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

[Guest cherzeca]

watched the SBC hearing on SIFI designation.  as far as I could tell, only 6 senators showed up for it.  this should not give anyone in administration comfort that congress will pass legislation re GSEs.

 

ms wachtler made a lot of sense and is a voice to watch in the debate going forward

 

Crapo, Calabria, and the banks would like additional competitors and explicit guarantee.  Brown appears to favor the utility.  And this is before getting Maxine involved.  I'm guessing additional competitors and the utility model plans would be difficult to implement together?  And also guessing that Brown wouldn't give Crapo both things he wants for free. 

 

So, is it possible to go both utility and explicit guarantee to give each side one piece of what they want?

 

utility reg and fed guaranty would be great for GSEs...which is why I dont think you can expect it from congress.  the whole bus in the republican side of the SBC is driven by tbtf banks, who would want to compete with rather than just sell to GSEs (ie sell to their affiliate in effect to get loans off books and to have friendlier purchase terms).  being a guarantor is very heavy sledding against GSEs without mbs fed backstop.  with no multiple guarantors, I see no fed backstop.

 

while I admit this is wishful thinking, I dont see how anything congress is doing recently related to GSEs gives calabria and the admin any hope that there will be any congressional reform. 

[hardincap]

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

[Luke 532]

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

 

Well, whatever the plan is large investors are "ecstatic" about it as of June 7th.

Fannie and Freddie stockholders were ecstatic at Calabria’s statements. “It’s exactly what we laid out,” one investor said. “The goal of this president is what can be done administratively. You can see there’s a focus on getting it done.”

https://www.abalert.com/search.pl?ARTICLE=183913

[hardincap]

how much are you willing to bank on an article that says "Most of the actions could be resolved by making preferred shareholders whole, potentially via a mass “sweep” of profits"?

 

edit: it also says investors are ecstatic about calabria's statements, ie his speeches, media interviews, etc. obviously this is no new insight

 

edit2: its amazing to me how strong confirmation bias is on this thread...

[DocSnowball]

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

Other possibilities:

- handing off the role to Calabria or another person after completing his piece of the work

- considering more lucrative positions in industry

 

I'm not disagreeing with you; just putting out a broader range of possibilities. Calabria's statements are not consistent with a scuttled plan, although they do indicate that the timeline of events is  longer and more variable/dependent on meeting certain pre-established conditions.

[allnatural]

For what its worth, WSJ confirmed those meetings took place on June 7th in their article yesterday. So maybe the ABS article is more credible than it appears.

 

We also know Phillips stepped down after the plan was finished and deliverer to the WH, where its now sitting with the White House staff before being handed off the Trump (hopefully in the coming weeks). I think Phillips more likely left b/c his literal job of drafting the reform plan was completed (confirmed after it was handed in to the White House) and he is now reported to be seeking a wall street job related to the IPO of the GSEs (shocker).

 

I guess we will find out in the next few weeks once the plan is released to the public.

[DocSnowball]

how much are you willing to bank on an article that says "Most of the actions could be resolved by making preferred shareholders whole, potentially via a mass “sweep” of profits"?

 

edit: it also says investors are ecstatic about calabria's statements, ie his speeches, media interviews, etc. obviously this is no new insight

 

edit2: its amazing to me how strong confirmation bias is on this thread...

 

+1

That is why following this saga is so much fun and highly educational as a value investor...

[hardincap]

the plan was not finished, it was drafted. the draft is now being reviewed by the white house. again, in the context of otting's statement that a plan will be out in 2-4 weeks, a draft many months later doesn't make sense. craig's resignation at the same time, before the plan is past "draft" status, is not a good sign.

 

also, you're making another unwarranted assumption that the plan will be released in weeks. we dont know if it'll be released at all to the public, let alone in weeks.

[allnatural]

FWIW, my assumption re: plan being released in a few weeks is simply listening to Calabrias comment from ~2 weeks ago ("hopefully by the end of June"), reading the most recent reporting from credible news sources such as WSJ (they said in July yesterday), and speaking to industry insiders who have indicated at recent conferences I attended that they expect it to be released by mid July latest. All these sources could be wrong, but they are all lining up around same time period.

