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

[undervalued]

His stint there may complicate his current work on the future of Fannie Mae and Freddie Mac because at that time, his BlackRock unit was acting as a consultant to F.H.F.A., analyzing Fannie and Freddie’s loss and capital projections. The companies were taken into conservatorship by the government over Labor Day weekend in 2008.

 

It is unclear what the BlackRock analyses showed. But it must be interesting reading given the great efforts the government has made to keep the documents from seeing the light of day in a lawsuit brought by shareholders of Fannie and Freddie.

 

https://www.nytimes.com/2017/04/07/business/fannie-mae-freddie-mac-craig-phillips.html?_r=0

[rros]

I think this will just take time.  I don't want to relink it but awhile back I posted an article from Reuters on Mnuchin and fannie.  They were quite clear that his strategy is to try to work with congress to come up with a solution and only if that stalls will he step in.

 

Perhaps it will take some time but there are likely important signs along the way -- for instance the reform principles that Calabria mentioned by this summer and also the inclusion or not of the long term GSE swept profits in the full OMB budget scheduled for May release.   

 

The current price levels, to me, represent low expectations of positive resolutions -- even the GSEs' main antagonist, the large bankers' organization, kept FnF alive among other competition in their recent proposal paper.

In my view, any change will come abruptly, without notice and with nothing being telegraphed in advance. So it is a moot point to try to figure whatever public information there is. You either believe it is going to happen or you should be out. And I know this sounds more like a gamble than investing. But perhaps this is what it is.

 

I also believe Treasury/WH won't be negotiating that much behind the scences (w/Congress). Most likely, any move regarding GSEs is being cooked between Gary Cohn, Mnuchin and Calabria.

[no_free_lunch]

I think this will just take time.  I don't want to relink it but awhile back I posted an article from Reuters on Mnuchin and fannie.  They were quite clear that his strategy is to try to work with congress to come up with a solution and only if that stalls will he step in.

 

Perhaps it will take some time but there are likely important signs along the way -- for instance the reform principles that Calabria mentioned by this summer and also the inclusion or not of the long term GSE swept profits in the full OMB budget scheduled for May release.   

 

The current price levels, to me, represent low expectations of positive resolutions -- even the GSEs' main antagonist, the large bankers' organization, kept FnF alive among other competition in their recent proposal paper.

In my view, any change will come abruptly, without notice and with nothing being telegraphed in advance. So it is a moot point to try to figure whatever public information there is. You either believe it is going to happen or you should be out. And I know this sounds more like a gamble than investing. But perhaps this is what it is.

 

I also believe Treasury/WH won't be negotiating that much behind the scences (w/Congress). Most likely, any move regarding GSEs is being cooked between Gary Cohn, Mnuchin and Calabria.

 

I am not sure about the telegraphing, I still think they will need to do some of that but I agree that it is being done internally to the administration.  I am just saying that they have to at least give the political process a shot before they have earned the right to move unilaterally.  In reality we all know that after 8 years the chance of this being solved by wide spread consensus is slim to none.  Just my opinion.

[waynepolsonAtoZ]

So, Craig Phillips was a toxic private-label MBS banker. Morgan Stanley, not GS. I think the dream of a change in heart by The Donald's crew is over and done with. On to Sweeney land.

[waynepolsonAtoZ]

I encourage you to rethink the idea that Mnuchin is committed to telling the truth in a confirmation hearing.

[Williams406]

Would I ever break even? The companies are making money hand and fist but my value keeps going down. I hear that breaking up of banks is very positive for us. But I don't know why, if someone can explain it.

 

Under such a scenario, a TBTF bank that is disintegrating is not focused, at least in the near term, on playing a role in a new mortgage program. In other words, FNM and FRE's main competition under some proposals would be impaired/distracted temporarily. Also, I don't think there is much overlap between the voices saying "Break up the TBTF banks" and the voices saying "Let's let the TBTF banks replace FNM/FRE". I place low odds on TBTF banks being broken up.

[orthopa]

I think this will just take time.  I don't want to relink it but awhile back I posted an article from Reuters on Mnuchin and fannie.  They were quite clear that his strategy is to try to work with congress to come up with a solution and only if that stalls will he step in.

 

Perhaps it will take some time but there are likely important signs along the way -- for instance the reform principles that Calabria mentioned by this summer and also the inclusion or not of the long term GSE swept profits in the full OMB budget scheduled for May release.   

 

The current price levels, to me, represent low expectations of positive resolutions -- even the GSEs' main antagonist, the large bankers' organization, kept FnF alive among other competition in their recent proposal paper.

In my view, any change will come abruptly, without notice and with nothing being telegraphed in advance. So it is a moot point to try to figure whatever public information there is. You either believe it is going to happen or you should be out. And I know this sounds more like a gamble than investing. But perhaps this is what it is.

 

I also believe Treasury/WH won't be negotiating that much behind the scences (w/Congress). Most likely, any move regarding GSEs is being cooked between Gary Cohn, Mnuchin and Calabria.

