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

[rros]

I am surprised shares did not react positively to an early-stages potential split plan. There is no way in hell FF can be successfully broken up and sold into private hands as bankrupt businesses. Split is a private market solution that must inherently respect shareholders. You can't wipe them out and then hope new buyers will fund the split. That is what Moelis plan is telling the world: "you need the guys with the capital".

[Guest cherzeca]

I am surprised shares did not react positively to an early-stages potential split plan. There is no way in hell FF can be successfully broken up and sold into private hands as bankrupt businesses. Split is a private market solution that must inherently respect shareholders. You can't wipe them out and then hope new buyers will fund the split. That is what Moelis plan is telling the world: "you need the guys with the capital".

 

This break up plan would be a logistical nightmare even if the companies were well capitalized and out of conservatorship. Doing it for $5T asset companies with no capital? Sounds highly unrealistic to understate the case

 

 

[rros]

I am surprised shares did not react positively to an early-stages potential split plan. There is no way in hell FF can be successfully broken up and sold into private hands as bankrupt businesses. Split is a private market solution that must inherently respect shareholders. You can't wipe them out and then hope new buyers will fund the split. That is what Moelis plan is telling the world: "you need the guys with the capital".

 

This break up plan would be a logistical nightmare even if the companies were well capitalized and out of conservatorship. Doing it for $5T asset companies with no capital? Sounds highly unrealistic to understate the case

Boltansky lowered the chance of legislative action prior to 2019 from 30% to 10%, after this lol.

[Flynnstone5]

Slow bleed

[Luke 532]

NAR Asks FHFA to Allow GSEs to Build Capital; Treasury and Panels Get CC’d

https://www.insidemortgagefinance.com/imfnews/1_1137/daily/NAR-Asks-FHFA-to-Allow-GSEs-to-Build-Capital-1000041868-1.html

 

Short Takes: Uncle Sam will be $5B Richer on Friday (GSE Money) /Zilch for the Others / Break Up Fannie and Freddie? / Something to Ponder / A Promotion at Guild Mortgage

https://www.insidemortgagefinance.com/imfnews/1_1137/daily/corker-and-warner-want-to-break-up-the-gses-1000041873-1.html?ET=imfpubs:e9489:73599a:&st=email&s=imfnews

[rros]

NAR Asks FHFA to Allow GSEs to Build Capital; Treasury and Panels Get CC’d

https://www.insidemortgagefinance.com/imfnews/1_1137/daily/NAR-Asks-FHFA-to-Allow-GSEs-to-Build-Capital-1000041868-1.html

 

Short Takes: Uncle Sam will be $5B Richer on Friday (GSE Money) /Zilch for the Others / Break Up Fannie and Freddie? / Something to Ponder / A Promotion at Guild Mortgage

https://www.insidemortgagefinance.com/imfnews/1_1137/daily/corker-and-warner-want-to-break-up-the-gses-1000041873-1.html?ET=imfpubs:e9489:73599a:&st=email&s=imfnews

 

"In its 2016 figures, the Center for Responsive Politics ranked the National Association of Realtors as the 2nd largest top spender in lobbying after the U.S. Chamber of Commerce. On the total spending, the largest share—46% -- has gone to Republicans."

 

Maybe NAR can move the needle?

[waynepolsonAtoZ]

Every summer has been a slow bleed. Ok, maybe not 2012, but we know how that worked out.

[Desert_Rat]

NAR Asks FHFA to Allow GSEs to Build Capital; Treasury and Panels Get CC’d

https://www.insidemortgagefinance.com/imfnews/1_1137/daily/NAR-Asks-FHFA-to-Allow-GSEs-to-Build-Capital-1000041868-1.html

 

Short Takes: Uncle Sam will be $5B Richer on Friday (GSE Money) /Zilch for the Others / Break Up Fannie and Freddie? / Something to Ponder / A Promotion at Guild Mortgage

https://www.insidemortgagefinance.com/imfnews/1_1137/daily/corker-and-warner-want-to-break-up-the-gses-1000041873-1.html?ET=imfpubs:e9489:73599a:&st=email&s=imfnews

 

"In its 2016 figures, the Center for Responsive Politics ranked the National Association of Realtors as the 2nd largest top spender in lobbying after the U.S. Chamber of Commerce. On the total spending, the largest share—46% -- has gone to Republicans."

