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

[hardincap]

run up today may be due to pershing's annual update presentation: http://www.valuewalk.com/wp-content/uploads/2017/01/2016-PSH-Annual-Update-Presentation-FOR-DISTRIBUTION-1.pdf

[Guest cherzeca]

run up today may be due to pershing's annual update presentation: http://www.valuewalk.com/wp-content/uploads/2017/01/2016-PSH-Annual-Update-Presentation-FOR-DISTRIBUTION-1.pdf

 

i think some traders are just getting jumpy re possible perry decision tomorrow. we shall soon see whether they had good cause.

[Gregmal]

run up today may be due to pershing's annual update presentation: http://www.valuewalk.com/wp-content/uploads/2017/01/2016-PSH-Annual-Update-Presentation-FOR-DISTRIBUTION-1.pdf

 

Gotta love Ackman, blind and ballsy.

 

Examples, page 5... ouch. Then 10 pages of self touting.

 

Page 15 Smaller investments with higher risk

-

adjusted returns but smaller portfolio allocations in light of the investments’ added risks:

Fannie & Freddie- OK, yes, the above makes sense.

Valeant- LOL. The position is small now, yes, but that was not always the case. I would be insulted if I was an LP reading that. At least have the respect not to feed me a sales script Bill

[Mephistopheles]

yes meph, trump can do what he wants but i don't even know how wiping everything save for 4 buds even works, and by winnings you gotta be referring to fortune 50 co's which not even trump would hand over in totality to four men, be sweet though " So, what do you do for a living? I own half of the US Mortgage Market.........................to total silence

 

Well idk...I can't put anything past that maniac. The way he enriched himself through the related party transactions at his casinos, and Trump University...it doesn't appear he cares about the rule of law so much as greed.

 

However I agree that this is not likely, just not impossible given the people involved.

 

Most likely I think he keeps the warrants to help pay for his budget. There's clearly friction among the Republicans; he refuses to cut entitlements but wants to lower taxes. The warrants will help fill that hole. And I bet despite Mnuchin's comments, he'll release them with less capital than we think. They're going to maximize the value of those shares as much as possible. Maybe convert the preferred to common and that's all.

[Guest cherzeca]

Hi cherz, please not gordon's, anything but that, like honey water, great for attracting hummingbird's though, as far as looking at a kardashian's butt, hard not to since they engulf your peripheral, hard to miss is what i'm trying to say :) not that i'd want to, reminds me of the time i lived.......nevermind...successful smart ladies and family no doubt. my position would be their rounding errors, maybe, who the f am i kidding...

 

thing about odds is that knowing them tempers your emotions while playing them, imo, this one certainly being shy. fact that we're taking the odds, long ones, knowing we had a president as a headwind that's up and vanished like a fart in said wind (Stephen King Shawshank :) ramped us up a bit to be sure, but to where.....i increased pos 40% post boss man, so i felt that much better,

 

oh by the way, this information should not be taken as a recommendation unless you're psychotic, in which case, go nuts,

 

Good Luck and God Bless Us All

 

no. 3 gin, well worth the search.  and re the kardashians, that's a large "rounding" error

[Seahug]

Glen Bradford's position from Seeking Alpha

 

" I have 4050 shares of FMCCH, 10860 shares of FMCCP, 8312 shares of FMCCT, 2600 shares of FMCKI, 1341 shares of FMCKO, 17585 shares of FMCKP, 17304 shares of FNMFN and 5 shares of FNMFO. That's a par value of over $3.5M and I have roughly $233K of debt"

 

All in. That's about $1mn before debt. Life changing. Hope he makes it which means we do too :)

[no_free_lunch]

So was just watching Mnuchin's testimony.  I read it before but never watched it.  Anyways, what I got out of it was quite consistent with what he said earlier about privatization.  He didn't close the door at all to that he just limited the options a bit.  He states that they need a bi partisan solution that balances the need for liquidity to the housing market (so NO WIND DOWN) with prevention of a monster bailout (So it CANNOT stay under government control).  He was very clear on this point.    So he basically just said fannie mae will continue with less government restrictions. Yes, something will change.  They will put some regulations in place to force them to build up higher capital, or put limits on the government backstop, I don't know, who knows?  I just see the companies running as private-ish at the end of it.  Maybe the government will exercise the warrants and keep them in order to have more oversight and upside.  They can't do straight-up recap and release but what does that even mean?  By exercising and holding the warrants it is not recap and release by some definitions.  I am very optimistic on this right now.

 

I can understand everyone wants to play devils advocate and think of all the scenarios where trump admin crush investors.  It could happen. However, I don't see it as likely to be frank.  Too many legal and reputational issues with going after the investors IMO, especially for a republican party. 

