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

[Wiggins]

Agreed, and for what it's worth which is not much, the interest referred to some sort of standard court interest like 6% and did not refer to dividends.

[DocSnowball]

Had given up hope on these for the next few years. Seems like prices are steadily going up, nearly a double in 3 months and now with volume, with no real public information or chatter. Not sure what to make of it but waiting to see if there is any insider info that will become public in the next month.

[Wiggins]

This guy has been pumping a lot lately, has 23K followers and a big stake according to his feed: 

 

[Wiggins]

I started adding significantly to my stake right after the miserable SCOTUS ruling. Glad I did that. I think it's still "oversold" by a lot.

[Capitalist World]

GSE Preferreds were up 20-25% last week and up 35% over the month. Something is up with Fannie & Freddie and it's about time..... Best ones to buy are $FNMAS $FNMAT $FMCKJ $FNMAJ $FNMAI

 

Latest piece by Gary Hindes http://delawarebayllc.com/images/There_is_no_legitimate_reason_for_keeping_Fannie_Mae_and_Freddie_Mac_in_conservatorship.pdf

[Midas79]

On 10/30/2021 at 6:02 PM, Capitalist World said:

GSE Preferreds were up 20-25% last week and up 35% over the month. Something is up with Fannie & Freddie and it's about time..... Best ones to buy are $FNMAS $FNMAT $FMCKJ $FNMAJ $FNMAI

 

Latest piece by Gary Hindes http://delawarebayllc.com/images/There_is_no_legitimate_reason_for_keeping_Fannie_Mae_and_Freddie_Mac_in_conservatorship.pdf

 

It's been a while since I posted here, but I am finally checking in.

 

I run a pref-swapping model designed to take advantage of mispricings among the different series: results posted on the @midas79JPSmodel account on Twitter. Right now the liquid series (FNMAS, FMCKJ, FNMAT) are actually horrible buys relative to the others. When you can get a $50-par, albeit zero-dividend, series like FNMAP for only 10% more than the $25-par FNMAS (and they were almost at parity last week), buying FNMAS doesn't make sense at all. Par value is guaranteed to matter in the resolution of the conservatorships, while dividend rate is iffy at best.

 

If you care about liquidity then FNMAS/FMCKJ/FNMAT are the only games in town. But if you're a small enough player or are willing to hold for a while, literally any other pref series is a better buy.

 

Wiggins is correct above: the remedy in Lamberth's court would be based on par value and simple interest, not dividend rate.

[maude]

11 minutes ago, Midas79 said:

Wiggins is correct above: the remedy in Lamberth's court would be based on par value and simple interest, not dividend rate.

Thanks. Why do you think the remedy in the Lamberth court would be based on par value (plus interest) and not dividends?

[Sunrider]

6 hours ago, maude said:

Thanks. Why do you think the remedy in the Lamberth court would be based on par value (plus interest) and not dividends?

Because that's what the statute says is probably the answer. You've been robbed of something which is worth X (par), and to compensate you for waiting you get interest as prescribed by the statute.

 

Makes sense if you consider that you can get robbed of all sorts of different things and it would be a nightmare if each of these cases had to be evaluated separately for the rate to compensate you with. The prefs are only ever worth par by their nature, the dividend right is contingent.... avoids judicial complexity/simplifies litigation to have a statute crafted this way. 

[Wiggins]

Midas it is good to see you check in!

Are you actively trading the prefs? That seems like it could work but would take a lot of time and patience. That's great if it works though.

 

[Midas79]

On 11/4/2021 at 4:51 AM, Wiggins said:

Midas it is good to see you check in!

Are you actively trading the prefs? That seems like it could work but would take a lot of time and patience. That's great if it works though.

 

 

Yup, lots of time and patience. I'm lucky to have a work-from-home desk job that lets me both have the time to develop the model I made (been improving it for 4 years) and monitor prices. My success in this investment is no longer dependent on recap and release, though this wasn't true until recently.

 

Ironically for a member of this board, I'm not really a value investor. I don't like stock-picking at all. I have owned stock in precisely 4 individual companies in my life, and Fannie and Freddie are two of them. If I make enough money from this stock to retire I will happily index from there and enjoy life.

 

I also have the advantage (if you can call it one) of not believing in opportunity costs in the way that most people seem to, so I'm not bothered at all by other people making huge returns on things other than FnF. My method is working and I'm quite comfortable with it as opposed to either doing lots of research (classic value investing) or just jumping on the meme coin of the moment (FOMO-driven investing).

Edited November 8, 2021 by Midas79

[Wiggins]

On 11/4/2021 at 10:30 PM, Midas79 said:

 

Yup, lots of time and patience. I'm lucky to have a work-from-home desk job that lets me both have the time to develop the model I made (been improving it for 4 years) and monitor prices. My success in this investment is no longer dependent on recap and release, though this wasn't true until recently.

 

Ironically for a member of this board, I'm not really a value investor. I don't like stock-picking at all. I have owned stock in precisely 4 individual companies in my life, and Fannie and Freddie are two of them. If I make enough money from this stock to retire I will happily index from there and enjoy life.

 

I also have the advantage (if you can call it one) of not believing in opportunity costs in the way that most people seem to, so I'm not bothered at all by other people making huge returns on things other than FnF. My method is working and I'm quite comfortable with it as opposed to either doing lots of research (classic value investing) or just jumping on the meme coin of the moment (FOMO-driven investing).