 

Maybe NAR can move the needle?

 

That could be the most informative thing I've read on this thread for months (except my posts of course). Forget the courts, people, this is all about politics and the money that drives it. I happen to think we're ahead there.

 

[investorG]

did anyone else hear corker talk about building off the current infrastructure? 

 

obviously he wants the standard explicit guarantee, competition, etc, but that sounded a little less antagonistic.

[undervalued]

https://www.wsj.com/articles/fund-manager-makes-contrarian-bet-loading-up-on-sears-1498734001

Treasury officials have said they want to reform Fannie Mae and Freddie Mac, which could include moving them out of government control. Such a move could put an end to litigation over their future and deliver a windfall to investors. For now, however, the future of the two entities and what that will mean for investors is unclear. Preferred shares in the two represented 38% of the Fairholme Fund at the end of February, according to a regulatory filing, the most recent holdings information available.

[investorG]

Senator Tom Cotton is a smart, independent man and also close to Trump.  I recommend checking out his portion of the Senate hearing yesterday where he questions the witnesses on incorporating any potential lawsuit costs into the reform equation. 

[rros]

Senator Tom Cotton is a smart, independent man and also close to Trump.  I recommend checking out his portion of the Senate hearing yesterday where he questions the witnesses on incorporating any potential lawsuit costs into the reform equation.

Sen. Cotton was one of the first ones to endorse Mnuchin before he was confirmed. However, I personally think only Corker matters. He was unusually careful in his statements. Had the feeling he feels there is a narrower path now set implicitly or explicitly by the WH. I don't know... he pointed at a consolidation of ideas as follows:

 

1. explicit, paid-for catastrophic guarantee.

2. private capital in front of #1 and not 1/2 percent as in the past.

3. pre-funded fund to deal with failure of mortgages, not bailing out the companies.

4. access to secondary markets by entities of all sizes (regional banks)

5. counter-cyclical nature of GSEs enabling credit during downturns.

6. build off of the existing infraestructure.

 

#1 and #2 are part of Moelis and #3 and #4 are also part of ICBAs. He is not endorsing Moelis and there is no assurance he may become friendlier to shareholders but he did sound different than in the past.

[investorG]

Senator Tom Cotton is a smart, independent man and also close to Trump.  I recommend checking out his portion of the Senate hearing yesterday where he questions the witnesses on incorporating any potential lawsuit costs into the reform equation.

Sen. Cotton was one of the first ones to endorse Mnuchin before he was confirmed. However, I personally think only Corker matters. He was unusually careful in his statements. Had the feeling he feels there is a narrower path now set implicitly or explicitly by the WH. I don't know... he pointed at a consolidation of ideas as follows:

 

1. explicit, paid-for catastrophic guarantee.

2. private capital in front of #1 and not 1/2 percent as in the past.

3. pre-funded fund to deal with failure of mortgages, not bailing out the companies.

4. access to secondary markets by entities of all sizes (regional banks)

5. counter-cyclical nature of GSEs enabling credit during downturns.

6. build off of the existing infraestructure.

 

#1 and #2 are part of Moelis and #3 and #4 are also part of ICBAs. He is not endorsing Moelis and there is no assurance he may become friendlier to shareholders but he did sound different than in the past.

 

I agree even though the market doesn't.  I wonder if the weakness at these low price levels is a delayed timing thing or more of a bad outcome thesis.

[rros]

Senator Tom Cotton is a smart, independent man and also close to Trump.  I recommend checking out his portion of the Senate hearing yesterday where he questions the witnesses on incorporating any potential lawsuit costs into the reform equation.

Sen. Cotton was one of the first ones to endorse Mnuchin before he was confirmed. However, I personally think only Corker matters. He was unusually careful in his statements. Had the feeling he feels there is a narrower path now set implicitly or explicitly by the WH. I don't know... he pointed at a consolidation of ideas as follows:

 

1. explicit, paid-for catastrophic guarantee.

2. private capital in front of #1 and not 1/2 percent as in the past.

3. pre-funded fund to deal with failure of mortgages, not bailing out the companies.

4. access to secondary markets by entities of all sizes (regional banks)

5. counter-cyclical nature of GSEs enabling credit during downturns.

6. build off of the existing infraestructure.

 

#1 and #2 are part of Moelis and #3 and #4 are also part of ICBAs. He is not endorsing Moelis and there is no assurance he may become friendlier to shareholders but he did sound different than in the past.