[Guest cherzeca]

So was just watching Mnuchin's testimony.  I read it before but never watched it.  Anyways, what I got out of it was quite consistent with what he said earlier about privatization.  He didn't close the door at all to that he just limited the options a bit.  He states that they need a bi partisan solution that balances the need for liquidity to the housing market (so NO WIND DOWN) with prevention of a monster bailout (So it CANNOT stay under government control).  He was very clear on this point.    So he basically just said fannie mae will continue with less government restrictions. Yes, something will change.  They will put some regulations in place to force them to build up higher capital, or put limits on the government backstop, I don't know, who knows?  I just see the companies running as private-ish at the end of it.  Maybe the government will exercise the warrants and keep them in order to have more oversight and upside.  They can't do straight-up recap and release but what does that even mean?  By exercising and holding the warrants it is not recap and release by some definitions.  I am very optimistic on this right now.

 

I can understand everyone wants to play devils advocate and think of all the scenarios where trump admin crush investors.  It could happen. However, I don't see it as likely to be frank.  Too many legal and reputational issues with going after the investors IMO, especially for a republican party.

 

mnuchin is a banker who is a GSE expert (his words).  this solution requires financing experience, to know what makes sense and what is a non-starter, from the get go.  mnuchin knows that all of the congressional reform proposals are crap.  lew had no clue, he was a placeholder (as is watt).  mnuchin can actually get in there and fix it, because this is a conventional financing assignment for him, nothing new here.

 

as for warrants, look for treasury to sell warrants back to issuer in exchange for issuer debt secured by portfolio mortgages. jumpstart language doesnt prevent this, as that was directed only to senior preferred.  treasury could easily resell this secured debt in open market, great execution for treasury, immediate proceeds, and this eliminates the 80% common equity overhang so that issuers can do primary capital raises more easily...which they will have to do big time.

[SnarkyPuppy]

Does anyone have any insight into this volume aside from Pershings slides?

[rros]

So was just watching Mnuchin's testimony.  I read it before but never watched it.  Anyways, what I got out of it was quite consistent with what he said earlier about privatization.  He didn't close the door at all to that he just limited the options a bit.  He states that they need a bi partisan solution that balances the need for liquidity to the housing market (so NO WIND DOWN) with prevention of a monster bailout (So it CANNOT stay under government control).  He was very clear on this point.    So he basically just said fannie mae will continue with less government restrictions. Yes, something will change.  They will put some regulations in place to force them to build up higher capital, or put limits on the government backstop, I don't know, who knows?  I just see the companies running as private-ish at the end of it.  Maybe the government will exercise the warrants and keep them in order to have more oversight and upside.  They can't do straight-up recap and release but what does that even mean?  By exercising and holding the warrants it is not recap and release by some definitions.  I am very optimistic on this right now.

 

I can understand everyone wants to play devils advocate and think of all the scenarios where trump admin crush investors.  It could happen. However, I don't see it as likely to be frank.  Too many legal and reputational issues with going after the investors IMO, especially for a republican party.

At the end of the day, this is what matters. And the real deal:

 

"we have to get these companies out of government control. It makes no sense this has gone on for so long".

[onyx1]

"We are going to do things that I said we were going to do, and we are going to take care of a lot of people that were mistreated by government for many, many years."  Trump, 1/26/2016

[doughishere]

"We are going to do things that I said we were going to do, and we are going to take care of a lot of people that were mistreated by government for many, many years."  Trump, 1/26/2016

 

Im sure he had Fannie and Freddie shareholders first on his mind. /s

[onyx1]

"We are going to do things that I said we were going to do, and we are going to take care of a lot of people that were mistreated by government for many, many years."  Trump, 1/26/2016

 

Im sure he had Fannie and Freddie shareholders first on his mind. /s

 

I'm surely hoping.

[orthopa]

Does anyone have any insight into this volume aside from Pershings slides?

 

My other thought was people front running a court decision today.

[waynepolsonAtoZ]

My lawyer guy responds to the comments about the en banc question:

 

"I can address both comments, however. The first comment is strange. Yes, the case is “heard” en banc and then it is decided en banc. So, the current delay could be attributed to the Court wrestling with whether to hear the case en banc or not. If so heard, there will be at least another oral argument, and then a decision by the full Court. The second comment is off the mark. The DC Circuit’s internal operating procedures make clear that a final opinion is circulated to the full Court before it is published and that a judge may suggest en banc consideration prior to the issuance of the panel decision. This is very rare, but it’s possible and this is the sort of high profile case in which one could imagine it happening.

 

            Again, we have no idea what’s happening, but the en banc route is a possibility."

 

[Mephistopheles]

When the hell is Mnuchin getting confirmed?!!

[SnarkyPuppy]

https://www.congress.gov/bill/115th-congress/house-bill/491/text/ih?overview=closed&format=txt

[Luke 532]

9 million shares of FNMAS traded so far today.

[Guest cherzeca]

My lawyer guy responds to the comments about the en banc question:

 

"I can address both comments, however. The first comment is strange. Yes, the case is “heard” en banc and then it is decided en banc. So, the current delay could be attributed to the Court wrestling with whether to hear the case en banc or not. If so heard, there will be at least another oral argument, and then a decision by the full Court. The second comment is off the mark. The DC Circuit’s internal operating procedures make clear that a final opinion is circulated to the full Court before it is published and that a judge may suggest en banc consideration prior to the issuance of the panel decision. This is very rare, but it’s possible and this is the sort of high profile case in which one could imagine it happening.

