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

[hardincap]

Attorney General Jeff Sessions asks remaining 46 US attorneys appointed by Obama to resign

http://www.businessinsider.com/sessions-asks-obama-appointed-us-attorneys-to-resign-2017-3

 

may not change anything wrt gse cases

[undervalued]

FWIW, Maria Bartiromo starts tweeting about fannie.

 

https://twitter.com/MariaBartiromo/status/840306218270916609

[DocSnowball]

At 4 pm Friday lol

[no_free_lunch]

This may be a stupid question. But does stopping Net Worth Sweep get's our $25 for FNMAS? Is that the end of this long battle for us to get full value?

 

I'm sure it will trade up from current levels but no it's not an immediate $25.  If they just cancel the NWS but it is not retroactive we are actually in big trouble because there is over $100B still owed in that case.  If it is retroactively stopped, I don't know the calculation but we are close to paying down the senior preferred's.  However there is still all the costs to recap.  There are many, many scenarios in how the recap is done but I don't see it as a guaranteed parity in that case.

 

One other thing to consider, in the event that they turned the prefs back on some would trade well above parity due to their high yields.  However I am told that this is unlikely to happen.

[Desert_Rat]

FWIW, Maria Bartiromo starts tweeting about fannie.

 

https://twitter.com/MariaBartiromo/status/840306218270916609

 

If only Infowars ugly mug wasn't all over that. If only..

[no_free_lunch]

FWIW, Maria Bartiromo starts tweeting about fannie.

 

https://twitter.com/MariaBartiromo/status/840306218270916609

 

I think this is significant.  Thanks for posting.

[waynepolsonAtoZ]

Yes, I bought some FMCKJ today at around $7 per share. Granted, I sold some other shares on Monday and I don't usually do much "trading." FMCKJ at least is easy to get in and out of (compared to some of the $50s).

[DocSnowball]

So after judges Millet and Ginsburg have convinced us that our company is not undergoing "liquidation", like a good corporate finance student I am trying to calculate the net present value of my equity FNMAT as promised in the prospectus (8.25% dividends unless called back at par, valuing it as a perpetuity). If dividends are turned on in future it will just be a delayed perpetuity and discounted further. I'm trying to do this to compare the best case scenario to alternative investment decisions, or to know what it is worth in case of a question of "just compensation".

 

NPV = Dividend/(r-g) where r is the discount rate and g is the growth rate (assuming zero growth rate, and beta =1 for a low risk utility)

Using Professor Aswath Damodaran's discount rate teachings, Discount rate = Risk free rate + Equity risk premium*Beta = 2.39%+ 5.39% = 7.78%

 

NPV = 2.06/0.0778%

      = 26.51

Thoughts?

 

EDIT: based on this valuation and revaluing it as an option, markets are giving 27.7% chance of this working out. That is a mispricing with the changing narrative

[doughishere]

So after judges Millet and Ginsburg have convinced us that our company is not undergoing "liquidation", like a good corporate finance student I am trying to calculate the net present value of my equity FNMAT as promised in the prospectus (8.25% dividends unless called back at par, valuing it as a perpetuity). If dividends are turned on in future it will just be a delayed perpetuity and discounted further. I'm trying to do this to compare the best case scenario to alternative investment decisions, or to know what it is worth in case of a question of "just compensation".

 

NPV = Dividend/(r-g) where r is the discount rate and g is the growth rate (assuming zero growth rate, and beta =1 for a low risk utility)

Using Professor Aswath Damodaran's discount rate teachings, Discount rate = Risk free rate + Equity risk premium*Beta = 2.39%+ 5.39% = 7.78%

 

NPV = 2.06/0.0778%

      = 26.51

Thoughts?

 

EDIT: based on this valuation and revaluing it as an option, markets are giving 27.7% chance of this working out. That is a mispricing with the changing narrative

 

Best valuation I've seen tbh

[muscleman]

http://m.dailykos.com/story/2017/3/10/1642307/-Trump-Abruptly-Fires-Remaining-Politically-Appointed-Prosecutors

 

This is a good move.

Do you guys know if the DOJ's GSE attorneys are still there? I suppose sooner or later they will be gone as well?

[Ismael]

@Doc, using the 30 year treasury for the cost of capital I got $66/share NPV.

