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

[muscleman]

Interesting to see this from our cheerleader:

"Otting 2019 Glen

‏

 

@DoNotLose

Following Following @DoNotLose

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Well calabria has not been announced by McConnell yet. I think that makes it unlikely if not impossible that he gets in in time to make changes this month... But anything is possible if anyone cares"

 

Coincidentally, last night I also had a dream that FNMAS was down 10.4%. I think this is just a general reflection of what people are feeling right now, cast into my own sub concious. I take this as a positive sign that it may build the bottom soon.  :)

[rros]

I think this is just a general reflection of what people are feeling right now, cast into my own sub concious.

I think your subconscious is really making you feel miserable for having sold. But don't worry. Maybe enough of retail gets scared that you get your chance.

[Eye4Valu]

I think this is just a general reflection of what people are feeling right now, cast into my own sub concious.

I think your subconscious is really making you feel miserable for having sold. But don't worry. Maybe enough of retail gets scared that you get your chance.

 

Based on your posts Muscle, I would wait for an inverse head and shoulders pattern to emerge. If you see a smiley face form in the charts, even better.

[muscleman]

I think this is just a general reflection of what people are feeling right now, cast into my own sub concious.

I think your subconscious is really making you feel miserable for having sold. But don't worry. Maybe enough of retail gets scared that you get your chance.

 

 

That's absurd LOL. Why do I feel miserable for having sold?

[rros]

I think this is just a general reflection of what people are feeling right now, cast into my own sub concious.

I think your subconscious is really making you feel miserable for having sold. But don't worry. Maybe enough of retail gets scared that you get your chance.

 

 

That's absurd LOL. Why do I feel miserable for having sold?

Because at these prices you aren't happy and would like to see a hard dive -which so far- has been elusive. At times, you seem to be timing the market by your own admission (charts), while simultaneously finding a reason that will justify the decision. What is absurd about unconsciousness or issues you aren't even aware of?

 

I am sorry. With the wide bid and ask I can't see getting in and out of the preferreds as an intelligent action. Unless you play the most liquid ones. Which happen to be an overcrowded trade.

[muscleman]

I think this is just a general reflection of what people are feeling right now, cast into my own sub concious.

I think your subconscious is really making you feel miserable for having sold. But don't worry. Maybe enough of retail gets scared that you get your chance.

 

 

That's absurd LOL. Why do I feel miserable for having sold?

Because at these prices you aren't happy and would like to see a hard dive -which so far- has been elusive. At times, you seem to be timing the market by your own admission (charts), while simultaneously finding a reason that will justify the decision. What is absurd about unconsciousness or issues you aren't even aware of?

 

I am sorry. With the wide bid and ask I can't see getting in and out of the preferreds as an intelligent action. Unless you play the most liquid ones. Which happen to be an overcrowded trade.

 

No I am no longer a value investor since last year, and if you understand how momo investors think, they never want the price to take a hard nose dive. If that happens, they would go away and won't touch it for a long time.

 

Yes I was trading FNMAS and FNMAT.

[orthopa]

It's unrealistic imo to expect a new director to implement such a large change as stopping the sweep in his first few days on the job.  I think it's Mnuchin - Otting or bust for the next 2 weeks.  Sadly, odds favor the sweep continuing again this month as the path of least resistance.  Punt (again) until the Collins verdict. 

 

It would be somewhat of a charade to increase the capital buffer and the sr pref by a likewise amount as the latter action is fairly inconsistent with the administration's stated goals of ending conservatorship and having the companies well capitalized.  So we're most likely left with the option of replacing the sweep with a backstop commitment fee - and I've had my hopes dashed too many times on this to get excited for it now.

 

good luck everyone.

 

Except that it already happened once in December of 2017.

 

I don't see anything inconsistent about another similar letter agreement in the next two weeks. All increasing the liquidation preference of the seniors does is stop the $16.1B overpayment, past the 10% moment, from going any higher.

 

I also don't see why Treasury wouldn't just insist on a huge instant capital raise, to get the companies recapped as fast as possible. Then no government backstop is necessary, beyond a catastrophic one that would only kick in if FnF lose more money than they did in 2008.

 

Agree. Not sure why treasury would want to make the rebuilding process harder when the eventual goal has been telegraphed to different extents by many different people....End of the day FnF need more capital. Hell even delaying the sweep or putting it off for a week makes more sense the missing out on billions of dollars due to timing of the new FHFA confirmation.

 

Apparently Otting, Calabria, Mnuchin, WH all on board right? Just end the sweep and build capital. Its not like the table has been set for EVERYONE interested and watching for it to happen.

[Guest cherzeca]

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

[allnatural]

+1

 

Well done. Hilarious and informative.