[Luke 532]

how much are you willing to bank on an article that says "Most of the actions could be resolved by making preferred shareholders whole, potentially via a mass “sweep” of profits"?

 

See cherzeca's previous comments about ABA's expertise (and lack thereof in some areas) and his comments on your point in particular.

 

edit: it also says investors are ecstatic about calabria's statements, ie his speeches, media interviews, etc. obviously this is no new insight

 

Talking directly with Calabria was new insight...

"Fannie and Freddie shareholders who spoke to FHFA head Mark Calabria this week..."

 

[muscleman]

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

 

Well, whatever the plan is large investors are "ecstatic" about it as of June 7th.

Fannie and Freddie stockholders were ecstatic at Calabria’s statements. “It’s exactly what we laid out,” one investor said. “The goal of this president is what can be done administratively. You can see there’s a focus on getting it done.”

https://www.abalert.com/search.pl?ARTICLE=183913

 

The chart tells me a different story. Since that time, the behavior has totally changed on the chart. I don't think ABA is a place where they have a collective interesting to make money for its readers. It is more like other forums like here or seeking alpha for spreading information.

If these "insiders" really know something so "ecstatic", the chart behavior would not look like what we've seen since then.

[allnatural]

You are wrong to compare ABS to a seeking alpha or forum like here. Its a professional industry subscription service that charges ~$4,500+/yr and has very little retail subscribers like ourselves.

 

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

 

Well, whatever the plan is large investors are "ecstatic" about it as of June 7th.

Fannie and Freddie stockholders were ecstatic at Calabria’s statements. “It’s exactly what we laid out,” one investor said. “The goal of this president is what can be done administratively. You can see there’s a focus on getting it done.”

https://www.abalert.com/search.pl?ARTICLE=183913

 

The chart tells me a different story. Since that time, the behavior has totally changed on the chart. I don't think ABA is a place where they have a collective interesting to make money for its readers. It is more like other forums like here or seeking alpha for spreading information.

If these "insiders" really know something so "ecstatic", the chart behavior would not look like what we've seen since then.

[hardincap]

luke, the "ecstatic" comment doesnt connect with "shareholders who spoke with calabria". this article is very ambiguous and cannot be relied on. even if it were reliable, you still have to explain how we went from "signed off" plan in 2-4 weeks to draft 6 months later, with the key author abruptly resigning before draft is finalizled. basically, you're overreaching. confirmation bias is a b****

 

edit: this will be my last comment on this matter. my main point is there are much greater risks of plan being derailed than is being talked about here. just my 2c, take it or leave it.

[Luke 532]

luke, the "ecstatic" comment doesnt connect with "shareholders who spoke with calabria".

 

Well, sure seems that way unless the author hasn't taken a basic writing course.  Professional writers don't, or shouldn't, go from one type of subject to another type of subject then back to the original subject without differentiating.  It would be an odd writing style.

 

Spoke with Calabria:

"Fannie and Freddie shareholders who spoke to FHFA head Mark Calabria this week..."

 

Later in article... Investors that didn't speak with Calabria, so random investors?

"Fannie and Freddie stockholders were ecstatic at Calabria’s statements. “It’s exactly what we laid out,” one investor said. “The goal of this president is what can be done administratively. You can see there’s a focus on getting it done.”"

 

Even later in the article... Spoke with Calabria:

"But one shareholder said Calabria was firm that an IPO is feasible."

 

this article is very ambiguous and cannot be relied on.

 

Of course one single article alone, in a vacuum, can't be relied upon.

 

even if it were reliable, you still have to explain how we went from "signed off" plan in 2-4 weeks to draft 6 months later, with the key author abruptly resigning before draft is finalizled. basically, you're overreaching. confirmation bias is a b****

 

Were Otting's comments on the record?

 

Did you not read about a month ago when it was said Phillips would leave but not until he was done?  It's not like his leaving was in the middle of the night... it was announced at least a few weeks before he departed.

