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

[Jcmeg35]

@luke, Thanks for posting

 

@chereza, not that I put much weight in Bove's opinion, but given the dearth of coverage from the street, I think it is useful to read his comments, since he gets interviewed and is written about, etc. I am looking forward to the point where the bulge brackets again begin recovering both companies.

 

https://www.marketwatch.com/story/fannie-freddie-overhaul-could-mean-windfall-for-preferred-stock-analyst-says-2019-07-12?mod=mw_share_twitter

[Guest cherzeca]

https://www.marketwatch.com/story/fannie-freddie-overhaul-could-mean-windfall-for-preferred-stock-analyst-says-2019-07-12?mod=mw_share_twitter

 

this analyst picked a bad deal to initiate coverage.  but I find the level of detail interesting (usually an analyst writing a detailed piece shows it to someone who knows what is going on and asks am I in the ballpark?  of course he could just be winging it like the Bloomberg journos).

 

remember this guy is an analyst who makes money by writing pieces that are well thought out and on which his clients can make money.  the Bloomberg journos have no repercussions if they are wrong, and in fact make more money whether right or wrong as long as splashy

[18436572]

https://www.wsj.com/articles/former-freddie-mac-ceo-plans-to-keep-hand-in-housing-finance-11562932800?shareToken=stacda0ce30d1d455ca47e0c1bf814b6ff&reflink=share_mobilewebshare

 

"Mr. Layton: No, it isn’t impossible. Four or five years of retained earnings, then do an IPO of more-likely digestible size that would be contemporaneous with the conservatorship ending and with the shareholders getting their full rights. That’s the baseline. I know a lot of people who would love to accelerate from that, but then they have to deal with all of these trade-offs. That acceleration is one area that’s hard.

"

 

 

[Guest cherzeca]

https://www.wsj.com/articles/former-freddie-mac-ceo-plans-to-keep-hand-in-housing-finance-11562932800?shareToken=stacda0ce30d1d455ca47e0c1bf814b6ff&reflink=share_mobilewebshare

 

"Mr. Layton: No, it isn’t impossible. Four or five years of retained earnings, then do an IPO of more-likely digestible size that would be contemporaneous with the conservatorship ending and with the shareholders getting their full rights. That’s the baseline. I know a lot of people who would love to accelerate from that, but then they have to deal with all of these trade-offs. That acceleration is one area that’s hard.

"

 

big news day.  while Layton makes a far point that it would be easier to do an offering if one retains earnings for four years and do a re-IPO then, which is his baseline, he doesn't really address what I expect to happen, which is to do an initial re-IPO up front along with retaining earnings, and a final offering(s) as capital is built up.  his point may simply be that you cant do an offering while in conservatorship.  he didn't make that point, but if that is his point, then he should explain it.

[orthopa]

All this news deluge does is prove no ones knows any more then anyone else. What else is new. At this point wondering what is taking so long is useless IMO as the possibilities are endless, both good and bad. Can only wait for FHFA capital rules and Treasury Plan.

 

Back to waiting for Godot.

[Guest cherzeca]

All this news deluge does is prove no ones knows any more then anyone else. What else is new. At this point wondering what is taking so long is useless IMO as the possibilities are endless, both good and bad. Can only wait for FHFA capital rules and Treasury Plan.

 

Back to waiting for Godot.

 

and the HUD plan.  as you recall POTUS asked for both, and inasmuch as Phillips worked at treasury and not HUD (and therefor probably didn't have much input on the HUD plan), god knows the status of the HUD plan.  I infer from calling for both plans that there will be some coordination between the plans, but it could be that we are all waiting on HUD

[allnatural]

Interesting development...

[Luke 532]

Interesting development...

 

The only quote in the entire article. Presidential priority.  Updated 10 minutes ago.

 

“The president earlier this year instructed the Department of Treasury to develop a comprehensive plan for bold reform,” White House spokesman Judd Deere said in an email statement. The National Economic Council, Treasury, Federal Housing Finance Agency and others “continue to work together on this presidential priority and anything to suggest otherwise is false,” Deere said.

