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

[COBFInfinity]

Treasury can convert some of the seniors to get them to 79.9% ownership (the warrants become superfluous here)...

 

...I think Treasury only picked that number for the warrants because that's the most they could do in a single transaction

 

I don't understand what you mean. Tsy already has 79.9% ownership, so if any of the Sr Pfd is converted to common, they go above 79.9%. Unless you're implying the warrants are cancelled, which I don't think will happen. If Tsy is going to write off an investment, it will be the Sr Pfd, not the warrants.

 

As to the 79.9% number, it's been a long time and I don't remember who said what or when, but it's been established that the reason that number was used was because if they go to 80%, the U.S. Gov't has to consolidate the companies on its balance sheet. This would cause both the assets and liabilites to increase significantly, but of course people would freak out because the debt side would go up and this would be seen as a "really bad thing".

[WB_fan82]

Hi Midas,

 

I'm a huge fan of your posts and thinking.  You're one of the only reasons I bother to post at all, and I love the pushback.

 

I think we do disagree on the importance of common dividends.  Just ask yourself, do you really need to get cash back to invest in these companies?  I sure don't.  I'm sure Ackman doesn't.  Dividends just don't change the intrinsic value of the company.  The earnings are there and accessible in the future, and the future is where most of the NPV is.  I also can't imagine Calabria declaring them when is all about retaining capital.  Yes, the capital rule has the flexibility but that doesn't mean it will happen.  It also had that section with flexibility to apply if the GSEs were released from cship early and yet here we are!

 

I'm no fan of bombastic theories, but I think the accounting for the current NWS/buffers is a total fiction.  I think only Bove has pointed it out.  Earnings are "retained" but the corresponding higher liquidation preferences is not accounted for in the financials.  "earnings per share" is something that first takes into account preferred dividends, yet the accounting ignore that the cumulative in-kind net worth sweep is just 100% of the "earnings per share"  Realistically, the true economic EPS of the GSEs is $0.00 every quarter the net worth sweep is in effect - paid in cash or in kind.  That economic reality is exactly why the common tread water even as Calabria touts "capital retention".  When/if mnuchin changes this, the common will accrete upward every quarter (very rapidly).

 

On the seniors converting, think about the likelihood of a sr pfd exchange happening given how things have unfolded.  As part of a grand recap plan with a collins settlement and exiting cship it made sense and common was at risk given the low price.  But now, I don't think it's in the cards.  The easier alternative is just make them prepayable at par.  Raise the capital in the market to pay them down.  There are a bunch of other ways of dealing with them and none of them involve an exchange.  There is no reason for urgency, especially if they become non-cum.  Not exchanging also implies letting the courts play out, and it seems clear that is how Mnuchin decided to handle that front...

 

Not converting seniors still allows third party capital raised over _time_ if srs are non-cumulative and if they were prepayable.  It just can't happen until earnings retention has reached a point where external capital can take them out.  That can always come from exchange offers, btw, and remember there is a huge stack of GSE liabilities that can be offered stock.  Not just the sr pfd.  But there is limited appeal in such an exchange, to anyone, until there is stability with the GSEs.  Both in earnings power and, most importantly, political certainty with the new admin and what happens with FHFA.  That takes time!  Which, by the way, you need to consider that capital rule is modified and it could be a lot easier to meeting the thresholds...

 

I think ultimately it comes down to this question.  Is there a rush and why?  I think there really isn't a rush.  And if there was a rush they could have done all of this stuff already.  I just haven't seen anything consistent with a rush from TSY (though FHFA moved quickly on capital rule and other things).  Earnings recap over time, and that time brings us capital, it brings us certainty on politics, it gives clarity on lawsuits, it makes people comfortable with GSE values post PSPA restrictions/fees.  All of those things make it much easier to pull off a future exchange, and the common will be higher as we get there.  On the other hand, what's the rush to raise external capital?  I'm struggling to make the case.

 

 

 

[COBFInfinity]

I think we do disagree on the importance of common dividends.  Just ask yourself, do you really need to get cash back to invest in these companies?  I sure don't.  I'm sure Ackman doesn't.  Dividends just don't change the intrinsic value of the company.g to make the case.

