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

[rros]

@race

 

"IMO, it makes no sense for common to get more upside than preferreds."

 

depends on the time horizon.  it is not controversial for common to outperform preferred on a longer time horizon, as blueprint indicates.  juniors can exchange if they are convinced this will happen.

I believe race figures are correct. And he is also correct on similar upside -at this point- for commons and Jrs.

 

Chris, in turn, has a point. Why would hedge funds be interested in conversion? My view is that common upside is major in the very long run for very specific reasons. Once Srs. totally disappear (equitisized, as per the plan), Jrs. are called or replaced for lower yielding shares AND companies are fully capitalized... what will happen with all the earnings? Hint: buy backs.

 

If you want to see how a long term buy back plan operates and what kind of leverage it can exert take a look at the chart of Dominos Pizzas (DPZ). Or simply go back and study Henry Singleton.

 

Sure, there is no hurry to convert. But commons might be the play after all is said and done. Right now, I am staying with my Jrs.

 

Lawsuits:

The recent filings in Perry may go the way the rest of the filings/cases. Benefiting defendant. I have made up my mind that all courts (except Sweeney, so far) are after a concerted effort in not allowing "lawsuit bets" to prevail. That is, buying into a stock just to pursue court action with the goal of a positive outcome.

 

Wayne:

I purchased a large amount of Jrs. from December 2010 through February 2011 after reading many insightful posts and information by him. Thank you Wayne. You have always showed common sense. The only worrisome thought is the one you have about Goldman Sachs. How they may view Moelis plan?

[waynepolsonAtoZ]

"the one you have about Goldman Sachs."

 

The counterargument (which is pretty plausible) is that GS and so on are basically IBanks and should be able to see the opportunities that recap can provide, i.e., pretty big fees. I don't know what the IBanks got out of AIG and the other ones, but they probably did pretty well.

 

As a quid pro quo GS might want "open access" to use the FnF securitization infrastructure to do private label stuff. That could be ok with FnF if they got paid adequately for doing so.

[waynepolsonAtoZ]

"So a lot of dilution, but not down to 2-3%."

 

OK, I get it. Thanks!

[waynepolsonAtoZ]

"Why would hedge funds be interested in conversion?"

 

I would think that would be for the ones that have huge blocks of preferreds. It builds in a transition mechanism for them--just in case they decide they want to switch.

[Guest cherzeca]

@wayne

 

"As a quid pro quo GS might want "open access" to use the FnF securitization infrastructure to do private label stuff. That could be ok with FnF if they got paid adequately for doing so."

 

access to the common securitization platform is no big deal.  problem for banks is that no institutional investor wants to buy non-guaranteed MBS...hence the MBA proposal for treasury mbs-level guarantee.

 

as far as i am concerned, if blueprint was implemented for GSEs and MBA proposal implemented for private label securitization, that would be fine with me.  i would expect that treasury would only want to guaranty a catastrophic tranche which is not what the institutional investors want to buy

[waynepolsonAtoZ]

"Under the proposed solution, preferreds and common have a similar upside."

 

I agree, but the preferreds are a simpler play. With the commons you have to worry more about the "end game" and all the things that could go wrong.

 

Based on what the real Tim Howard said a few months ago it seems like this plan might provide "too much" equity, which would require higher gfees. The higher gfees might be hard to get FHFA to agree to, plus if gfees were raised then FnF might become unattractive relative to FHA and lose market share.

 

I have enough stress in my body without having to deal with all that stuff too much.

[Desert_Rat]

This latest and greatest proposed solution sure is getting a lot of play here. I never even heard of Moelis before thursday, but has anyone determined what shareholders they're actually advising?

 

I'll be first: They're not advising me.

 

[racemize]

"Under the proposed solution, preferreds and common have a similar upside."

 

I agree, but the preferreds are a simpler play. With the commons you have to worry more about the "end game" and all the things that could go wrong.

 

Based on what the real Tim Howard said a few months ago it seems like this plan might provide "too much" equity, which would require higher gfees. The higher gfees might be hard to get FHFA to agree to, plus if gfees were raised then FnF might become unattractive relative to FHA and lose market share.

 

I have enough stress in my body without having to deal with all that stuff too much.