Thanks for sharing these thoughts. I'm glad the arbitrage and/or trading of the prefs is working for you. Please keep us posted.

Fannie is trying to buy back CAS notes in a tender: https://www.prnewswire.com/news-releases/fannie-mae-announces-tender-offer-for-any-and-all-of-certain-cas-debt-notes-301424020.html

I would like to think now that the infrastructure bill is out of the way that they're trying to clean up the balance sheet in preparation to exit conservatorship, though I'm not counting on it. My plan is to keep holding and hope that Lamberth helps us.

[allnatural]

https://www.wsj.com/articles/fannie-mae-freddie-mac-to-back-home-loans-of-nearly-1-million-as-prices-soar-11637071380?mod=breakingnews

 

GSEs should see a nice uptick in underwriting starting in Dec based off this, which should helpfully translate to more retained earnings in the year to come.

Edited November 16, 2021 by allnatural

[allnatural]

pretty big development...

 

https://twitter.com/moonsooncapital/status/1465694717161590793?s=20

[buffetteer1984]

9 minutes ago, allnatural said:

pretty big development...

 

 

https://twitter.com/moonsooncapital/status/1465694717161590793?s=20

Is this letter real?

[allnatural]

31 minutes ago, buffetteer1984 said:

Is this letter real?

Looks like multiple sources confirming..

[allnatural]

Relevant article: https://www.realclearpolitics.com/articles/2021/11/30/trump_fights_fanniefreddie_battle_from_outside_the_wh_146802.html

[DRValue]

2 hours ago, allnatural said:

Relevant article: https://www.realclearpolitics.com/articles/2021/11/30/trump_fights_fanniefreddie_battle_from_outside_the_wh_146802.html

I thought one of you mad lads made a fake but wow that seems legit. 

[Wiggins]

The verbiage of this letter is breathtaking (e.g. "steal the retirement of hardworking Americans"). Any press is good press. This is good press and will get at least some traction in the courts and in the news. Expect court filings soon

[allnatural]

4 minutes ago, Wiggins said:

The verbiage of this letter is breathtaking (e.g. "steal the retirement of hardworking Americans"). Any press is good press. This is good press and will get at least some traction in the courts and in the news. Expect court filings soon

They don't waste any time in the 5th circuit https://t.co/gY8GBNbg0a

[COBFInfinity]

19 hours ago, Wiggins said:

The verbiage of this letter is breathtaking (e.g. "steal the retirement of hardworking Americans"). Any press is good press. This is good press and will get at least some traction in the courts and in the news. Expect court filings soon

 

I know some are excited about the actual legal relevance of this, but I'm not sure it's worth much. Is a court really going to just accept this after-the-fact declaration without depositions of many of the relevant players? Ultimately, we know that Treasury punted, not FHFA. So is Mnuchin going to provide testimony that he really would have agreed to end the conservatorships if he had more time, even though he did actually have the chance to set them on that path at the end of his term and he chose not to? Seems pretty weak.

 

Separately, is there going to be an inquiry as to how many shares of GSE securities Trump & friends accumulated before this letter was written?

[Sunrider]

Trump style. However, given Cooper&Kirk's prompt tie-in to the Supreme Court language one has to wonder ... but then again, why did Mnuchin 'take a powder' rather than 'getting it done' (as was quoted here somewhere before)? 

 

Anyway, if anything it served as a prop to remind the court of what the SC said. If they are inclined to believe the orange-faced guy then it should also perfectly tick the box as to what the SC said was required ... the only thing standing in the way of this is the choice of language 'had the president' is past tense, and Trump pontificated after the fact, so I'm sure there will millions spent on lawyers just arguing this in front of a court ... and given that 'may' can mean whatever you want it to ... well, we'll see I guess. Plus ça change...

[Wiggins]

On 8/18/2021 at 12:36 PM, muscleman said:

The whole market is doing a top building right now. Liquidity is being drained from small caps each day. Without any catalyst, I expect FNMAS to drift down along the rest of the small cap stocks.

How is everyone doing? Did anyone else buy post Jun 23rd SCOTUS?

[allnatural]

2 hours ago, Wiggins said:

How is everyone doing? Did anyone else buy post Jun 23rd SCOTUS?

tripled up sub $2. yolo life

 

(and took advantage of the tax benefits by realizing losses and swapping into other pfd lines) .. double whammy

Edited December 2, 2021 by allnatural

[Mephistopheles]

But Mel Watt's term ended, and Trump appointed Calabria who proceeded to do nothing. Mnuchin also did nothing. So it's a little rich for him to be writing a letter on how decisive he would have been. Well, he had the opportunity to place in somebody he wanted, and that person did nothing! Why did it take this long to write the letter after the SCOTUS ruling? Is it because the shares are so illiquid and it takes that long to accumulate a big position? lol, joking; not joking

[Wiggins]

10 hours ago, allnatural said:

tripled up sub $2. yolo life

 

(and took advantage of the tax benefits by realizing losses and swapping into other pfd lines) .. double whammy

Nice work!

 

I have been thinking we could be setting up for another move up similar to that seen Dec '18 to Jan '19. I think there was heavy tax loss selling in '18 and then investors got back in with a new basis and there was additionally some optimism over releasing the GSEs at that time. Now, especially after the Drumpf letter my thesis is that Dec '21 to Jan '22 will be a repeat.