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

[Guest cherzeca]

@mm

 

I think the admin is doing a great job canvassing the entire "housing finance reform" landscape and masking their intentions as to what they may do.  I remember seeing Phillips on a Q/A video responding to a question re moelis blueprint, and he replied that he wasn't terribly allergic to anything in there.  I found that to be a remarkable thing to say.  willfully indeterminate. admin wants everyone to think they have had their concerns heard, and that the admin has prejudged nothing.  hence, no one seems to know what the state of play is...so I am not sure I agree with you that word will get out in advance of something being released.  3/31 dividend or not day would be a good time for that.

 

now word will get out once an investment banker is selected since bankers gossip more than your mother in law. so that hasn't happened yet.  the plan may simply be on Phillips laptop, waiting for Mnuchin's final critique.  and Mnuchin is busy right now.

[muscleman]

@mm

 

I think the admin is doing a great job canvassing the entire "housing finance reform" landscape and masking their intentions as to what they may do.  I remember seeing Phillips on a Q/A video responding to a question re moelis blueprint, and he replied that he wasn't terribly allergic to anything in there.  I found that to be a remarkable thing to say.  willfully indeterminate. admin wants everyone to think they have had their concerns heard, and that the admin has prejudged nothing.  hence, no one seems to know what the state of play is...so I am not sure I agree with you that word will get out in advance of something being released.  3/31 dividend or not day would be a good time for that.

 

now word will get out once an investment banker is selected since bankers gossip more than your mother in law. so that hasn't happened yet.  the plan may simply be on Phillips laptop, waiting for Mnuchin's final critique.  and Mnuchin is busy right now.

 

Yeah.... What you said is totally possible as well. The other possibility is that they want the plans to be leaked out, and share prices slowly ascending, so they don't get any headline risk of their plan helped push the stock up 150% in one day and enriching the evil hedge fund managers like John Paulson. We'll see.

[SnarkyPuppy]

@mm

 

I think the admin is doing a great job canvassing the entire "housing finance reform" landscape and masking their intentions as to what they may do.  I remember seeing Phillips on a Q/A video responding to a question re moelis blueprint, and he replied that he wasn't terribly allergic to anything in there.  I found that to be a remarkable thing to say.  willfully indeterminate. admin wants everyone to think they have had their concerns heard, and that the admin has prejudged nothing.  hence, no one seems to know what the state of play is...so I am not sure I agree with you that word will get out in advance of something being released.  3/31 dividend or not day would be a good time for that.

 

now word will get out once an investment banker is selected since bankers gossip more than your mother in law. so that hasn't happened yet.  the plan may simply be on Phillips laptop, waiting for Mnuchin's final critique.  and Mnuchin is busy right now.

 

Yeah.... What you said is totally possible as well. The other possibility is that they want the plans to be leaked out, and share prices slowly ascending, so they don't get any headline risk of their plan helped push the stock up 150% in one day and enriching the evil hedge fund managers like John Paulson. We'll see.

 

It's almost as if... this... is happening already...?

[Sunrider]

if you watched testimony you would come to conclusion that at least some D senators would vote for calabria. turns out politics is a stronger impulse in senate than governance

There is no longer any rational thinking by the Democrats today. The only thing they do is to angrily object anything. I dare say if Trump declares himself as self-identified woman, and therefore the first female president in the US, the democrats will not celebrate, but instead yelling angrily. (Even though they should celebrate, as that seems to be inline with their value.)

 

Let's leave D/R politics out of here ... your statement would just as well apply to R during Obama - in fact they are on record saying "We will sabotage and object to anything this president wants to do." It's sad that this sort of 'politics' seems to be the norm now (and as per your statement the D are now doing the same as the R back then). Representatives are elected to do work - which typically means compromising to find workable, albeit imperfect, solutions.

[Guest cherzeca]

if you watched testimony you would come to conclusion that at least some D senators would vote for calabria. turns out politics is a stronger impulse in senate than governance

There is no longer any rational thinking by the Democrats today. The only thing they do is to angrily object anything. I dare say if Trump declares himself as self-identified woman, and therefore the first female president in the US, the democrats will not celebrate, but instead yelling angrily. (Even though they should celebrate, as that seems to be inline with their value.)

 

Let's leave D/R politics out of here ... your statement would just as well apply to R during Obama - in fact they are on record saying "We will sabotage and object to anything this president wants to do." It's sad that this sort of 'politics' seems to be the norm now (and as per your statement the D are now doing the same as the R back then). Representatives are elected to do work - which typically means compromising to find workable, albeit imperfect, solutions.

 

I agree sunrider, but this is highly relevant to current situation.

