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

[Guest cherzeca]

I agree with your view. They will increase the SPSA liquidation preference by the buffer they allow them to retain. This gives them cover while litigation plays out and they finalize a reform which involves the government declaring the senior prefs fully paid off (settlement w/ shareholders).

 

Yeah... that’s what I am thinking. And that would totally throw the balls back to the courts.

Regarding Otting’s plan, it surely looks like a dead one now. I am surprised if he talked about such specifics in front of journalists, how can he be not concerned that it gets leaked out? That’s the journalist’s job!

 

@MM

there is no Otting plan just like there is no calabria plan.  there will be a treasury plan, because only treasury can sponsor on behalf of the GSEs a $150B capital raise.  treasury's plan will be revealed when it is ready (likely with an investment banking advisor retained). until then, I would think that no more NWS distributions will be made, and until the plan is released, it would be premature to do anything other than increase the senior pref when the dividends are not made.

[Guest cherzeca]

I am out again. I don't think the technicals will show immediate jump from here. I'll closely watch this to see if it is worth another shot.

 

 

Now this looks like a timely exit. At that time, it was unclear why I should sell from a fundamental perspective, but now it is clearer. (Otting’s 2-4 week plan probably dead. 3/31 sweep probably will happen. Calabria may increase the capital buffer by retaining earnings while increasing senior preferred liquidation value by same amount etc.)

 

The price action has been so lame that if I don’t see another Long setup this or next week, then it seems unlikely I’ll get a setup.

 

from a trading perspective, if the market thinks the dividend won't be made 3/31, you will start to see some upward price movement maybe a week before. 

[locutusoftexas]

Can someone shed some light or provide an estimate of timing on the schedule for the Fairholme lawsuit in Sweeney's Court? The Defendants have just delivered a guide to their omnibus motion to dismiss. Thanks.

[allnatural]

I have final briefs due 5/6.. followed by potential oral arguments and then a decision hopefully by year end or q1 2020.

[orthopa]

I am out again. I don't think the technicals will show immediate jump from here. I'll closely watch this to see if it is worth another shot.

 

 

Now this looks like a timely exit. At that time, it was unclear why I should sell from a fundamental perspective, but now it is clearer. (Otting’s 2-4 week plan probably dead. 3/31 sweep probably will happen. Calabria may increase the capital buffer by retaining earnings while increasing senior preferred liquidation value by same amount etc.)

 

The price action has been so lame that if I don’t see another Long setup this or next week, then it seems unlikely I’ll get a setup.

 

Not criticizing your approach here but how do you technically trade a binary decision? The common/preferred are trading as they are because there is a lull in the news and the next known binary decision date is 3/31 and 3+ weeks away. The date/occurance of any upcoming news is known to no one otherwise.

 

The current technical pattern is one of indecision...because its a binary outcome with no news. Im all for technically trading some issues if one sees fit but this is either yea or nay. Could you pick up a couple small percentages here and there on some very short term time frames? Maybe but with the preferred you will likely lose any gains on the bid ask spread. Price action will not be able to guide you in any fashion with this.

[Luke 532]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

[Luke 532]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Hmmm, why "in next 2 weeks"?  Is there anything important happening around the end of March that might need to be changed or amended?  :-)

[DRValue]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

[Guest cherzeca]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

serious nonfan of exasparino but what does it mean to take a scalpel to GSEs reducing footprint? mean reduce footprint or cut out reducing footprint?  anyway it is a SCOOP

[Guest cherzeca]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

 

I think this is funny.  treasury/fhfa need to raise some $150B of capital. at that point, FHFA will release from conservatorship. but it will be nice and ask if it is ok by congress.  how can congress say no?

[muscleman]

I am out again. I don't think the technicals will show immediate jump from here. I'll closely watch this to see if it is worth another shot.

 

 

Now this looks like a timely exit. At that time, it was unclear why I should sell from a fundamental perspective, but now it is clearer. (Otting’s 2-4 week plan probably dead. 3/31 sweep probably will happen. Calabria may increase the capital buffer by retaining earnings while increasing senior preferred liquidation value by same amount etc.)

