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

[waynepolsonAtoZ]

Hi! I just wanted to mention that the "ACA sabotage" is expected to add $6 b to the deficit in 2018, $21 b in 2020, and $26 b in 2026, if I copied the numbers right.

 

http://www.slate.com/blogs/the_slatest/2017/10/13/voters_think_trump_owns_his_obamacare_sabotage_republican_politicians_agree.html

 

It seems increasingly likely (to me) that the gov't will not give up on the NWS anytime soon.

 

[TwoCitiesCapital]

Hi! I just wanted to mention that the "ACA sabotage" is expected to add $6 b to the deficit in 2018, $21 b in 2020, and $26 b in 2026, if I copied the numbers right.

 

http://www.slate.com/blogs/the_slatest/2017/10/13/voters_think_trump_owns_his_obamacare_sabotage_republican_politicians_agree.html

 

It seems increasingly likely (to me) that the gov't will not give up on the NWS anytime soon.

 

Would be interesting to see how they calculated that the gov't NOT paying billions to insurers somehow increased the deficit by more than if the gov't DOES pay billions to insurers. I'm sure there's some assumptions about collateral damage and such - would just be curious to see what assumptions those were and how they account for them.

 

 

[waynepolsonAtoZ]

Fair enough. Another thing is that a serious attack on the health care industry could cause a recession. Health care is 1/6 of the economy at this point.

 

https://www.theatlantic.com/politics/archive/2017/06/the-ahca-recession-report/530322/

[rros]

Fair enough. Another thing is that a serious attack on the health care industry could cause a recession. Health care is 1/6 of the economy at this point.

 

https://www.theatlantic.com/politics/archive/2017/06/the-ahca-recession-report/530322/

The current low volatility environment is scary. You all know the next thing coming is volatility with potentially big sell-offs. What event may trigger this nobody knows. Neither when. But when it happens healthcare may not be the only industry pushing us into a recession. Extremely low unemployment, rising rates and industry bottlenecks will also contribute to have corporate profits take a hit.

 

In a downturn the nws will not add to neither benefit the government. Instead, it will become another burden. The logic of keeping it may then go up in flames.

 

This is a case of 'know when to fold them'. Looking at the rear-view mirror the nws was awesome to Treasury in many ways. Going forward it is a question mark. KWTFT means cashing in the warrants.

[beaufort]

With the coming blow out quarter as a result of the RBS settlement (according to IMF news), my memory is the full amount borrowed from Tsy with the 10% coupon will have been paid off entirely.  When that happens, there is no justification for the NWS. 

 

I could see the NWS ending by agreement between Tsy and FHFA after full payment has been made, even if both FnF are both left in conservatorship moving forward while waiting on legislative reform.  While there are elements of a recap, it is not release because there is no release.

 

Watt has said he believes that it is the legislature's job to enact housing reform.  That doesn't mean the NWS has to keep going on after all debts have been paid.  I don't remember what he has said about ending conservatorship.   

 

 

[Seahug]

Bruce Berkowitz just resigned from SHLD board and also sold 6% their holdings. Probably means he will sell more of this strong conviction holding.

 

Possible redemptions? Wonder about FNMA prefs if he needs to reduce as well.

 

Though what really matters are the courts and treasury/congress.

 

So just wait...whinge once in a while... read tea leaves... speculate...hope...

[investorG]

Bruce Berkowitz just resigned from SHLD board and also sold 6% their holdings. Probably means he will sell more of this strong conviction holding.

 

Possible redemptions? Wonder about FNMA prefs if he needs to reduce as well.

 

Though what really matters are the courts and treasury/congress.

 

So just wait...whinge once in a while... read tea leaves... speculate...hope...

 

likely - there has been a good amount of re-loading supply over the past several weeks, often in the series he owns. 

