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

[merkhet]

I don't see Sweeney stopping discovery.

 

Joint status report filed today that indicates no need for a conference, so it seems like discovery is still chugging along.

 

On one hand, there was the filing that says discovery may conclude in mid-January. On the other hand, the filing also says there were still significant documents not turned in yet. Is it really possible to conclude in mid-January?

 

Anyway, if discover concludes now, it seems to make no more sense to either grant or deny the Government's motion to stay, right?

 

No, the filing said that "responsive, non-privileged documents" would be provided by mid-January. There are still privileged documents that the Government has been providing and will continue to provide past mid-January, so discovery won't be ending completely in January but probably soon thereafter and probably before the previous March/April timeframe. (i.e. I don't think there are a ton of documents that are privileged that the Government still needs to provide.)

 

The reason it makes no sense to grant the Government's motion to stay is that the Government is once again trying to end discovery prior to the production of the documents that they don't want to produce. Remember when they said the world would end if those documents saw the light of day? My guess is that Sweeney sees through that.

[intothebreach]

merkhet, I know you mentioned your disclaimer a few times earlier in the thread not to rely too much on you and that you had so far been wrong on this (paraphrasing here, not exact quote), but I wanted to thank you for repeatedly providing your thoughts on this whole thread. I'm convinced many followers here find it makes it easier to follow and more enjoyable (and rest assured, no expectation of success created : )

[merkhet]

merkhet, I know you mentioned your disclaimer a few times earlier in the thread not to rely too much on you and that you had so far been wrong on this (paraphrasing here, not exact quote), but I wanted to thank you for repeatedly providing your thoughts on this whole thread. I'm convinced many followers here find it makes it easier to follow and more enjoyable (and rest assured, no expectation of success created : )

 

No problem. I put up my disclaimer to remind people that they get what they pay for. :)

 

 

[doughishere]

Interesting SA article:

 

http://seekingalpha.com/article/2812755-why-a-fannie-and-freddie-wind-down-could-benefit-shareholders

 

 

 

I never really bought the argument that winding up the companies gets rid of the duty to the shareholders.

 

In the Western Insurance Case Mr. Caynes argument that Cooper is missing one word...."Wind up"..

 

US Code 4617 a.2 states "The Agency may, at the discretion of the Director, be appointed conservator or receiver for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity."

 

What scares me is that he goes on to argue that "these are two-party agreements by sophisticated parties and Judge Lamberth properly found that the Plaintiffs could not transform their subjective conclusionary allegations into an actual claim that the third amendment was somehow overruled one sided, Your Honor."

 

"The only thing that happened here is we had a business deal that provided for capital, that provided for financing, and the two parties to the deal, for reasons they deemed appropriate, decided to switch one mechanism, a periodic commitment fee, for another mechanism, a sweep, for so long as they agree to keep that alteration in effect. That's the entire story, Your Honor, of the third amendment."

 

 

Basically....it was just another business deal involving "two-party agreements by sophisticated parties "

 

 

Later on Ms. McElvaian states that the Treasury did not get new securities like Copper suggests but rather......" the third amendment did not commit any additional funds. The same amount of funds was capped in the third amendment as had been in the second amendment so no additional funds were committed and the entire point of this purchase restriction in the statute was to protect the taxpayer, protect the public of risk saying Treasury can commit essentially an unlimited amount of funds"

 

 

I dont know if i buy her argument here but she states that  since "There is no additional commitment of funds after 2009 so the purchase restriction has not been violated, but again to repeat, our position is that you don't even need to engage that analysis because we've already established that FHFA acted within its own powers as Conservator."

 

 

I'd do find Coopers rebuttal to this to be sufficient enough to Ms. McElvaians statement but....Mr Caynes is the one that has the markets spooked along with me. Specifically....with the self dealing.....and i think that Epstein...has been banging on this war drum for the longetst time....July 2013 he states "the United States was on both sides of the transaction in a clear breach of the standard rule that all self-dealing transactions must be scrutinized to determine whether the shareholders' conservator provide them with fair value."

 

 

 

 

 

[Mephistopheles]

merkhet, I know you mentioned your disclaimer a few times earlier in the thread not to rely too much on you and that you had so far been wrong on this (paraphrasing here, not exact quote), but I wanted to thank you for repeatedly providing your thoughts on this whole thread. I'm convinced many followers here find it makes it easier to follow and more enjoyable (and rest assured, no expectation of success created : )

 

+1, thank you merkhet!

[muscleman]

merkhet, I know you mentioned your disclaimer a few times earlier in the thread not to rely too much on you and that you had so far been wrong on this (paraphrasing here, not exact quote), but I wanted to thank you for repeatedly providing your thoughts on this whole thread. I'm convinced many followers here find it makes it easier to follow and more enjoyable (and rest assured, no expectation of success created : )

 

+1, thank you merkhet!

