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

[Midas79]

What a great job FHFA has done in 10 years of Conservatorship. $250K Chandelier, stealing shareholders profit, leave 5T entities with 0 capital, enrich large banks, making mortgage market less safe and less sound……sad part is judges agree that they are doing god’s work.

 

Watt cannot unilaterally get out of the NWS and he didn't agree to it. What exactly is it that you expect him to do?

 

Your anger would be much more justified if it were directed at Mnuchin.

[investorG]

after reading the first 2/3 of the Bhatti oral arguments, it feels like the judge is sympathetic to our view but doesn't seem to have a mechanism to fix it. 

[Spekulatius]

^ Simple, he works for the owner, the treasury. I think he sleep very well. And with the full backing of the treasury, there is no issue with soundness either, their rating is the same than the US sovereign. If they ever generate a loss, they will get the cash to plug the hole, in exchange for an IOU. Same than with social security.

[Guest cherzeca]

after reading the first 2/3 of the Bhatti oral arguments, it feels like the judge is sympathetic to our view but doesn't seem to have a mechanism to fix it.

 

judge is worried about giving broad remedies.  the separation of powers argument would entail nullifying all fhfa action.  as judge put it to P counsel, you want me to invalidate NWS, and go back to the second amendment which also would be nullified, except you are not asking for that relief.

 

judge seemed much more comfortable with appointments clause claim, where if judge uses Ps bright line 2 year cutoff for acting directors (borrowed from the 2 years allowed for recess appointments), then only NWS would be invalidated. 

 

judge also seemed to countenance the nondelegation claim which as he mentions hasnt seen much judicial support for about 100 years.

 

on the negative, judge seemed to countenance defendants claim that res judicata bars this suit since this could have been brought in perry.  i strongly disagree with this, apparently as does judge's law clerk.

 

judge is smart and engaged.  if he works as hard on this as i expect he will, Ps have a puncher's chance.

 

[investorG]

after reading the first 2/3 of the Bhatti oral arguments, it feels like the judge is sympathetic to our view but doesn't seem to have a mechanism to fix it.

 

judge is worried about giving broad remedies.  the separation of powers argument would entail nullifying all fhfa action.  as judge put it to P counsel, you want me to invalidate NWS, and go back to the second amendment which also would be nullified, except you are not asking for that relief.

 

judge seemed much more comfortable with appointments clause claim, where if judge uses Ps bright line 2 year cutoff for acting directors (borrowed from the 2 years allowed for recess appointments), then only NWS would be invalidated. 

 

judge also seemed to countenance the nondelegation claim which as he mentions hasnt seen much judicial support for about 100 years.

 

on the negative, judge seemed to countenance defendants claim that res judicata bars this suit since this could have been brought in perry.  i strongly disagree with this, apparently as does judge's law clerk.

 

judge is smart and engaged.  if he works as hard on this as i expect he will, Ps have a puncher's chance.

 

thanks.  it sounded like he thought the perry decision was improper but then said you have given me little to work with in this constitutional area to help you (plaintiffs) out.  the 2-year appointments area was perhaps the best area for success, but still there in terms of remedy, he said it would be quite a lot for a judge on his level to set this precedent.  I doubt we win even though he was kind of searching for a way to help us.

 

Is the Collins appeal the exact same kind of case or does it have other areas?  although I am mistaken, I was hoping the Bhatti case had BOTH the constitutional side and the same arguments as perry.  this would theoretically allow the judge to believe in our cause, decide the constitutional side remedy was a bridge too far, but then just side with the brown view and overturn the NWS in that component of the suit.

[Guest cherzeca]

after reading the first 2/3 of the Bhatti oral arguments, it feels like the judge is sympathetic to our view but doesn't seem to have a mechanism to fix it.

 

judge is worried about giving broad remedies.  the separation of powers argument would entail nullifying all fhfa action.  as judge put it to P counsel, you want me to invalidate NWS, and go back to the second amendment which also would be nullified, except you are not asking for that relief.

 

judge seemed much more comfortable with appointments clause claim, where if judge uses Ps bright line 2 year cutoff for acting directors (borrowed from the 2 years allowed for recess appointments), then only NWS would be invalidated. 

 

judge also seemed to countenance the nondelegation claim which as he mentions hasnt seen much judicial support for about 100 years.

 

on the negative, judge seemed to countenance defendants claim that res judicata bars this suit since this could have been brought in perry.  i strongly disagree with this, apparently as does judge's law clerk.

 

judge is smart and engaged.  if he works as hard on this as i expect he will, Ps have a puncher's chance.

 

thanks.  it sounded like he thought the perry decision was improper but then said you have given me little to work with in this constitutional area to help you (plaintiffs) out.  the 2-year appointments area was perhaps the best area for success, but still there in terms of remedy, he said it would be quite a lot for a judge on his level to set this precedent.  I doubt we win even though he was kind of searching for a way to help us.

