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

[investorG]

a fairly wide differential has opened up between the liquid and less liquid preferreds, fwiw.

[Luke 532]

“ Don’t buy this stock again, you have already lost in it. There is absolutely no hope for justice in courts, all NWS cases were lost and claims court case has been set up for a loss by a promotion earlier this year. There is a reason Fairlhome has been slowly selling its position. There is no legislative or administrative action hope either. The party needs money for 2020 and is deep in banks pockets and the banks are doing everything to close the two as they did by implementing NWS through an admin action (and not congressional action). The same banks will not allow an admin action to raise money via sale of warrants by manipulating this OTC stock to very low valuation as long as it trades on  OTC and value will not be realized. If you are in love with this stock, wait and buy FNMAS at around $0.30 or commons around $0.15 and can indeed happen in this OTC scenario and a recession will make it certain to take it down. Then you can hold it for 20 years. Personally, I would not touch it, this was the biggest gift to the current admin that is enjoying the free money and will continue to have talking points and no more. These companies are making over 40 billion in a year and have no capital, never in history. Good luck.”

 

Emily, can you please save these kind of posts for the IHub and Yahoo message boards?  I suspect the content would be appreciated more in those forums.  Thanks.

[blackcoffee]

“ Don’t buy this stock again, you have already lost in it. There is absolutely no hope for justice in courts, all NWS cases were lost and claims court case has been set up for a loss by a promotion earlier this year. There is a reason Fairlhome has been slowly selling its position. There is no legislative or administrative action hope either. The party needs money for 2020 and is deep in banks pockets and the banks are doing everything to close the two as they did by implementing NWS through an admin action (and not congressional action). The same banks will not allow an admin action to raise money via sale of warrants by manipulating this OTC stock to very low valuation as long as it trades on  OTC and value will not be realized. If you are in love with this stock, wait and buy FNMAS at around $0.30 or commons around $0.15 and can indeed happen in this OTC scenario and a recession will make it certain to take it down. Then you can hold it for 20 years. Personally, I would not touch it, this was the biggest gift to the current admin that is enjoying the free money and will continue to have talking points and no more. These companies are making over 40 billion in a year and have no capital, never in history. Good luck.”

 

who are you quoting here?

[orthopa]

Depending how wonky you want to get the preferred are nearly all in a big bull flag/pennant that resolves by May of 2019. As wonky as it is it may not be a coincidence. The market always seems to know.  ;)

[allnatural]

Can you link the hearing? I didn't realize Corker was speaking yday.

 

Chris, did you see the 2 questions addressed to counsel on Collins? One is specifically on the NWS. That has to be good news, no?

 

Also, did anybody hear Corker today at the hearing? He said something like 'the wh will take some actions and then leave other things to congress' or similar. Looks like he has accepted the fact there will be administrative reform. He then insisted on the GSEs being SIFIs. Probably, thinking the only way to contain them once out c-ship is by over-regulation/overseeing. He seems to be anticipating, perhaps correctly, this is going the way of Treasury/FHFA.

[rros]

Can you link the hearing? I didn't realize Corker was speaking yday.

 

Chris, did you see the 2 questions addressed to counsel on Collins? One is specifically on the NWS. That has to be good news, no?

 

Also, did anybody hear Corker today at the hearing? He said something like 'the wh will take some actions and then leave other things to congress' or similar. Looks like he has accepted the fact there will be administrative reform. He then insisted on the GSEs being SIFIs. Probably, thinking the only way to contain them once out c-ship is by over-regulation/overseeing. He seems to be anticipating, perhaps correctly, this is going the way of Treasury/FHFA.

It's around minute 43'.

 

https://www.banking.senate.gov/hearings/10/22/2018/the-semiannual-testimony-on-the-federal-reserves-supervision-and-regulation-of-the-financial-system

 

 

[orthopa]

He says "some things to lead on the issue before reform." My sense is Moelis can occur/start along side or before reform correct? Whatever if anything is ever decided. Administration obviously has a plan then and is going to implement it sooner then later. Announcement with a new FHFA director would be convenient.  Not sure how much Corker can let out of the bag but I would have to imagine he isn't the least informed congressman in DC, especially with his work on the GSEs.

 

So the biggest opponent of the GSEs has resigned to the fact that admin reform is coming. One could easily argue that release from conservatorship and stopping the NWS are those leading reforms and the first to be instituted. Then you have two Trump economic advisors who are preferred shareholders/stakeholders who teamed up with Moelis on a plan that needs the exact admin reforms instituted to get going.

 

Idk why I am not all in at this point.

