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


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Posted

Mnuchin is on the record stating that F&F should be preserved and removed from government control. He's not in it to fund Obamacare or slush fund, and he's not going to place them in receivership. When CW2.0 fails, which is likely soon, Mnuchin/Watt have the green light for administrative reform together. Mnuchin is not going to wait until November to look down at his cards or stare the other players down. He already knows what cards he has, and knows the other players have zilch. I expect administrative reform to take place this year based on utility model. That is Plan A. SCOTUS and Fed. Ct. of Claims are Plans B and C, respectively. CWdon't have a plan. Draft 29 or whatever it was is nonsensical.

 

+1

 

I would argue the most likely outcome is the one we least expect which would be mnuchin acting sooner then later. Why wait till the balance of power could shift away from him? He is working with Congress as he said he would and letting them put out a bill in anyway they want, if they cant get their act together as noted above then he is on the record saying he will. Clearly based on the last hearing the admin options have been hashed out too.

 

FWIW Paulson (in his latest letter to shareholders) is still of the belief this gets done sooner then later. In light of the connection to mnuchin he has this could be very relevant or just bias on his part. Depends if you believe the relationship is relevant or not but shouldnt be ignored with where we are now with things.

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Posted

SCOTUS is a waste of time to worry about or hope for. The notion that a court is somehow going to right a wrong and shower people with money is a foolish notion and complete waste of time. Move along from that and contemplate Mnuchins admin options since it appears congress has little to offer.

 

I agree with the second sentence here but not necessarily with the others. My idea is that if SCOTUS grants cert then it increases the administration's urgency to act. Is it possible that the worst SCOTUS could do (from the administration's perspective) is order the NWS unwound? Or is there more?

 

I would argue the most likely outcome is the one we least expect which would be mnuchin acting sooner then later. Why wait till the balance of power could shift away from him? He is working with Congress as he said he would and letting them put out a bill in anyway they want, if they cant get their act together as noted above then he is on the record saying he will. Clearly based on the last hearing the admin options have been hashed out too.

 

FWIW Paulson (in his latest letter to shareholders) is still of the belief this gets done sooner then later. In light of the connection to mnuchin he has this could be very relevant or just bias on his part. Depends if you believe the relationship is relevant or not but shouldnt be ignored with where we are now with things.

 

Craig Phillips said that the administration will not act in August even if Congress gets nothing done and that they will instead wait. Of course, this was before Draft 29 was leaked. Perhaps Treasury thought it would take a lot longer for Congressional action to go completely off the rails like this.

Posted

Would be perfect:

 

Feb 19th : Scotus grants Certorari (top secret discussions within judges, no chance of influencing the decision) raising the stake that plaintiffs may finally get justice

 

Feb 2018  : Fairlhome releases docs based on quick peak, embarrassing docs, political storm. This investment has become political football anyways.

 

Feb 2018  : Infrastructure bill not funded by congress, no deal on immigration

 

March 2018 : Crystal clear that no legislative solution

 

March 2018:  Recap and release via Admin action, raise 100 billion to 200 billion.

 

Why not?

 

Your incentives are creating massive bias in outcome prediction

Posted

Treasury Secretary Steve Mnuchin testifies before the House Financial Services Committee about the annual report from the Financial Stability Oversight Council : Live

 

https://www.c-span.org/video/?440758-1/treasury-secretary-mnuchin-testifies-financial-stability-report&live

 

The bolded portion in his testimony implies goodbye to banks lobbying effort?

 

"On housing finance, the current situation of indefinite conservatorship for Fannie Mae and Freddie Mac is neither a sustainable nor a lasting solution. The Administration looks forward to working with Congress to reform America’s housing finance system in a manner that helps consumers obtain the housing best suited to their own personal and financial situations while, at the same time, protecting taxpayers."

 

https://financialservices.house.gov/UploadedFiles/HHRG-115-BA00-WState-SMnuchin-20180206.pdf

Thank you.

In my view, these words are meant to say something while saying nothing.

 

If another market shoe drops in March I can see Watt raising alarms and the "exigent circumstances" card, while Mnuchin raises his eyebrows before he nods. Fully nodding may require a 3rd shoe dropping by the summer.

 

We are headed south. Negative surprises from China March/April, easing by PBOC to add stimulus, commodities skyrocketing leading to more inflation pressures creating a bad US storm. Not perfect. But very bad.