 

I have always thought the "housing reform" operates at two levels:  a policy-based congressional level, where policy can be debated (do you "wind down" GSEs and if so replace them with some other structure) and comprehensive legislation a la health care "could" be passed, and a practical real world executive level, where you simply implement a practical fix that works.  if the former doesn't get done, then do latter.

 

the latter is essentially a large scale financial restructuring, something congress knows nothing about and something that admin is expert in (given former bankers at treasury).  this can be done and I believe will be done because of the political failure that you mention in congress. political failure in congress is a defining characteristic of how the GSE conservatorship will be resolved.

 

[Sunrider]

Chris - I agree with your views & that understanding politics is informative in relation to predicting how this may play out.

 

I'm simply tired of seeing one or the other side of the political divide (for it is now really a divide) accuse the other of stonewalling, abdicating their duty, being evil, etc. When you consider yourself righteous and the other side evil, it's not hard to see why nothing productive gets done.

 

Sadly, it doesn't matter which side it comes from, it's just the kettle calling the pot black. I'm not American and for me the US used to be the beacon of liberty, so it is very disappointing to see what a bunch of small-minded, squabbling, barely competent, ill-informed, and often ignorant people get to positions of power. The current president's lack of ethics are just the visible symptom of a deeper malaise affecting what used to be the leading country of the free world. (To be clear, I don't care much what side of the aisle he comes from, nor do I think does he, I judge him by what he says and does.)

 

That's where I'm coming from --- and thus I felt compelled to call out this instance of somewhat hypocritical (whether intended or not) political hogwash (not your analysis, but the statement of 'Democrats are X' ... it's the same as 'Republicans are Y').

 

Cheers.

[muscleman]

if you watched testimony you would come to conclusion that at least some D senators would vote for calabria. turns out politics is a stronger impulse in senate than governance

There is no longer any rational thinking by the Democrats today. The only thing they do is to angrily object anything. I dare say if Trump declares himself as self-identified woman, and therefore the first female president in the US, the democrats will not celebrate, but instead yelling angrily. (Even though they should celebrate, as that seems to be inline with their value.)

 

Let's leave D/R politics out of here ... your statement would just as well apply to R during Obama - in fact they are on record saying "We will sabotage and object to anything this president wants to do." It's sad that this sort of 'politics' seems to be the norm now (and as per your statement the D are now doing the same as the R back then). Representatives are elected to do work - which typically means compromising to find workable, albeit imperfect, solutions.

 

I agree sunrider, but this is highly relevant to current situation.

 

I have always thought the "housing reform" operates at two levels:  a policy-based congressional level, where policy can be debated (do you "wind down" GSEs and if so replace them with some other structure) and comprehensive legislation a la health care "could" be passed, and a practical real world executive level, where you simply implement a practical fix that works.  if the former doesn't get done, then do latter.

 

the latter is essentially a large scale financial restructuring, something congress knows nothing about and something that admin is expert in (given former bankers at treasury).  this can be done and I believe will be done because of the political failure that you mention in congress. political failure in congress is a defining characteristic of how the GSE conservatorship will be resolved.

 

Yeah. Spot on! I don't expect any bipartisan deal on the GSEs, so Admin reform seems  to be the way to go.

What makes me curious is why Otting said he has a plan coming out in 2-4 weeks but now after nearly 8 weeks, nothing came up? if I remember correctly, he was giving a private talk about that 2-4 weeks timeline, and then some news media leaked that out?

[Luke 532]

What makes me curious is why Otting said he has a plan coming out in 2-4 weeks but now after nearly 8 weeks, nothing came up?

 

Just FYI, he said it on January 17th.  It's been two days short of 6 weeks.

[Midas79]

What makes me curious is why Otting said he has a plan coming out in 2-4 weeks but now after nearly 8 weeks, nothing came up? if I remember correctly, he was giving a private talk about that 2-4 weeks timeline, and then some news media leaked that out?

 

The theory is that nobody in the administration expected Calabria's nomination to proceed so quickly, meaning that Otting would have to do some of the work himself to get things done in the administration's timeline.

 

Now that Calabria might be in place soon, likely before the March 31 NWS payment, it's better to wait because he will be the full Director, avoiding potential problems from having an Acting Director take large-scale actions.

 

Of course, Otting also just plain shouldn't have been as specific as he was. I think he made an error in judgment when he gave as much detail as he did. There's a reason that the administration has been rather vague so far, this is a politically delicate process.

[Luke 532]

SFIG Speakers Expect Administrative Reform of the GSEs. Capital Build? Yes

https://www.insidemortgagefinance.com/imfnews/1_1553/daily/SFIG-Speakers-Expect-Administrative-Reform-of-gse-1000049710-1.html

 

Not a long article, but here are two excerpts...

“Clearly, there is going to be some kind of capitalization of the GSEs while they are in conservatorship,” said Michael Stegman, a senior fellow at the Milken Institute. 