 

I also wouldn't completely discount the possibility that articles in the past two days discussing receivership and delay, delay, delay without one high-ranking source or even an anonymous quote were the work of those that have been so adamantly against the GSE's for many years.

[orthopa]

also, how do you (and others here) interpret craig's departure now?

 

More color based on my previous reply. According to Bloomberg article (yeah I know) https://www.bloomberg.com/news/articles/2019-06-17/craig-phillips-leaves-treasury-before-fannie-report-is-finished.

 

"Craig Phillips, a top aide to Treasury Secretary Steven Mnuchin, left the agency last week before the release of a housing-finance plan he was expected to finish, according to people familiar with the matter.

 

Phillips, who said in May that he was planing to step down, led the Treasury Department’s effort to draft a plan to get Fannie Mae and Freddie Mac out of U.S. conservatorship. Federal Housing Finance Agency Director Mark Calabria said last week that he hoped Treasury’s plan to return the companies to private ownership would come by the end of the month. The White House is reviewing a draft of the proposal, people familiar with the matter have said."

 

Phillips wrote the draft and moved on. Not sure there is much else to glean from that.

[no_free_lunch]

Nice find allnatural.

 

In the end, who cares. If anything this provided an opportunity to invest.  Fannie isn't hurt by this.  They will still package mortgages. They didn't have to raise capital today.  In the end all that matters is what Trump admin does.  Maybe this will serve as a reminder to move reform forward.

[Guest cherzeca]

Nice find allnatural.

 

In the end, who cares. If anything this provided an opportunity to invest.  Fannie isn't hurt by this.  They will still package mortgages. They didn't have to raise capital today.  In the end all that matters is what Trump admin does.  Maybe this will serve as a reminder to move reform forward.

 

good reason always to have some dry tinder

[investorG]

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.

 

luke, how do you explain the continued delays and reneging of previously committed timelines and positions (collins about-face)?

 

hardincap, have you ever canceled (partially or fully) a ~$200bn asset of the US govt? it might not be so easy.  If that was your intention, which appears necessary for them to exit conservatorship, and ~15 judges were about to issue a ruling that may or may not do it for you -- wouldn't you buy some time by contacting your favorite Bloomberg reporter?

 

imo the main deadline is next may.  after that, a re-IPO is unlikely with the summer and election.  whether the Tsy report comes out to the public in june, july or September of 2019 isn't likely crucial. 

 

There's a real chance Mnuchin has kept a professional distance between watt, otting, and Calabria while they are FHFA director (not before).  There's some chance Otting acted on his own regarding the constitutional decision.  And it made good sense for Calabria to try to protect his job in 2021 if Trump loses by reversing Otting's move.

[muscleman]

Just a reminder, a lot of GSE investors on this thread don’t seem to have a plan to exit their positions. Whenever some bad news came out, keep rationalizing why it is ok, and that’s not a solid plan.

Selling at par is the maximum goal but most optimistic goal would not be the baseline goal for your trading plan.

[james22]

What makes you think that, muscleman?

[muscleman]

What makes you think that, muscleman?

 

The last few trading days’ posts

[orthopa]

Just a reminder, a lot of GSE investors on this thread don’t seem to have a plan to exit their positions. Whenever some bad news came out, keep rationalizing why it is ok, and that’s not a solid plan.

Selling at par is the maximum goal but most optimistic goal would not be the baseline goal for your trading plan.

 

I exit the position after the recap plan comes out and I make an assessment of perceived final value after conversion or redemption etc. That is the exit plan. Bad news for me is if FnF is liquidated and the gov, the appeals courts and supreme court tell shareholders to fuck off. I believe we are the furthest from that than any other time I have held the shares.

 

I think your trying to apply a trading plan to an event driven highly sensitive illiquid set of securities.  That in of itself would probably exclude it from most rational technical analysis trading plans. As someone pointed out before you cant predict the future and thus the final outcome. This investment has a binary outcome, really bad, or really good and Im pretty sure most of those posting and invested have come to terms with that. As a conclusion an exit plan is not rational with your line of thinking here.