 

You might be surprised to learn that many investors have different preferences than you and Bill Ackman. There are dozens of mutual funds and ETFs that have a dividend focus. There are trusts and endowments that have dividend mandates. Lots of investors look to their stocks for cash flow, not appreciation. Simply put, it is not debatable that having no dividend reduces the pool of investors for the GSE's. So if you are correct that dividends don't change the intrinsic value (which can't be perfectly true, but I agree it's close enough for this argument), then you should expect a lower stock price at which capital is raised by excluding a large block of potential investors. I'm sure Calabria will be given that message - what decision he makes on whether to allow dividends early on, I can't predict.

[WB_fan82]

I feel very confident asserting there is no way Calabria is going to declare divs when the companies are in cship and below capital requirements.  Not for the common, not for the jr pfd, and hopefully more to the point, not for the sr pfd.

 

From a capital perspective, it's no different than a buyback.  He's not going to let the assets dissipate (when/if given the choice).

[Midas79]

@WB_fan

 

I do agree that the central question is about the timing and amount of FnF's third-party capital raise(s). Following is the reasoning I posted on another board. Right now I'll use the assumptions that FnF need to hit $235B in core capital at the end of 2025, that the seniors are cancelled/converted, and that they earn $20B per year. Without the seniors their core capital right now is around $35B. That leaves $100B of common shares to be sold some time between now and the end of 2025.

 

Note: with the current capital rule FnF's 4% with-buffers core capital standard, which is a percentage of total assets, would be around $300B at an annual asset growth rate of 2.5%. Thus my assumptions include a 22% reduction in the capital requirements. Consider the following three scenarios:

 

1) FnF raise $100B immediately. Their core capital levels are $135/155/175/195/215/235B at the end of 2020-2025.

2) FnF raise $20B per year. Capital levels of $35/75/115/155/195/235B.

3) FnF raise $100B five years from now. $35/55/75/95/115/235B.

 

It is clear that #1 dominates #2, which in turn dominates #3. At every moment in time, more capital is better than less capital. Period. This remains true even if you tweak the assumptions above.

 

I have heard the argument made before that FnF have operated with little to no capital for 12 years so what's the rush? My response is summed up well by this tweet:

https://twitter.com/the_CMLA/status/1339600322046513160

 

Should we just wait for retained earnings to build?  Small lenders say no, because in the YEARS it takes to get there, a large negative economic event CAN and WILL happen, depleting the inadequate capital & destabilizing the entire US secondary, which in turn harms taxpayers

 

In conservatorship and with the NWS in place, the government both has control over FnF and rights to all its profits, while taking all the risk. But FnF are meant to be private, shareholder-owned companies, and there is no point to having shareholders if they gain no economic benefits from their shares. A permanent nationalization truly would consolidate FnF onto the government's balance sheet, an outcome everybody involved wants to avoid. If Treasury wants to remove that risk to the taxpayer, they must get private capital involved, and the sooner the better.

 

Calabria has also said that FnF will go under in a severe economic downturn. In the end, I see no reason not to raise capital ASAP and in as large amounts as the market will support. The only ones who benefit from a slow, earnings-only capital raise are existing commons, who have nobody on their side except maybe Treasury due to the warrants, and Treasury has enough ways to make money here that they aren't going to try to maximize the value of just the warrants, especially if they give up the seniors.

 

To the rest of your points:

 

[*]COBFInfinity summed up my feelings on dividends nicely. FnF need a ton of outside capital, and restricting the investor pool by not offering dividends is unwise, if it's even possible. Not to mention the facts that the offering price of the commons will be lower than it otherwise would be if there were dividends. The same is true for an early junior conversion: if one doesn't happen immediately, there will have to be $33B more of commons raised later than if the conversion does happen first. That future dilution risk will be factored into the offering price.

[*]In a low-interest rate environment, I fully expect any FnF junior pref share with a div rate of at least 5% or so to trade at >=120% of par once dividends are turned on. Even discounted back 3 years that's at least 80% of par. The choice on whether to own the commons or juniors now is based on the prices of each at the time of the first share offering, and is answered simply by whether you think the pref:common ratio will be greater then than it is now. If yes, own prefs, it no, own commons. If you think it will be close own both, though I'd still weight towards prefs due to my opinion that they have less downside. It doesn't matter what the commons do later because the juniors could just convert in the open market at the time of the first capital raise. For the commons to be a better buy (and hold) right now they will have to hit at least $6 or so (and that's with no immediate divs or conversion) when everything is announced and stay there (because short-term irrational exuberance could push it above there temporarily but we're talking long-term value). I don't think there's enough future upside to the commons at $6 for them to stay there for long.

