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

[DRValue]

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

 

Ah so it's a clickbait tweet. Recap and release is still on, but it'll still be govt subsidised and not a fully private system.

Cheers.

[Luke 532]

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

 

Thanks.  Here's the clip: https://video.foxbusiness.com/v/6059461043001/#sp=show-clips

[Midas79]

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.

 

I watch the price action more closely than most here, mainly in order to trade small amount of prefs around when opportunities present themselves. For example, I was able to sell some FNMAM for $19.99 and immediately turn around and buy the same amount of FNMAK for $19.55. It's picking up pennies, but the steamroller doesn't have a chance to move in between.

 

According to my database, FNMAS's dollar volume (approximated by closing price times volume) has actually exceeded that of FNMA 603 times over those 888 days, and FMCKJ's has exceeded FMCC's 480 times.

[Guest cherzeca]

privatize means=

reform means=

follow gaspo=

 

 

[orthopa]

https://www.realvision.com/tv/shows/the-larry-mcdonald-series/videos/the-man-who-saved-aig

 

Interesting discussion with Millstein and his thoughts on Fannie, Freddie and Calabria.  Starts 21 minutes in.

 

https://www.realvision.com/tv/shows/the-larry-mcdonald-series/videos/the-man-who-saved-aig

[orthopa]

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

 

Thanks.  Here's the clip: https://video.foxbusiness.com/v/6059461043001/#sp=show-clips

 

So we know first part of the plan. A guarantee, seemingly explicit and most likely paid for. The details may conveniently leak from here on out. 

[Midas79]

So we know first part of the plan. A guarantee, seemingly explicit and most likely paid for. The details may conveniently leak from here on out.

 

Explicit guarantee means Congress. If the administration is counting on that then I'm selling everything tomorrow.

 

What I think is more likely is a continuance of the existing implicit guarantee and Treasury line of credit, with FnF paying a commitment fee. This lines up with what was in the presidential memo.

 

The difference is that right now Treasury is only contractually responsible for around $200B of losses, which represents the undrawn money from the PSPA funding commitment. I'm not sure if FHFA and Treasury can legally increase this amount, but it shouldn't be necessary. As I said in my post on Tim Howard's blog (and first said by cherzeca on Twitter), right now we have $6B of capital in front of the $200B line of credit, and after recap and release it would be $150B (or whatever Calabria decides on) ahead of that same line of credit. It's a good enough arrangement now and will be better than good after recap and release. That should be plenty to reassure MBS investors while technically not potentially putting Treaury on the hook for all $5.5T of FnF's liabilities as an explicit guarantee would do.

[Guest cherzeca]

So we know first part of the plan. A guarantee, seemingly explicit and most likely paid for. The details may conveniently leak from here on out.

 

Explicit guarantee means Congress. If the administration is counting on that then I'm selling everything tomorrow.

 

What I think is more likely is a continuance of the existing implicit guarantee and Treasury line of credit, with FnF paying a commitment fee. This lines up with what was in the presidential memo.

 

The difference is that right now Treasury is only contractually responsible for around $200B of losses, which represents the undrawn money from the PSPA funding commitment. I'm not sure if FHFA and Treasury can legally increase this amount, but it shouldn't be necessary. As I said in my post on Tim Howard's blog (and first said by cherzeca on Twitter), right now we have $6B of capital in front of the $200B line of credit, and after recap and release it would be $150B (or whatever Calabria decides on) ahead of that same line of credit. It's a good enough arrangement now and will be better than good after recap and release. That should be plenty to reassure MBS investors while technically not potentially putting Treaury on the hook for all $5.5T of FnF's liabilities as an explicit guarantee would do.

 

the key point here is that the treasury line has been appropriated by congress as per HERA.  so that is a big deal...there is $200B of backstop, which GSEs should start paying for, which is an important credit support until recap is done.  this is conveniently ignored by chris whalen and the MBA crowd

[orthopa]

So we know first part of the plan. A guarantee, seemingly explicit and most likely paid for. The details may conveniently leak from here on out.

 

Explicit guarantee means Congress. If the administration is counting on that then I'm selling everything tomorrow.

 

What I think is more likely is a continuance of the existing implicit guarantee and Treasury line of credit, with FnF paying a commitment fee. This lines up with what was in the presidential memo.

 

The difference is that right now Treasury is only contractually responsible for around $200B of losses, which represents the undrawn money from the PSPA funding commitment. I'm not sure if FHFA and Treasury can legally increase this amount, but it shouldn't be necessary. As I said in my post on Tim Howard's blog (and first said by cherzeca on Twitter), right now we have $6B of capital in front of the $200B line of credit, and after recap and release it would be $150B (or whatever Calabria decides on) ahead of that same line of credit. It's a good enough arrangement now and will be better than good after recap and release. That should be plenty to reassure MBS investors while technically not potentially putting Treaury on the hook for all $5.5T of FnF's liabilities as an explicit guarantee would do.