[DocSnowball]

@Doc, using the 30 year treasury for the cost of capital I got $66/share NPV.

 

I used cost of equity as these are non cumulative dividends coming from net income. Not that any of this is happening but at least can be compared to other investments this way

[rros]

@Doc, using the 30 year treasury for the cost of capital I got $66/share NPV.

 

I used cost of equity as these are non cumulative dividends coming from net income. Not that any of this is happening but at least can be compared to other investments this way

Goldman has a valuation of $32 for either fmckj or fnmas.

[Picasso]

@Doc, using the 30 year treasury for the cost of capital I got $66/share NPV.

 

I used cost of equity as these are non cumulative dividends coming from net income. Not that any of this is happening but at least can be compared to other investments this way

Goldman has a valuation of $32 for either fmckj or fnmas.

 

I thought investors just misread what Goldman actually said?

[Desert_Rat]

FWIW, Maria Bartiromo starts tweeting about fannie.

 

https://twitter.com/MariaBartiromo/status/840306218270916609

 

On Fox News: 

[no_free_lunch]

FWIW, Maria Bartiromo starts tweeting about fannie.

 

https://twitter.com/MariaBartiromo/status/840306218270916609

 

On Fox News: 

 

"Some people say they took money from all sorts of agencies to pay for Obamacare.. like Fannie and Freddie.  That's been circulating all weekend."  Maria Bartiromo.

 

The narrative is building.  If nothing else this is interesting to watch.  Still need a bit more to completely buy into it but very encouraging.

[rros]

@Doc, using the 30 year treasury for the cost of capital I got $66/share NPV.

 

I used cost of equity as these are non cumulative dividends coming from net income. Not that any of this is happening but at least can be compared to other investments this way

Goldman has a valuation of $32 for either fmckj or fnmas.

I thought investors just misread what Goldman actually said?

"Goldman weighed in on GSE's, issued a note stating $FNMAS could trade $32's with a 8.25% coupon when all is said & done".

 

What did the report say, exactly?

[Desert_Rat]

FWIW, Maria Bartiromo starts tweeting about fannie.

 

https://twitter.com/MariaBartiromo/status/840306218270916609

 

On Fox News: 

 

"Some people say they took money from all sorts of agencies to pay for Obamacare.. like Fannie and Freddie.  That's been circulating all weekend."  Maria Bartiromo.

 

The narrative is building.  If nothing else this is interesting to watch.  Still need a bit more to completely buy into it but very encouraging.

 

I agree, as long as Infowars name isn't attached. The scapegoat it was done to finance ACA brought by legitimate accusers portrays us as victims, and as such may change the opinion of those who actually believe the sweep was necessary. They might be inclined to dig deeper.

 

 

[no_free_lunch]

This is old, old news but still relevant.  At the end of 2015, Fannie / Freddie loosened their high balance loan terms.  So admin says that the plan with the net worth sweep in 2012 is to prevent a death spiral.  Why, 3 years later with the NWS still in place, are they taking steps to increase their business?  It doesn't make any sense.

 

First and foremost, the 10% minimum down-payment has been changed to 5% down, just like regular, ordinary conforming loans (second homes were also aligned and the 35% down payment is now 10%!). The mortgage vetting process and the necessary PMI (Private Mortgage Insurance) will continue to combat delinquencies.

..

Secondly, borrowers are no longer required to have 5% of their own money actively in the deal if they are putting down less than 20%. Now all of the down payment, closing costs, escrows and everything else can be covered with a gift from a relative or a grant or from another source within the framework of Fannie Mae underwriting guidelines.

 

https://www.forbes.com/sites/markgreene/2015/12/12/2-new-blockbuster-changes-to-fannie-mae-loans/2

[Mephistopheles]

Anyone have any thoughts on the dividends on March 31? Think there's a chance they don't happen?

[Williams406]

Sure I think there is chance they don't happen. Not willing to say anything like better than even odds on that. But, if the administration moves forward with some recap and release plan eventually, I think they have to scapegoat the prior administration (not hard) and any argument they make like that is stronger if they can say, "we stopped it as soon as we could." Taking the NWS money for a couple of quarters without at least cordoning off the funds pending "investigation" or something opens the door for a headline like: "Treasury Secretary Mnuchin spotted in velvet tracksuit, shiny new lamborghini, and giant styrofoam cowboy hat after Treasury receives possibly illegal funds from Fannie/Freddie." Or something like that. If you want to claim an income stream is illegal, it's best not to accept it at all.