 

The natural order of things:

If scotus steps aside, it is all Congress. But if/when Market speaks, Congress listens.

 

Posted

rros, you are giving me a headache with your gsecryptomergency .  I don't have the financial savvy brain like you to understand all this. I am about to sell my measly gse preferreds holding and walk away.  I bought commons over $4.00, switched all to preferreds at 2.7 common shares to 1 preferred  share based on advice of this board and still losing. This is too much.  Are you saying that we should sell everything ?

 

Emily, no, he is not saying to sell everything.  If that brings you relief then there is a problem.  Your investment decisions should not be influenced that much by what total strangers say on a message board, or your neighbor, or anybody else.  Your investment decisions should be based on your thesis and whether or not changes, if any, to the fundamentals impact your thesis.  That's it.  That's where your focus should be. 

 

I suggest picking up a copy of The Little Book of Behavioral Investing by James Montier.  It's a great read.  I'll mail you a free copy (no strings attached) if you'd like. Just private message me where to send it.

Posted

rros, you are giving me a headache with your gsecryptomergency .  I don't have the financial savvy brain like you to understand all this. I am about to sell my measly gse preferreds holding and walk away.  I bought commons over $4.00, switched all to preferreds at 2.7 common shares to 1 preferred  share based on advice of this board and still losing. This is too much.  Are you saying that we should sell everything ?

A market that tanks in the next 3 to 6 months may overwhelm everyone and both Mnuchin and Watt may decide or be forced to recapitalize the companies to prevent any new bailout. We have all witnessed in the past the power of the market. I have not and will not sell any of my preferreds.

 

Narrow money measures have been flashing red for months. They are now confirming a sharp global slowdown coming. We should see slowing economic momentum in China by the end of March.

 

Luke, great advice. Yes, emily: own homework and own conclusions. Then, you can stick to your position when it moves against you.

Guest cherzeca
Posted

while i dont pretend to understand the market's "internals", it seems that alot of institutional investors were caught on the wrong side of a volatility spike; many were shorting volatility because, well, there hasnt been any in awhile, and when something works you stick with it until it doesnt, and when it doesnt, you remember to match the past year's gains against the past week's losses.

 

none of this applies to the GSEs investment or GSE reform, imo.

 

avoid the incoming.  aint no luck, learned to duck

Posted

while i dont pretend to understand the market's "internals", it seems that alot of institutional investors were caught on the wrong side of a volatility spike; many were shorting volatility because, well, there hasnt been any in awhile, and when something works you stick with it until it doesnt, and when it doesnt, you remember to match the past year's gains against the past week's losses.

 

none of this applies to the GSEs investment or GSE reform, imo.

 

avoid the incoming.  aint no luck, learned to duck

Chris, so you do not think a market slump or a recession may influence events? What if it leads to the companies losing money and needing real bailouts?
Posted

A slump or recession may not be good,  that could incur more losses and make this situation more muddy.

 

If they need to raise more private capital from the markets, the government would want market conditions to support those things easily.

 

Guest cherzeca
Posted

while i dont pretend to understand the market's "internals", it seems that alot of institutional investors were caught on the wrong side of a volatility spike; many were shorting volatility because, well, there hasnt been any in awhile, and when something works you stick with it until it doesnt, and when it doesnt, you remember to match the past year's gains against the past week's losses.

 

none of this applies to the GSEs investment or GSE reform, imo.

 

avoid the incoming.  aint no luck, learned to duck

Chris, so you do not think a market slump or a recession may influence events? What if it leads to the companies losing money and needing real bailouts?

 

that would be bad but that is not my read of what happened.  we shall see whether there is a return to normalcy, but you had alot of investors needing to cover spot vix having shorted futures vix, and alot of risk parity funds needing to sell risk (stocks).  i just dont see that causing a new wave of bad mortgage loans

Posted

mnuchin wouldn't even answer the credit risk transfer question yesterday. he stuck to his old talking points while saying he's just 'cautiously optimistic' about Dodd Frank reform (which seems likelier than housing finance reform) getting done.

 

to me, either:

 

a) he has no master plan, is truly willing to work with congress, and is willing to wait until 2019 if needed.

 

b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course.

Posted

mnuchin wouldn't even answer the credit risk transfer question yesterday. he stuck to his old talking points while saying he's just 'cautiously optimistic' about Dodd Frank reform (which seems likelier than housing finance reform) getting done.