 

True, I guess what I was suggesting that Treasury would prefer that as part of their working with congress on reform as recommendation. I think that honestly would be Mnuchins preference in the end as he has repeated the working with congress multiple times. We could see both options as the mandate calls for both in its directions.

 

"(A)  The Federal Government is fully compensated for the explicit and implicit guarantees provided by it to the GSEs or any successor entities in the form of an ongoing payment to the United States;"

 

Implicit as it is now to get the wheels turning as an admin reform and an Explicit as part of an ongoing reform effort with congress.

[Midas79]

the key point here is that the treasury line has been appropriated by congress as per HERA.  so that is a big deal...there is $200B of backstop, which GSEs should start paying for, which is an important credit support until recap is done.  this is conveniently ignored by chris whalen and the MBA crowd

 

If Treasury cancels the seniors, does the line of credit go back up to $400B, as in $200B for each company? If so, that means even more protection for MBS holders, but even if not then adding capital to FnF only makes them safer than they are today, which is evidently safe enough for MBS investors to not be jittery.

 

And just to be clear, is the following the section of HERA you are referring to?

 

‘(3) FUNDING- For the purpose of the authorities granted in this subsection, the Secretary of the Treasury may use the proceeds of the sale of any securities issued under chapter 31 of Title 31, and the purposes for which securities may be issued under chapter 31 of Title 31 are extended to include such purchases and the exercise of any rights in connection with such purchases. Any funds expended for the purchase of, or modifications to, obligations and securities, or the exercise of any rights received in connection with such purchases under this subsection shall be deemed appropriated at the time of such purchase, modification, or exercise.

[muscleman]

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?

 

This is getting interesting...... I wonder when did the treasury plan get to the white house? Is that early June? I was ultra bullish and even predicted an accelerated run up back in the end of May, but then in early June I started to see very suspicious technicals to the point where I had to sell out the whole position. I wonder if someone already knows the details of the treasury plan and started selling heavily since early to mid June.

 

[Guest cherzeca]

@MM. well Phillips certainly knows the details of the treasury plan, and he is now "on the loose" where information means money.  I dont know that you can frame an investment strategy around whether and who spills the beans

[muscleman]

@MM. well Phillips certainly knows the details of the treasury plan, and he is now "on the loose" where information means money.  I dont know that you can frame an investment strategy around whether and who spills the beans

 

It is part of my technical indicator actually. As I said before, when Gaspirino bashed hard and GSE shares didn't move much in May or maybe April, I was ultra bullish. Later when Maloni lied about "coming Collins on Friday", I turned bearish.

This time, if the treasury plan comes to the White House in early June, right around when the stock topped and started steady declining, that's what I would turn ultra bearish.

You said this is an event driven stock. Yes it is. That's why I focus on these events.

[Guest cherzeca]

to be clear when I was referring to GSEs as an event driven investment, I wasn't referring to events such as if maloni writes something stupid in a blog or gasp in a tweet

[Luke 532]

to be clear when I was referring to GSEs as an event driven investment, I wasn't referring to events such as if maloni writes something stupid in a blog or gasp in a tweet

 

;D

[muscleman]

to be clear when I was referring to GSEs as an event driven investment, I wasn't referring to events such as if maloni writes something stupid in a blog or gasp in a tweet

 

I know what you meant. You are a great attorney and you focus on real events like Collins and admin reform.

I handle it differently though. My guess is that Maloni wrote that blog message for a reason. Either someone who wanted to sell baited him with such false information to pump the stock up so they can get out without bashing down the price, or Maloni is part of that game directly. Otherwise how could he just wake up one day and started day dreaming about Collins decision coming that afternoon? Unless he is a psychic, there is no way this could happen.

The gasp tweet is also important to me. When big players are bullish, they will pay such guys to spread bad news to scare people out so they can load up the position without raising the price. While these events may be non-sense to pure FA investors, they are very important to TA traders like me.

 

 

 

[allnatural]

https://www.jchs.harvard.edu/blog/why-is-the-administration-not-talking-about-utility-style-regulation-of-g-fees/

[Guest cherzeca]

maloni I cant speak to, but gaspo is playing a game that we all know about, trying to make a bigger bonus by moving the stock quoting unnamed sources (like Bloomberg "journalists"), and so who is going to play that game with gaspo? correct, assholes!  so why should I trade or invest based upon a self-interested nitwit who is willing to let himself be used by assholes?

 

sorry MM, I respect everyone on this board (well almost), but I ascribe no signaling value whatsoever to gaspo (or maloni)

[Guest cherzeca]

https://www.jchs.harvard.edu/blog/why-is-the-administration-not-talking-about-utility-style-regulation-of-g-fees/

 

nice post allnatural.  you really cant argue with Layton's reasoning, and while the art of utility regulation of price to ensure adequate return is not something that is easy to achieve, Layton points out that fhfa has in fact been working towards that goal during conservatorship.