 

The price action has been so lame that if I don’t see another Long setup this or next week, then it seems unlikely I’ll get a setup.

 

Not criticizing your approach here but how do you technically trade a binary decision? The common/preferred are trading as they are because there is a lull in the news and the next known binary decision date is 3/31 and 3+ weeks away. The date/occurance of any upcoming news is known to no one otherwise.

 

The current technical pattern is one of indecision...because its a binary outcome with no news. Im all for technically trading some issues if one sees fit but this is either yea or nay. Could you pick up a couple small percentages here and there on some very short term time frames? Maybe but with the preferred you will likely lose any gains on the bid ask spread. Price action will not be able to guide you in any fashion with this.

 

I don’t worry about no news. The crux of technical analysis is to assume that other players in this field is either smarter than me or have insider info or both, and when they act, they will leave their foot print on the chart.

[Guest cherzeca]

millstein sounding sane:  https://www.bloomberg.com/news/videos/2019-03-11/gov-t-has-made-a-lot-of-money-from-fannie-and-freddie-jim-millstein-says-video

[orthopa]

I am out again. I don't think the technicals will show immediate jump from here. I'll closely watch this to see if it is worth another shot.

 

 

Now this looks like a timely exit. At that time, it was unclear why I should sell from a fundamental perspective, but now it is clearer. (Otting’s 2-4 week plan probably dead. 3/31 sweep probably will happen. Calabria may increase the capital buffer by retaining earnings while increasing senior preferred liquidation value by same amount etc.)

 

The price action has been so lame that if I don’t see another Long setup this or next week, then it seems unlikely I’ll get a setup.

 

Not criticizing your approach here but how do you technically trade a binary decision? The common/preferred are trading as they are because there is a lull in the news and the next known binary decision date is 3/31 and 3+ weeks away. The date/occurance of any upcoming news is known to no one otherwise.

 

The current technical pattern is one of indecision...because its a binary outcome with no news. Im all for technically trading some issues if one sees fit but this is either yea or nay. Could you pick up a couple small percentages here and there on some very short term time frames? Maybe but with the preferred you will likely lose any gains on the bid ask spread. Price action will not be able to guide you in any fashion with this.

 

I don’t worry about no news. The crux of technical analysis is to assume that other players in this field is either smarter than me or have insider info or both, and when they act, they will leave their foot print on the chart.

 

Not trying to highjack the thread but I can tell you what will happen already and Im nor an insider or necessarily smarter. If developments are favorable the price will go UP. If not price will go down. Hopefully not favorably after hours because the securities will gap up and will be priced in instantly and any foot print and will be useless.

[orthopa]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

serious nonfan of exasparino but what does it mean to take a scalpel to GSEs reducing footprint? mean reduce footprint or cut out reducing footprint?  anyway it is a SCOOP

 

Gasparinos "source" has been wrong before and Im nowhere near a White House insider and I could have told you there would be a push to get Calabria confirmed before 3/31. Gasparino has been all about FnF causing the financial crisis and taxpayers being at risk so the reducing footprint bent could be his own or to agitate the fanniegaters on twitter. I take it as more private capital.

 

Seems like based on what was said before congress approval is desired by Mnuchin et al but simply could be a go ahead. Would they really not approve of releasing FnF after going through all of the trouble of raising capital and in the process settle litigation. Who knows but sounds like just lip service.

[rros]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

Too few words a-la-twit by Gasparino. But it could mean "scalpel" as in really cautious or little, delicate approach... no-big-plan-nothing-to-worry-about. And approval to end c-ship may mean Calabria will seek some comprehensive legislation that will include wrapping things up. Meanwhile, it is possible he will simply recapitalize -partially or totally- the entities. And in the time frame required for this, work with Congress.

 

RE increasing liquidation pref of Srs. by having FF retain full earnings. Why worry? When Watt/Tsy agreed to it the Jrs. ran. What matters really is that money stays with the companies regardless of how much Srs. balance increases. Why? Because if Srs. find -somehow- their way to the toilette, the money is already with FF.