 

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

[muscleman]

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

 

Isn't it amazing that every time there was an admin delay, we say "Now the thesis is back to courts", and every time there was a negative court ruling, we say "Courts don't matter. Now the thesis is back to admin reform"?  ::)

 

With that said, I do think Collins is promising. But we have been wrong all along the way. ::)

[rros]

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

 

Isn't it amazing that every time there was an admin delay, we say "Now the thesis is back to courts", and every time there was a negative court ruling, we say "Courts don't matter. Now the thesis is back to admin reform"?  ::)

 

With that said, I do think Collins is promising. But we have been wrong all along the way. ::)

Just to add some perspective. My cost basis on the Jrs. is 47 cents or about 2 cents on the dollar. If I were to sell today that would mean 1700% correctness. I would love to be wrong this way only 1 more time in my investing journey.

[Luke 532]

Mulvaney to be Chief of Staff, no longer acting Chief of Staff

https://www.politico.com/story/2019/03/19/white-house-mulvaney-acting-chief-staff-1226055

[Luke 532]

Forbes today...

https://www.forbes.com/sites/ikebrannon/2019/03/19/fannie-and-freddie-need-more-capital/#699414245436

[DRValue]

I like the fact the nws this quarter is on a Sunday. just saying...  ;)

[DocSnowball]

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

 

Isn't it amazing that every time there was an admin delay, we say "Now the thesis is back to courts", and every time there was a negative court ruling, we say "Courts don't matter. Now the thesis is back to admin reform"?  ::)

 

With that said, I do think Collins is promising. But we have been wrong all along the way. ::)

Just to add some perspective. My cost basis on the Jrs. is 47 cents or about 2 cents on the dollar. If I were to sell today that would mean 1700% correctness. I would love to be wrong this way only 1 more time in my investing journey.

 

Hats off to you. Do you think the "house money" makes you less risk averse to a loss from these levels? Or is there loss aversion from threat of a big chunk of profit being taxed? If the security was available at today's prices, would you enter into the investment and build this level of allocation? Just curious. I have enjoyed your comments along the ride a lot, worth much more than 2c on the dollar, closer to priceless!

[Seahug]

As has been history, better not to add/buy when there's a lot of hype/chatter/optimism on this board.

 

Since it's been quiet past few weeks and looking like going no where, especially if march earnings are paid out, maybe this is the time to add.

 

Then mnuchin et al can just surprise us w a done deal like tax reform

[rros]

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

 

Isn't it amazing that every time there was an admin delay, we say "Now the thesis is back to courts", and every time there was a negative court ruling, we say "Courts don't matter. Now the thesis is back to admin reform"?  ::)

 

With that said, I do think Collins is promising. But we have been wrong all along the way. ::)

Just to add some perspective. My cost basis on the Jrs. is 47 cents or about 2 cents on the dollar. If I were to sell today that would mean 1700% correctness. I would love to be wrong this way only 1 more time in my investing journey.

 

Hats off to you. Do you think the "house money" makes you less risk averse to a loss from these levels? Or is there loss aversion from threat of a big chunk of profit being taxed? If the security was available at today's prices, would you enter into the investment and build this level of allocation? Just curious. I have enjoyed your comments along the ride a lot, worth much more than 2c on the dollar, closer to priceless!

Well.. I am far from being in the same league as those members here who write technically savvy, mathematically thorough, legally correct and well researched posts and answers. Those indeed are priceless. So thank you for overestimating me :)

 

It's difficult to say where being risk averse is coming from. As you mentioned, the hatred of having to pay a small fortune to the IRS, the greed of perhaps leaving money on the table, the comfort of sitting on large paper profits... all play a part. Maybe it's inertia. Maybe obstinacy. But over the years and after seeing shares losing a lot of ground -on occasions- I came to the conclusion that at 60% of par it may not be worth to wait for full face value. The time and the battle... Believing there may be other "close to doubles" that can fill the gap of Jrs. at 60% helps keep greed in check. Or transplant it, I should say.

 

Today I would not build the position I originally built back then. Not because of prices nor because risk/reward has changed. But because today's reality (and the information we acquired) is vastly different than the one we faced in 2010. All we had then was our (correct) interpretation of HERA, our correct interpretation of the SPSPAs and a leftist President who had been in office less than 2 years and appeared too timid in the aftermath of decades of Reaganomics. Now we are waking up to the fact the companies had been nationalized and neither courts nor the government seem to know where to go.

 

Still, in this utter confusion I do see benign signs. Since Lamberth, we've had nothing but good news. Scratch that. News becoming better at a compounding rate. While the smallest victories may have gone unnoticed at first -Sweeney's discovery for one-, news from courts continued to build momentum to the upside in an ever so slightly upward slope. More recently, from Willet's dissent to the En Banc proceedings. Perhaps one day this curve goes parabolic.