 

Speaking at SFIG, Landon Parsons, a senior advisor at Moelis & Company, said the GSEs need roughly $150 billion in capital, which he said could be established through new issuance of stock and by allowing the GSEs to retain earnings.

 

[Luke 532]

Logically speaking, there exists next to zero reason to avoid the preferred shares at this point in the game.  There are emotional reasons, investor fatigue, opportunity cost of missing other investment opportunities for "only" a double-triple here, etc, but those arguments don't come close to counter the bull thesis.

[Guest cherzeca]

among the logical participants in an admin plan, mulvaney is in vietnam with trump and busy as chief staff, and mnuchin is knee-deep in china trade negotiations, Iran sanctions etc.  understanding that calabria is not yet fhfa director and otting is a placeholder this leaves phillips, who has operated in the background and as a banker probably is something of a detail guy.  so my guess, is Phillips is working away, maybe chatting with senior bankers on the street, and not much will happen until they all get back together and figure out who leads.  the first real tell will be 3/31 and whether dividends are paid

[rros]

Logically speaking, there exists next to zero reason to avoid the preferred shares at this point in the game.  There are emotional reasons, investor fatigue, opportunity cost of missing other investment opportunities for "only" a double-triple here, etc, but those arguments don't come close to counter the bull thesis.

Well said, Luke.

[TwoCitiesCapital]

@mm

 

I think the admin is doing a great job canvassing the entire "housing finance reform" landscape and masking their intentions as to what they may do.  I remember seeing Phillips on a Q/A video responding to a question re moelis blueprint, and he replied that he wasn't terribly allergic to anything in there.  I found that to be a remarkable thing to say.  willfully indeterminate. admin wants everyone to think they have had their concerns heard, and that the admin has prejudged nothing.  hence, no one seems to know what the state of play is...so I am not sure I agree with you that word will get out in advance of something being released.  3/31 dividend or not day would be a good time for that.

 

now word will get out once an investment banker is selected since bankers gossip more than your mother in law. so that hasn't happened yet.  the plan may simply be on Phillips laptop, waiting for Mnuchin's final critique.  and Mnuchin is busy right now.

 

Yeah.... What you said is totally possible as well. The other possibility is that they want the plans to be leaked out, and share prices slowly ascending, so they don't get any headline risk of their plan helped push the stock up 150% in one day and enriching the evil hedge fund managers like John Paulson. We'll see.

 

It's almost as if... this... is happening already...?

 

Lol

 

+1

[Luke 532]

SFIG Speakers Expect Administrative Reform of the GSEs. Capital Build? Yes

https://www.insidemortgagefinance.com/imfnews/1_1553/daily/SFIG-Speakers-Expect-Administrative-Reform-of-gse-1000049710-1.html

 

Not a long article, but here are two excerpts...

“Clearly, there is going to be some kind of capitalization of the GSEs while they are in conservatorship,” said Michael Stegman, a senior fellow at the Milken Institute. 

 

Speaking at SFIG, Landon Parsons, a senior advisor at Moelis & Company, said the GSEs need roughly $150 billion in capital, which he said could be established through new issuance of stock and by allowing the GSEs to retain earnings.

 

 

I can't believe I'm about to mention Charles Gasparino.  I can't stand financial TV personalities, but even he is saying Calabria will end the conservatorship on his own.  https://twitter.com/CGasparino/status/1100803600631115776

 

The market is really missing the boat on this situation given the pricing of prefs.  But, then again like I said earlier, emotional factors and investor fatigue has likely taken a toll on many.

[Guest cherzeca]

@Luke

 

I think that every institutional investor that has taken the time to really understand this is already into this, and their risk managers likely wont let them increase exposure at this stage, given the political etc risk...maybe later on when more information become available.  also, very few brokers will recommend this to clients given pink sheets and historical animus. research coverage is very weak...you have crap shops like cowen putting out crap coverage. so this is your perfect Graham Dodd hated company. you will see late comers come in, and flow out, as things develop.  my expectation is that if we do have some kind of event, you will see a lot of late comers piling in, which may be a good time to take a little off the table.  but now is a pretty good time imo to consider whether on a risk adjusted basis one might get as full an exposure as one can stomach.

[muscleman]

@Luke

 

I think that every institutional investor that has taken the time to really understand this is already into this, and their risk managers likely wont let them increase exposure at this stage, given the political etc risk...maybe later on when more information become available.  also, very few brokers will recommend this to clients given pink sheets and historical animus. research coverage is very weak...you have crap shops like cowen putting out crap coverage. so this is your perfect Graham Dodd hated company. you will see late comers come in, and flow out, as things develop.  my expectation is that if we do have some kind of event, you will see a lot of late comers piling in, which may be a good time to take a little off the table.  but now is a pretty good time imo to consider whether on a risk adjusted basis one might get as full an exposure as one can stomach.

