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

[TwoCitiesCapital]

3 hours ago, typicalvalue said:

Thats my rationale. There is only a low possibility that kills me (recievership).  This a perpetual option with strike at par when restructuring kicks in and many ways to win through judicial action if admin is not keen to recap the GSES. Willing to handle vol. Know many investors involved that are betting big, not just me (other than Glen Bradford ofc). Having said that huge concentration is risky.

Also think that the amount of brain damage and work that this trade requires is not worthy if you don't make this at least 20% of your portfolio. 

Started off as a 10-15% position for me. Has receded over the years as my opportunistic adds have not kept up with my overall portfolio growth in other positions. 

Quite honestly, the brain damage for me would have been worse if it had been larger. It's been frustrating watching this languish and do nothing for ~10-years.

Obviously I'll regret not having more of it IF we get the outcome we want, but I have to ask myself at what cost? I would feel way worse if I had 30% of my portfolio in this for the last 10-years instead of 10-15%. And while resolution seems around the corner and I did add a hair recently, it's ALWAYS seemed like resolution was around the corner for the last 10-years and we've been wrong the whole way so far. What matters is the outcome, but you have to survive the journey too!

[typicalvalue]

23 minutes ago, TwoCitiesCapital said:

Started off as a 10-15% position for me. Has receded over the years as my opportunistic adds have not kept up with my overall portfolio growth in other positions. 

Quite honestly, the brain damage for me would have been worse if it had been larger. It's been frustrating watching this languish and do nothing for ~10-years.

Obviously I'll regret not having more of it IF we get the outcome we want, but I have to ask myself at what cost? I would feel way worse if I had 30% of my portfolio in this for the last 10-years instead of 10-15%. And while resolution seems around the corner and I did add a hair recently, it's ALWAYS seemed like resolution was around the corner for the last 10-years and we've been wrong the whole way so far. What matters is the outcome, but you have to survive the journey too!

Understand the frustation, started the journey on dec 2019, I've been holding for less than 2 years so not as burnt as many of you that've been holding for 10 years+ in an endless bull market. IRR on this investment has been awful and with so many headaches on the journey. My base case is that in 8 year timeframe if we reach par/exchange I get market beating returns on my portfolio (+15% IRR). Could be very well wrong and end this will continue to be an endless purgatory, but paying 20 cents on the dollar does not seem demanding. Also SCOTUS could be the catalyst we are waiting to force restructuring.

Edited June 4, 2021 by typicalvalue

[james22]

Same here.

Initially 10% back in early 2019, half that now.

Think of doubling bet again as we seem so close, but my faith in the Rule of Law has been sorely tested of late.

 

[james22]

Opinions on Mon and Thurs next week.

 

[gfp]

1 hour ago, emily said:

“Diamond hands, nerves of steel is needed. Don’t listen to analysts and reporters. They said tesla is going to bankruptcy but the stock is over $2000 pre-split. They said AMC is worth 1 cent and it is over $50.00.  Fannie Mae and Freddie Mac are the strongest companies out here that survived 2008 crash and the pandemic. I can wait till 2028 if I have to when warrants expire. In fact, it is the treasury that has to rush to cash in. Investors have waited 13 years and can wait. Commons can go anywhere between $300-$500, watch for WSB and Reedit who are already getting ready if you read the chatter. Fannie Mae stock was over $80 not long ago and even paid dividends”

Forgive me if you have already explained this, but what does it mean when your posts are in quotation marks?  That you are quoting someone else?  Or are you writing this?

[tiddman]

I have never paid such close attention to the week by week workings of the Supreme Court.

 

So it seems likely that there will be a decision sometime in the next couple of weeks, before their summer recess?

[TwoCitiesCapital]

3 minutes ago, tiddman said:

I have never paid such close attention to the week by week workings of the Supreme Court.

 

So it seems likely that there will be a decision sometime in the next couple of weeks, before their summer recess?

 

Just ignore it. There have been several hypothesis of when this would be decided and each has come and gone. Don't think about it. Don't watch. One day it'll be up 100-200% or down 90% and you'll know what the decision was. 

[james22]

But there might be a brief window to buy or sell immediately after the decision.

