COBFInfinity

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

Don't know, but SCOTUS will release opinion(s) on at least one case next Thursday. Watch this calendar: https://www.scotusblog.com/events/

Do you have a link to this? Never mind, I found it. There are some on this discussion board who have taken the same stance that the NWS has been ended. I did not agree and still don't. But I'm not surprised the DOJ is taking that stance; they want the gov't to keep all stolen funds, past and future.

Yeah, pretty strange that they couldn't find someone to sell to. I would think First Eagle would have paid them something to take over that asset base.

I can't believe anyone still subscribes to the Milton Friedman philosophy on inflation. There hasn't been a useful relationship between M2 and CPI in decades, so why would it start now? Seems pretty reasonable that there will be some inflationary pressures as the economy fully re-opens, but to project that as a new long-term trend seems a bit premature.

How do you know when the warrant separation will occur? TIA. Never mind. Found it in the S-1. For others who have not actually bought SPACs before, like me, it will be the 52nd day after February 12. I like this idea a lot. Much appreciated.

I can't believe no one has suggested GSE preferreds! SCOTUS case decision will come in less than 4 months and the market is not pricing in anything positive at all. So I say FNMAL is your pick. Current volatility is low, but will go up later.

We haven't heard much from any of the major institutional players since the amendment, but Fairholme's annual report is out (http://www.fairholmefundsinc.com/Reports/Funds2020Annual.pdf). But keep in mind that there are 3 Fairholme funds and sometimes Berkowitz will write something a little different for each one even in regards to the same investment. So below I consolidated his relevant comments on F&F. Fannie Mae and Freddie Mac's businesses are booming while in conservatorships. The U.S. Treasury has finally agreed to allow them to retain earnings for capital safety and soundness. Treasury still has not agreed that $191 billion of "loans and fees" have been repaid even after receiving over $300 billion of reimbursements and controlling 80% stakes. I expect The Supreme Court will remedy the rights of two highly successful private enterprises and further their exit from federal control. Until then, preferred shareholders remain in a volatile purgatory. A resumption of preferred stock dividends should benefit the Fund's current dividend of 2.0%. That last line sure is interesting. Does he really expect dividends to be turned back on, as opposed to an exchange of JPS into common?

Another cash-out refi. Lenders don't seem to be too concerned about property values. https://therealdeal.com/la/2021/01/27/brookfield-lining-up-465m-refi-for-gas-company-tower-in-dtla/

60% of the time, it works every time.

It's a special game of musical chairs: "Who will screw us the least?" Calabria wants to the end the conservatorships, true, but he also wants excessively high capital levels. All of this discussion is a sideshow until SCOTUS opinion is out, or a settlement occurs first. If we lose SCOTUS, the preferreds will be back under 5% of par and we'll have all the time in the world to guess who might be our savior.

Simple: Sr Pfd can't be converted to common (if that's even being considered) unless all litigation is resolved. End of litigation is the first step in all of this.

I disagree that the NWS has been ended. I know, even Calabria has claimed that. But as long as the Sr Pfd balance increases right along with retained earnings, the GSEs are only building fictional capital. The NWS is not really ended as long as this continues. One thing that has been lost along the way is what exactly is meant by "capital". I'm seeing similar problems in my discussion with Tim Howard on his blog. I can see five different ways to define capital: [*]Total stockholder equity on the balance sheet [*]Amount of liquidation preference owed to shareholders upon liquidation [*]Core capital: stockholder equity minus cumulative prefs and AOCI [*]Tier 1 capital: core capital minus DTAs [*]CET1 capital: Tier 1 capital minus non-cumulative prefs When you say that only "fictional" capital is being built, that tells me you are using #2 as your definition, or perhaps something not on the list. All other entries on the list will go up with FnF's retained earnings because they are balance sheet calculations: the earnings go on there but the senior pref liquidation preference increases don't. The key is that core capital is defined under HERA, and FnF's post-release capital classifications are defined by HERA. Thus increasing core capital, which retained earnings now do, is important even if the senior pref liquidation preference increases along with it. This is real capital being built in the eyes of the law. The letter agreement might have been thin gruel, but it wasn't a complete nothingburger. The date at which the true NWS would have turned back on has been pushed from around now to 2044 or so. While not being nearly enough to accomplish recap and release, it's a significant step. Yes, I'm not using the balance sheet calculations, because they ignore that a real liability is being kept off balance sheet as the Sr Pfd balance increases. Now, you might argue that the next agreement (hopefully pushed by a settlement) will finally take care of this, but as of now, it hasn't done anything for us other than create a fictional balance sheet entry that can eventually be relied on to reach capital levels and theoretically allow for paydown of the very real liability of the Sr Pfd. All retained earnings "capital" built under the current agreement is bogus.

I disagree that the NWS has been ended. I know, even Calabria has claimed that. But as long as the Sr Pfd balance increases right along with retained earnings, the GSEs are only building fictional capital. The NWS is not really ended as long as this continues.

I don't think I said that. I did say that the few preferreds that have low floating rate coupons (some of which would actually be 0% right now) are bad bets. I think everything with a fixed coupon of 4.5-6.0% is where the best values are. It is possible, but I don't think certain, that the even higher coupon issues will get better terms down the line, but you have to pay up for it, which I choose not to do. The interesting question now is should we actually have a preference for Freddie preferreds over Fannie? Based on the $70 billion capital raise limit before SPS paydown is required, Fannie is constrained from exiting conservatorship a lot longer than Freddie. But if the preferreds get exchanged as part of a settlement at the same time, then it may not matter that much as to the actual end date of the conservatorship. Mr. Market didn't make any distinction between the two on Friday, but that was just one day. Does anyone think there will be some price separation favoring Freddie in the near term?