[Guest cherzeca]

He says "some things to lead on the issue before reform." My sense is Moelis can occur/start along side or before reform correct? Whatever if anything is ever decided. Administration obviously has a plan then and is going to implement it sooner then later. Announcement with a new FHFA director would be convenient.  Not sure how much Corker can let out of the bag but I would have to imagine he isn't the least informed congressman in DC, especially with his work on the GSEs.

 

So the biggest opponent of the GSEs has resigned to the fact that admin reform is coming. One could easily argue that release from conservatorship and stopping the NWS are those leading reforms and the first to be instituted. Then you have two Trump economic advisors who are preferred shareholders/stakeholders who teamed up with Moelis on a plan that needs the exact admin reforms instituted to get going.

 

Idk why I am not all in at this point.

 

there is a certain amount of trading dissonance going on during this period of uncertainty.  common falling out of bed at same time the preferreds are doing well.  is this just guessing that an admin plan that will favor prefs at expense of common? does someone really know something here? does it make sense for the common to be disadvantaged by an admin plan when treasury owns 80% common?

 

you can spin this around until your head itself spins.  and end up where you began.  all I think I know is that actual congressional reform is highly unlikely in next two years given election results, that most of the items the MBA plan seeks to achieve require legislation, and none of the things the moelis blueprint seeks to achieve require legislation. 

[Midas79]

does it make sense for the common to be disadvantaged by an admin plan when treasury owns 80% common?

 

Sure, because the commons would only be disadvantaged vis a vis the juniors. Relative terms, not absolute terms. The warrants are magic, Treasury might not care how the total pie given to the current commons and juniors is split. In that fight the juniors hold all the cards.

[Guest cherzeca]

does it make sense for the common to be disadvantaged by an admin plan when treasury owns 80% common?

 

Sure, because the commons would only be disadvantaged vis a vis the juniors. Relative terms, not absolute terms. The warrants are magic, Treasury might not care how the total pie given to the current commons and juniors is split. In that fight the juniors hold all the cards.

 

so you are saying in effect that the ratchet in the warrants ('magic") will protect treasury after the common and preferred hash things out.  I see that. not sure screwing the common holders before you exercise and try to sell all of your common will be a wise execution strategy, but it is available.

[Midas79]

does it make sense for the common to be disadvantaged by an admin plan when treasury owns 80% common?

 

Sure, because the commons would only be disadvantaged vis a vis the juniors. Relative terms, not absolute terms. The warrants are magic, Treasury might not care how the total pie given to the current commons and juniors is split. In that fight the juniors hold all the cards.

 

so you are saying in effect that the ratchet in the warrants ('magic") will protect treasury after the common and preferred hash things out.  I see that. not sure screwing the common holders before you exercise and try to sell all of your common will be a wise execution strategy, but it is available.

 

I guess I'm too cynical. I see the new common buyers as having more of a "sucks to be you" attitude towards the current common holders, and less of "what if this happens to me?" Everyone else benefits by screwing the current common holders.

[rros]

does it make sense for the common to be disadvantaged by an admin plan when treasury owns 80% common?

 

Sure, because the commons would only be disadvantaged vis a vis the juniors. Relative terms, not absolute terms. The warrants are magic, Treasury might not care how the total pie given to the current commons and juniors is split. In that fight the juniors hold all the cards.

 

so you are saying in effect that the ratchet in the warrants ('magic") will protect treasury after the common and preferred hash things out.  I see that. not sure screwing the common holders before you exercise and try to sell all of your common will be a wise execution strategy, but it is available.

Treasury will still own 79.9% of whatever hits the fan, so not revelant for them. Today's commons could end up owning a big or a small chunk of the remaining 20.1%. Future common holders post-restructuring will all do well, including Treasury.

 

In the screwing, and I hope it never happens, only today's holders may see reduction of ownership. As per Moelis, Jrs. will chip away and hopefully not both Jrs. AND Treasury who may decide to add to their stake in a double dip. Then, owning Jrs. today is a safer way to own the commons after conversion. Common shares are guaranteed to do well for a long time after all is said and done... but do you use your funds to buy todays commons or, instead, buy the Jrs. that will still become common shares? How do you end up owning more with the same amount of money?

[Guest cherzeca]

does it make sense for the common to be disadvantaged by an admin plan when treasury owns 80% common?

 

Sure, because the commons would only be disadvantaged vis a vis the juniors. Relative terms, not absolute terms. The warrants are magic, Treasury might not care how the total pie given to the current commons and juniors is split. In that fight the juniors hold all the cards.

 

so you are saying in effect that the ratchet in the warrants ('magic") will protect treasury after the common and preferred hash things out.  I see that. not sure screwing the common holders before you exercise and try to sell all of your common will be a wise execution strategy, but it is available.

