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

[Guest cherzeca]

Twiddling thumbs waiting for January hearing en banc in the 5th circuit.

 

Anybody know when the government's reply will be filed?

 

1/11.  then arg 1/23

[Midas79]

High volume in a few of the less liquid preferred series: 150k shares of FNMAG, 90k shares of FMCCT, and even 48 shares of FMNFO, the first two at prices above the ask and the last near it. Good volume in many other series as well. These buyers are in it for at least the medium term; 150k shares of FNMAG is pretty hard to dump.

 

The overall dividend-price correlation is still strong at 0.884 on the bid and 0.890 on the ask, but FNMAT is being a bit of a laggard. I sold some other series to buy some FNMAT today on that weakness. FNMAS and FMCKJ also didn't share in the strong volume and price action in the other series, which makes me think that at least some of the money out there believes that the low or medium divs are a good investment compared to the high divs.

 

That puts me at about 50% Fannie 50s, 20% Fannie 25s, 15% Freddie 50s, 15% Freddie 25s.

[rros]

High volume in a few of the less liquid preferred series: 150k shares of FNMAG, 90k shares of FMCCT, and even 48 shares of FMNFO, the first two at prices above the ask and the last near it. Good volume in many other series as well. These buyers are in it for at least the medium term; 150k shares of FNMAG is pretty hard to dump.

 

The overall dividend-price correlation is still strong at 0.884 on the bid and 0.890 on the ask, but FNMAT is being a bit of a laggard. I sold some other series to buy some FNMAT today on that weakness. FNMAS and FMCKJ also didn't share in the strong volume and price action in the other series, which makes me think that at least some of the money out there believes that the low or medium divs are a good investment compared to the high divs.

 

That puts me at about 50% Fannie 50s, 20% Fannie 25s, 15% Freddie 50s, 15% Freddie 25s.

Thank you for the update, Midas.

 

https://www.forexlive.com/news/!/trump-said-to-consider-declaring-emergency-for-wall-funding-20190104

Democrats would consider it a major overreach of his powers.

 

This is why I think the warrants for the wall may be easier said than done. But I do not really know the legalities here...

[Guest cherzeca]

"This is why I think the warrants for the wall may be easier said than done. But I do not really know the legalities here..."

 

the legalities are reasonably clear. potus has article II constitutional authority to declare national emergencies and there is a statute that says he can divert appropriated defense construction spending to new construction priorities as he wishes in the event of a national emergency.  (this approach would use the bloated defense budget rather than warrant proceeds)

 

so done deal....except this is a disrespected potus among much of the judiciary and congress (Pelosi) would commence litigation that might be successful for reasons of politics rather than legalities

[rros]

"This is why I think the warrants for the wall may be easier said than done. But I do not really know the legalities here..."

 

the legalities are reasonably clear. potus has article II constitutional authority to declare national emergencies and there is a statute that says he can divert appropriated defense construction spending to new construction priorities as he wishes in the event of a national emergency.  (this approach would use the bloated defense budget rather than warrant proceeds)

 

so done deal....except this is a disrespected potus among much of the judiciary and congress (Pelosi) would commence litigation that might be successful for reasons of politics rather than legalities

Thank you for clarifying, Chris.

[DRValue]

Could be an interesting day tomorrow, but not holding my breath.

 

Here's to more useless comments in 2019!

[rros]

Could be an interesting day tomorrow, but not holding my breath.

 

Here's to more useless comments in 2019!

And on that note, here is my first (or third) useless comment for 2019.

 

Can you all imagine the NWS on the hands of new congresswoman Ocasio-Cortes when she is ready to run for President? Or even as congresswoman trying to crystallize it into law? Maybe even as an amendment to our Constitution as a tool for redistribution?

 

/Comment not to be construed as misogynist./

 

Not too long ago Hillary wanted to impose a special tax on XOM for their excess profits.

[DocSnowball]

Could be an interesting day tomorrow, but not holding my breath.

 

Here's to more useless comments in 2019!

And on that note, here is my first (or third) useless comment for 2019.

 

 

One useless comment from my side - when I look back and reflect on my thesis, it has conveniently drifted from legal (Fifth amendment violation) to Administrative (Restructuring or even receivership with shares in New Co because there is no good alternative). Only solace in the last week has been no significant selling by those closest to being "insiders" to the administration aka Moelis sponsors. Still holding at 10% of portfolio but not sure if this falls under deep value or pure speculation.