 

I agree even though the market doesn't.  I wonder if the weakness at these low price levels is a delayed timing thing or more of a bad outcome thesis.

Everybody and their lawyer is on hold. No buying, no selling. So small bleed is from retail that needs to pay for their daily mcdonalds.

 

What is fascinating about these hearings is that almost everyone agrees the NWS must end. Yet, they scorn at the possibility of the WH/Treasury doing it. It is really, really crazy. Like being in love with someone you hate. Or being faithful to someone that cheats on you. It is completely dysfunctional.

[Guest cherzeca]

@rros

 

i havent followed this hearing much at all, but i note that if corker said: "5. counter-cyclical nature of GSEs enabling credit during downturns."  then he should realize that scale matters. also equity capital matters. you cant have small guarantors relying on CRTs to provide countercyclical support.

[rros]

@rros

 

i havent followed this hearing much at all, but i note that if corker said: "5. counter-cyclical nature of GSEs enabling credit during downturns."  then he should realize that scale matters. also equity capital matters. you cant have small guarantors relying on CRTs to provide countercyclical support.

His actual words were:

 

"credit needs to be available throughout all economic cycles and I think the last go around we did not focus enough on that component."

 

But I agree with you. He must realize scale and equity are essential factors. Also, I think he is falling in line (more) after he got reprimanded by the WH when he suggested Watt use taxpayers' money to create an artificial draw.

 

[asterisk]

http://www.washingtonexaminer.com/jeb-hensarling-tells-bankers-ending-fannie-and-freddie-is-still-the-best-path-forward/article/2626608

 

Hensarling returns to the picture...

[ValueMaven]

Hi - Can someone in plain English explain to ME why one would play this through the Prefereds like Perry and Fairhome vs. the Common stock of the GSE's like Ackman and others?  I've always wondered this...much thx!!!

 

VM

[Desert_Rat]

Because the preferreds could have 5x upside to the commons no upside, but not the reverse. To reject the safety moat offered by the preferreds for an imaginary higher upside is foolish, imo.

 

As far as Ackman, I'd bet he'd prefer the preferreds as well (probably owns a bunch now too), but the math in accumulating them at the time over just buying the heavier traded common shares didn't work for him. Most preferreds trade very sparsely.

 

 

[ValueMaven]

Count me the latest bag-holder of the preferreds...(bought last week)

 

I found this to be a very interesting talk:

 

Let the summer bleed begin... 

 

Sincerely,

ValueMaven

[DocSnowball]

I share that feeling! Still have to think the preferreds are high uncertainty but low risk in the long term. That part of the thesis has not changed imo

[Flynnstone5]

Count me the latest bag-holder of the preferreds...(bought last week)

 

I found this to be a very interesting talk:

 

Let the summer bleed begin... 

 

Sincerely,

ValueMaven

 

Hadn't watched this in a while. It is an excellent talk!

[SnarkyPuppy]

Count me the latest bag-holder of the preferreds...(bought last week)

 

I found this to be a very interesting talk:

 

Let the summer bleed begin... 

 

Sincerely,

ValueMaven

 

Hadn't watched this in a while. It is an excellent talk!

 

This was the catalyst for me to start seriously considering the preferreds.  Ultimately it comes down to his comments around the 25:10 mark in the video regarding "I believe there is no viable alternative...".  We'll see how it ends. 

[SnarkyPuppy]

Has anyone done an analysis to determine the likelihood of negative legislation passing each layer of the government?   

 

- Likelihood of successful voting in the House Financial Services Committee

- Likelihood of successful voting in the House (simple majority)?

- Likelihood of successful voting in the Senate (simple majority)?

 

I guess the backstop to all of this is Mnuchin.  I'm assuming this is like any new legislation which goes to the White House and would allow Trump (Mnuchin) to veto?

[Luke 532]

I guess the backstop to all of this is Mnuchin.  I'm assuming this is like any new legislation which goes to the White House and would allow Trump (Mnuchin) to veto?

 

This is a good point and one that I think those bearish on Fannie/Freddie due to a bad law being passed are overlooking/discounting.  If any legislation that makes its way through Congress wouldn't protect tax payers and prevent future bailouts, in the eyes of Mnuchin, then he'd likely put a stop to it before it became law.