeds zero.

 

[Desert_Rat]

Brown: "Are you and FHFA/Watt working together to prevent another draw by GSE's?"

Mnuchin: "No.  My conversations with him are on the dividend... And conversations that we're willing to work with him and Congress on housing reform."

 

That's in Corkers corner. By ignoring it, he's saying he doesn't believe a draw would be an issue.

[rros]

Brown: "Are you and FHFA/Watt working together to prevent another draw by GSE's?"

Mnuchin: "No.  My conversations with him are on the dividend... And conversations that we're willing to work with him and Congress on housing reform."

 

That's in Corkers corner. By ignoring it, he's saying he doesn't believe a draw would be an issue.

The MBS securities issue is a concern for the GSEs/FHFA. These are sold by them, not Treasury. It is Watt who is concerned about investors not wanting MBS if they continue to see the GSEs in an unstable position. In fact, Treasury may prefer there are no MBS so that central banks around the world only buy treasurys. I am not sure what will happen now and maybe there is something to Wayne's view of not trusting Mnuchin. About the only positive has been his avoidance to be drawn into a corner. Specially, by Mark Warner on the issue of wiping out shareholders of failed institutions. That was a good moment, I think. Perhaps by the time -second half- that more detailed discussions happen Treasury might come out respecting shareholders' rights.

[Desert_Rat]

Yeah, I don't agree with that. How can you say that MBS market isn't a concern of Treasury when they're the one's backing it? Besides, the question was specific: Are you concerned about a draw (from your treasury). How can he not answer that? Maybe not wanting to get between Watt and Corker.

[rros]

Yeah, I don't agree with that. How can you say that MBS market isn't a concern of Treasury when they're the one's backing it? Besides, the question was specific: Are you concerned about a draw (from your treasury). How can he not answer that? Maybe not wanting to get between Watt and Corker.

You must differentiate between "backing" and "buying". Treasury is backing losses, but it is not doing the buying. The "buying" part, or better yet the selling of MBS, falls on the GSEs laps only. They have to go out there and find investors. It is not Treasury's problem. It only becomes a problem if GSEs can't sell and no, Mnuchin doesn't appear too concerned about a draw in case no selling leads to liquidity issues.

 

This becomes a problem for Treasury only if liquidity in the mortgage market falters. But the federal reserve can buy them too -as they have been-, so no real liquidity issues and, apparently, no investors' confidence concerns. Maybe Watt believes the Fed buying is the wrong buyer, while Mnuchin doesn''t care and is happy to have all the central banks of the world just for himself. (So there is a draw, investors flee and turn into Treasurys, the Fed comes in as buyer and restores liquidity).

 

I do not know what is happening and I cannot guess anymore. Just disregard my last posts.

[Flynnstone5]

I don't know how anyone can infer anything other than the fact Mnuchin has repeatedly said that he wants complete safety in front of taxpayers should there be a gov guarantee (which there absolutely will). No matter what, I see him setting an extremely high capital buffer so that virtually no one can question the safety of taxpayers in the event of a major down turn. Purely my own intuition/speculation, but Mnuchin strikes me as having no problem what so ever in blowing out common shareholders. In his world, his peers would buy prfd for an investment such as this and I believe he will respect those rights.

 

Watt may simply be acting like today's typical dem, which is to just do the opposite of what the admin wants you to do. I can see Mnuchin wanting to just buy time and if Watt suspends the sweep, then that could spur the Corker/Crapo & co. into taking action they might not get around to prior to Jan 2018.

 

What's up with price action in prfd's lately?

[Luke 532]

What's up with price action in prfd's lately?

 

I haven't added a single share to my already significant position in prefs since March of 2016.  I'll likely be adding if it drops a little more.  Chapter 8 of The Intelligent Investor in action.

[Flynnstone5]

What's up with price action in prfd's lately?

 

I haven't added a single share to my already significant position in prefs since March of 2016.  I'll likely be adding if it drops a little more.  Chapter 8 of The Intelligent Investor in action.

 

I actually bought some yesterday despite thinking I need my head examined.

[Desert_Rat]

I don't know how anyone can infer anything other than the fact Mnuchin has repeatedly said that he wants complete safety in front of taxpayers should there be a gov guarantee (which there absolutely will). No matter what, I see him setting an extremely high capital buffer so that virtually no one can question the safety of taxpayers in the event of a major down turn. Purely my own intuition/speculation, but Mnuchin strikes me as having no problem what so ever in blowing out common shareholders. In his world, his peers would buy prfd for an investment such as this and I believe he will respect those rights.

 

Watt may simply be acting like today's typical dem, which is to just do the opposite of what the admin wants you to do. I can see Mnuchin wanting to just buy time and if Watt suspends the sweep, then that could spur the Corker/Crapo & co. into taking action they might not get around to prior to Jan 2018.

 

What's up with price action in prfd's lately?

 

There's two ways to blow out commons, and preferreds too for that matter. 1)Big FU. Fold both companies into one and dump existing shareholders. Like you, I don't see this happening because it won't make lawsuits go away but may make recapitalizing a bummer. Voids treasury's shares too. 2) FU. Treasury ignores immediate gains of selling seniors and warrants for longer term hold. No change to FnF structures. NWS ends 1/1/18, 10% dividend doesn't. Capital buffer is comprised of remaining year's earnings plus order to sweep all future earnings (minus dividend) until level is met. That would be $1.5b this year. Companies gain right to pay down seniors.