 

 

I need at least $230,000 for school and have 10,000 shares @4.05. When should I exit or keep them till they hit $20.00? What would be safer as you say 'all the things that could go wrong' . You all are very smart and deserve every penny you can make here. My hats off to those who have held this since 2008.

 

This has already been answered. This is an incredibly bad idea and you should not be in this investment for college.

[HalfMeasure]

This latest and greatest proposed solution sure is getting a lot of play here. I never even heard of Moelis before thursday, but has anyone determined what shareholders they're actually advising?

 

I'll be first: They're not advising me.

 

John Paulson and Blackstone, apparently. See below.

 

https://www.axios.com/first-look-john-paulsons-blueprint-for-reforming-fannie-freddie-2428957928.html

 

https://www.bloomberg.com/news/articles/2017-06-01/paulson-blackstone-said-to-back-plan-for-freeing-fannie-freddie

[Desert_Rat]

This latest and greatest proposed solution sure is getting a lot of play here. I never even heard of Moelis before thursday, but has anyone determined what shareholders they're actually advising?

 

I'll be first: They're not advising me.

 

John Paulson and Blackstone, apparently. See below.

 

https://www.axios.com/first-look-john-paulsons-blueprint-for-reforming-fannie-freddie-2428957928.html

 

https://www.bloomberg.com/news/articles/2017-06-01/paulson-blackstone-said-to-back-plan-for-freeing-fannie-freddie

 

Definitive. Thanks.

The paper, "Restoring Safety and Soundness to the GSEs," is available here. It was written by Moelis & Company, as financial adviser to some Fannie and Freddie stockholders, including Paulson & Co. and Blackstone GSO Capital Partners.

[Sunrider]

Because those are just projections based on assumptions. They amount to nothing until someone is willing to pay you (and others) that much for the shares. As with all other shares, that may or may not happen. If it doesn't happen then what does that mean for your ability to pay fees? If the stock goes to $0.02 then what? I happen to believe that there is a better chance for a good pay-off but I agree with everyone here that it seems inordinately risky to put your school nest egg into this.

 

 

"Under the proposed solution, preferreds and common have a similar upside."

 

I agree, but the preferreds are a simpler play. With the commons you have to worry more about the "end game" and all the things that could go wrong.

 

Based on what the real Tim Howard said a few months ago it seems like this plan might provide "too much" equity, which would require higher gfees. The higher gfees might be hard to get FHFA to agree to, plus if gfees were raised then FnF might become unattractive relative to FHA and lose market share.

 

I have enough stress in my body without having to deal with all that stuff too much.

 

 

I need at least $230,000 for school and have 10,000 shares @4.05. When should I exit or keep them till they hit $20.00? What would be safer as you say 'all the things that could go wrong' . You all are very smart and deserve every penny you can make here. My hats off to those who have held this since 2008.

 

This has already been answered. This is an incredibly bad idea and you should not be in this investment for college.

 

What ? All this analysis is not good? I see a $19-$20 valuation for commons, why not?

[investorG]

now that a solid blueprint is out, they should partially fund the infrastructure plan they're rolling out with the warrants.

 

there was a headline of ackman mentioning this a couple weeks ago.

 

the banks could moan a bit but there's 4-5bn of underwriting fees to be had from selling $200bn of primary and secondary shares, which is a jackpot in the current environment.

[Luke 532]

now that a solid blueprint is out, they should partially fund the infrastructure plan they're rolling out with the warrants.

 

Great point, investorG.  I don't think that fact is lost on Carson (very, very familiar with management that backed the blueprint).  And it's awfully convenient this plan came out when it did just before Mnuchin, Calabria, and others are ready to tackle the GSE issue in the 2nd half of the year...

 

Carson said housing is involved in the infrastructure bill that they are currently working on.  We know housing accounts for 20%+ of the American economy and any reform to housing, for any realistic person, has to deal with the Fannie and Freddie issue.  It is also going to cost about $1 trillion for the infrastructure plan (partially offset by the gain in warrants that Treasury sells once they appreciate).

 

We also have Calabria saying that a framework is coming "within months." (could be 2 months, could be 11 months, or anywhere in between)

[undervalued]

Because those are just projections based on assumptions. They amount to nothing until someone is willing to pay you (and others) that much for the shares. As with all other shares, that may or may not happen. If it doesn't happen then what does that mean for your ability to pay fees? If the stock goes to $0.02 then what? I happen to believe that there is a better chance for a good pay-off but I agree with everyone here that it seems inordinately risky to put your school nest egg into this.