 

Is the Collins appeal the exact same kind of case or does it have other areas?  although I am mistaken, I was hoping the Bhatti case had BOTH the constitutional side and the same arguments as perry.  this would theoretically allow the judge to believe in our cause, decide the constitutional side remedy was a bridge too far, but then just side with the brown view and overturn the NWS in that component of the suit.

 

collins had "perry" arguments and PHH separation of powers.  bhatti had PHH and appointments clause.  schlitz started into perry because bhatti also raised nondelegation argument, which is obscure but basically says congress cant tell an agency to do what it wants...which is what perry seemed to say

[investorG]

after reading the first 2/3 of the Bhatti oral arguments, it feels like the judge is sympathetic to our view but doesn't seem to have a mechanism to fix it.

 

judge is worried about giving broad remedies.  the separation of powers argument would entail nullifying all fhfa action.  as judge put it to P counsel, you want me to invalidate NWS, and go back to the second amendment which also would be nullified, except you are not asking for that relief.

 

judge seemed much more comfortable with appointments clause claim, where if judge uses Ps bright line 2 year cutoff for acting directors (borrowed from the 2 years allowed for recess appointments), then only NWS would be invalidated. 

 

judge also seemed to countenance the nondelegation claim which as he mentions hasnt seen much judicial support for about 100 years.

 

on the negative, judge seemed to countenance defendants claim that res judicata bars this suit since this could have been brought in perry.  i strongly disagree with this, apparently as does judge's law clerk.

 

judge is smart and engaged.  if he works as hard on this as i expect he will, Ps have a puncher's chance.

 

thanks.  it sounded like he thought the perry decision was improper but then said you have given me little to work with in this constitutional area to help you (plaintiffs) out.  the 2-year appointments area was perhaps the best area for success, but still there in terms of remedy, he said it would be quite a lot for a judge on his level to set this precedent.  I doubt we win even though he was kind of searching for a way to help us.

 

Is the Collins appeal the exact same kind of case or does it have other areas?  although I am mistaken, I was hoping the Bhatti case had BOTH the constitutional side and the same arguments as perry.  this would theoretically allow the judge to believe in our cause, decide the constitutional side remedy was a bridge too far, but then just side with the brown view and overturn the NWS in that component of the suit.

 

collins had "perry" arguments and PHH separation of powers.  bhatti had PHH and appointments clause.  schlitz started into perry because bhatti also raised nondelegation argument, which is obscure but basically says congress cant tell an agency to do what it wants...which is what perry seemed to say

 

thanks, I wonder why Bhatti and rop didn't throw in both the constitutional arguments and perry arguments. 

[investorG]

How can FHFA director, the person in the drivers seat, sleep in night knowing he is pushing each and every penny of the very companies HE is supposed to conserve assets of and knowing that companies have paid all of the principal and 10% dividend and more? He works for Treasury or the companies?

 

it doesn't appear that watt is the center of our issues.  he wrote a shareholder owned utility proposal after all, which might been what stopped the corker bill.

 

[Guest cherzeca]

after reading the first 2/3 of the Bhatti oral arguments, it feels like the judge is sympathetic to our view but doesn't seem to have a mechanism to fix it.

 

judge is worried about giving broad remedies.  the separation of powers argument would entail nullifying all fhfa action.  as judge put it to P counsel, you want me to invalidate NWS, and go back to the second amendment which also would be nullified, except you are not asking for that relief.

 

judge seemed much more comfortable with appointments clause claim, where if judge uses Ps bright line 2 year cutoff for acting directors (borrowed from the 2 years allowed for recess appointments), then only NWS would be invalidated. 

 

judge also seemed to countenance the nondelegation claim which as he mentions hasnt seen much judicial support for about 100 years.

 

on the negative, judge seemed to countenance defendants claim that res judicata bars this suit since this could have been brought in perry.  i strongly disagree with this, apparently as does judge's law clerk.

 

judge is smart and engaged.  if he works as hard on this as i expect he will, Ps have a puncher's chance.

 

thanks.  it sounded like he thought the perry decision was improper but then said you have given me little to work with in this constitutional area to help you (plaintiffs) out.  the 2-year appointments area was perhaps the best area for success, but still there in terms of remedy, he said it would be quite a lot for a judge on his level to set this precedent.  I doubt we win even though he was kind of searching for a way to help us.

 

Is the Collins appeal the exact same kind of case or does it have other areas?  although I am mistaken, I was hoping the Bhatti case had BOTH the constitutional side and the same arguments as perry.  this would theoretically allow the judge to believe in our cause, decide the constitutional side remedy was a bridge too far, but then just side with the brown view and overturn the NWS in that component of the suit.