[Wiggins]

Is anyone here (besides Midas) following the controversy over Borden vs United states:

https://howardonmortgagefinance.com/2021/05/24/fhfas-crt-report/#comment-23502

?

 

I've read Kagan's plurality opinion and Kavanaugh's dissent.

 

I agree with Kavanaugh and after reading the plurality's opinion it worries me a bit more about an adverse outcome. I do still cling to the idea that precedent is not needed for a win in Collins though given the plain language of the text. But, curious if others have thought about this.

[DRValue]

If capital requirement increases by an equal amount of earnings, what does this mean for the value of the stock, dividends, capital raising, and the capital rule?

 

Something gotta give? 

[MrSwankyPants]

8 hours ago, Wiggins said:

Is anyone here (besides Midas) following the controversy over Borden vs United states:

https://howardonmortgagefinance.com/2021/05/24/fhfas-crt-report/#comment-23502

?

 

I've read Kagan's plurality opinion and Kavanaugh's dissent.

 

I agree with Kavanaugh and after reading the plurality's opinion it worries me a bit more about an adverse outcome. I do still cling to the idea that precedent is not needed for a win in Collins though given the plain language of the text. But, curious if others have thought about this.

A good analysis is given on the latest episode of the Advisory Opinions Podcast with David French and helped me to understand what was going on here. The issue at hand is Thomas being the lone wolf, creating a plurality agreement on the outcome, but for different reasons. I'd encourage you to listen to it. 

 

The TLDR of what's said is basically this- Thomas decided to be take the practical route in this case based on his previous dissent in another case (Johnson) and his view that a 4/4/1 decision would create significant confusion for lower courts going forward.

 

What's important for Collins is that the two textualist Gorsuch and Thomas stuck together.... I firmly believe Gorsuch joined Kagan most likely because of the TEXT of the statute. Add in the language of Kanavaugh's dissent (pulled straight from judge brown) and I feel good about our chances simply because Roberts, Alito, and Barrett have seemingly put their stamp of approval on that reasoning at some point during the drafting of the dissent. 

 

 

 

 

 

 

[Wiggins]

On 6/11/2021 at 8:56 PM, MrSwankyPants said:

A good analysis is given on the latest episode of the Advisory Opinions Podcast with David French and helped me to understand what was going on here. The issue at hand is Thomas being the lone wolf, creating a plurality agreement on the outcome, but for different reasons. I'd encourage you to listen to it. 

 

The TLDR of what's said is basically this- Thomas decided to be take the practical route in this case based on his previous dissent in another case (Johnson) and his view that a 4/4/1 decision would create significant confusion for lower courts going forward.

 

What's important for Collins is that the two textualist Gorsuch and Thomas stuck together.... I firmly believe Gorsuch joined Kagan most likely because of the TEXT of the statute. Add in the language of Kanavaugh's dissent (pulled straight from judge brown) and I feel good about our chances simply because Roberts, Alito, and Barrett have seemingly put their stamp of approval on that reasoning at some point during the drafting of the dissent. 

 

 

 

 

 

 

Thanks for the suggestion. So if I understand you correctly, you're saying it's hopeful because the textualists will follow the text which favors our side; and precedent -also on our side- will be brought into the discussion by Kavanaugh? That's hopeful. Now we just have to hope they don't revive something dumb like the "may vs shall" debate, or "hide an elephant in a mouse hole."

 

[COBFInfinity]

On 6/11/2021 at 5:11 PM, DRValue said:

If capital requirement increases by an equal amount of earnings, what does this mean for the value of the stock, dividends, capital raising, and the capital rule?

 

Something gotta give? 

Yes, it is an unworkable capital structure. It will have to change at some point, hopefully driven by an upcoming SCOTUS win for plaintiffs.

[Castanza]

So the Lamberth trial is delayed 45 days to see what SCOTUS rules? Are we expecting a ruling before 45 days? Or is this a minimum before another extension needs to be filed? 
 

edit Lamberth trial not Collins 

Edited June 16, 2021 by Castanza

[allnatural]

40 minutes ago, Castanza said:

So the Collins case is delayed 45 days to see what SCOTUS rules? Are we expecting a ruling before 45 days? Or is this a minimum before another extension needs to be filed? 

You mean the Lamberth trial is delayed 45 days. Expecting Collins ruling by the end of the month (possibly tomorrow).