 

            Again, we have no idea what’s happening, but the en banc route is a possibility."

 

i am not aware that the dc circuit has a procedure that merits panel opinions are first circulated to the entire court before issuance.  i seriously doubt this occurs in practice.

 

what i have found, and what may be going on here with perry, is the very rare instance of getting what's referred to as an "irons footnote".  see https://www.cadc.uscourts.gov/internet/home.nsf/Content/VL%20-%20RPP%20-%20Irons%20Footnote/$FILE/IRONS.PDF

 

this involves a merits panel circulating its opinion en banc internally and publishing it as the merits panel decision, but with a footnote stating that the opinion has been endorsed by the court.

 

the extraordinary nature of the irons procedure leads me to believe that prior circulation of merits panel decisions to the entire dc circuit court en banc, as your lawyer suggests, is almost never done.

[Guest cherzeca]

i find it curious that fnmas is up about 10% this week, and volume is exploding today.  perhaps institutional investors that have (reasonably) viewed GSEs as too risky are now getting involved.

[Mephistopheles]

https://www.congress.gov/bill/115th-congress/house-bill/491/text/ih?overview=closed&format=txt

 

https://www.congress.gov/bill/115th-congress/house-bill/491/text/ih?overview=closed&format=txt

 

(2) Treatment of enterprise draws on treasury.--That any

        amounts received, before or after such modification, during a

        single year by the enterprise as a draw on the commitment made

        by the Department of the Treasury under such an Agreement,

        shall be treated as a loan made by the Treasury to the

        enterprise that--

                    (A) was originated on the date of the last such

                draw during such year;

                    (B) has an original principal obligation in an

                amount equal to the aggregate amount of such draws;

                    © has a term to maturity of 30 years;

                    (D) has an annual interest rate of 5 percent for

                the entire term of the loan;

                    (E) has terms that provide for full amortization of

                the loan over such term to maturity; and

                    (F) shall be repaid by the enterprise in accordance

                with the amortization schedule established for the loan

                pursuant to subparagraph (E) of this paragraph, subject

                to paragraph (3).

            (3) Treatment of dividends paid.--That any dividends paid

        by the enterprise to the Department of the Treasury under the

        Senior Preferred Stock Agreement before such modification of

        such Agreement shall be treated as payments of principal and

        interest due under the loan referred to in paragraph (2), and

        shall be credited against payments due under the terms of such

        loan (in accordance with the amortization schedule established

        for such loan pursuant to paragraph (2)(E)), first to such loan

        having the earliest origination date that has not yet been

        fully repaid until such loan is repaid, and then to the next

        such loan having the next earliest origination date until such

        loan is repaid.

 

So what I gather from this: Dividends count towards principle payments, and at a rate of 5% instead of 10%, retroactively? Am I reading this correctly? Looks like Capuano introduced the same bill in 2013 and 2015.

[Luke 532]

http://www.washingtonexaminer.com/senate-panel-to-vote-on-treasury-candidate-mnuchin-monday/article/2613221

 

Mnuchin vote on Monday

[Guest cherzeca]

random thought while working out:  when i die and go visit the pearly gates, st. peter will no doubt look at me and say, wow, you need to do some time in purgatory.  my response: nope st pete, i've done my purgatory time, i was a fannie mae shareholder.

[BTShine]

Meph,

 

That's what it looks like to me.  I'm no lawyer and have limited knowledge of the law.  If this passes it seems very favorable to investors.  Going retroactive at 5% would be a powerball jackpot sized win...could just be a starting point for negotiation tho

 

Would love to hear the thoughts of local experts Cherz, Merk and the epic PaulyMontreal

 

[no_free_lunch]

So I am long Fannie and generally on your side here.  However, wasn't the initial bailout of fannie under Bush?  The sweep is totally obama and shouldn't have happened but the initial deal was started under a republican admin.  The warrants and senior preferred are legit and will need to be included in any investing calculation.  Best case the sweep is reversed and fannie only owes $15-20B on the senior preferred,  IMO.

 

n September 7, 2008, James Lockhart, director of the Federal Housing Finance Agency (FHFA), announced that Fannie Mae and Freddie Mac were being placed into conservatorship of the FHFA. The action was "one of the most sweeping government interventions in private financial markets in decades".[43][44][45] Lockhart also dismissed the firms' chief executive officers and boards of directors, and caused the issuance to the Treasury new senior preferred stock and common stock warrants amounting to 79.9% of each GSE. The value of the common stock and preferred stock to pre-conservatorship holders was greatly diminished by the suspension of future dividends on previously outstanding stock, in the effort to maintain the value of company debt and of mortgage-backed securities. FHFA stated that there are no plans to liquidate the company.

 

https://en.wikipedia.org/wiki/Fannie_Mae#2008_.E2.80.93_crisis_and_conservatorship