 

 

"Under the proposed solution, preferreds and common have a similar upside."

 

I agree, but the preferreds are a simpler play. With the commons you have to worry more about the "end game" and all the things that could go wrong.

 

Based on what the real Tim Howard said a few months ago it seems like this plan might provide "too much" equity, which would require higher gfees. The higher gfees might be hard to get FHFA to agree to, plus if gfees were raised then FnF might become unattractive relative to FHA and lose market share.

 

I have enough stress in my body without having to deal with all that stuff too much.

 

 

I need at least $230,000 for school and have 10,000 shares @4.05. When should I exit or keep them till they hit $20.00? What would be safer as you say 'all the things that could go wrong' . You all are very smart and deserve every penny you can make here. My hats off to those who have held this since 2008.

 

This has already been answered. This is an incredibly bad idea and you should not be in this investment for college.

 

What ? All this analysis is not good? I see a $19-$20 valuation for commons, why not?

 

You can do all the best analysis you want but shit happens. https://en.wikipedia.org/wiki/Murphy%27s_law.

 

You want to focus on the downside not when everything is going your way and is perfect. If you think everything will goes your way and is perfect, why don't you put all your money in 0 or 00 on a roulette wheel at your closest casino. It pays out 35 times way higher than this. Your $40k will turn into $1.4 millions.

[rros]

now that a solid blueprint is out, they should partially fund the infrastructure plan they're rolling out with the warrants.

 

Great point, investorG.  I don't think that fact is lost on Carson (very, very familiar with management that backed the blueprint).  And it's awfully convenient this plan came out when it did just before Mnuchin, Calabria, and others are ready to tackle the GSE issue in the 2nd half of the year...

 

Carson said housing is involved in the infrastructure bill that they are currently working on.  We know housing accounts for 20%+ of the American economy and any reform to housing, for any realistic person, has to deal with the Fannie and Freddie issue.  It is also going to cost about $1 trillion for the infrastructure plan (partially offset by the gain in warrants that Treasury sells once they appreciate).

 

We also have Calabria saying that a framework is coming "within months." (could be 2 months, could be 11 months, or anywhere in between)

I think it pays to be cautious. That has been the case... for years... something coming at us out of left field... and Carney and Joe Light hiding behind the scenes waiting to strike.

 

What undervalued said.

[investorG]

 

 

I need at least $230,000 for school and have 10,000 shares @4.05. When should I exit or keep them till they hit $20.00? What would be safer as you say 'all the things that could go wrong' . You all are very smart and deserve every penny you can make here. My hats off to those who have held this since 2008.

 

This has already been answered. This is an incredibly bad idea and you should not be in this investment for college.

 

What ? All this analysis is not good? I see a $19-$20 valuation for commons, why not?

 

You can do all the best analysis you want but shit happens. https://en.wikipedia.org/wiki/Murphy%27s_law.

 

You want to focus on the downside not when everything is going your way and is perfect. If you think everything will goes your way and is perfect, why don't you put all your money in 0 or 00 on a roulette wheel at your closest casino. It pays out 35 times way higher than this. Your $40k will turn into $1.4 millions.

 

comparing this to a roulette wheel is laughable.  there are NO guarantees this won't go to 0 but you don't need me to go through all the reasons why this investment is different than a casino.  Despite all the criticism on this board, I admire Emily's aggressive attitude and bluntness.

[investorG]

now that a solid blueprint is out, they should partially fund the infrastructure plan they're rolling out with the warrants.

 

Great point, investorG.  I don't think that fact is lost on Carson (very, very familiar with management that backed the blueprint).  And it's awfully convenient this plan came out when it did just before Mnuchin, Calabria, and others are ready to tackle the GSE issue in the 2nd half of the year...

 

Carson said housing is involved in the infrastructure bill that they are currently working on.  We know housing accounts for 20%+ of the American economy and any reform to housing, for any realistic person, has to deal with the Fannie and Freddie issue.  It is also going to cost about $1 trillion for the infrastructure plan (partially offset by the gain in warrants that Treasury sells once they appreciate).