[Guest cherzeca]

I would agree that in an event driven investment, you have to wait for the event or clarity that the event won't happen etc.  looking at the chart doesn't do much for me...unless the chart says close to par.

 

letter from counsel for collins today (example where you point out that defendant's conduct makes plaintiff's argument for them):

 

"Re: Collins v. Federal Housing Finance Agency,

No. 17-20364

 

Dear Mr. Cayce:

 

It is no coincidence that since the current President took office the Department of Justice has had one position on FHFA’s constitutionality and FHFA has had three. FHFA’s latest switch, prompted once again by a change in leadership at the agency, only further underscores how this agency’s novel structure places vast executive power in the hands of a single individual who is wholly unaccountable to the President. Humphrey’s Executor blessed the FTC’s independence because in that case independence—combined with leadership from a commission whose members serve staggered terms—was thought to promote continuity and expertise at the agency. In FHFA’s case, independence achieves the opposite of continuity by leaving critical policy decisions up to the whim of whichever individual happens to sit atop the organizational chart of an agency that answers to no one. FHFA was right the second time, not the first or the third.

 

Respectfully submitted,

 

/s/ David H. Thompson"

 

[james22]

What orthopa and cherzeca said.

 

I've made my bet and I'll live with it.

 

The last thing I'll do is trade around Bloomberg "news" and White House corrections.

[Luke 532]

FNMAS has traded more shares today than FNMA.  Not sure I've seen that before, although I haven't compared historical volume.  I post this as nothing more than an interesting observation.

[Luke 532]

SCOOP: @USTreasury unlikely to advocate privatization as a viable option in @FannieMae @FreddieMac reform-sources; Treasury complaining lack of personnel w GSE skills slowing reform, timetable uncertain-sources more 345pm @FoxBusiness @LizClaman $FNMA $FMCC

[muscleman]

What makes you think that, muscleman?

 

 

I have more time now so I’ll elaborate. One of the members said a few times that we were all fine because the price has never breached the 5 month MA. It was breached last Friday. Did he sell? I am 100% sure he didn’t because the way he was talking about the MA was clearly a rationalization to come up with reasons for holding. The other member privately messaged me that he didn’t believe the top was in because he didn’t see high volume down days, which we saw last Friday. Did he sell? Did he sell? I am 70% sure he didn’t either. Please let me know if my guesses are correct.

 

I feel confident about my guesses because I’ve gone through all of these myself.

[Luke 532]

The Treasury plan to reform FanFred is at the White House, has been for weeks. Will it see the light of day? Yes. but who gets to see it first? And will it be set in motion?

[Midas79]

FNMAS has traded more shares today than FNMA.  Not sure I've seen that before, although I haven't compared historical volume.  I post this as nothing more than an interesting observation.

 

By my data, today is the 41st time this has happened out of the 888 trading days since the start of 2016.

[Luke 532]

FNMAS has traded more shares today than FNMA.  Not sure I've seen that before, although I haven't compared historical volume.  I post this as nothing more than an interesting observation.

 

By my data, today is the 41st time this has happened out of the 888 trading days since the start of 2016.

 

Thanks for the info, so not rare as it happens ~5% of the time.  I admittedly don't watch volume and price action each day.

[allnatural]

Seems like this isn't such a big deal. If you listen to his Fox Interview, it sounded like government doesn't want to "TOTALLY" privatize the GSEs, as in there will always be some sort of government backing of some kind. Which has always been the assumption here. I don't believe many people thought they would be fully privatized with ZERO government backing. The Trump memo even asked for ways for the government to be compensated for their support whether implicit or explicit. Non-story.

 

He also mentioned plan still coming but timing unknown.

 

SCOOP: @USTreasury unlikely to advocate privatization as a viable option in @FannieMae @FreddieMac reform-sources; Treasury complaining lack of personnel w GSE skills slowing reform, timetable uncertain-sources more 345pm @FoxBusiness @LizClaman $FNMA $FMCC