 

On top of that, with forced redemptions from Fairholm and possibly other underperforming funds, they have no choice but to sell this piece by piece. Whitney Tilson's fund was forced to close last year, and Fairholm under pressure. Paulson hasn't been doing well for years so probably redemption too, etc.

This is why I focus on technicals and have given up doing the fundamental analysis. A lot of things have been obvious in hindsight only, but I can get ahead with technicals.

[rros]

If you are not at the table then you are on the menu.

 

 

Him. Writing a bill that would have made shareholders whole. Two seats from T.

 

Amazing some don't get the significance of this.

[Luke 532]

This is why I focus on technicals and have given up doing the fundamental analysis. A lot of things have been obvious in hindsight only, but I can get ahead with technicals.

 

Muscle, with all due respect, this comment scares the hell out of me.  Fundamental analysis studies a business and what is really happening which leads to a rough estimate of what a business is really worth.  Opportunities arise when the temporary stock price provides an arbitrage situation.  Fundamental analysis is a weighing machine founded on logic.

 

Technical analysis gives the same weighting of importance to Company A with 10 billion in assets and 1 billion in liabilities as it does to Company B with 1 billion in assets and 10 billion in liabilities... and that weighting is zero importance.  Technical analysis doesn't care whether a business is good, bad, a fraud, legit, etc.  It relies solely on price action, momentum, and predicting when the next guy will hit the buy button or the sell button at some level of support or resistance.  Technical analysis is a voting machine founded on emotion.

 

I hope you don't take this comment the wrong way or personally, but it seems lately you've been singing the praises of technical analysis quite a bit so I just wanted to pump the brakes a little bit.

[Guest cherzeca]

@rros

 

if only mulvaney and mnuchin could get some time to focus on GSEs...

[muscleman]

This is why I focus on technicals and have given up doing the fundamental analysis. A lot of things have been obvious in hindsight only, but I can get ahead with technicals.

 

Muscle, with all due respect, this comment scares the hell out of me.  Fundamental analysis studies a business and what is really happening which leads to a rough estimate of what a business is really worth.  Opportunities arise when the temporary stock price provides an arbitrage situation.  Fundamental analysis is a weighing machine founded on logic.

 

Technical analysis gives the same weighting of importance to Company A with 10 billion in assets and 1 billion in liabilities as it does to Company B with 1 billion in assets and 10 billion in liabilities... and that weighting is zero importance.  Technical analysis doesn't care whether a business is good, bad, a fraud, legit, etc.  It relies solely on price action, momentum, and predicting when the next guy will hit the buy button or the sell button at some level of support or resistance.  Technical analysis is a voting machine founded on emotion.

 

I hope you don't take this comment the wrong way or personally, but it seems lately you've been singing the praises of technical analysis quite a bit so I just wanted to pump the brakes a little bit.

 

Well, I don't want to go into depth on this discussion in this thread. I had another thread "I have given up value investing", where you are welcome to discuss this. You don't have to pump the brakes for me, as after trying really hard for 8 years, I realized that I am just not good at fundamental analysis.

[Luke 532]

 

Well, I don't want to go into depth on this discussion in this thread. I had another thread "I have given up value investing", where you are welcome to discuss this. You don't have to pump the brakes for me, as after trying really hard for 8 years, I realized that I am just not good at fundamental analysis.

 

I didn't realize you created a thread with that topic. I agree that's a better place to discuss. I'll look for it. 

[rros]

@rros

 

if only mulvaney and mnuchin could get some time to focus on GSEs...

True... the hope is that $100 billion on the table for the taking will become irresistible.

[Guest cherzeca]

@rros

 

if only mulvaney and mnuchin could get some time to focus on GSEs...

True... the hope is that $100 billion on the table for the taking will become irresistible.

 

like every other politician, job one is to get reelected, and winning china/n. Korea/iran not getting impeached etc is more important than winning GSEs.

[muscleman]

@rros

 

if only mulvaney and mnuchin could get some time to focus on GSEs...

True... the hope is that $100 billion on the table for the taking will become irresistible.

 

like every other politician, job one is to get reelected, and winning china/n. Korea/iran not getting impeached etc is more important than winning GSEs.

 

Well, Mnuchin is busy with China trade deal, but Calabria and Otting should be full time in figuring out the GSE reforms, right? I am sure Otting is working hard right now to understand what's going on, talking to mortage industry CEOs to learn their feedback, and coming up with a plan before Calabria is confirmed. He originally said 2-4 weeks with a plan but now 6 weeks have past. It seems to me that there is always some delay in the GSE promises. Mnuchin had multiple delays, and now Otting.