 

We also have Calabria saying that a framework is coming "within months." (could be 2 months, could be 11 months, or anywhere in between)

I think it pays to be cautious. That has been the case... for years... something coming at us out of left field... and Carney and Joe Light hiding behind the scenes waiting to strike.

 

What undervalued said.

 

i'm focused on the news not the stock price and last week was a major positive in my opinion, regarding the blueprint and carson's comments.  of course there's pitfalls ahead with likely court losses, congressional republican proposals, and with trump in general.  but if you can't get a little excited over something positive happening, what's the point?

[Desert_Rat]

I'm in enough stock at the moment that most people don't give a rat's about, although their value is crystal clear, to realize that it actually doesn't matter what we think, or how awesome this latest and greatest idea is. It matters what they think. They're wrong but they also dictate the rules.

[Eye4Valu]

I'm in enough stock at the moment that most people don't give a rat's about, although their value is crystal clear, to realize that it actually doesn't matter what we think, or how awesome this latest and greatest idea is. It matters what they think. They're wrong but they also dictate the rules.

 

But they have to play with the trillion dollar cards they've been dealt. Odds favor the path of least resistance financially, which will pave the way for a political solution. At least that is what my fortune cookie said. :)

[Guest cherzeca]

good new post by tim howard, plus an interesting willingness by stevens expressed in comments to meet with howard to discuss:  https://howardonmortgagefinance.com/2017/06/06/the-path-forward/comment-page-1/#comment-3584

 

i dont see stevens coming over from the dark side, but i think his willingness to meet with howard is both sensible and i think indicative of MBA's increasing fear that it is losing traction on the issue. 

 

i think howard described in his new post about how MBA is beginning to lose its grip:

 

"The president of the Mortgage Bankers Association, David Stevens, immediately responded to the Moelis plan by saying, “This proposal is clearly self-serving and designed to confuse unsuspecting, innocent taxpayers into supporting a plan that is intended to line the pockets of hedge funds who invested in Fannie and Freddie.” Tellingly, however, Stevens offered no specific criticism of the plan. Instead, he fairly begged critics of the MBA’s plan to respond by calling it “clearly self-serving and designed to confuse unsuspecting, innocent homebuyers into supporting a plan that is intended to line the pockets of banks who want the business of Fannie and Freddie.”

 

touche

[Luke 532]

I am hoping that within next 14 days they quickly announce a plan to implement. We will lose Sweeney, Delaware and keep losing leverage. This needs to be done quickly like NWS was. Courts are highly political and it is a shame. Research yourself and every court we are in, are lined up with fellow travelers. Didn't someone say that majority of perry appeals court judges were appointed by Obama and that Ginsberg was friend of one of the fellow travelers? Why did we expect to win?  Really sad state of affair and we can't rely on political courts and hope we go with a plan before they release their stupid decision based on the word 'may' in HERA.

 

Corker and fellow travelers are buying time till Jan 2018 and Watt is playing politics as he knows he can RUIN the housing in Jan 2018 when they run out of capital and current admin will be blamed. Watt wants to ruin the market as he is only few left. Get it?

 

Emily, I appreciate your comments and thoughts on this board.  With that said, I do get the hunch that you're on tilt.  About two weeks ago you were very worried about this investment, then a few days ago you wondered if you should even sell common at the low price of $20, and again today you are convinced that something needs to be done within 2 weeks or we're toast.  I understand emotions can cause swings but just wanted to caution against letting that drive your decisions.  I hope this is well received, not meant to be preachy, just hopefully helpful.  Thanks.

[Luke 532]

In fact, problem with investors  is they have no tilt.

From the Wikipedia page...

Tilt is a poker term for a state of mental or emotional confusion or frustration in which a player adopts a less than optimal strategy, usually resulting in the player becoming over-aggressive. This term is closely associated with "steam" and some consider the terms equivalent, although steam typically carries more anger and intensity.

 

Placing an opponent on tilt or dealing with being on tilt oneself is an important aspect of poker. It is a relatively frequent occurrence due to frustration, animosity against other players, or simply bad luck. Experienced players recommend learning to recognize that one is experiencing tilt and avoid allowing it to influence one’s play.