 

+1. :)

[hardincap]

merkhet, I know you mentioned your disclaimer a few times earlier in the thread not to rely too much on you and that you had so far been wrong on this (paraphrasing here, not exact quote), but I wanted to thank you for repeatedly providing your thoughts on this whole thread. I'm convinced many followers here find it makes it easier to follow and more enjoyable (and rest assured, no expectation of success created : )

 

+1, thank you merkhet!

 

+1. :)

 

+1

[merkhet]

Well, let's just hope I don't inadvertently turn this into the LVLT thread. :)

 

I'm hoping that we start to see some movement on the litigation front soon -- though the longer Sweeney waits to rule on the motion, the less likely there is a burden on the government to produce.

[hardincap]

https://www.scribd.com/doc/252822489/Treasury-and-Conservatorship-by-Timothy-Howard-Jan-11-2015

[merkhet]

This is what I've been waiting for...

 

http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=398622

[brker_guy]

Well, let's just hope I don't inadvertently turn this into the LVLT thread. :)

 

Merkhet, 44 more pages of posts to go, and we shall catch up the LVLT thread. ;D ;D

 

Speaking of the LVLT, Net Neutrality and broadband services made it into the State of the Union Address last night, and today, WFC got on the wagon and upgraded LVLT.  So, watch for that LVLT free cash flow machine to get bigger and bigger this year...

[muscleman]

merkhet, did you see this?

http://static1.squarespace.com/static/53962eb7e4b053c664d74f3d/t/54c15672e4b0a736d2a3d829/1421956722757/Conference+Call+Press+Release+1_22_2015.pdf

 

I suggest that we gather a number of important F&F questions and send one email. This may get more serious treatment than sending various random F&F questions in various emails.

 

My question about F&F (though he may not be able to answer):

1. What's the legal prospect right now for the Iowa and Sweeney courts?

2. How is Bill Ackman's lawyers helping with the Sweeney court? Are they helpful?

3. Did he track the AIG-Greenberg case? Is he interesting in hiring David Boies to help with the F&F cases?

[merkhet]

I saw that.

 

I'm not sure we're going to get a heck of a lot out of him at this conference call. It's not like he'll reveal litigation strategy and/or settlement talks in a public setting. It's more of a reassurance conference call like the Brian Moynihan call a few years back.

[muscleman]

I saw that.

 

I'm not sure we're going to get a heck of a lot out of him at this conference call. It's not like he'll reveal litigation strategy and/or settlement talks in a public setting. It's more of a reassurance conference call like the Brian Moynihan call a few years back.

 

Yeah. That's most likely. He may not be able to answer these questions due to legal restrictions. Even if he could, the mom and pop investors in his fund would not understand.

I kind of have a feeling that every time he is pressured to put out a reassurance conference call, his fund jumps up huge the next two years. :D

[merkhet]

I saw that.

 

I'm not sure we're going to get a heck of a lot out of him at this conference call. It's not like he'll reveal litigation strategy and/or settlement talks in a public setting. It's more of a reassurance conference call like the Brian Moynihan call a few years back.

 

Yeah. That's most likely. He may not be able to answer these questions due to legal restrictions. Even if he could, the mom and pop investors in his fund would not understand.

I kind of have a feeling that every time he is pressured to put out a reassurance conference call, his fund jumps up huge the next two years. :D

 

Well, I think he's only done it once, so that's a small sample size. :)

[cubsfan]

Actually back in 2008 & 2009 he did a series of 3-5 calls that were extremely reassuring, given the crisis that was

unfolding beginning in the summer of 2008. I wish he would do a couple of calls a year - other than his annual

Wealth track interview.

[muscleman]

Actually back in 2008 & 2009 he did a series of 3-5 calls that were extremely reassuring, given the crisis that was

unfolding beginning in the summer of 2008. I wish he would do a couple of calls a year - other than his annual

Wealth track interview.

 

I see. I sent out 4 questions in the email anyway.

My primary question is his view of Margin of Safety on this Fannie and Freddie invesment.  :)

[doughishere]

I own shares if people want me to submit questions i can. I will be in china for the call so will most likey not listen to the live call.

[merkhet]

Actually back in 2008 & 2009 he did a series of 3-5 calls that were extremely reassuring, given the crisis that was

unfolding beginning in the summer of 2008. I wish he would do a couple of calls a year - other than his annual

Wealth track interview.

 

Huh, interesting. I didn't know that.

[JRH]

Actually back in 2008 & 2009 he did a series of 3-5 calls that were extremely reassuring, given the crisis that was

unfolding beginning in the summer of 2008. I wish he would do a couple of calls a year - other than his annual

Wealth track interview.

 

Huh, interesting. I didn't know that.

 

I can second that they were remarkably reassuring and candid at the time. Fairholme's worst prior year was about -2% in 2002 and suddenly the fund was down >25% on the year. I was not an experienced investor at the time (even now is debatable), but those calls made me comfortable to significantly increase my position at what turned out to be the right time.