[Castanza]

15 minutes ago, allnatural said:

You mean the Lamberth trial is delayed 45 days. Expecting Collins ruling by the end of the month (possibly tomorrow).

Yeah that’s correct 

[allnatural]

3 SCOTUS rulings today, all from 2020. Only 1 remains from 2020 (Collins)... tick tock

[allnatural]

 

glta

[Castanza]

Collins vs Yellen 

 

https://www.supremecourt.gov/opinions/20pdf/19-422_k537.pdf

 

"The Court says "it is not necessary for us to decide . . . whether the FHFA made the best, or even a particularly good, business decision when it adopted the third amendment. Instead, we conclude only that under the terms of the Recovery Act, the FHFA did not exceed its authority as a conservator, and therefore the anti-injunction clause bars the shareholders' statutory claim."

Edited June 23, 2021 by Castanza

[Spekulatius]

14 minutes ago, Castanza said:

Collins vs Yellen 

 

https://www.supremecourt.gov/opinions/20pdf/19-422_k537.pdf

No expert on legal docs, but it sounds to me like we are done here.

[TwoCitiesCapital]

20 minutes ago, Castanza said:

Collins vs Yellen 

 

https://www.supremecourt.gov/opinions/20pdf/19-422_k537.pdf

 

"The Court says "it is not necessary for us to decide . . . whether the FHFA made the best, or even a particularly good, business decision when it adopted the third amendment. Instead, we conclude only that under the terms of the Recovery Act, the FHFA did not exceed its authority as a conservator, and therefore the anti-injunction clause bars the shareholders' statutory claim."

 

Got it. Conservator = Receiver with no legal differentiation and no difference in responsibilities.  We just call them different things and define them differently in legal docs to confuse people. 

 

What a f*cking joke. 

[DRValue]

So not only does the govt get to take whatever it wants, and it can't be challenged in court cos they made a law saying so, now they can remove supposedly pro private capital calabria and put in their guy to keep taking the money!

[Gregmal]

At least these things will finally provide me some sort of value. Much needed tax losses.

[Castanza]

35 minutes ago, Spekulatius said:

No expert on legal docs, but it sounds to me like we are done here.

 

Seems that way

 

"The shareholders argue that the third amendment did not actually serve the best interests of the FHFA or the public because it did Cite as: 594 U. S. ____ (2021) 3 Syllabus not further the asserted objective of protecting Treasury’s capital commitment. First, they claim that the FHFA agreed to the amendment at a time when the companies were on the precipice of a financial uptick which would have allowed them to pay their cash dividends and build up capital buffers to absorb future losses. Thus, the shareholders assert, sweeping all the companies’ earnings to Treasury increased rather than decreased the risk that the companies would make further draws and eventually deplete Treasury’s commitment. But the success of the strategy that the shareholders tout was dependent on speculative projections about future earnings, and recent experience had given the FHFA reasons for caution. The nature of the conservatorship authorized by the Recovery Act permitted the Agency to reject the shareholders’ suggested strategy in favor of one that the Agency reasonably viewed as more certain to ensure market stability. Second, the shareholders claim that the FHFA could have protected Treasury’s capital commitment by ordering the companies to pay the dividends in kind rather than in cash. This argument rests on a misunderstanding of the agreement between the companies and Treasury. Paying Treasury in kind would not have satisfied the cash dividend obligation; it would only have delayed that obligation, as well as the risk that the companies’ cash dividend obligations would consume Treasury’s capital commitment. Choosing to forgo this option in favor of one that eliminated the risk entirely was not in excess of the FHFA’s authority as a conservator. Finally, the shareholders argue that because the third amendment left the companies unable to build capital reserves and exit conservatorship, it is best viewed as a step toward liquidation, which the FHFA lacked the authority to take without first placing the companies in receivership. This characterization is inaccurate. Nothing about the third amendment precluded the companies from operating at full steam in the marketplace, and all available evidence suggests that they did. The companies were not in the process of winding down their affairs"

[DRValue]

So, this is done then and the only way that anything changes is if govt wants it to. So, they sit and collect the money as long as they can and then when the next housing crisis comes along, just put them in receivership and run the programme through the govt.?

 

That's it, right?