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

[muscleman]

So Trump just announced his economic advisory team, and it includes John Paulson, who's a GSE shareholder. Icahn was also offered a spot apparently which he declined, but Trump has made it clear that Icahn would have his ear if he becomes President.

 

I think this tilts the odds in our favor, perhaps significantly if he wins. Thoughts?

And how is Paulson going to handle the conflict of interest?

 

I bet he will just handle it like Senator Bob Corker and will have no problem.  ;D

[Mephistopheles]

So Trump just announced his economic advisory team, and it includes John Paulson, who's a GSE shareholder. Icahn was also offered a spot apparently which he declined, but Trump has made it clear that Icahn would have his ear if he becomes President.

 

I think this tilts the odds in our favor, perhaps significantly if he wins. Thoughts?

And how is Paulson going to handle the conflict of interest?

 

It doesn't have to be a conflict of interest. He's already been lobbying Congress for a recap and release, same idea here with the Executive Branch. It's not like he has to be the one who goes in and makes the decision.

[Guest cherzeca]

So Trump just announced his economic advisory team, and it includes John Paulson, who's a GSE shareholder. Icahn was also offered a spot apparently which he declined, but Trump has made it clear that Icahn would have his ear if he becomes President.

 

I think this tilts the odds in our favor, perhaps significantly if he wins. Thoughts?

And how is Paulson going to handle the conflict of interest?

 

It doesn't have to be a conflict of interest. He's already been lobbying Congress for a recap and release, same idea here with the Executive Branch. It's not like he has to be the one who goes in and makes the decision.

 

as an advisor, he can have a conflict. not so as an administration official.  big issue as far as i see about whether paulsen ever gets to a place of influence is whether trump can shut up and look like a reasonable alternative to HRC

[doughishere]

Interesting going back to some of this stuff from just 2 years ago. hah...

 

It’s Time to Get Off Our Fannie Ira Sohn Conference May 5, 2014 Pershing Square Capital Management, L.P.

 

http://www.zerohedge.com/news/2014-05-07/all-110-slides-bill-ackmans-fannie-mae-pitch

 

 

[Mephistopheles]

big issue as far as i see about whether paulsen ever gets to a place of influence is whether trump can shut up and look like a reasonable alternative to HRC

 

Agreed. The more that I think about it, I firmly believe that a Trump win significantly improves our odds. He's made it loud and clear that he wanted Icahn not just as an adviser, but as Treasury Secretary. Maybe Icahn refused both of these positions to avoid any sort of conflict all together? Maybe he plans on loading up on FNMA/FMCC if Trump wins...

 

I'd like to see Ackman join the Trump train - if so, it's a near guarantee that a Trump win = shareholder win.

[doughishere]

Does the fact that FMCJK and FNMAS are only callable On "December 31, 2012 and on each 5fth anniversary thereafter" make them a better security than the rest of the preferred lot?

 

Perpetual is in the name of the security......The earliest FMCJK could be recalled under "normal" circumstances is 2017...provided there is enough capital under Fannie and Freddie a 5year perpetual "treasury-like" security that trades 3Mo LIBOR + 4.16%% is pretty hard to find these days.

 

FtFPrefStock-oc.pdf

[morningstar]

Does the fact that FMCJK and FNMAS are only callable On "December 31, 2012 and on each 5fth anniversary thereafter" make them a better security than the rest of the preferred lot?

 

Perpetual is in the name of the security......The earliest FMCJK could be recalled under "normal" circumstances is 2017...provided there is enough capital under Fannie and Freddie a 5year perpetual "treasury-like" security that trades 3Mo LIBOR + 4.16%% is pretty hard to find these days.

 

FNMAS has a coupon floor of 7.75%, so it would be even better than that. The problem is the low likelihood of the coupon ever being turned back on. The biggest appeal of FNMAS/FMCKJ is liquidity - this explains most of why they trade at a premium, I think.

[hardincap]

http://www.forbes.com/sites/richardepstein/2016/08/08/the-dc-circuit-should-invalidate-the-net-worth-sweep-of-fanniefreddie-assets/#28905e342c40

[Eye4Valu]

Adding insult to injury.