 

Sure, confirmation bias is a b****, but mere confirmation from those calling the shots is a beautiful thing.

[hardincap]

sorry to be blunt, but that is borderline delusional. you might say, perhaps I am the delusional one? could be! but i say, always better to entertain disconfirming narratives (esp when coming from experts with insider knowledge like tim howard) than confirming. good luck everyone.

[Luke 532]

sorry to be blunt, but that is borderline delusional. you might say, perhaps I am the delusional one? could be! but i say, always better to entertain disconfirming narratives (esp when coming from experts with insider knowledge like tim howard) than confirming. good luck everyone.

 

I don't get offended, so no worries on being blunt.  I appreciate your arguments but don't think they are as nearly as plausible as the case for a favorable plan for shareholders being announced and then acted upon.  Again, appreciate your input.  Differing opinions make a market, which is why I have long loved this game.

[muscleman]

luke, the "ecstatic" comment doesnt connect with "shareholders who spoke with calabria". this article is very ambiguous and cannot be relied on. even if it were reliable, you still have to explain how we went from "signed off" plan in 2-4 weeks to draft 6 months later, with the key author abruptly resigning before draft is finalizled. basically, you're overreaching. confirmation bias is a b****

 

edit: this will be my last comment on this matter. my main point is there are much greater risks of plan being derailed than is being talked about here. just my 2c, take it or leave it.

 

How come you are bearish on this and still hold the position?

[Luke 532]

luke, the "ecstatic" comment doesnt connect with "shareholders who spoke with calabria". this article is very ambiguous and cannot be relied on. even if it were reliable, you still have to explain how we went from "signed off" plan in 2-4 weeks to draft 6 months later, with the key author abruptly resigning before draft is finalizled. basically, you're overreaching. confirmation bias is a b****

 

edit: this will be my last comment on this matter. my main point is there are much greater risks of plan being derailed than is being talked about here. just my 2c, take it or leave it.

 

How come you are bearish on this and still hold the position?

 

One investor being more bearish than another doesn't mean the former is a bear, just means he's not as bullish for the reasons he laid out.

[Jcmeg35]

To throw another hat in the ring, I have felt the positive narrative has slowed the last couple of weeks. With fewer Public appearances and statements by Calabria, and reporting and rumors that indicate something may have changed/momentum has slowed. This is obviously a very tenuous process with a lot of obstacles, and entrenched interest that make it practically and politically tough to get done.

 

While the ABS article seemed to be bullish, there has been more bearish anecdotes and seeming delays in timeline of late that, I think definitely warrants concern.

[hardincap]

One investor being more bearish than another doesn't mean the former is a bear, just means he's not as bullish for the reasons he laid out.

 

+1

[muscleman]

You are wrong to compare ABS to a seeking alpha or forum like here. Its a professional industry subscription service that charges ~$4,500+/yr and has very little retail subscribers like ourselves.

 

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

 

Well, whatever the plan is large investors are "ecstatic" about it as of June 7th.

Fannie and Freddie stockholders were ecstatic at Calabria’s statements. “It’s exactly what we laid out,” one investor said. “The goal of this president is what can be done administratively. You can see there’s a focus on getting it done.”

https://www.abalert.com/search.pl?ARTICLE=183913

 

The chart tells me a different story. Since that time, the behavior has totally changed on the chart. I don't think ABA is a place where they have a collective interesting to make money for its readers. It is more like other forums like here or seeking alpha for spreading information.

If these "insiders" really know something so "ecstatic", the chart behavior would not look like what we've seen since then.

 

I wish it would be so easy to pay only $4500 a year to enter an elite circle whose members are so nice and considerate that they actually CARE about me making money.

I've never seen a single financial writer who actually cares about whether his readers can make money off his articles.

[allnatural]

Lol they rarely even write about stocks/GSEs if ever. Most of their publication revolves around the securitization business, which the GSEs happen to come up from time to time (i think twice in the last 6 months). This isnt your retail pump newsletter.