[undervalued]

What interesting thing happened today?

[WB_fan82]

Milken Institute getting on board!

[Luke 532]

Milken Institute getting on board!

 

https://www.prnewswire.com/news-releases/milken-institute-housing-team-calls-for-administrative-reform-to-strengthen-housing-finance-system-paving-the-way-for-legislative-action-300774588.html

 

[rros]

Milken Institute getting on board!

lol. Stegman is now making administrative reform his battlefield.

 

I do not see this as "on board". More likely, an attempt to infiltrate and maneuver away from the real administrative reform we want. The only good news is that this confirms legislative reform is 100% dead.

[allnatural]

Very interesting they are calling for the GSEs to end the NWS today and begin retaining capital regardless of how legislative reform plays out. It appears even they are conceding that the GSEs will emerge as recapitalized private companies in any event, which is great for jr pref holders, regardless if GSEs are weakened or not.

[rros]

Very interesting they are calling for the GSEs to end the NWS today and begin retaining capital regardless of how legislative reform plays out. It appears even they are conceding that the GSEs will emerge as recapitalized private companies in any event, which is great for jr pref holders, regardless if GSEs are weakened or not.

I am sorry. I think you are fooling yourself. Stegman is, has been and will always be enemy #1. Or #2. Read more carefully:

Additionally, such amendments should allow each GSE to retain capital on their balance sheets above the current applicable limit of $3 billion, provided that doing so (i) is not a prelude to releasing the GSEs from conservatorship absent legislation to resolve serious charter flaws, and (ii) would not represent a compromise of taxpayer claims.

Taxpayers claims are the Sr. preferred shares. This is why they speak of a period of suspension for the dividends. The essential purpose of this is to block any cascading to the Jrs. Not even being cleverly disguised.

 

As said, they are trying to hijack administrative reform and block shareholders from benefiting in any possible way.

 

 

[allnatural]

I would agree with you, but the key word for me is "non-accrual", meaning the profits /divs that don't get paid during the suspension- don't eventually flow to the senior prefs.

 

"The Treasury Department (Treasury) and the FHFA should amend the Preferred Stock Purchase Agreements (PSPAs) to suspend dividend payments to Treasury on a non-accrual basis during the suspension period."

 

Either way, in what world can suspending the current NWS agreement not be read as an equity positive event for jr prefs?

 

Very interesting they are calling for the GSEs to end the NWS today and begin retaining capital regardless of how legislative reform plays out. It appears even they are conceding that the GSEs will emerge as recapitalized private companies in any event, which is great for jr pref holders, regardless if GSEs are weakened or not.

I am sorry. I think you are fooling yourself. Stegman is, has been and will always be enemy #1. Or #2. Read more carefully:

Additionally, such amendments should allow each GSE to retain capital on their balance sheets above the current applicable limit of $3 billion, provided that doing so (i) is not a prelude to releasing the GSEs from conservatorship absent legislation to resolve serious charter flaws, and (ii) would not represent a compromise of taxpayer claims.

Taxpayers claims are the Sr. preferred shares. This is why they speak of a period of suspension for the dividends. The essential purpose of this is to block any cascading to the Jrs. Not even being cleverly disguised.

 

As said, they are trying to hijack administrative reform and block shareholders from benefiting in any possible way.

[Guest cherzeca]

@undervalued

 

given the historic animosity of Milken Institute to GSEs, converting senior pref into non accruing (or better stated non compounding) pref is a significant half step.  this is massive backsliding by MI, and it seems to me that MI is clawing the ground as it senses the ground shifting under its feet.  you would not be proposing this unless you accepted at least implicitly that the govt has been repaid.  again, you cant expect that one of the fiercest GSE enemies is going to be a wolf sleeping with the lambs in one fell swoop

[rros]

@undervalued

 

given the historic animosity of Milken Institute to GSEs, converting senior pref into non accruing (or better stated non compounding) pref is a significant half step.  this is massive backsliding by MI, and it seems to me that MI is clawing the ground as it senses the ground shifting under its feet.  you would not be proposing this unless you accepted at least implicitly that the govt has been repaid.  again, you cant expect that one of the fiercest GSE enemies is going to be a wolf sleeping with the lambs in one fell swoop

I know you are answering to undervalue but I would like to insert a note, if I may and with all due respect.