 

https://howardonmortgagefinance.com/2016/08/08/far-less-than-meets-the-eye/

 

[doughishere]

http://www.forbes.com/sites/richardepstein/2016/08/08/the-dc-circuit-should-invalidate-the-net-worth-sweep-of-fanniefreddie-assets/#28905e342c40

 

"But it is worth noting that one of the most incorrigible defenders of the NWS, John Carney of the Wall Street Journal once again demonstrates his abysmal lack of financial acumen. "

 

"In this particular case, then, the only serious difficulty is the choice of remedy for what is on the first theory a breach of fiduciary duty and on a second theory a stripping of the assets from the companies without just, indeed any, compensation at all."

 

 

The assuredness of people is something of significance I feel like. Its not just Epstein.

 

 

 

Epistein walks off by saying......."Indeed, perhaps the strongest reason to end the conservatorship is that there is under current law no way that these shareholders can challenge FHFA in its administration of Fannie and Freddie assets. It is always risky business to have a faithless trustee in charge, and that is what seems to be the case here. It should be evident that the entire matter has been mishandled from start to finish. It is time for the Circuit Court to set matters right.

 

 

"the only serious difficulty is the choice of remedy"

 

[merkhet]

http://www.bloomberg.com/view/articles/2016-08-08/fannie-and-freddie-will-be-profitable-after-their-next-bailouts-too

[Guest cherzeca]

http://www.bloomberg.com/view/articles/2016-08-08/fannie-and-freddie-will-be-profitable-after-their-next-bailouts-too

 

levine is not only smart, but he is willing to provide an out of box take on a situation.  here he rightly eliminates the DTA reserve creation and then subsequent reallowance as a net non-cash wash, and points out that even if the next cash infusion is a total loss, govt still comes out ahead based upon its return to date.  i can assure you that not only did no one else reporting on GSEs write this insightfully, but likely few who are reporting can even understand levine.

[rros]

http://www.bloomberg.com/view/articles/2016-08-08/fannie-and-freddie-will-be-profitable-after-their-next-bailouts-too

 

levine is not only smart, but he is willing to provide an out of box take on a situation.  here he rightly eliminates the DTA reserve creation and then subsequent reallowance as a net non-cash wash, and points out that even if the next cash infusion is a total loss, govt still comes out ahead based upon its return to date.  i can assure you that not only did no one else reporting on GSEs write this insightfully, but likely few who are reporting can even understand levine.

 

That's a great insight, thank you. Yes, his unusual take together with his giving shareholders the benefit of the doubt are both pluses.

[Guest cherzeca]

over past 3 months, fnmas has outperformed fnma by about 18%. (+12% compared to -6%)

 

anyone have a view as to why? 

 

my own view is that common holders may not be as patient as preferred holders and, at the margin, there are more short term and even day trading types in the common who think nothing will get done this month (and i think they are right).

 

just trying to get a reality test on my thinking (as many of you know, i hold common and many of you hold preferred)

 

EDIT: over last 5 days, fnma -9%, fnmas flat.  i would start to get worried, but i havent seen the kind of volume here that we saw pre lamberth

[Luke 532]

over past 3 months, fnmas has outperformed fnma by about 18%. (+12% compared to -6%)

 

anyone have a view as to why? 

 

my own view is that common holders may not be as patient as preferred holders and, at the margin, there are more short term and even day trading types in the common who think nothing will get done this month (and i think they are right).

 

just trying to get a reality test on my thinking (as many of you know, i hold common and many of you hold preferred)

 

I suggest ignoring price action as it's largely irrelevant.

[hardincap]

@luke i dont think price action pre-lamberth was purely coincidence

 

theres an awful lot of berkowitz followers in fnma and i have to think him exiting commons had an influence on the stock falling

[Luke 532]

@luke i dont think price action pre-lamberth was purely coincidence

 

Me neither, but I do think it is a mistake to view price action in general as a viable method of predicting what will happen.  I'm not saying anybody here is doing that.

 

theres an awful lot of berkowitz followers in fnma and i have to think him exiting commons had an influence on the stock falling

 

I agree.

[Mephistopheles]

big issue as far as i see about whether paulsen ever gets to a place of influence is whether trump can shut up and look like a reasonable alternative to HRC

 

Agreed. The more that I think about it, I firmly believe that a Trump win significantly improves our odds. He's made it loud and clear that he wanted Icahn not just as an adviser, but as Treasury Secretary. Maybe Icahn refused both of these positions to avoid any sort of conflict all together? Maybe he plans on loading up on FNMA/FMCC if Trump wins...