 

In the face of an improving rate of change of court news, under the belief that Otting, Calabria, Mnuchin and Mulvaney are beneficial to shareholders and being close to a price level I would consider satisfactory, would you recommend becoming conservative taking some chips off the table?

 

In other words, do you think 60% is achievable sometime this year?

[muscleman]

Thursday again. Are we getting Calabria confirmation today?

 

[DRValue]

Thursday again. Are we getting Calabria confirmation today?

 

Smart money says 50/50.

[allnatural]

Senate is off this week.

[DocSnowball]

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

 

Isn't it amazing that every time there was an admin delay, we say "Now the thesis is back to courts", and every time there was a negative court ruling, we say "Courts don't matter. Now the thesis is back to admin reform"?  ::)

 

With that said, I do think Collins is promising. But we have been wrong all along the way. ::)

Just to add some perspective. My cost basis on the Jrs. is 47 cents or about 2 cents on the dollar. If I were to sell today that would mean 1700% correctness. I would love to be wrong this way only 1 more time in my investing journey.

 

Hats off to you. Do you think the "house money" makes you less risk averse to a loss from these levels? Or is there loss aversion from threat of a big chunk of profit being taxed? If the security was available at today's prices, would you enter into the investment and build this level of allocation? Just curious. I have enjoyed your comments along the ride a lot, worth much more than 2c on the dollar, closer to priceless!

Well.. I am far from being in the same league as those members here who write technically savvy, mathematically thorough, legally correct and well researched posts and answers. Those indeed are priceless. So thank you for overestimating me :)

 

It's difficult to say where being risk averse is coming from. As you mentioned, the hatred of having to pay a small fortune to the IRS, the greed of perhaps leaving money on the table, the comfort of sitting on large paper profits... all play a part. Maybe it's inertia. Maybe obstinacy. But over the years and after seeing shares losing a lot of ground -on occasions- I came to the conclusion that at 60% of par it may not be worth to wait for full face value. The time and the battle... Believing there may be other "close to doubles" that can fill the gap of Jrs. at 60% helps keep greed in check. Or transplant it, I should say.

 

Today I would not build the position I originally built back then. Not because of prices nor because risk/reward has changed. But because today's reality (and the information we acquired) is vastly different than the one we faced in 2010. All we had then was our (correct) interpretation of HERA, our correct interpretation of the SPSPAs and a leftist President who had been in office less than 2 years and appeared too timid in the aftermath of decades of Reaganomics. Now we are waking up to the fact the companies had been nationalized and neither courts nor the government seem to know where to go.

 

Still, in this utter confusion I do see benign signs. Since Lamberth, we've had nothing but good news. Scratch that. News becoming better at a compounding rate. While the smallest victories may have gone unnoticed at first -Sweeney's discovery for one-, news from courts continued to build momentum to the upside in an ever so slightly upward slope. More recently, from Willet's dissent to the En Banc proceedings. Perhaps one day this curve goes parabolic.

 

In the face of an improving rate of change of court news, under the belief that Otting, Calabria, Mnuchin and Mulvaney are beneficial to shareholders and being close to a price level I would consider satisfactory, would you recommend becoming conservative taking some chips off the table?

 

In other words, do you think 60% is achievable sometime this year?

 

Thanks for sharing. If I knew whether this will reach 60% of par, wouldn't that be great. Do I think so, yes more likely than not. My context in this is of a small private investor who is not at the negotiation table in a situation without margin of safety and dependent on the kindness of strangers who I can't bring myself to trust; with the legal system so far not standing behind me to serve its role of enabling trust in contracts.

 

My asset allocation approach here is to put in only so much that if it reaches par on best case scenario, then it represents what I'd want at steady state in my portfolio; and so little that if it goes to zero or very low then I won't lose sleep. For me this is 2%, and at par 5%, leaving me with another 5% I can allocate after the binary outcome is over. One can argue using Kelly's formula would be another option, and reach a much higher allocation. I'd have to say I have subjectively felt much better after cutting down my allocation from 15% to 2% here in the last few months, but unlike you it was not a 1700% gain, only 150% and much of it helped offset another investment that didn't work out.

[muscleman]

Senate is off this week.

 

Oh, I see. No wonder there was a lot of expectation to get Calabria closure last Thursday. Does anyone know what the senate procedure is, to inject one FHFA director ahead of other judges waiting for closure? I am sure William Barr was injected into the head of that queue. After searching in Google, it seems like William Barr was nominated on December 7th, and got confirmed on Feb. 14th. Calabria was nominated on December 12th, so I'd think he would get confirmed by end of Feburary. Otting's original comment of 2-4 weeks may be because he expected Calabria to have been confirmed at that time. Why is Calabria confirmation taking so much longer than William Barr?