[Guest cherzeca]

i see berkowitz's resignation from shld as a non-event for fnma.  last thing he wants to do is have insider knowledge and section 16b liability if he wants to sell some shld if more fairx redemptions come in.  he wanted to have more of a strategic advice at shld just as he did at st joe, and he has no further reason to be on board at shld

[orthopa]

Correct me if Im wrong but the hedge fund he closed is not the same mutual funds that hold the vast majority if not all of the GSE preferred. Same guy, different entity.

 

At this point Berkowitz' main role is keeping the lawsuit going in Sweeney's court and any effect that may have with Mnuchin regarding a final GSE reform picture. I highly doubt the outcome is different if he sells even a couple million preferred shares with redemptions.

[TwoCitiesCapital]

"Investor Bruce Berkowitz is shutting his hedge fund and distributing its holdings to investors, including a stake in Sears Holdings Corp."

 

I see that it is the same fund that holds Fannie Mae and Freddie Mac. Is he liquidating GSE's too? The Bloomberg piece says he is shutting his fund.

 

http://www.fairholmefundsinc.com/Facts/FAIRXfacts.pdf

 

Hope this fund does not own any Fannie and Freddie shares.

 

https://www.bloomberg.com/amp/news/articles/2017-10-16/berkowitz-liquidates-hedge-fund-that-owned-sears-holdings-shares

 

There was a 300,000 shares transaction of FNMAS at the close. I think he owns this series and not sure if it is related to him or not.

 

The bloomberg piece says he's shutting his hedge fund. FAIRX is his mutual fund.

[HalfMeasure]

Perry capital files suit in Supreme court

 

Is there anything on this other than the Carney piece?

[Midas79]

If memory serves me correctly, yesterday was the deadline for Perry to petition the Supreme Court.

 

Carney's piece: http://www.breitbart.com/big-government/2017/10/16/hedge-fund-perry-capital-asks-supreme-court-to-revive-fannie-mae-lawsuit/

 

Aside: Perry Capital has basically unwound all of its non-FnF positions, right? And the Fairholme Fund that owns GSE preferreds is a mutual fund and not a hedge fund. Are there any actual hedge funds that own FnF shares at this point? Pershing Square is the only one that comes to mind and they are not party to any of the lawsuits. Potential "windfalls" to "hedge fund billionaires" has been a point of emphasis for those who are anti-shareholder (David Stevens et al), so it would be at least humorous if it wasn't technically true.

[TwoCitiesCapital]

If memory serves me correctly, yesterday was the deadline for Perry to petition the Supreme Court.

 

Carney's piece: http://www.breitbart.com/big-government/2017/10/16/hedge-fund-perry-capital-asks-supreme-court-to-revive-fannie-mae-lawsuit/

 

Aside: Perry Capital has basically unwound all of its non-FnF positions, right? And the Fairholme Fund that owns GSE preferreds is a mutual fund and not a hedge fund. Are there any actual hedge funds that own FnF shares at this point? Pershing Square is the only one that comes to mind and they are not party to any of the lawsuits. Potential "windfalls" to "hedge fund billionaires" has been a point of emphasis for those who are anti-shareholder (David Stevens et al), so it would be at least humorous if it wasn't technically true.

 

I think Perry retains the FnF position, right? He's doing an orderly liquidation of his fund, but that doesn't mean he's sold FnF yet.

 

Why else continue burning the money to fight the case if everyone but you benefits?

[Luke 532]

https://www.allenwest.com/2017/10/15/exclusive-government-scam-thats-keeping-obamacare-alive/

[DocSnowball]

Link to leave input on FHFA’s strategic plan

 

https://www.fhfa.gov/AboutUs/Contact/Pages/Request-for-Information-Form.aspx

[Luke 532]

No.  His hedge fund did, his mutual fund did not.  The PDF you posted is for his mutual fund clients.

 

Did Bloomberg lie? I read that Fairlhome has not sold a single share of Sears in 2017.

 

http://www.fairholmefundsinc.com/Bulletin/SHLDstatement20171017.pdf

 

 

Hope this fund does not own any Fannie and Freddie shares.