[rros]

millstein sounding sane:  https://www.bloomberg.com/news/videos/2019-03-11/gov-t-has-made-a-lot-of-money-from-fannie-and-freddie-jim-millstein-says-video

Sane is a good word... but his answer to 'when it all gets done?' did he interpret it as merely the recap? His answer pointed at a lengthy recapitalization process from 3 bill to 120/160 bill. But my intepretation of the question was more of the whole enchilada including exiting the c-ship. Anybody surprise he did not even consider the possibility of a faster recap by stock issuance or raising capital in other ways? Or even stock issuance will require 3 or 4 secondaries?

[DRValue]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

I found the fox news video funny.

Exasparino basically says "recap and release, don't buy the stock. He'll recap them we don't know when. DON'T BUY THE STOCK"

 

Absolutely a gatekeeper to riches...

[orthopa]

Looks like there was an American Banker (sp?) article on fannie and freddie but behind a paywall, anyone have a summary

[muscleman]

link? If you post the link it maybe easier for someone to get a full article

[muscleman]

https://www.insidemortgagefinance.com/imfnews/1_1562/daily/White-House-Hikes-Value-of-GSE-Senior-Preferred-1000049865-1.html?ET=imfpubs:e12028:73683a:&st=email&s=imfnews

 

 

What a difference a year can make. In the White House’s new budget document, the Trump administration values the senior preferred stock it owns in Fannie Mae and Freddie Mac at $113 billion, an increase of roughly 21% from the year before.

However, there is no detailed explanation on the accounting behind the change.

Since Thanksgiving, the value of GSE common and junior preferred have increased nicely, but both classes of stock are considered highly speculative, the common more than the juniors.

The only class of GSE stock deemed to be of value is the senior preferred owned by the U.S. Treasury Department – though opinions vary widely on what the common and juniors could be worth if a “recap and release” plan is executed by Treasury working in tandem with the Federal Housing Finance Agency.

 

 

[muscleman]

I am out again. I don't think the technicals will show immediate jump from here. I'll closely watch this to see if it is worth another shot.

 

 

Now this looks like a timely exit. At that time, it was unclear why I should sell from a fundamental perspective, but now it is clearer. (Otting’s 2-4 week plan probably dead. 3/31 sweep probably will happen. Calabria may increase the capital buffer by retaining earnings while increasing senior preferred liquidation value by same amount etc.)

 

The price action has been so lame that if I don’t see another Long setup this or next week, then it seems unlikely I’ll get a setup.

 

Not criticizing your approach here but how do you technically trade a binary decision? The common/preferred are trading as they are because there is a lull in the news and the next known binary decision date is 3/31 and 3+ weeks away. The date/occurance of any upcoming news is known to no one otherwise.

 

The current technical pattern is one of indecision...because its a binary outcome with no news. Im all for technically trading some issues if one sees fit but this is either yea or nay. Could you pick up a couple small percentages here and there on some very short term time frames? Maybe but with the preferred you will likely lose any gains on the bid ask spread. Price action will not be able to guide you in any fashion with this.

 

I don’t worry about no news. The crux of technical analysis is to assume that other players in this field is either smarter than me or have insider info or both, and when they act, they will leave their foot print on the chart.

 

Not trying to highjack the thread but I can tell you what will happen already and Im nor an insider or necessarily smarter. If developments are favorable the price will go UP. If not price will go down. Hopefully not favorably after hours because the securities will gap up and will be priced in instantly and any foot print and will be useless.

 

I think just like efficient market hypothesis believers, your belief is too idealistic. Your argument assumes that everyone has the same IQ and no one trades on insider information. Therefore prices won’t move until any news come out. I believe otherwise. There are people who trade on grey and black edge and know far more than us. There are also people who trade on white edge but are far smarter than us. Look at Ericopoly on our board. He loaded up call options on MBIA days before their big settlement, based merely on white edge (publicly known info).

[orthopa]

I am out again. I don't think the technicals will show immediate jump from here. I'll closely watch this to see if it is worth another shot.

 

 

Now this looks like a timely exit. At that time, it was unclear why I should sell from a fundamental perspective, but now it is clearer. (Otting’s 2-4 week plan probably dead. 3/31 sweep probably will happen. Calabria may increase the capital buffer by retaining earnings while increasing senior preferred liquidation value by same amount etc.)