Treasury will still own 79.9% of whatever hits the fan, so not revelant for them. Today's commons could end up owning a big or a small chunk of the remaining 20.1%. Future common holders post-restructuring will all do well, including Treasury.

 

In the screwing, and I hope it never happens, only today's holders may see reduction of ownership. As per Moelis, Jrs. will chip away and hopefully not both Jrs. AND Treasury who may decide to add to their stake in a double dip. Then, owning Jrs. today is a safer way to own the commons after conversion. Common shares are guaranteed to do well for a long time after all is said and done... but do you use your funds to buy todays commons or, instead, buy the Jrs. that will still become common shares? How do you end up owning more with the same amount of money?

 

at some point price is relevant.  over past 6 months, fnmas has outperformed fnma by 30%.  so at some point the dog has his day

[rros]

does it make sense for the common to be disadvantaged by an admin plan when treasury owns 80% common?

 

Sure, because the commons would only be disadvantaged vis a vis the juniors. Relative terms, not absolute terms. The warrants are magic, Treasury might not care how the total pie given to the current commons and juniors is split. In that fight the juniors hold all the cards.

 

so you are saying in effect that the ratchet in the warrants ('magic") will protect treasury after the common and preferred hash things out.  I see that. not sure screwing the common holders before you exercise and try to sell all of your common will be a wise execution strategy, but it is available.

Treasury will still own 79.9% of whatever hits the fan, so not revelant for them. Today's commons could end up owning a big or a small chunk of the remaining 20.1%. Future common holders post-restructuring will all do well, including Treasury.

 

In the screwing, and I hope it never happens, only today's holders may see reduction of ownership. As per Moelis, Jrs. will chip away and hopefully not both Jrs. AND Treasury who may decide to add to their stake in a double dip. Then, owning Jrs. today is a safer way to own the commons after conversion. Common shares are guaranteed to do well for a long time after all is said and done... but do you use your funds to buy todays commons or, instead, buy the Jrs. that will still become common shares? How do you end up owning more with the same amount of money?

 

at some point price is relevant.  over past 6 months, fnmas has outperformed fnma by 30%.  so at some point the dog has his day

You could be right in that common has now too much pessimism priced in.

[DRValue]

I think common have been falling since the 3rd circuit loss.

 

For what it's worth I'm buying mainly common now and hedging with preferred 80/20, or whatever the ratio is at the time.

 

I also don't see how legislative reform can get much done after admin reform and a capital raise as it could totally change the model and change projected returns. Too much uncertainty would cause a capital raise to fail.

 

My best guess is capital raise and the only legislative reform is a paid for guarantee. If it's done in that order.

[Guest cherzeca]

I think common have been falling since the 3rd circuit loss.

 

For what it's worth I'm buying mainly common now and hedging with preferred 80/20, or whatever the ratio is at the time.

 

I also don't see how legislative reform can get much done after admin reform and a capital raise as it could totally change the model and change projected returns. Too much uncertainty would cause a capital raise to fail.

 

My best guess is capital raise and the only legislative reform is a paid for guarantee. If it's done in that order.

 

I agree with this.  the 3rd circuit was a disappointment but more than countered by 5th circuit granting rehearing.  one wonders whether the moelis paymasters would have paid for an update of the blueprint if they didn't have some feeling that it was a propos to do so

[rros]

Many have argued that the main incentive, if not the only one, for Treasury to continue with the status quo has been the greed factor. Given the most likely substantial slow down right ahead, next 2 quarters if not longer, wouldn't the fact that the companies may face great turbulence act in the opposite fashion, with Treasury trying to disengage? In this case, it will no be about politics, legal cases, Congress or even reform. It will simply be that there is no more money to steal.

[TwoCitiesCapital]

This is all about NWS. Can they just pay who bought prior to NWS? That would be simple, palatable, non-controversial, non-political and cannot be challenged in court either as we have lost all of the court cases anyways. Speculators out of the door. Could this explain why both commons and preferreds have lost so much value in last few weeks?

 

Would be terribly difficult as their is already legal precedent for those rights transferring with the securities in a sale.

 

While it seems simplest, it flies in the face of precedent AND would cast into doubt how to handle such cases in the future as we'd now have legal precedent for both the rights transferring and the rights not transferring calling into question what exactly you're biting each time you buy an equity security.

[allnatural]

For those paying attention, Lambert already ruled on this issue last month and made it clear that shareholder rights/claims travel. So it doesn't matter if you owned shares pre or post NWS.

 

This is all about NWS. Can they just pay who bought prior to NWS? That would be simple, palatable, non-controversial, non-political and cannot be challenged in court either as we have lost all of the court cases anyways. Speculators out of the door. Could this explain why both commons and preferreds have lost so much value in last few weeks?

 

Would be terribly difficult as their is already legal precedent for those rights transferring with the securities in a sale.