 

I'd like to see Ackman join the Trump train - if so, it's a near guarantee that a Trump win = shareholder win.

 

Has anyone looked into Trump's financial disclosure from last year?

 

http://online.wsj.com/public/resources/documents/TrumpFinancialDisclosure20150722.pdf

 

Pg. 35, line 15, 16, 17: $1-5 million each in 3 of Paulson's funds

Pg. 43, line 28: $500,000 - $1 million in FNMA

 

Edit: it also shows "interest" of between $1,001 and $2,500 for the FNMA position, so he owns bonds and not stock. Still, the Paulson investments make this interesting.

 

[muscleman]

@luke i dont think price action pre-lamberth was purely coincidence

 

theres an awful lot of berkowitz followers in fnma and i have to think him exiting commons had an influence on the stock falling

 

Are you saying the Lamberth decision might be leaked? I think that's definitely possible.

[Steve_Berk]

the vast majority of my shares are commons, so if this tanks, you can enjoy my miserable company.

 

BTW, i tend to agree that nobody really knows anything here, and that this is either reflective of momentum/technical trading, or following Berk. Ultimately won't matter when we get real news.

 

over past 3 months, fnmas has outperformed fnma by about 18%. (+12% compared to -6%)

 

anyone have a view as to why? 

 

my own view is that common holders may not be as patient as preferred holders and, at the margin, there are more short term and even day trading types in the common who think nothing will get done this month (and i think they are right).

 

just trying to get a reality test on my thinking (as many of you know, i hold common and many of you hold preferred)

 

EDIT: over last 5 days, fnma -9%, fnmas flat.  i would start to get worried, but i havent seen the kind of volume here that we saw pre lamberth

[muscleman]

http://www.bloomberg.com/news/articles/2016-08-09/icahn-hopeful-trump-wins-presidency-on-economic-stance

 

"He said he talks to Trump and expresses his views, but didn’t join the official advisory group. Icahn said he wants to keep his options open to potentially fund a political action committee addressing his business and economic concerns."

 

So as you guys suggested, Icahn probably rejected the offer to run Treasury because he wanted to avoid conflict of interest. So he wants to be in none of those roles but just talk to Trump as a friend.

[Eye4Valu]

Pretty sure Trump is a 3:1 dog to win the Presidency. If you're looking at this from a political angle, I would not have too much faith in a Trump victory. No bone of contention to pick here, just trying to assess what is likely to occur in November.

[Guest cherzeca]

Pretty sure Trump is a 3:1 dog to win the Presidency. If you're looking at this from a political angle, I would not have too much faith in a Trump victory. No bone of contention to pick here, just trying to assess what is likely to occur in November.

 

agreed...unless HRC keels over and has to wear funny glasses again

[Mephistopheles]

Pretty sure Trump is a 3:1 dog to win the Presidency. If you're looking at this from a political angle, I would not have too much faith in a Trump victory. No bone of contention to pick here, just trying to assess what is likely to occur in November.

 

Not from a political angle. If Clinton wins, the odds are still pretty good with the legal avenue. If Trump wins, they're significantly better, so even at 3:1, it makes a difference. That's a 25% shot at maybe 80-90% chance of release?

 

And Trump is coming off his worst couple of weeks, who knows what will happen in the next few months? It might all reverse as HRC is still very much hated.

[Guest cherzeca]

Pretty sure Trump is a 3:1 dog to win the Presidency. If you're looking at this from a political angle, I would not have too much faith in a Trump victory. No bone of contention to pick here, just trying to assess what is likely to occur in November.

 

Not from a political angle. If Clinton wins, the odds are still pretty good with the legal avenue. If Trump wins, they're significantly better, so even at 3:1, it makes a difference. That's a 25% shot at maybe 80-90% chance of release?

 

And Trump is coming off his worst couple of weeks, who knows what will happen in the next few months? It might all reverse as HRC is still very much hated.

 

if you tell trump he has two pathways, one makes the warrants worth zippo, the other makes them worth >$100B, which do you think he would choose (assuming he doesnt choose the zippo first, buy the warrants for PA, then changes policy...)