 

so why is calabria speaking about competition before he rolls up his sleeves and finds out what his agency is actually doing?  as Taleb would say, IYI

[investorG]

hey cherzeca, would you mind if I had a few questions,

 

do we know what judges actually sat for the collins en banc?  All 16 regulars?  In the other en banc case it appears they added a 17th, one of the senior judges - is that to make a tie less likely, and is typical?  finally, can a judge abstain or do they have to pick a side? 

 

 

thank you. 

 

[Guest cherzeca]

hey cherzeca, would you mind if I had a few questions,

 

do we know what judges actually sat for the collins en banc?  All 16 regulars?  In the other en banc case it appears they added a 17th, one of the senior judges - is that to make a tie less likely, and is typical?  finally, can a judge abstain or do they have to pick a side? 

 

 

thank you.

 

from the docket:  EN BANC ORAL ARGUMENT HEARD Stewart, Jones, Smith, Dennis, Owen, Elrod, Southwick, Haynes, Graves, Higginson, Costa, Willett, Ho, Duncan, Engelhardt, Oldham En Banc;

 

dont know about 17th judge though I seem to recall there was an unfilled vacancy on 1/23.

 

9 or more judges will have to vote for some form of reversal, whether all 9 or more joining in the majority opinion or concurring in the judgment. judges dont abstain 

[Guest cherzeca]

some writing to see what I think re Collins en banc timing

 

it has been 5 months and three weeks since oral argument.  we should receive the decision "soon".  some speculation:

 

1.  it would appear that both the APA and constitutional claims will be addressed.  one may think that if the APA claim was won by Ps the court might not have addressed the constitutional claim (as the APA relief would be all that Ps are seeking).  if this is true one might think the decision would have been delivered by now. does this mean the Ps lost on the APA claim?  not necessarily.  I suspect this court wanted to address the constitutional claim in any event, and importantly the relief available to Ps in connection with a constitutional violation.  there is a 5th C merits panel that has already heard another nearly identical separation of powers claim (CFPB and All American case), so there is no ducking the constitutional question by the 5th C, and its better to rule en banc than let the merits panel handle it.

 

2.  writing opinions and getting consensus is time consuming with 16 judges.  there are 3 substantial majority opinions to be written, APA claim, constitutional claim, and relief if court finds a violation of separation of powers constitutional claim, which means there are 3 substantial dissents to be written as well.  if P wins either claim, then all judges will know that SCOTUS will likely grant cert, and will read all 6 opinions with care...which means all 6 opinions will be written with care en banc.  this takes time, and if there are disagreements of emphasis, wording or analysis within each cohort of judges who agree with a particular majority opinion or dissent, you might see concurring opinions laying out those differences of view while concurring in the judgment.  so there may well be more than 6 opinions.  while not trying to put any 5th C judge on the couch, as Bush 41 used to say, if trump is in a position to nominate another SCOTUS justice, it could well come from the 5th C, so these judges (say, Willett in particular) will have a professional reason to write the best opinion they could possible write.  indeed, Justice Kavanugh grew to even larger prominence before his nomination based upon his bravura opinion in PHH (yes, a CFPB separation of powers case).

 

3.  is the admin waiting on collins before releasing its reform plans?  if so, this implies that the admin is in contact with one or more "friends" on the 5th C to monitor the decision timing.  this is possible.  I suppose it gives the admin some "cover" to push for admin reform if a court has struck down some aspect of the current GSE conservatorship status quo.  can you imagine if some other judges suspect that one or more of them is in back-channel conversation, and decide to slow walk their own work flow? 

 

4.  neither "side" on the 5th C will want a split 8-8 vote, although one side likely wants it less than the other.  so again, on the three major claims, there may be politicking, for lack of a better word, to get a decision reached.  this may result, for example with the APA claim, to a vacating of the district court order to dismiss Ps claim with instruction to hold a trial on some fact question(s), as opposed to reversing the order and granting summary judgment for Ps.  the latter result may be a bridge too far for some judge who may extract the lesser holding as the price for his concurrence

[james22]

is the admin waiting on collins before releasing its reform plans? 

 

Sure seems like it.

[hardincap]

i noticed the part of this interview where calabria says most of the litigation issues will "go away" has been edited out from the video. i wonder whats up with that?

 

www.foxbusiness.com/markets/fannie-freddie-ipo-could-come-in-2020-fhfa-mark-calabria

[Luke 532]

i noticed the part of this interview where calabria says most of the litigation issues will "go away" has been edited out from the video. i wonder whats up with that?

 

www.foxbusiness.com/markets/fannie-freddie-ipo-could-come-in-2020-fhfa-mark-calabria

 

Interesting, good catch.  Do you remember what timestamp (or roughly 1/4 way through, 1/2 way, etc.) of the interview he previously said that about the litigation?