 

https://www.bloomberg.com/amp/news/articles/2017-10-16/berkowitz-liquidates-hedge-fund-that-owned-sears-holdings-shares

 

There was a 300,000 shares transaction of FNMAS at the close. I think he owns this series and not sure if it is related to him or not.

[Luke 532]

Why would one feel differently about the same stock SHLD in one portfolio than the other?

 

That's not a discussion for this forum.  Research the differences between a hedge fund and a mutual fund.  Then send me a private message and we can discuss.

[Guest cherzeca]

anyone find the link to the perry scotus cert filing?

[Guest cherzeca]

http://gselinks.com/Court_Filings/Perry/Perry_Capital_Certiorari_Petition_as_filed.pdf

 

gse links johnny on the spot

[TonyG]

cherzeca or anyone, obviously impossible to predict, but what you think the odds they actually hear this case?

[Guest cherzeca]

cherzeca or anyone, obviously impossible to predict, but what you think the odds they actually hear this case?

 

just briefly, small odds if petition simply said judge brown was right and judges ginsburg and millet were wrong.  scotus usually wants to see that there is a circuit split since it doesnt want federal law interpreted inconsistently within the US.

 

the petition goes at length to point out that 9th/11th circuits dont permit fhfa to evade judicial review by merely putting a "conservator stamp" on an action.  while ginsburg and millet didnt specifically say/do this, the petition says that what the majority did was tantamount to insulating the nws from judicial review by simply labelling the nws as authorized conservator action (and by preventing review of treasury's authority to purchase securities post 2009 by saying that such judicial review would adversely affect conservator). 

 

the petition also goes on to say that the majority has just empowered fdic to do whatever it wants since the fdic and fhfa language re conservatorship is identical.  this is in my view perry's strongest argument, but it gets heard at scotus only if scotus believes that perry's majority decision conflicts with how the 9th/11th circuits would review conservator action.

 

my hope is that olson's reputation in front of scotus (former SG) helps here too.

[Eye4Valu]

To put things in perspective, an attorney prepared petition for writ of cert. has a better chance than a non attorney prepared petition for writ of cert., bearing in mind that the majority of petitions are submitted by non attorneys. There is approx. 5% chance that cert. is granted for an attorney prepared petition, although I think the odds are greater than that in the Perry case. So, not great odds overall, but perhaps as good as can be expected. 

[Guest cherzeca]

forceful conclusion:

 

"The D.C. Circuit’s decision dangerously misconstrues

FHFA’s conservatorship powers. FHFA’s conservatorship

provisions are neither new nor alien—

Congress took them verbatim from FIRREA, importing

the FDIC’s decades of sound experience in resolving

troubled financial institutions, and the centuries

of common-law conservatorships on which the FDIC

relied. Nothing in the text or purpose of HERA, decades

of FDIC practice, or centuries of common law

even remotely condones the Net Worth Sweep’s massive

expropriation—a confiscation that leaves the

Companies functionally insolvent, saddled with

Treasury’s $189 billion liquidation claim, and with no

ability to escape a vampiric relationship with the government.

Yet the decision below permits any governmental

conservator—including the FDIC—to confiscate

funds under its supervision without judicial review

simply because the conservator did so in the

course of operating the ward. That’s not a conservatorship;

that’s embezzlement.

This Court should grant the petition."

[SnarkyPuppy]

I do believe that Supreme court will grant the petition. And we will win. Is there a timeline for the Supreme Court to respond to it?

 

You're a lawyer?  Or just going off a feeling?  :-X

[DocSnowball]

The Court system has seriously let down ordinary citizens in this case. Executive branches try to overreach their powers in every country, the difference in America used to be answerability to the courts and justice there. This case shakes that belief, at least for me. Why not be an optimist, it’s not like the “experts” have been able to predict correctly so far. I’m optimistic that at least the threat of this going on has value at the bargaining table.