 

to me, either:

 

a) he has no master plan, is truly willing to work with congress, and is willing to wait until 2019 if needed.

 

b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course.

b
Posted

mnuchin wouldn't even answer the credit risk transfer question yesterday. he stuck to his old talking points while saying he's just 'cautiously optimistic' about Dodd Frank reform (which seems likelier than housing finance reform) getting done.

 

to me, either:

 

a) he has no master plan, is truly willing to work with congress, and is willing to wait until 2019 if needed.

 

b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course.

 

B), He has a master plan.

Guest cherzeca
Posted

mnuchin wouldn't even answer the credit risk transfer question yesterday. he stuck to his old talking points while saying he's just 'cautiously optimistic' about Dodd Frank reform (which seems likelier than housing finance reform) getting done.

 

to me, either:

 

a) he has no master plan, is truly willing to work with congress, and is willing to wait until 2019 if needed.

 

b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course.

 

B), He has a master plan.

 

while i think B is correct, the most cogent reason for me is because notwithstanding mnuchin's oft-referenced preference that he wants to work with congress (A), i have seen no evidence to date that mnuchin has worked with congress.

 

has anyone heard corker or anyone else on senate banking committee say that anything in draft #29 incorporates anything from mnuchin?  if he really wanted to "work with" congress, rather than "wait out" congress, wouldnt you think there would have been evidence of that?

Posted

mnuchin wouldn't even answer the credit risk transfer question yesterday. he stuck to his old talking points while saying he's just 'cautiously optimistic' about Dodd Frank reform (which seems likelier than housing finance reform) getting done.

 

to me, either:

 

a) he has no master plan, is truly willing to work with congress, and is willing to wait until 2019 if needed.

 

b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course.

 

B), He has a master plan.

 

while i think B is correct, the most cogent reason for me is because notwithstanding mnuchin's oft-referenced preference that he wants to work with congress (A), i have seen no evidence to date that mnuchin has worked with congress.

 

has anyone heard corker or anyone else on senate banking committee say that anything in draft #29 incorporates anything from mnuchin?  if he really wanted to "work with" congress, rather than "wait out" congress, wouldnt you think there would have been evidence of that?

 

Excellent point. More like let congress fall on its face. I the most recent hearing in the Mnuchin Corker exchange Corker explains how difficult of a problem this is and Mnuchin mentions working with congress, and you hear Corker with a quick and flippant "yeah". Probably because he has helped very little as assumed here.

 

In the same breath Congress probably hasn't asked for Mnuchins help as 1) its shows they are inept, 2) likely would be a bill/process they would highly disagree with.

 

The devils advocate would say there is no guarantee Mnuchin is friendly to shareholders but I believe his lip service to this point in regards to working with congress is knowing full well congress has no interest in where his help would guide them.

Posted

Mnuchin knows a lot about Fannie and Freddie, and the congressman simply don't know as much beyond the talking points and false narratives. The main thing is that Fannie and Freddie survive when "released" from "conservatorship." Like Tim Howard points out on his blog, you can talk a big game when you're a congressman proposing a bill that leaves all the heavy lifting to others at some later date. In actuality, their proposal would be very difficult and costly to implement. Mnuchin realizes that Fannie and Freddie provide an important countercyclical role, and are the main reason the 30 yr. mortgage is available. He knows they shouldn't go away. If the dems gain more seats in Nov., which looks likely at the present time, GSE reform becomes even more difficult for congress to resolve. You likely need an administrative solution here. Mnuchin is prepared to provide one, which keeps Fannie and Freddie, but it is a matter of timing and going through the motions with congress. I think Tim Howard also does a good job of evaluating the likelihood of a new FHFA director that is right leaning taking unilateral action to enact GSE reform. He doesn't view it as likely without Mnuchin's support. I conclude after thinking it through that Fannie and Freddie likely survive, but the timing is unpredictable.

 

 

Posted

"b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course."

 

The catch is that his master plan is to do what's good for Goldman Sachs, not what's good for America (or us).

 

Posted

"b) he has a master plan and is saying absolutely nothing so that he can roll out whatever it is when desired with zero hints that could throw it off course."

 

The catch is that his master plan is to do what's good for Goldman Sachs, not what's good for America (or us).

 

What fate for FnF do you believe is good for Goldman Sachs?

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