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

[james22]

Yeah:

[lnofeisone]

so is it over?

[Wiggins]

It's not over. There are a few lawsuits still pending. And there's still the issue of what to do with the GSEs.

[TwoCitiesCapital]

My patience, and hope in court cases, is running thin after 12 years.  Just getting exhausting watching these things trade lower every day after being dead money for a decade. 

 

Anybody keeping a watch on the progression of any of the cases through the courts? Any encouraging signs?

[Sweet]

This meme sums up investing so much, particularly the GSEs.  You are always at one of these stages:

 

Edited June 8, 2023 by Sweet

[sholland]

4 hours ago, TwoCitiesCapital said:

My patience, and hope in court cases, is running thin after 12 years.  Just getting exhausting watching these things trade lower every day after being dead money for a decade. 

 

Anybody keeping a watch on the progression of any of the cases through the courts? Any encouraging signs?

follow this guy on Twitter to keep up with the progression of the cases

[TwoCitiesCapital]

40 minutes ago, sholland said:

follow this guy on Twitter to keep up with the progression of the cases

+1 

 

Appreciate the referral 

[james22]

Supreme Court turns down appeal from Fannie Mae, Freddie Mac shareholders

 

https://archive.ph/4l221#selection-745.0-745.73

[Sweet]

What or who is causing this pump?

[Wiggins]

Catalysts:

 

Welcome to Trump trade 2024. The New Hampshire primary is today. I expect Trump to win handily and GSE stock to continue its run. Tomorrow should be another catalyst as it will be the first trading day after Trump won NH, and there will be lots of talk about the inevitability of him winning the Republican primary. Then there will be another catalyst when Nikki Haley drops out of the race. I would be surprised if she does that before the SC primary. After all the primaries and it is inevitable that Trump will be selected, when will there be a pullback or plateau? It has to come at some point.

 

Tim Pagliara has been making a lot of noise about R&R being worked on by Biden who won't want to hand this over to Trump to get credit. Regardless, there is a lot of discussion that either Biden or Trump will be moving the needle soon. Of course, the GSEs are holding a lot more capital now. Maybe even Maria Bartiromo will interview Trump and ask about it, which could be a good catalyst. I'm holding for now.

[Sweet]

Trump had 4 years to get it done last time and it didn't happen and I don't think there is any reason to think it will be different.  I had traded in and out of a position in this years ago, twice for small profits, once for a small loss.  It was a gruelling lesson in not buying into a company based on a court case, as the recent Spirit Airlines merger has shown.  It's just too hard to predict court cases, and its especially hard to win them when government are on the other side of the bench from you.  I'd like to own the companies at low prices but I'm not holding my breath.

[Wiggins]

31 minutes ago, Sweet said:

Trump had 4 years to get it done last time and it didn't happen and I don't think there is any reason to think it will be different.  I had traded in and out of a position in this years ago, twice for small profits, once for a small loss.  It was a gruelling lesson in not buying into a company based on a court case, as the recent Spirit Airlines merger has shown.  It's just too hard to predict court cases, and its especially hard to win them when government are on the other side of the bench from you.  I'd like to own the companies at low prices but I'm not holding my breath.

Will have to disagree quite a bit since the Trump administration DID stop the NWS spend, and this was after the Democratic FHFA head sucked up two years of time.  This was a critical step. He also wrote an important letter to Rand Paul. These acts are far more than any other president has done. Going forward, he would be in his last term and would have no reason to keep the GSEs in conservatorship. His buddies will be lined up holding JPS. I'm not holding my breath but I am holding lots of GSE JPS.

[Sweet]

Just now, Wiggins said:

Will have to disagree quite a bit since the Trump administration DID stop the NWS spend, and this was after the Democratic FHFA head sucked up two years of time.  This was a critical step. He also wrote an important letter to Rand Paul. These acts are far more than any other president has done. Going forward, he would be in his last term and would have no reason to keep the GSEs in conservatorship. His buddies will be lined up holding JPS. I'm not holding my breath but I am holding lots of GSE JPS.

 

Stopping the NWS does mean much.  Sure it is a prelude to release, but it doesn't guarantee the shareholders get anything.

[TwoCitiesCapital]

2 hours ago, Sweet said:

Trump had 4 years to get it done last time and it didn't happen and I don't think there is any reason to think it will be different.  I had traded in and out of a position in this years ago, twice for small profits, once for a small loss.  It was a gruelling lesson in not buying into a company based on a court case, as the recent Spirit Airlines merger has shown.  It's just too hard to predict court cases, and its especially hard to win them when government are on the other side of the bench from you.  I'd like to own the companies at low prices but I'm not holding my breath.