 

The price action has been so lame that if I don’t see another Long setup this or next week, then it seems unlikely I’ll get a setup.

 

Not criticizing your approach here but how do you technically trade a binary decision? The common/preferred are trading as they are because there is a lull in the news and the next known binary decision date is 3/31 and 3+ weeks away. The date/occurance of any upcoming news is known to no one otherwise.

 

The current technical pattern is one of indecision...because its a binary outcome with no news. Im all for technically trading some issues if one sees fit but this is either yea or nay. Could you pick up a couple small percentages here and there on some very short term time frames? Maybe but with the preferred you will likely lose any gains on the bid ask spread. Price action will not be able to guide you in any fashion with this.

 

I don’t worry about no news. The crux of technical analysis is to assume that other players in this field is either smarter than me or have insider info or both, and when they act, they will leave their foot print on the chart.

 

Not trying to highjack the thread but I can tell you what will happen already and Im nor an insider or necessarily smarter. If developments are favorable the price will go UP. If not price will go down. Hopefully not favorably after hours because the securities will gap up and will be priced in instantly and any foot print and will be useless.

 

I think just like efficient market hypothesis believers, your belief is too idealistic. Your argument assumes that everyone has the same IQ and no one trades on insider information. Therefore prices won’t move until any news come out. I believe otherwise. There are people who trade on grey and black edge and know far more than us. There are also people who trade on white edge but are far smarter than us. Look at Ericopoly on our board. He loaded up call options on MBIA days before their big settlement, based merely on white edge (publicly known info).

 

I see. So let me ask you this. Do you think FnF will be recapitalized and released from conservatorship?

[investorG]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

Too few words a-la-twit by Gasparino. But it could mean "scalpel" as in really cautious or little, delicate approach... no-big-plan-nothing-to-worry-about. And approval to end c-ship may mean Calabria will seek some comprehensive legislation that will include wrapping things up. Meanwhile, it is possible he will simply recapitalize -partially or totally- the entities. And in the time frame required for this, work with Congress.

 

RE increasing liquidation pref of Srs. by having FF retain full earnings. Why worry? When Watt/Tsy agreed to it the Jrs. ran. What matters really is that money stays with the companies regardless of how much Srs. balance increases. Why? Because if Srs. find -somehow- their way to the toilette, the money is already with FF.

 

the flaw with moelis - and why it's likely just a marketing document to help draw attention to the matter - is that investors are unlikely to front the many tens of billions necessary for recap in a series of equity offerings without A) congressional stamp (permanence) or B) exit from conservatorship whereby the company's mgmt and boards are in charge.  Or both A and B.  And Mnuchin doesn't want to risk failure, the stakes are too high, which is likely one reason why he's acted so timidly on the matter.

 

IMO the one exception to this view is if one or a couple large entities writes a giant check ($25-50bn) overnight at a low price that 1) gets the companies so far down the recapitalization path that its hard to turn back and 2) has such attractive risk-reward profile (ie low stock price) that the upside potential is so great to risk the investment losing material money if political (or economic) winds turn at some point in the future. 

 

If this scenario is even legally and logistically possible, where a huge chunk is raised overnight private equity style, then the returns to shareholders and govt warrants are likely reduced well below moelis numbers.  Otherwise, I'm prepared for Congress (and perhaps Calabria if confirmed) to possibly play a larger role than expected.

 

[rros]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

Too few words a-la-twit by Gasparino. But it could mean "scalpel" as in really cautious or little, delicate approach... no-big-plan-nothing-to-worry-about. And approval to end c-ship may mean Calabria will seek some comprehensive legislation that will include wrapping things up. Meanwhile, it is possible he will simply recapitalize -partially or totally- the entities. And in the time frame required for this, work with Congress.

 

RE increasing liquidation pref of Srs. by having FF retain full earnings. Why worry? When Watt/Tsy agreed to it the Jrs. ran. What matters really is that money stays with the companies regardless of how much Srs. balance increases. Why? Because if Srs. find -somehow- their way to the toilette, the money is already with FF.