 

Again not to rehash this I think an intelligent observer can agree they are not going to be wound down in the true sense of the word. The capital buffer is right before our eyes but that ultimately maybe the reason a solution is determined sooner then later. The nagging question and what I think is causing this current pricing and uncertainty is two fold. 1. Time,  the quick money that has caused the price to gyrate like it has isn't in the mood for waiting a long period of time. 2. What do shareholders get if any and how much? The second point really is complete speculation but can be very educated also.

 

One could argue both ways in or against shareholders depending on their view but a-lot goes "right" if the companies are recapped in a fashion that is viewed as fair to shareholders and allows govt to monetize their ownership in FnF.  If shareholders get screwed it maybe years before an ultimate outcome is ever decided legally with appeals, motions, etc and I think that is the antithesis of moving forward with comprehensive mortgage reform. Does Mnuchin want housing policy to have lawsuits hanging over its head with the possibility of a bad outcome? Get it done and over with.

 

The prickly issue is that people /congress/gov does not want the taxpayer to be held responsible again. That can be decided without liquidating the companies and completely starting over. Low income groups want to make sure housing is still affordable. Again same possible solution. Small banks want to be represented and protected. Same solution

 

Sometimes I sit and think this is so obvious. What has been said by mnuchin, the 0 capital threat being reason why he has to act, the fact that congress cant get their act together, Paulson, Berkowitz, Icahn.  It also could be the reason Im a big dummy falling for promises and lies.

 

Either way the way it sits I lose ~10% of my portfolio, or at these prices on the preferred make up to 5 times my money.

[orthopa]

I encourage you to rethink the idea that Mnuchin is committed to telling the truth in a confirmation hearing.

 

I dont get this either. Why would he stick his neck out on an issue like Fannie and Freddie if he didn't have strong views on the topic. Why didn't the guy just say he would leave it up to congress and he could care less if they went or stayed?

 

What does he gain by going on TV and saying what he said? Why did he not affirm with Warner that he would not act unilaterally in the committee hearing? If you remember correctly the Dems refused to get him out of committee. You think he lied about Fannie and Freddie in Nov and "recap and release" as Warner put it just to make it harder for him to get nominated?

 

Your skepticism about Mnuchin and GS is certainly warranted but starting to border on irrational given the context of what has transpired since Mnuchin went on TV in November.  I dont think a non invested outsider looking at this would come up with your conclusions regarding Goldman Sachs etc.

[Williams406]

Wayne,

 

Given that you are calling Sweeney case "the only game in town" what you think is realistic to hope for coming out of Sweeney's court for FNM/FRE bulls? Over what timeframe?

[Luke 532]

Donald Trump, Jr. retweeting about Fannie/Freddie (see attached)...

[Williams406]

My bet here centers on a few things:

a) Housing is a very big deal. Mess it up or have it turn down on your watch is a nightmare for any administration. Of course you'll blame it on the last office holder, but voters largely will hold the current administration responsible. Not the last administration. Not Clinton or Bush policies or Acorn. There are not many surer ways to get slammed in mid-terms and getting just four years in the White House. The Trump team doesn't control all the levers with respect to the housing market, of course.

 

b) FNM and FRE have been integral to housing and remain so. The administration does have a lot of control over this housing lever.

 

c) Replacing them with something different represents a much riskier and more complicated action than revising what is already in place.

 

d) The clock is ticking. FNM/FRE reform may not be top priority, but I view additional Treasury draws as significant unforced errors and believe the administration would as well. Negotiate tax reform, infrastructure all you want. But you better have your FNM/FRE ducks in a row well before year-end.

 

e) Recap and release won't make you popular with FNM/FRE's enemies--and they have power--but you can raise (and market the raising) a big chunk of capital for government and benefit current shareholders. I have concerns about the terms here, but believe the administration chooses a path that benefits both government coffers and shareholders.

 

In short, I think this administration chooses to control what they can control with respect to housing by choosing the simple, less risky path represented by recapping/releasing FNM/FRE and present their plan well within six months. The stock price says I'm wrong and that has been the case...once or twice. 

[waynepolsonAtoZ]

Only game in town is, I guess, a bit of an exaggeration Something could happen by year end, which is when book equity goes down to zero.

[Desert_Rat]

Anyone who believes a court action is the only game in town needs to exit immediately. If I was smaht, which I'm not, I'd exit prior to Sweeney because it's likely to go as the others have.

 

Beating the govt in court is extremely difficult. Throw in our recent defeats and the fact that our scenario came about because of a complete collapse of the world's financial systems, and good luck finding a court willing to give us (and our hedge funds) a break.

 

[Desert_Rat]

I encourage you to rethink the idea that Mnuchin is committed to telling the truth in a confirmation hearing.

 

I dont get this either. Why would he stick his neck out on an issue like Fannie and Freddie if he didn't have strong views on the topic. Why didn't the guy just say he would leave it up to congress and he could care less if they went or stayed?