 

collins had "perry" arguments and PHH separation of powers.  bhatti had PHH and appointments clause.  schlitz started into perry because bhatti also raised nondelegation argument, which is obscure but basically says congress cant tell an agency to do what it wants...which is what perry seemed to say

 

thanks, I wonder why Bhatti and rop didn't throw in both the constitutional arguments and perry arguments.

 

this is a good question.  just because perry in dc circuit decided adverse on APA claims shouldnt preclude Ps from raising claim in another circuit.  yet if you look at the the APA claim landscape, you have 5th circuit (collins) and 8th circuit (saxton) hearing appeals, and the 8th circuit is the circuit for bhatti (but not rop).  looks to me like the rop judge is taking a powder, waiting on schlitz.

 

i think in bhatti the constitutional claims were well argued by Ps.  the separation of powers claim will lose in front of schlitz, but that claim will be decided in scotus anyhow (perhaps PHH will ask for cert, need to by end of month).  question is whether schlitz will be bold on the appointments clause claim. 

[investorG]

I re-read the appointments section, hoping to become more optimistic.  fortunately, we found a thoughtful and apparently sympathetic judge.  the constitutional angle, though, is a huge reach, it seems the very definition of 'legislating from the bench'.  I think the most likely outcome is a loss but with some language in there that encourages appeals to a higher level court that has more authority to possibly side with us.  and even in the small chance that we won in this judge's court, i'd guess an appeal is almost certain; whereas if we won in some other cases, maybe more of a settlement.

[Guest cherzeca]

I re-read the appointments section, hoping to become more optimistic.  fortunately, we found a thoughtful and apparently sympathetic judge.  the constitutional angle, though, is a huge reach, it seems the very definition of 'legislating from the bench'.  I think the most likely outcome is a loss but with some language in there that encourages appeals to a higher level court that has more authority to possibly side with us.  and even in the small chance that we won in this judge's court, i'd guess an appeal is almost certain; whereas if we won in some other cases, maybe more of a settlement.

 

an appeal is certain.

 

i wouldnt call it legislating from the bench exactly, as the judge is being asked to define what period is "reasonable under the circumstances" for confirmation of a director to replace an acting director (the office of legislative counsel opinion, which both sides agree is relevant). 

 

the use of a bright line 2 years has many advantages, not the least that it is the maximum period for a recess appointment (which is actually specifically permitted by constitution...constitution is silent on acting directors).  indeed, judge schlitz called the two year bright line a good analogy. 

 

the best i saw defendants come up with is the apparent authority argument, which judge intimated was inappropriate for constitutional violations, and leave it up to congress to fix...except congress could have subjected HERA to the Vacancies Act, but elected to not do so...so one could conclude that congress already did act in HERA.

[investorG]

besides government greed, what's the downside of stopping the sweep and turning on the currently-dormant periodic commitment fee as a replacement compensation for the capital backstop?  unless I am mistaken, mnuchin and watt - who have authority at the moment on this issue - have both said they don't want the GSEs to be shut down.

[rros]

besides government greed, what's the downside of stopping the sweep and turning on the currently-dormant periodic commitment fee as a replacement compensation for the capital backstop?  unless I am mistaken, mnuchin and watt - who have authority at the moment on this issue - have both said they don't want the GSEs to be shut down.

The sweep is actually a *variable* dividend. How do you stop it? Make a fixed one of 1%? 3%? 5%? Declare the Srs. paid off? Any radical change to the sweep will be considered by Congress -perhaps correctly- an attempt to rebuild capital moving away from congressional reform. It will all depend on the narrative Treasury comes up with.

[investorG]

Pershing square holdings acquires another 44.7 million common shares (Pershing capital already had 115 million common shares) ? and American capital acquires another 3.3 million common shares?. What is going on? The price is dropping on commons, there is gloom and doom on GSE  stock but Pershing  and American capital buy even more? Something that we don’t know or they are fools?

 

http://markets.money.cnn.com/research/quote/shareholders.asp?symb=FNM&subView=institutional

 

capital bought a little more in the quarter but the pershing info is old and stale.  rather, i'm kinda anticipating some WSJ news story that ackman or some other large common holder has fully exited their common position.

[blackcoffee]

 

So you think they unloaded  115 million shares in last 3 days? Or the info in this filing is wrong?

 

I'm sure they're misrepresenting material information to the courts... whoops sorry no that's what the defendants do in these cases.. sorry I got my wires crossed.

[rros]

As mentioned since January, watch April/May. I am now seeing potential recession by July. This downdraft together with congress legislative failure and the fear of Watt being replaced next year maybe the sweetest "exigent" recipe. The 10Y T will not break through 3%.

[investorG]

On page 13 (filed few days ago).