[*]The retained earnings from the last year do count as capital because of the way capital is calculated. Core capital is balance sheet equity minus the seniors and minus AOCI (a rounding error). The concomitant increases in senior liquidation preference don't change that because they don't show up on the balance sheet. And weren't you the one saying liquidation preference doesn't matter outside actual liquidation? If so, why do last year's earnings not count for raising the common share price but future ones will?

[*]Your argument that Calabria won't allow dividends, even though he specifically included the possibility of exceptions to the dividend restrictions in his capital rule for the purposes of raising capital (thus showing that he thinks immediate or near-immediate dividends will be necessary to raise capital), conflicts with your argument that he won't push for a third-party capital raise ASAP. If the purpose of keeping divs off is to build capital faster, why unnecessarily delay third-party capital raises?

[*]The seniors are already repayable upon the issuance of capital stock. In fact the paydown would be mandatory. The problem is that in your scenario of the seniors staying in place (though becoming non-cumulative), the first $193B FnF raise would have to go towards paying off the seniors and thus wouldn't build capital at all. Raising that much equity, which would have to be all common shares, would cause a crazy amount of dilution in and of itself. $193B is already 80% or so of the future market cap, so the investors will want even more. Add in Treasury exercising the warrants first and you're looking at the existing commons having low single-digit % of the overall equity in the end. This scenario likely leads to the commons being worth less per share than they are now.

[*]Your idea that some FnF debt could be exchanged for equity is something I hadn't considered. It certainly would raise capital, though again it would have to be for common shares only because the juniors take up all the available room for non-cumulative prefs in Calabria's capital rule. It's hard to say how this would affect the price, but corporate debt investors, especially in companies as safe as FnF, are unlikely imo to take the risk of owning common shares unless they are richly compensated, resulting in more dilution to the existing commons than just doing a public offering.

[*]If Treasury does what I expect and takes actions that will allow third-party capital to be raised, they will be out of the loop in terms of capital raise timing. That's the whole point of getting this done before Yellen takes over: neither Calabria nor Mnuchin want her to be able to stop the recap and release process. Then it becomes only Calabria's call as to how soon to raise capital, and he has said in interviews he wants it done sooner rather than later.

[*]This shows the difference between Calabria and Mnuchin in terms of capital raise urgency. Mnuchin has an incentive for third-party capital to be raised sooner due to taxpayer protection, but the housing market has been robust enough during Calabria's term that he hasn't had to worry about FnF going under, especially with the increased capital levels due to the letter agreements. He has also had a ton else on his plate. Calabria, on the other hand, has been very outspoken about FnF's lack of adequate capital and the need to build it. The only reason he hasn't had FnF do capital raises already is that the conditions that would allow that have not been in place (NWS, seniors). He even said that he would have wanted FnF to do huge capital raises earlier this year but it just wasn't possible at that time. Once Calabria is free to determine how fast FnF raise third-party capital, I believe he will push for (and get because he's the FHFA director) the largest possible raises ASAP. No self-proclaimed safety and soundness regulator would do otherwise.

[typicalvalue]

Calabria interviewed on Friday the 22nd of Jan. Sure will be talking about a failed attempt to recap the GSE's (for those that are doubting a  PSPA amendment *kidding*)

 

https://www.crefc.org/cre/content/events/January-Conference/2021/January_Conference_2021.aspx?WebsiteKey=105b6c32-4dc8-4e9f-8ba4-8b92bdce1c9e&CCOMain=2&_zs=axRfO1&_zl=O1K56&DC_Symposium=3#DC_Symposium

 

Also, Mnuchin on travel until the 10th of this month, so I don't see it happening this week

[COBFInfinity]

Calabria interviewed on Friday the 22nd of Jan. Sure will be talking about a failed attempt to recap the GSE's (for those that are doubting a  PSPA amendment *kidding*)

 

https://www.crefc.org/cre/content/events/January-Conference/2021/January_Conference_2021.aspx?WebsiteKey=105b6c32-4dc8-4e9f-8ba4-8b92bdce1c9e&CCOMain=2&_zs=axRfO1&_zl=O1K56&DC_Symposium=3#DC_Symposium

 

Also, Mnuchin on travel until the 10th of this month, so I don't see it happening this week

 

That's at least two interviews Calabria has lined up for the next 3 weeks, the other being with Tim Rood. It sure does look like a signal that he wants to talk about something positive. If not, he would just take a call on Jan 20 from WSJ or Bloomberg and explain that Mnuchin didn't want to play ball anymore.