 

Just look at this recent article pumping CRT-backed bonds!! /sarcasm

https://www.abalert.com/search.pl?ARTICLE=184680

 

Besides, the meetings they claimed took place on June 7th that no one else reported on but them turned out to be true based off WSJ's reporting from yesterday. Weird for a pump newsletter to have access to such insider information...

 

You are wrong to compare ABS to a seeking alpha or forum like here. Its a professional industry subscription service that charges ~$4,500+/yr and has very little retail subscribers like ourselves.

 

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

 

Well, whatever the plan is large investors are "ecstatic" about it as of June 7th.

Fannie and Freddie stockholders were ecstatic at Calabria’s statements. “It’s exactly what we laid out,” one investor said. “The goal of this president is what can be done administratively. You can see there’s a focus on getting it done.”

https://www.abalert.com/search.pl?ARTICLE=183913

 

The chart tells me a different story. Since that time, the behavior has totally changed on the chart. I don't think ABA is a place where they have a collective interesting to make money for its readers. It is more like other forums like here or seeking alpha for spreading information.

If these "insiders" really know something so "ecstatic", the chart behavior would not look like what we've seen since then.

 

I wish it would be so easy to pay only $4500 a year to enter an elite circle whose members are so nice and considerate that they actually CARE about me making money.

I've never seen a single financial writer who actually cares about whether his readers can make money off his articles.

[Guest cherzeca]

we know from the leaked remarks made by Acting Director Otting to the FHFA staff in mid-January that there was an administrative proposal set be announced “in two to four weeks” that “really sets a direction for what the future of housing will be in the U.S.,” and that would require raising “probably somewhere, based upon their business models today, [in the range of] $150 to $200 billion.” Something happened to derail that plan, and I believe it was a swift and fierce show of opposition by the banks and their supporters

 

imo craig's abrupt resignation has to be interpreted in this context. occams razor explanation is that whatever happened to derail the original plan caused him to resign. what happens now, i dont think anyone has a clue...

 

phillips had been consistent about returning to private sector after 2 years.  also was just awarded treasury's Alexander Hamilton award.  still sticking with the fired scenario?

[Guest cherzeca]

re Occam's razor, the simplest explanation is that mnuchin doesn't want the treasury plan delivered to potus until he has signed off on it, and he has been derailed by trade and sanction issues.  one may also speculate that the HUD plan hasn't been finalized yet (I dont see HUD as a particularly efficient agency) and that the inter-agency review is still ongoing.  there are many possibilities.  I just dont think one of these possibilities is that Craig (if I may be so bold as to first name) was fired

 

btw I have found in life that the simplest explanation is usually wrong

 

edit: also, I dont believe that disputing that phillips was fired, or concluding that otting was just pep talking out of turn, is an example of confirmation bias.  it simply means that I am unconvinced.  real easy to be unconvinced that phillips was fired when he said multiple times he was going to finish his work on the plan and return to the private sector

 

edit 2:  as for Occam's razor, occam was a philosopher critiquing other philosopher's speculations regarding metaphysics...not exactly transferable to a heuristic to explain human conduct

[Guest cherzeca]

as for confirmation bias, I think this is one of the least understood aspects of behavioral finance.  of course we have confirmation bias...we are hard wired by evolution to act with confirmation bias.  using present evidence to confirm prior tentative conclusions kept us alive on the savanna. 

 

now as for finance, if you have developed conviction in a position, of course you will have confirmation bias to place more weight on "good" news than "bad" news, because all news fits into a narrative that you have constructed regarding an investment, and if "bad" news destroys your narrative then your conviction was weak.  if bad news accumulates to the point where your conviction is not weak but no longer understandable to you, then you need to adjust.

 

the GSE narrative is a very difficult one, more difficult than i had thought.  but if my conviction is (essentially) TINA, the administration wants GSEs out of conservatorship, and the NWS is invalid, a little delay in producing the potus memos is not going to destroy that narrative for me, and if it did, then the conviction was weak.  nothing wrong with having a weak conviction, just move on without casting potshots at those who dont