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

[Castanza]

15 minutes ago, DRValue said:

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? 

The nail is in the coffin. SCOTUS pretty much nixed any path forward for shareholders while giving all  control to the government. What investor would touch this moving forward? I had a really small stake that I took a few weeks ago, so not much I can complain about. But I feel bad for anyone who held this 10+ years....Thing is, you couldn't have had a "better" SCOTUS to rule on the case. 

 

As Greg said.....thanks for the tax losses! A small reminder of why I avoid special situations involving courts like the plague...

[DRValue]

4 minutes ago, Castanza said:

The nail is in the coffin. SCOTUS pretty much nixed any path forward for shareholders while giving all  control to the government. What investor would touch this moving forward? I had a really small stake that I took a few weeks ago, so not much I can complain about. But I feel bad for anyone who held this 10+ years....Thing is, you couldn't have had a "better" SCOTUS to rule on the case. 

 

As Greg said.....thanks for the tax losses! A small reminder of why I avoid special situations involving courts like the plague...

I'd hope restructuring is still on the table. But there's no evidence the govt will do this,  after all they could've done under Mnuchin and calabria but chose not to. The opportunity to take all profits in perpetuity is too much to give up, I fear.

 

How anyone could rule the govt can make a law that can't be reviewed is beyond me, but I'm no lawyer...

[Castanza]

1 minute ago, DRValue said:

I'd hope restructuring is still on the table. But there's no evidence the govt will do this,  after all they could've done under Mnuchin and calabria but chose not to. The opportunity to take all profits in perpetuity is too much to give up, I fear.

 

How anyone could rule the govt can make a law that can't be reviewed is beyond me, but I'm no lawyer...

Yeah I am no lawyer or legal scholar, but doesn't this give the government the precedent to nationalize any private company through means of c-ship? 

[DRValue]

Just now, Castanza said:

Yeah I am no lawyer or legal scholar, but doesn't this give the government the precedent to nationalize any private company through means of c-ship? 

That's what I assumed and why it seemed obvious the legal case would prevail. If it is the case it's pretty scary and I'd expect should limit investors appetite in the US. I'm all for paying what's owed, but here apparently that will not be allowed to happen. Ever. 

[TwoCitiesCapital]

1 minute ago, Castanza said:

Yeah I am no lawyer or legal scholar, but doesn't this give the government the precedent to nationalize any private company through means of c-ship? 

 

Seems that way. All they have to do is cite a crisis - any crisis - and threaten the board with legal action and/or retaliation if they don't sign the docs. Then they can usurp every single dollar of private capital and private profit those entities generate into perpetuity while in "conservatorship" and we now have a legal precedent that says it's ok and that the courts can't challenge it....

 

This should be a negative for any SIFI organization here in the United States as they'd be the most obvious targets. Maybe the crisis could be declared retroactively and they take over the banks due to Covid....

[james22]

 

 

 

 

LOL

 

Edited June 23, 2021 by james22

[DRValue]

https://www.google.com/amp/s/www.housingwire.com/articles/fhfa-director-mark-calabria-must-go/amp/

 

Dave Stevens says calabria must go cos he wants the companies to hold too much capital and the govt guarantee is good. 

[Mephistopheles]

I got out of this completely not so long ago. After many years of disappointment by the Courts, I wasn't expecting anything great from SCOTUS, even at apparent 4:1 odds. What a shame. I lost a small amount of money net, but the biggest loss was the opportunity cost over the years.

 

Whatever happened with the 5th amendment takings case in the Federal Court of Claims?

[Castanza]

22 minutes ago, james22 said:

 

 

 

 

LOL

 

Someone better check on Glen Bradford....dude is probably on suicide watch

[COBFInfinity]

I don't even know if it's worth reading this opinion. I'm only on page 4 and the number of logical errors and dubious reasoning already has me spinning.

[TwoCitiesCapital]

14 minutes ago, Castanza said:

Someone better check on Glen Bradford....dude is probably on suicide watch

 

Seriously. Didn't he borrow a ton to buy those preferred shares? It's been years since I followed him, but I seem to recall him mortgaging like everything to accumulate his position. Hopefully he trimmed some in favorable times 

[james22]

14 minutes ago, Castanza said:

Someone better check on Glen Bradford....dude is probably on suicide watch

 

Neither Gaby or AGC Analytics have tweeted yet.

 

Sure they're in shock.

[Castanza]

10 minutes ago, TwoCitiesCapital said:

 

Seriously. Didn't he borrow a ton to buy those preferred shares? It's been years since I followed him, but I seem to recall him mortgaging like everything to accumulate his position. Hopefully he trimmed some in favorable times 

Anyone who talks that much about a single stock has to be leveraged to the tits 

Edited June 23, 2021 by Castanza

[DRValue]

6 minutes ago, Castanza said:

Anyone who talks that much about a single stock has to be leveraged to the tits 

He kept adding.

 

I went in but never in debt. Overall about a 10pct position but mainly due to some other gains, was much higher than that.

 

It will be interesting what happens there. The news is hard to take for all but he's fully invested financially, and emotionally. 

 

 

[COBFInfinity]

8 minutes ago, Castanza said:

Anyone who talks that much about a single stock has to be leveraged to the tits 

Yeah, he is. He has spent the last 7-8 years on the beach because he was counting on the payoff the whole time. That's one hell of a vacation, but I guess it's time for him to go back to work.