 

But yet again, Mr. Market says F your wishful thinking and sends the preferreds a few percent lower.

[Spekulatius]

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

[COBFInfinity]

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

[Spekulatius]

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

[COBFInfinity]

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

 

No, January 20 is clearly Steve Mnuchin's deadline, not mine, and he started talking about ending the conservatorships before he even started the job 4 years ago. If he had no interest in actually doing something, why did he bring it up then and then keep telling everyone for 4 years that he wanted it to happen? Now, I don't believe he's going to give investors anywhere near what they hoped for, but he can do enough to set the path for a recap to occur. We'll all find out soon enough.

[Jcmeg35]

At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

 

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

[muscleman]

At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

 

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

 

Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least.

[typicalvalue]

Mr. Market agrees with all of you guys, maybe im hopeless but still time.

[beaufort]

It's possible that nothing happens or that what happens is underwhelming; some agree with the likes of MM on that point.  But there are some of us that don't think that's is probable and vote with our wallet.  I bought more FNMAT this morning for 6.55.  This is why we have a market.  I don't think the volume says anything right now, but I am not a 'technician'.

[DocSnowball]

Staying the course as well. Not sure what else to say. Either this moves dramatically in the next couple of weeks, or the hemorrhage continues. Eventually, either there is restructuring or a taking due to nationalization. It is a volatile investment, but the discrete events in 2020 have moved us forward rather than take us back. Thesis creep and sunk costs are also into play for sure, need to acknowledge that and not invest any more $ at this point.

 

If you are Calabria, what are you asking Mnuchin to do at this point before the balance of power shifts?

[COBFInfinity]

At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

 

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

 

Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least.

 

Or Mnuchin will say, "I don't want to leave this up to Dems" and he'll sign the PSPA amendment.

[Guest cherzeca]

SM said most recently, publicly, that it is likely they will put GSEs on a path to recap.  I believe that is very close to verbatim. now privately, who knows what is going on. counterintuitively, D control of senate may add to reasons SM will act

[orthopa]

At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

 

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

 

Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least.

 

Wow, yeah I didnt realize congress controlled this investment. Great point. Thank god your around muscleman.

[COBFInfinity]

As a reminder, not EVERYTHING is based on Mnuchin. Spike in interest rates will reduce refi activity, reducing GSE profits. Price drop may not be unreasonable based on that.

[Wiggins]

buying opportunity today

[Spekulatius]

At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

 

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

 

Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least.

 

Or Mnuchin will say, "I don't want to leave this up to Dems" and he'll sign the PSPA amendment.

 

Which will most likely promptly reversed 2 weeks later.

 

Just a general observation from binary net situations, I have found that in most cases absent much indications of progress and with deadlines approaching these often trade on more hope than facts. I guess we will know in two weeks.

[Guest cherzeca]

At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

 

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

 

Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least.

 

Or Mnuchin will say, "I don't want to leave this up to Dems" and he'll sign the PSPA amendment.

 

Which will most likely promptly reversed 2 weeks later.

 

Just a general observation from binary net situations, I have found that in most cases absent much indications of progress and with deadlines approaching these often trade on more hope than facts. I guess we will know in two weeks.

 

there is no deadline here, spek. you are a casual observer, saying that the lawsuits have gone nowhere.  you are just fanning fumes

[WB_fan82]

My understanding is that PSPA changes cannot just be reversed two weeks later.  It's an agreement between the TSY/GSEs/FHFA.

 

You need both TSY and FHFA as conservator to agree to change it back.  That would likely require a confirmed Calabria replacement.

[muscleman]

At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

 

Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

 

Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

 

The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

 

Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

 

Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

 

Yep. Now Dems control House, Senate, and presidency. Nothing will be done in the next 4 years at least.

 

Or Mnuchin will say, "I don't want to leave this up to Dems" and he'll sign the PSPA amendment.

 

Investing is a probability game. What do you think is the likelihood of this? My assigned probability is 0.0005%