 

the flaw with moelis - and why it's likely just a marketing document to help draw attention to the matter - is that investors are unlikely to front the many tens of billions necessary for recap in a series of equity offerings without A) congressional stamp (permanence) or B) exit from conservatorship whereby the company's mgmt and boards are in charge.  Or both A and B.  And Mnuchin doesn't want to risk failure, the stakes are too high, which is likely one reason why he's acted so timidly on the matter.

 

IMO the one exception to this view is if one or a couple large entities writes a giant check ($25-50bn) overnight at a low price that 1) gets the companies so far down the recapitalization path that its hard to turn back and 2) has such attractive risk-reward profile (ie low stock price) that the upside potential is so great to risk the investment losing material money if political (or economic) winds turn at some point in the future. 

 

If this scenario is even legally and logistically possible, where a huge chunk is raised overnight private equity style, then the returns to shareholders and govt warrants are likely reduced well below moelis numbers.  Otherwise, I'm prepared for Congress (and perhaps Calabria if confirmed) to possibly play a larger role than expected.

It is always difficult to tell whether you are gloomy, optimistic, outright negative, long or short. Not that it matters. But sometimes I am not sure where you are coming from. Though you have been very informative (thanks).

[Guest cherzeca]

For what it's worth...

 

@CGasparino

SCOOP: @WhiteHouse pushing expedited Senate confirmation of new FHFA Chief @MarkCalabria in next 2 weeks to jump-start GSE reform; Calabria likely to take a “scalpel” to GSEs reducing footprint in housing mkt seek Congress approval before ending conservatorship more @FoxBusiness

 

Any thoughts on what approval from congress looks like? Surely they can only implicitly approve it by not explicitly denying it?

Too few words a-la-twit by Gasparino. But it could mean "scalpel" as in really cautious or little, delicate approach... no-big-plan-nothing-to-worry-about. And approval to end c-ship may mean Calabria will seek some comprehensive legislation that will include wrapping things up. Meanwhile, it is possible he will simply recapitalize -partially or totally- the entities. And in the time frame required for this, work with Congress.

 

RE increasing liquidation pref of Srs. by having FF retain full earnings. Why worry? When Watt/Tsy agreed to it the Jrs. ran. What matters really is that money stays with the companies regardless of how much Srs. balance increases. Why? Because if Srs. find -somehow- their way to the toilette, the money is already with FF.

 

the flaw with moelis - and why it's likely just a marketing document to help draw attention to the matter - is that investors are unlikely to front the many tens of billions necessary for recap in a series of equity offerings without A) congressional stamp (permanence) or B) exit from conservatorship whereby the company's mgmt and boards are in charge.  Or both A and B.  And Mnuchin doesn't want to risk failure, the stakes are too high, which is likely one reason why he's acted so timidly on the matter.

 

IMO the one exception to this view is if one or a couple large entities writes a giant check ($25-50bn) overnight at a low price that 1) gets the companies so far down the recapitalization path that its hard to turn back and 2) has such attractive risk-reward profile (ie low stock price) that the upside potential is so great to risk the investment losing material money if political (or economic) winds turn at some point in the future. 

 

If this scenario is even legally and logistically possible, where a huge chunk is raised overnight private equity style, then the returns to shareholders and govt warrants are likely reduced well below moelis numbers.  Otherwise, I'm prepared for Congress (and perhaps Calabria if confirmed) to possibly play a larger role than expected.

 

I agree with this as a concern, but I dont share your pessimism.

 

I do agree that this 3-4 year $150B capital raise is a massive endeavor, and it needs a "lead" investor to jumpstart things.  this could simply be in the form of an initial small investment and a backstop commitment, for which backstop commitment the lead investor would get an inducement. alternatively, a core group of existing investors (Blackstone, capital group, Perry, fairholme, Paulson, ackman etc) could form a lead investor group and commit as a group to invest new money.  you have cited a problem for which there is an answer.

 

if treasury comes out strongly in favor of a plan and asks for congressional support without offering congress a veto (which congress doesn't have), congress range of action does not include anything that I expect could kill the capital raise.  do you think, based upon what you watched in the Calabria hearing, crapo or Warner is going to introduce legislation to stop it?  even if corker were still around I would still expect merely sound and fury signifying nothing.  but corker has been corked.