 

I agree it's a step closer. But as long as the Srs. exist liquidation preference is negatively impacted for us and the ultimate aim here is to have Congress formulate a reform that will include, most likely, a receivership pass-through. MI is maneuvering within a very narrow path, the only one left for them and they still want to kill legacy shareholders.

 

I imagine you are thinking the next 1/2 step is deeming the Srs. paid but MI, anticipating such outcome, explicitly states taxpayer claims should not be modified.

[Guest cherzeca]

@rros

Yes I agree MI wants to open the door just a wee bit. But what we see is tea leaf reading by MI and they are trying to stand as fast as they can against what they clearly feel to be an adverse tide. Nothing really to cheer here, as I chuckle nonetheless

[orthopa]

This looks like an admission that administrative reform is coming and a voluntary action to throw their hat in the ring. Just like the "warning" from Stevens et al. you dont write a paper like this unless you feel compelled to give the opposing view.

 

 

[SnarkyPuppy]

Another strong signal, of many.

[SnarkyPuppy]

Stegman or any of the fellow travelers are non existent and gophers as far as this administration is concerned, they have no power. They are better off in hiding and keep some dignity. The song Stegman is singing is decade old and tried, the background music changed but only fools may not recognize the gophers.

 

Gophers: An evil rodent that spreads the evil monkey pox disease. They have sold their souls to their satanic leaders- the monkeys- in exchange for eternal dominion over their arch nemesis: the weasels.

 

https://www.urbandictionary.com/define.php?term=gopher&page=2

 

Gophers: A low-ranking employee ......

https://www.urbandictionary.com/define.php?term=gopher

 

 

 

Milken Institute getting on board!

lol. Stegman is now making administrative reform his battlefield.

 

I do not see this as "on board". More likely, an attempt to infiltrate and maneuver away from the real administrative reform we want. The only good news is that this confirms legislative reform is 100% dead.

 

Seriously, wtf?

[Luke 532]

Seriously, wtf?

 

She thinks those that have read The Intelligent Investor have been brainwashed.  I think that answers your question. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/fnma-and-fmcc-preferreds-in-search-of-the-elusive-10-bagger/msg343898/#msg343898

[Luke 532]

Your time is better spent reading Intelligent Investor once again. My comment wasn't about this specific book but about reading too much in so called ‘stock market experts’. That is exactly what Behavioral Investing book warns about.

 

Emily, The Little Book of Behavioral Investing is 1 of 2 books that I personally recommended you read (the other being The Intelligent Investor, of course).  I think I even offered to pay for them?  Not sure, don't remember.  I'm sure you mean well, but your posts that neither strengthen nor detract from a thesis show that the core messages from those books have not yet hit home. 

 

Look, I don't mean to be rude or insensitive or whatever, but taking heed of what I'm saying will provide benefit to you, if properly applied, long after you're done with college.  You're young (I presume) so you have an incredibly valuable asset on your side (time).  However, one must make haste to learn, devour, then apply those lessons to take full advantage of the gift of time.  I wish you well.

[Luke 532]

Yes you offered  a copy , thank you. As I wrote here that I was able to get a copy from public library and read it.  I still don't see Graham figuring out this investment as it is not about companies making money  or intrinsic value (both companies are making a ton) but this investment is mired in dirty politics by bad actors, an irrefutable fact, and that is why it has been a decade. 100% of money made is swept, by deceit,  and that is why none of the institutional investors would touch it and I am sure they have read Graham like books, many times. Consider yourself lucky if an Admin action would resolve it but I would not call it value investing exactly, not in this case, my point.

 

Fair enough.  Hope you have a great 2019!

[DRValue]

@Cherzeca

 

Chris, do you have any insight about what sort of settlement or negotiations are ongoing between plaintiffs and Treasury/FHFA?

Assuming the Treasury genuinely does want to end the conservatorship, both sides have massive leverage. The Treasury can threaten to not end the conservatorship and to wind up the companies (although that would cause more problems IMO), and the plaintiffs can argue that if they want to end the conservatorship and lawsuits they have to give us one hell of a deal.

 

I'll be really interested to see how all this plays out and hope that I'll be able to be a party in any class settlement.