 

GSE reform clearly does not seem to be top priority, but I wouldn't be surprised if there are actions taken on Fannie/Freddie even before things like tax reform are squared away.

 

The dividend could go through. It might not, and if it does not, there are a few forks in that road.

[waynepolsonAtoZ]

The date on release of documents is April 17, 2017. I'd guess that there is a 50/50 chance that they substantially lighten up on their privilege (secrecy) arguments in their April 17, 2017 filing.

 

I doubt Tsy will change the sweep in March, maybe a one in 10 chance. If the Tsy/DOJ lightens up on privilege, then I wouldn't be too surprised that they did change the sweep so for the June payment, say one in three chance.

[rros]

The date on release of documents is April 17, 2017. I'd guess that there is a 50/50 chance that they substantially lighten up on their privilege (secrecy) arguments in their April 17, 2017 filing.

 

I doubt Tsy will change the sweep in March, maybe a one in 10 chance. If the Tsy/DOJ lightens up on privilege, then I wouldn't be too surprised that they did change the sweep so for the June payment, say one in three chance.

But Williamson is correct. They had enough time to decide on the merits of the sweep. If for principles, it will make no sense to take a sweep now and nothing in June and thereafter. As for forks, any fork will be a sea change.

[Guest cherzeca]

Sure I think there is chance they don't happen. Not willing to say anything like better than even odds on that. But, if the administration moves forward with some recap and release plan eventually, I think they have to scapegoat the prior administration (not hard) and any argument they make like that is stronger if they can say, "we stopped it as soon as we could." Taking the NWS money for a couple of quarters without at least cordoning off the funds pending "investigation" or something opens the door for a headline like: "Treasury Secretary Mnuchin spotted in velvet tracksuit, shiny new lamborghini, and giant styrofoam cowboy hat after Treasury receives possibly illegal funds from Fannie/Freddie." Or something like that. If you want to claim an income stream is illegal, it's best not to accept it at all.

 

GSE reform clearly does not seem to be top priority, but I wouldn't be surprised if there are actions taken on Fannie/Freddie even before things like tax reform are squared away.

 

The dividend could go through. It might not, and if it does not, there are a few forks in that road.

 

watt of fhfa is on record as warning on depletion of GSE capital.  went to deaf ears last year with Obama treasury. i can see mnuchin agreeing to defer receipt of dividends, and say that he talked to watt and they agree about need for GSEs to operate with capital.  real simple, no handwringing and mudslinging, and no statement about eventual reform.

[Mephistopheles]

Sure I think there is chance they don't happen. Not willing to say anything like better than even odds on that. But, if the administration moves forward with some recap and release plan eventually, I think they have to scapegoat the prior administration (not hard) and any argument they make like that is stronger if they can say, "we stopped it as soon as we could." Taking the NWS money for a couple of quarters without at least cordoning off the funds pending "investigation" or something opens the door for a headline like: "Treasury Secretary Mnuchin spotted in velvet tracksuit, shiny new lamborghini, and giant styrofoam cowboy hat after Treasury receives possibly illegal funds from Fannie/Freddie." Or something like that. If you want to claim an income stream is illegal, it's best not to accept it at all.

 

GSE reform clearly does not seem to be top priority, but I wouldn't be surprised if there are actions taken on Fannie/Freddie even before things like tax reform are squared away.

 

The dividend could go through. It might not, and if it does not, there are a few forks in that road.

 

watt of fhfa is on record as warning on depletion of GSE capital.  went to deaf ears last year with Obama treasury. i can see mnuchin agreeing to defer receipt of dividends, and say that he talked to watt and they agree about need for GSEs to operate with capital.  real simple, no handwringing and mudslinging, and no statement about eventual reform.

 

I'm thinking the same thing. Frankly, accepting the dividend goes against everything Mnuchin has said thus far. It simply doesn't make sense, and oh, the companies also happen to be severely undercapped.