 

I still remember in late 2010 when he said he couldn't remember if Fairholme even had a month of net redemptions during the crisis. Of course, he was cursing himself for 2011 by saying that. ;)

 

[Matson125]

January 27, 2015, Full Committee Hearing Entitled “Sustainable Housing

Finance: An Update from the Director of the Federal Housing Finance

Agency”

 

http://financialservices.house.gov/uploadedfiles/012715_fc_memo.pdf

[muscleman]

January 27, 2015, Full Committee Hearing Entitled “Sustainable Housing

Finance: An Update from the Director of the Federal Housing Finance

Agency”

 

http://financialservices.house.gov/uploadedfiles/012715_fc_memo.pdf

 

Is this important? FHFA did the 3rd amendment with treasury. Now we can't expect them to update and say that's wrong and we are going to reverse it.

[merkhet]

I suppose there's no harm in letting out my theory now.

 

If anyone else is watching the House hearing right now, there have been multiple people who have been jumping up and down on Mel Watt because he's diverting funds to the housing trusts while Fannie & Freddie remain undercapitalized. (As of this moment, I can count 4 Congressmen: Luetkemeyer, Royce, Duffy and Mulvaney.)

 

I think Mel Watt has played them all like a fiddle. The Administration would like to push the housing trusts. The Republicans will play the undercapitalized card substantially, and Watt will push back and say that they should just push through housing reform. Republicans know they can't make that happen. Watt, then, would be more than happy to push through an administrative reform of recapitalizing Fannie & Freddie since the Republicans say that it's undercapitalized.

 

Democrats get to preserve their housing trust payments, and they get to say that the Republicans have no reason to be mad because Watt just did what they told him to do.

 

Republicans get to say that the Administration is playing it fast and loose with the law.

 

Shareholders get a nice payout.

 

(Also, as a side note, there's a joint status conference tomorrow that I'll be attending. -- See attached.)

2015-01-26_Joint_Status_Report_Regarding_January_28_Status_Conference.pdf

[onyx1]

I suppose there's no harm in letting out my theory now.

 

If anyone else is watching the House hearing right now, there have been multiple people who have been jumping up and down on Mel Watt because he's diverting funds to the housing trusts while Fannie & Freddie remain undercapitalized. (As of this moment, I can count 4 Congressmen: Luetkemeyer, Royce, Duffy and Mulvaney.)

 

I think Mel Watt has played them all like a fiddle. The Administration would like to push the housing trusts. The Republicans will play the undercapitalized card substantially, and Watt will push back and say that they should just push through housing reform. Republicans know they can't make that happen. Watt, then, would be more than happy to push through an administrative reform of recapitalizing Fannie & Freddie since the Republicans say that it's undercapitalized.

 

Democrats get to preserve their housing trust payments, and they get to say that the Republicans have no reason to be mad because Watt just did what they told him to do.

 

Republicans get to say that the Administration is playing it fast and loose with the law.

 

Shareholders get a nice payout.

 

 

I agree the Republicans are giving Watt all the ammo he needs, and more, to declare an end to the conservatorship.  Watt is also on record now saying the GSEs are "stabilized".  That alone is justification enough for him to return the GSEs back to shareholders and recapitalize. 

 

Either the Dems don't have a clue of what is going on, or they do and are avoiding entirely the opportunity to object to the errors and inconsistencies in the Republican statements such as "GSE haven't paid back the taxpayers", or Royce's assertion that the Housing Trust fund payments are bad for the capitalization of the GSE (but the alternative of sending the same money to the UST is somehow better?)

 

Merket - I'd really appreciate any observations you can offer from tomorrows conference.

[merkhet]

I suppose there's no harm in letting out my theory now.

 

If anyone else is watching the House hearing right now, there have been multiple people who have been jumping up and down on Mel Watt because he's diverting funds to the housing trusts while Fannie & Freddie remain undercapitalized. (As of this moment, I can count 4 Congressmen: Luetkemeyer, Royce, Duffy and Mulvaney.)

 

I think Mel Watt has played them all like a fiddle. The Administration would like to push the housing trusts. The Republicans will play the undercapitalized card substantially, and Watt will push back and say that they should just push through housing reform. Republicans know they can't make that happen. Watt, then, would be more than happy to push through an administrative reform of recapitalizing Fannie & Freddie since the Republicans say that it's undercapitalized.

 

Democrats get to preserve their housing trust payments, and they get to say that the Republicans have no reason to be mad because Watt just did what they told him to do.

 

Republicans get to say that the Administration is playing it fast and loose with the law.

 

Shareholders get a nice payout.

 

 

I agree the Republicans are giving Watt all the ammo he needs, and more, to declare an end to the conservatorship.  Watt is also on record now saying the GSEs are "stabilized".  That alone is justification enough for him to return the GSEs back to shareholders and recapitalize. 

 

Either the Dems don't have a clue of what is going on, or they do and are avoiding entirely the opportunity to object to the errors and inconsistencies in the Republican statements such as "GSE haven't paid back the taxpayers", or Royce's assertion that the Housing Trust fund payments are bad for the capitalization of the GSE (but the alternative of sending the same money to the UST is somehow better?)

 

I think the Democrats DO have a clue. If your opponent is well on his way to hanging himself, you should not get in the way -- let the Republicans get on a roll and hand them more rope. :)