 

 

[rros]

Senate is off this week.

 

Oh, I see. No wonder there was a lot of expectation to get Calabria closure last Thursday. Does anyone know what the senate procedure is, to inject one FHFA director ahead of other judges waiting for closure? I am sure William Barr was injected into the head of that queue. After searching in Google, it seems like William Barr was nominated on December 7th, and got confirmed on Feb. 14th. Calabria was nominated on December 12th, so I'd think he would get confirmed by end of Feburary. Otting's original comment of 2-4 weeks may be because he expected Calabria to have been confirmed at that time. Why is Calabria confirmation taking so much longer than William Barr?

Here, you can follow what happens in the Senate.

[rros]

Prospects For Fannie/Freddie Recapitalization In An Environment Of Political Risk:  An Allegory

 

https://www.dropbox.com/s/3r34frvf1p0hfgp/The%20Set%20Up.docx?dl=0

 

Isn't it amazing that every time there was an admin delay, we say "Now the thesis is back to courts", and every time there was a negative court ruling, we say "Courts don't matter. Now the thesis is back to admin reform"?  ::)

 

With that said, I do think Collins is promising. But we have been wrong all along the way. ::)

Just to add some perspective. My cost basis on the Jrs. is 47 cents or about 2 cents on the dollar. If I were to sell today that would mean 1700% correctness. I would love to be wrong this way only 1 more time in my investing journey.

 

Hats off to you. Do you think the "house money" makes you less risk averse to a loss from these levels? Or is there loss aversion from threat of a big chunk of profit being taxed? If the security was available at today's prices, would you enter into the investment and build this level of allocation? Just curious. I have enjoyed your comments along the ride a lot, worth much more than 2c on the dollar, closer to priceless!

Well.. I am far from being in the same league as those members here who write technically savvy, mathematically thorough, legally correct and well researched posts and answers. Those indeed are priceless. So thank you for overestimating me :)

 

It's difficult to say where being risk averse is coming from. As you mentioned, the hatred of having to pay a small fortune to the IRS, the greed of perhaps leaving money on the table, the comfort of sitting on large paper profits... all play a part. Maybe it's inertia. Maybe obstinacy. But over the years and after seeing shares losing a lot of ground -on occasions- I came to the conclusion that at 60% of par it may not be worth to wait for full face value. The time and the battle... Believing there may be other "close to doubles" that can fill the gap of Jrs. at 60% helps keep greed in check. Or transplant it, I should say.

 

Today I would not build the position I originally built back then. Not because of prices nor because risk/reward has changed. But because today's reality (and the information we acquired) is vastly different than the one we faced in 2010. All we had then was our (correct) interpretation of HERA, our correct interpretation of the SPSPAs and a leftist President who had been in office less than 2 years and appeared too timid in the aftermath of decades of Reaganomics. Now we are waking up to the fact the companies had been nationalized and neither courts nor the government seem to know where to go.

 

Still, in this utter confusion I do see benign signs. Since Lamberth, we've had nothing but good news. Scratch that. News becoming better at a compounding rate. While the smallest victories may have gone unnoticed at first -Sweeney's discovery for one-, news from courts continued to build momentum to the upside in an ever so slightly upward slope. More recently, from Willet's dissent to the En Banc proceedings. Perhaps one day this curve goes parabolic.

 

In the face of an improving rate of change of court news, under the belief that Otting, Calabria, Mnuchin and Mulvaney are beneficial to shareholders and being close to a price level I would consider satisfactory, would you recommend becoming conservative taking some chips off the table?

 

In other words, do you think 60% is achievable sometime this year?

 

Thanks for sharing. If I knew whether this will reach 60% of par, wouldn't that be great. Do I think so, yes more likely than not. My context in this is of a small private investor who is not at the negotiation table in a situation without margin of safety and dependent on the kindness of strangers who I can't bring myself to trust; with the legal system so far not standing behind me to serve its role of enabling trust in contracts.

 

My asset allocation approach here is to put in only so much that if it reaches par on best case scenario, then it represents what I'd want at steady state in my portfolio; and so little that if it goes to zero or very low then I won't lose sleep. For me this is 2%, and at par 5%, leaving me with another 5% I can allocate after the binary outcome is over. One can argue using Kelly's formula would be another option, and reach a much higher allocation. I'd have to say I have subjectively felt much better after cutting down my allocation from 15% to 2% here in the last few months, but unlike you it was not a 1700% gain, only 150% and much of it helped offset another investment that didn't work out.

After reading your post I feel I still have a lot to learn.

[orthopa]

People who bought on Ottings comments are getting restless and moving on.