 

What does he gain by going on TV and saying what he said? Why did he not affirm with Warner that he would not act unilaterally in the committee hearing? If you remember correctly the Dems refused to get him out of committee. You think he lied about Fannie and Freddie in Nov and "recap and release" as Warner put it just to make it harder for him to get nominated?

 

Your skepticism about Mnuchin and GS is certainly warranted but starting to border on irrational given the context of what has transpired since Mnuchin went on TV in November.  I dont think a non invested outsider looking at this would come up with your conclusions regarding Goldman Sachs etc.

 

If anything, Mnuchin is more likely to lower thresholds for FnF as that would help his banker buddies and the less fortunate both. Do away with them though? nuts. Not only wouldn't he as an experienced CDO dude, but it wouldn't pass even if he wanted to.

 

[Desert_Rat]

This is the most liquid preferred: http://finance.yahoo.com/quote/FNMAS/history?p=FNMAS

 

That isn't a selling spree, that's a lack of buyers and their fickle friends, the flippers. Given how even the staunchest Trump supporters are questioning his admin's ability to pass any bill, no one should be surprised by the weakness in this market. I mean, what's the hurry?

 

But if the NY Times is publishing favorable tone on FnF, as many others also are, the pressure is increasing to fix this fraud. We are getting closer.

 

 

[Desert_Rat]

A view from the other side: http://www.breitbart.com/economics/2017/04/07/phony-obamacare-attack-aimed-at-luring-conservatives-to-support-a-hedge-fund-windfall/

 

Info-wars vs Breibart, oh lawd!

[muscleman]

A view from the other side: http://www.breitbart.com/economics/2017/04/07/phony-obamacare-attack-aimed-at-luring-conservatives-to-support-a-hedge-fund-windfall/

 

Info-wars vs Breibart, oh lawd!

 

 

This is the notorious John Carney. He has written countless hit pieces on FnF when he was in WSJ

[Spekulatius]

Donald Trump, Jr. retweeting about Fannie/Freddie (see attached)...

 

Trading on Trumps tweets are Hail Mary's... I bet he doesn't even remember in the evening what he tweeted about in the morning, the ridiculous fact aside that he uses this medium to begin with. Didn't one of the he value guys state in his letter that the he majority of the Millenium generation trades on Trump's tweets? God bless them.

[Luke 532]

Donald Trump, Jr. retweeting about Fannie/Freddie (see attached)...

 

Trading on Trumps tweets are Hail Mary's... I bet he doesn't even remember in the evening what he tweeted about in the morning, the ridiculous fact aside that he uses this medium to begin with. Didn't one of the he value guys state in his letter that the he majority of the Millenium generation trades on Trump's tweets? God bless them.

 

Nobody is suggesting anybody trade on somebody's tweets. Besides, you might be mistaking this retweet with that of the POTUS.

[Desert_Rat]

That said..

 

DJT: "Obama stealing from Fannie and Freddie to cover shortfall with his terrible healthcare plan"

 

Would send FnF to the moon!

[beaufort]

Judge Sweeney's order is for document production to happen on or before April 17, 2017 in the Fairholme action for some 11,000 privileged documents. 

 

After documents are produced, are other plaintiffs able to use them freely or is there an implied undertaking that the documents will only be used in the Fairholme action absent a court order permitting usage in the other actions?

[Guest cherzeca]

Judge Sweeney's order is for document production to happen on or before April 17, 2017 in the Fairholme action for some 11,000 privileged documents. 

 

After documents are produced, are other plaintiffs able to use them freely or is there an implied undertaking that the documents will only be used in the Fairholme action absent a court order permitting usage in the other actions?

 

other Ps can petition ct to have access subject to seal. sweeney can grant

[DocSnowball]

While Buffett is out there owning "ethical" companies like Wells Fargo and United, honest Fannie Mae shareholders "on board" are facing the equivalent of that passenger being stunned and dragged off the plane while our Judiciary turns a blind eye. Jeez!

[Guest cherzeca]

interesting filing by the collins plaintiff: http://www.gselinks.com/Court_Filings/Collins/16-cv-03113-0050.pdf

 

collins points out that the DOJ has argued in the linked brief before the DC Circuit Court that if an agency made a decision at the time it’s director was subject to an unconstitutional removal provision, the court must vacate the decision and remand for reconsideration by a constitutionally constituted agency…which is what collins itself argued in its brief in its claim iv.

 

if judge atlas agrees with collins, she would vacate the NWS and instruct fhfa to reconsider the NWS once it’s director has been properly subjected to removal by POTUS at will. she may or may not makes this removal change herself by simply excising the removal for cause provision in HERA (which she may or may not decide she has the power to do given that HERA has no severability clause).

 

if she does this, then what is there to keep fhfa director watt from simply approving the NWS again? nothing…except a political decision by POTUS that might be made in connection with an administrative GSE reform program.

 

 

[Desert_Rat]

I'd say that another dozen arguments could be filed tomorrow since the whole deal, everything about it, stinks to holy hell. Maybe not tomorrow but I also suspect they will be. Then one day we will all be able to tell the grandkids that we beat the govt's butt with patience, and it actually paid us for it!