 

Glen almost played a role in my position here. I had owned a small position in Pfd at the time of the NWS, at which point I dumped them and moved on. But a while later after the price had risen quite a bit, I was curious what was going on and found that Glen was writing articles about the GSEs. I said to myself, "This is the same guy who got scammed by dozens of Chinese frauds just a few years earlier, so I think I will not go back into this trade." Alas, along came Fairholme, Paulson, etc. and I decided to get in along side them. It turns out I should have maintained my skepticism of anything that Glen was doing.

[DRValue]

The prefs have dumped about 65pct vs the commons 35pct.

 

That's funny. 

 

Must be a few funds offloading all. 

[TwoCitiesCapital]

I just can't get beyond the ability for Congress to pass laws outside of judicial review and that the courts are just ok with it...

 

Want to make graft and theft legal for Congressman? Pass a law that allows it and then says any action taken while serving in your duties as a Congressman cannot come under judicial review.  Want to get that by a president so they won't veto it? Cut them in on the deal and provide them a similar exclusion.

 

Now each of them has 4-7 years to enrich themselves as much as possible before their term ends and there is nothing anyone could do about it.

[Spekulatius]

2 hours ago, DRValue said:

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? 

I believe it is settled that these are basically government institutions now. 

 

One thing that is remarkable is that the Common is actually down less than the preferred. Who would have thought?

[TwoCitiesCapital]

3 minutes ago, DRValue said:

The prefs have dumped about 65pct vs the commons 35pct.

 

That's funny. 

 

Must be a few funds offloading all. 

 

This news is more positive for the common. This means the preferred shareholders have zero leverage for favorable terms in the restructuring meaning less chance of common being diluted into oblivion. 

 

It also reduces the likelihood of a favorable capital raise which is why they're still down, but crushing the leverage of preferreds is a positive for the common when it comes to future restructuring. 

 

I have no idea how they're going to sell equity in this thing though...who would be dumb enough to buy it? 

[Spekulatius]

1 hour ago, TwoCitiesCapital said:

 

Seems that way. All they have to do is cite a crisis - any crisis - and threaten the board with legal action and/or retaliation if they don't sign the docs. Then they can usurp every single dollar of private capital and private profit those entities generate into perpetuity while in "conservatorship" and we now have a legal precedent that says it's ok and that the courts can't challenge it....

 

This should be a negative for any SIFI organization here in the United States as they'd be the most obvious targets. Maybe the crisis could be declared retroactively and they take over the banks due to Covid....

The government can take banks into receivership of they fail. It has happened many times and it is nothing new. Same for insurance companies although that it more regulated at the state level and much rarer.

[COBFInfinity]

6 minutes ago, TwoCitiesCapital said:

 

This news is more positive for the common. This means the preferred shareholders have zero leverage for favorable terms in the restructuring meaning less chance of common being diluted into oblivion. 

 

It also reduces the likelihood of a favorable capital raise which is why they're still down, but crushing the leverage of preferreds is a positive for the common when it comes to future restructuring. 

 

I have no idea how they're going to sell equity in this thing though...who would be dumb enough to buy it? 

There is no plausible restructuring with meaningful value to common or preferred without a court win, so that argument doesn't make much sense to me.

[Wiggins]

3 minutes ago, COBFInfinity said:

There is no plausible restructuring with meaningful value to common or preferred without a court win, so that argument doesn't make much sense to me.

 

The SCOTUS ruling is obviously terrible but the "implied covenant" claim in Lamberth's court is still alive, it applies to preferred shares, rights travel with shares when bought/sold, and it is a class action.

[DRValue]

3 minutes ago, COBFInfinity said:

There is no plausible restructuring with meaningful value to common or preferred without a court win, so that argument doesn't make much sense to me.

The only potential positive is lower capital requirements possibly under Biden. If govt does restructure then it may help. But none can buy now unless they expect the govt to restructure and why would they? 

[TwoCitiesCapital]

13 minutes ago, Spekulatius said:

The government can take banks into receivership of they fail. It has happened many times and it is nothing new. Same for insurance companies although that it more regulated at the state level and much rarer.

 

What's new here is that it can be done even if they don't fail. Fannie/Freddie never did. In hindsight, they never needed a penny of the bailout.

 

Now, I'm not one of those to argue that the bailouts themselves were illegal or shouldn't have happened. I get it. Times of crisis and all. 

 

 But having the knowledge that the board was coerced into the decision, the money was never actually needed, and the accounting write-downs that made it look like it was needed were reversed and proceeds swept to the gov't is certainly a very different situation than say Lehman Brothers or AIG. 

 

Also, it is no longer necessary to distinguish between conservatorship and receivership despite their differences as recorded in law and the normal procedure to move from one to the other and the rights afforded to shareholders in one or the other. None of that matters if courts can't review and enforce the differences so from now on every conservatorship must be treated as a receivership and shareholders are entitled to 0 of the proceeds. 

Edited June 23, 2021 by TwoCitiesCapital

[DRValue]

1 minute ago, Wiggins said:

 

The SCOTUS ruling is obviously terrible but the "implied covenant" claim in Lamberth's court is still alive, it applies to preferred shares, rights travel with shares when bought/sold, and it is a class action.

But we've learnt the law doesn't matter...