 

That's why action is so poor lately, there's a growing distrust for Mnuchin.

 

[Flynnstone5]

I don't know how anyone can infer anything other than the fact Mnuchin has repeatedly said that he wants complete safety in front of taxpayers should there be a gov guarantee (which there absolutely will). No matter what, I see him setting an extremely high capital buffer so that virtually no one can question the safety of taxpayers in the event of a major down turn. Purely my own intuition/speculation, but Mnuchin strikes me as having no problem what so ever in blowing out common shareholders. In his world, his peers would buy prfd for an investment such as this and I believe he will respect those rights.

 

Watt may simply be acting like today's typical dem, which is to just do the opposite of what the admin wants you to do. I can see Mnuchin wanting to just buy time and if Watt suspends the sweep, then that could spur the Corker/Crapo & co. into taking action they might not get around to prior to Jan 2018.

 

What's up with price action in prfd's lately?

 

There's two ways to blow out commons, and preferreds too for that matter. 1)Big FU. Fold both companies into one and dump existing shareholders. Like you, I don't see this happening because it won't make lawsuits go away but may make recapitalizing a bummer. Voids treasury's shares too. 2) FU. Treasury ignores immediate gains of selling seniors and warrants for longer term hold. No change to FnF structures. NWS ends 1/1/18, 10% dividend doesn't. Capital buffer is comprised of remaining year's earnings plus order to sweep all future earnings (minus dividend) until level is met. That would be $1.5b this year. Companies gain right to pay down seniors.

 

That's why action is so poor lately, there's a growing distrust for Mnuchin.

 

I can see some distrust, but the vol doesn't really match with that theory.

[muscleman]

Brown: "Are you and FHFA/Watt working together to prevent another draw by GSE's?"

Mnuchin: "No.  My conversations with him are on the dividend... And conversations that we're willing to work with him and Congress on housing reform."

 

What does this mean? I think suspending dividend and preventing the draw is the same thing, no?

[Desert_Rat]

I don't know how anyone can infer anything other than the fact Mnuchin has repeatedly said that he wants complete safety in front of taxpayers should there be a gov guarantee (which there absolutely will). No matter what, I see him setting an extremely high capital buffer so that virtually no one can question the safety of taxpayers in the event of a major down turn. Purely my own intuition/speculation, but Mnuchin strikes me as having no problem what so ever in blowing out common shareholders. In his world, his peers would buy prfd for an investment such as this and I believe he will respect those rights.

 

Watt may simply be acting like today's typical dem, which is to just do the opposite of what the admin wants you to do. I can see Mnuchin wanting to just buy time and if Watt suspends the sweep, then that could spur the Corker/Crapo & co. into taking action they might not get around to prior to Jan 2018.

 

What's up with price action in prfd's lately?

 

There's two ways to blow out commons, and preferreds too for that matter. 1)Big FU. Fold both companies into one and dump existing shareholders. Like you, I don't see this happening because it won't make lawsuits go away but may make recapitalizing a bummer. Voids treasury's shares too. 2) FU. Treasury ignores immediate gains of selling seniors and warrants for longer term hold. No change to FnF structures. NWS ends 1/1/18, 10% dividend doesn't. Capital buffer is comprised of remaining year's earnings plus order to sweep all future earnings (minus dividend) until level is met. That would be $1.5b this year. Companies gain right to pay down seniors.

 

That's why action is so poor lately, there's a growing distrust for Mnuchin.

 

I can see some distrust, but the vol doesn't really match with that theory.

 

Not a theory. It's possible of course, but I was just responding to your statement about blowing out common shareholders. I don't think they'll get blown out except to the extent of my scenario or similar, which hurts preferreds too. I don't think they have much upside, but I doubt they're blown out.

 

Mnuchin not exactly having our backs lately stands.

 

[beaufort]

I agree with Tim Howard that Watt has the political cover to stop the NWS (at least for a time).  Mnuchin does not following Perry. 

 

Now we do what we have been doing for some time.  We wait. 

[muscleman]

https://www.c-span.org/video/?428291-1/treasury-secretary-comes-fire-glasssteagall-stance

 

I just watched the Corker Mnuchin exchange.

 

Mnuchin talked with Watt and hopes that the dividend will continue to be paid in the future per agreement. And Watt talked about "dancing unilaterally" in last hearing. Does this imply that Watt is the only one thinking about suspending the dividend and not Mnuchin?

 

Corker mentioned that he phoned Mnuchin last night with a few FnF reform proposals. I think they exchanged the opinions privately last night, which is why Corker didn't bring up Recap and Release this morning.

 

What's your thoughts on this? Either:

1. Corker wanted to avoid being disagreed and viewed by his big money donors as losing control, so he wanted to know what Mnuchin thinks ahead of time.

Or:

2. He got some agreements or promise from Mnuchin so he wouldn't bother to confront him again in Congress.

 

 

 

I am leaning to #1 because Corker raised his voice when he said "Hopefully completing the work" around 31:10.

But I don't want to have a biased view here. Any other thoughts welcome.