“Presently, the Funds’ holdings amount, collectively, to approximately 10% of the outstanding common stock of each Company, and the Funds together constitute the Companies’ largest common shareholder”

 

http://gselinks.com/Court_Filings/Rafter/14-740-0027.pdf

 

 

So you think they unloaded  115 million shares in last 3 days? Or the info in this filing is wrong?

 

 

Pershing square holdings acquires another 44.7 million common shares (Pershing capital already had 115 million common shares) ? and American capital acquires another 3.3 million common shares?. What is going on? The price is dropping on commons, there is gloom and doom on GSE  stock but Pershing  and American capital buy even more? Something that we don’t know or they are fools?

 

http://markets.money.cnn.com/research/quote/shareholders.asp?symb=FNM&subView=institutional

 

capital bought a little more in the quarter but the pershing info is old and stale.  rather, i'm kinda anticipating some WSJ news story that ackman or some other large common holder has fully exited their common position.

 

the adding portion was stale.  the existing portion, I was guessing they might have been the seller but the filing you highligted does say 'presently' when referring to their 10pct stake.  so my guess is likely wrong.  if they aren't selling, and capital held/increased, i'm stunned that the common dropped 60pct between dec and april.

[Luke 532]

https://www.congress.gov/bill/115th-congress/house-bill/4560/all-actions?loclr=cga-bill

 

H.R.4560 - GSE Jumpstart Reauthorization Act of 2017

Latest Action: House - 04/24/2018 Placed on the Union Calendar, Calendar No. 497.  (All Actions)

[rros]

https://www.congress.gov/bill/115th-congress/house-bill/4560/all-actions?loclr=cga-bill

 

H.R.4560 - GSE Jumpstart Reauthorization Act of 2017

Latest Action: House - 04/24/2018 Placed on the Union Calendar, Calendar No. 497.  (All Actions)

 

Thank you.

 

some changes..

https://www.congress.gov/bill/115th-congress/house-bill/4560/text

 

Senators playing with words are more dangerous than a monkey with a thompson submachine.

[rros]

OT:

 

Globally, around 150 bill of green bonds (renewable energy) were issued around the world. About 56% in China, France and the US. In the US, Fannie Mae was the largest overall issuer with $24.9 billion from its green Mortgage Backed Securities programme. And the majority, globally, towards solar projects. A new line of business for Fannie, it appears.

 

For 2018, global green bonds are estimated to double to 300 billion. Target is 1 trillion by 2020. Although green bonds make up a small fraction of the overall bond market, they are attracting more attention because meeting emissions-cut targets will require trillions of dollars of capital from public and private sectors.

[Luke 532]

FMCCL at roughly 18% of par looks super attractive here.  Yes, I'm talking my book.  ;)

[Midas79]

the lawmaker also said he supports administrative action for reforming Fannie Mae and Freddie Mac, if it comes down to that.

 

Only if it means gutting or winding down the GSEs, probably.

 

I wonder if Mnuchin is more likely to act if he gets calls from enough members of Congress to do so, even if they can't pass any legislation. He has said he wants to work with Congress: would this scenario count?

 

Since Treasury "is not allergic" to the utility model put forth by FHFA, ostensibly administrative reform would result in FnF continuing to be owned by shareholders, and perhaps even without competition. Utility models lend themselves to monopolies rather than lots of competitors.

[Midas79]

FMCCL at roughly 18% of par looks super attractive here.  Yes, I'm talking my book.  ;)

 

From my model, R^2 coefficient of "% of par vs dividend yield" hit 0.85 last week, pretty high. It's still at 0.77 now, so I have been selling high divs and buying low ones. If it gets back down to the 0.5-0.55 range I'll do the reverse. For now I'm mostly in the low-divs like FNMAL and FMCKM.

 

(btw I can't buy or sell the variables. They would kind of break my model anyway)

[Luke 532]

FMCCL at roughly 18% of par looks super attractive here.  Yes, I'm talking my book.  ;)

 

From my model, R^2 coefficient of "% of par vs dividend yield" hit 0.85 last week, pretty high. It's still at 0.77 now, so I have been selling high divs and buying low ones. If it gets back down to the 0.5-0.55 range I'll do the reverse. For now I'm mostly in the low-divs like FNMAL and FMCKM.

 

(btw I can't buy or sell the variables. They would kind of break my model anyway)

 

I don't factor dividends into the prefs I'm buying at all.  Not expecting the div rate to have any meaningful, if any at all, impact long-term.

[Midas79]

I don't factor dividends into the prefs I'm buying at all.  Not expecting the div rate to have any meaningful, if any at all, impact long-term.

 

I have a core position that I hold on to. I just use the rest to jump around and hopefully take advantages of the sways of the market. The correlation directly reflects the market's opinion of the probability that dividends ever get turned back on. I leave out FNMAS and FMCKJ on purpose to avoid liquidity premiums tainting the data, but I include FNMAT when I perhaps shouldn't.