[rros]

good new post by tim howard, plus an interesting willingness by stevens expressed in comments to meet with howard to discuss:  https://howardonmortgagefinance.com/2017/06/06/the-path-forward/comment-page-1/#comment-3584

 

i dont see stevens coming over from the dark side, but i think his willingness to meet with howard is both sensible and i think indicative of MBA's increasing fear that it is losing traction on the issue. 

 

i think howard described in his new post about how MBA is beginning to lose its grip:

 

"The president of the Mortgage Bankers Association, David Stevens, immediately responded to the Moelis plan by saying, “This proposal is clearly self-serving and designed to confuse unsuspecting, innocent taxpayers into supporting a plan that is intended to line the pockets of hedge funds who invested in Fannie and Freddie.” Tellingly, however, Stevens offered no specific criticism of the plan. Instead, he fairly begged critics of the MBA’s plan to respond by calling it “clearly self-serving and designed to confuse unsuspecting, innocent homebuyers into supporting a plan that is intended to line the pockets of banks who want the business of Fannie and Freddie.”

 

touche

Moelis and MBA have no common ground. And they are as far apart as it comes. Moelis' essence revolves around the principle of shareholders' rights. Instead, MBA's plan completely ignores these rights even explicitly stating the plan is agnostic when it comes to shareholders. What Stevens can't understand is that having no view on something *is* a point of view.

[Sunrider]

Ermm ... while I share your frustration, I'd say that you should lay that at the feet of the populus as a whole and their elected representatives. It's not that there should be transparency because it serves investors - it should be there because it's good for democracy.

 

In fact, problem with investors  is they are lacking tilt meaning investors should be uneasy with the unfair situation and not keep waiting for a decision from political courts . We have been docile for last 8 years and FHFA, TSY has been taking all of mom and pop's money. Fannie Mae is making 10 billion dollars with 1 billion shares i.e. $10 per share and they are trading around $2.50. It is a joke. We keep cheering when a new lawsuit is filed. The courts are useless as they are highly political and another 10 years will go by if politicians, political judges and biased press keeps doing so. Judges should not be appointed but elected by a group. The whole system smells politics all around and is sickening in our largest and best democracy in the world that we belong to. Didn't Judge Brown say we are behaving like Venezuela? Why is Watt driving a car without an air bag? Where is the transcript of his phone conversation with Corker? What is going on behind the scenes. I may be new and naive to this but that is what I think reading everything on this. Watt is out to destroy 25% of our GDP via housing by depriving them of capital. In Jan 2018 with no capital, markets will feel the quake and jolted badly. Who will be blamed? Watt will quietly slide saying "it all happened before I came onboard"

 

I am hoping that within next 14 days they quickly announce a plan to implement. We will lose Sweeney, Delaware and keep losing leverage. This needs to be done quickly like NWS was. Courts are highly political and it is a shame. Research yourself and every court we are in, are lined up with fellow travelers. Didn't someone say that majority of perry appeals court judges were appointed by Obama and that Ginsberg was friend of one of the fellow travelers? Why did we expect to win?  Really sad state of affair and we can't rely on political courts and hope we go with a plan before they release their stupid decision based on the word 'may' in HERA.

 

Corker and fellow travelers are buying time till Jan 2018 and Watt is playing politics as he knows he can RUIN the housing in Jan 2018 when they run out of capital and current admin will be blamed. Watt wants to ruin the market as he is only few left. Get it?

 

Emily, I appreciate your comments and thoughts on this board.  With that said, I do get the hunch that you're on tilt.  About two weeks ago you were very worried about this investment, then a few days ago you wondered if you should even sell common at the low price of $20, and again today you are convinced that something needs to be done within 2 weeks or we're toast.  I understand emotions can cause swings but just wanted to caution against letting that drive your decisions.  I hope this is well received, not meant to be preachy, just hopefully helpful.  Thanks.

[Luke 532]

I'm also interested to see whether anyone else endorses this plan, like the ICBA, etc.

 

June 6th... https://www.nationalmortgagenews.com/news/bankers-at-odds-over-gse-recapitalization-proposal

 

"The Independent Community Bankers of America supports the plan developed by the investment banking firm Moelis..."

 

 

ICBA‏Verified account @ICBA 9m9 minutes ago

.@HaynieRon: @ICBA aligned w/ @Moelis proposal bc it provides GSEs w/ capital & there is process for that under law