 

Yea, I'm still long and wrong on this over 10 years later, but at least it's come way down from the 10% position it was as my other position as have grown. Basically no longer a drag on my performance to keep holding it, but is a lottery ticket that can impact it if I ever do get par.

 

2 hours ago, Wiggins said:

Will have to disagree quite a bit since the Trump administration DID stop the NWS spend, and this was after the Democratic FHFA head sucked up two years of time.  This was a critical step. He also wrote an important letter to Rand Paul. These acts are far more than any other president has done. Going forward, he would be in his last term and would have no reason to keep the GSEs in conservatorship. His buddies will be lined up holding JPS. I'm not holding my breath but I am holding lots of GSE JPS.

 

They stopped the net worth sweep and replaced it with a mechanism that accomplished the same thing. The companies were allowed to retain capital, but the treasury's ownership of them increases for each dollar retained. The money still "belongs" to the Treasury and not shareholders - it's just being kept in Fannie/Freddie specific capital accounts now instead of being able to be spent by the next administration. It was more to sabotage Democrats if they won rather than do the right thing for the GSEs and their shareholders. 

 

Was Trump better than Biden or Obama? Sure. But seeing as Biden/Obama were the ones to rob them in the first place, it's a real low bar to measure success from. They've all been pretty shitty for the GSEs and unfortunately the courts have proven largely useless in acting as a counterbalance here

Edited January 23 by TwoCitiesCapital

[gfp]

Who knows what Trump would have gotten done if COVID hadn't have come along.  Once it did, Trump was checked out and Mnuchin was too busy and understaffed to handle much else.  No indication so far that Mnuchin would come back for a 2nd Trump term so you have to wonder what kind of goofball cabinet he ends up putting together.  I'm not even sure Kushner would come back and that would be kind of scary (to not have Kushner).

Edited January 23 by gfp

[Wiggins]

2 hours ago, TwoCitiesCapital said:

They stopped the net worth sweep and replaced it with a mechanism that accomplished the same thing. 

Probably most of us are aware of that mechanism and that it's still bad. But it's not the same because the money is not actually being spent. That's a huge difference IMO because it shifts the financial incentives. The only way to get the money is to ACT.

Edited January 23 by Wiggins

[sleepydragon]

hi folks, I am new one. Just wondering which one is the best to buy if trump wins? There are stocks, and all these different kind of preferred. Thanks!

[Sunrider]

Hi - is anyone still looking at these?

 

It seems they've perked up but the twitter sphere seems to be confined to the conspiracy ramblers. Are there any substantial updates here (beyond people hoping for a re-run of Trump)? 

 

thank you

C.

 

P.S. Sleepydragon. Any of the prefs - if you believe that conservatorship will end and that common equity has value in that scenario, then the prefs should have substantially more value than their current prices imply.

[Mephistopheles]

Why would Trump help this time around when he didn’t last time? When his Treasury secretary explicitly stated it was his goal and did nothing. What will be different this time?

[sleepydragon]

With the high mortgage interest rate, it does seems the equity is a cash cow? They are making a lot money. I bought the preferred and thinking if I shall buy some common as well..

[Sweet]

They are great businesses but no reason to think they will be released from conservatorship anytime soon.

[TwoCitiesCapital]

3 hours ago, Mephistopheles said:

Why would Trump help this time around when he didn’t last time? When his Treasury secretary explicitly stated it was his goal and did nothing. What will be different this time?

 

This is my concern. 

 

It's easy to say "I couldn't do anything because I couldn't fire someone" but they also didn't really do much in favor of shareholders when they COULD do something after the firing.

 

I don't think Trump cares about anything other than what's good for him and what makes his opponents look bad. If he's previously disclosed an ownership stake, I'd agree. Until then, it's whatever is good for him @ the time is what we can expect he'll do so I expect the issue to continue being ignored. 

 

The courts have failed us, thus far, and are our primary remedy

[ValueArb]

This has to have been one of the greatest investment hypothesises of all time. Doesn't matter whether it's failed, what matters is the insanely long time it's had just enough of a pulse to keep hope alive. 

[james22]

Elusive, indeed.

[Sunrider]

Indeed - what a slow burn. Just wondered whether there's anything new in terms of admin action or courts which I missed? I seem to recall that there was a plan to release once they build enough capital - was that ever formalised? How far away would the companies be from that?

C.