 

While it seems simplest, it flies in the face of precedent AND would cast into doubt how to handle such cases in the future as we'd now have legal precedent for both the rights transferring and the rights not transferring calling into question what exactly you're biting each time you buy an equity security.

[Midas79]

This is all about NWS. Can they just pay who bought prior to NWS? That would be simple, palatable, non-controversial, non-political and cannot be challenged in court either as we have lost all of the court cases anyways. Speculators out of the door. Could this explain why both commons and preferreds have lost so much value in last few weeks?

 

Would be terribly difficult as their is already legal precedent for those rights transferring with the securities in a sale.

 

While it seems simplest, it flies in the face of precedent AND would cast into doubt how to handle such cases in the future as we'd now have legal precedent for both the rights transferring and the rights not transferring calling into question what exactly you're biting each time you buy an equity security.

 

How does this affect the Washington Federal suit, which only asks for damages for (all of) those who held shares on the day of conservatorship? If an award is actually made, who gets the money?

[rros]

This is all about NWS. Can they just pay who bought prior to NWS? That would be simple, palatable, non-controversial, non-political and cannot be challenged in court either as we have lost all of the court cases anyways. Speculators out of the door. Could this explain why both commons and preferreds have lost so much value in last few weeks?

This idea interferes directly on how free markets operate. Free markets function based on the liquidity that allows any item to be freely exchanged between parties through price discovery. If only the original buyer of an object that has lost most of its value is subject to a recovery claim, any exit for that buyer is literally shut down. No subsequent buyers would buy that object so the price of the object becomes zero. No bids, no liquidity. Whereas in true free markets the holder of that loss+claim can exit the position at an agreed price and find the next buyer (or bagholder) who may believe the claim has a chance to succeed.

 

I would love to be paid for all my pre-nws shares, half of which I already sold (years ago). But I see an issue with this so I do not think it is a good idea. Neither I think it has any ears on Mnuchin who has expressed admiration for Alexander Hamilton. But then, judges are a whole different ball game. And some have no clue on capital markets.

[blackcoffee]

This is all about NWS. Can they just pay who bought prior to NWS? That would be simple, palatable, non-controversial, non-political and cannot be challenged in court either as we have lost all of the court cases anyways. Speculators out of the door. Could this explain why both commons and preferreds have lost so much value in last few weeks?

This idea interferes directly on how free markets operate. Free markets function based on the liquidity that allows any item to be freely exchanged between parties through price discovery. If only the original buyer of an object that has lost most of its value is subject to a recovery claim, any exit for that buyer is literally shut down. No subsequent buyers would buy that object so the price of the object becomes zero. No bids, no liquidity. Whereas in true free markets the holder of that loss+claim can exit the position at an agreed price and find the next buyer (or bagholder) who may believe the claim has a chance to succeed.

 

I would love to be paid for all my pre-nws shares, half of which I already sold (years ago). But I see an issue with this so I do not think it is a good idea. Neither I think it has any ears on Mnuchin who has expressed admiration for Alexander Hamilton. But then, judges are a whole different ball game. And some have no clue on capital markets.

 

It would seem that some would be closer to all. We're still sitting here watching the insanity because they have no clue what they're doing or are corrupt. you pick.

[Luke 532]

https://www.breitbart.com/economy/2018/11/21/carney-hedge-funds-are-manuevering-to-loot-fannie-and-freddie-from-the-u-s-taxpayer/amp/?__twitter_impression=true

"It has garnered support among some Treasury Department officials, including very high-ranking advisers to Treasury Secretary Steven Mnuchin. Most of the officials who have taken a favorable view of the Moelis plan have close ties to Wall Street firms themselves."

[Guest cherzeca]

https://www.breitbart.com/economy/2018/11/21/carney-hedge-funds-are-manuevering-to-loot-fannie-and-freddie-from-the-u-s-taxpayer/amp/?__twitter_impression=true

"It has garnered support among some Treasury Department officials, including very high-ranking advisers to Treasury Secretary Steven Mnuchin. Most of the officials who have taken a favorable view of the Moelis plan have close ties to Wall Street firms themselves."

 

what a great journalist!  using "loot" and writing for Breitbart.  I would say carney has fallen but that would imply that he ever had bona fides.

[investorG]

https://www.breitbart.com/economy/2018/11/21/carney-hedge-funds-are-manuevering-to-loot-fannie-and-freddie-from-the-u-s-taxpayer/amp/?__twitter_impression=true

"It has garnered support among some Treasury Department officials, including very high-ranking advisers to Treasury Secretary Steven Mnuchin. Most of the officials who have taken a favorable view of the Moelis plan have close ties to Wall Street firms themselves."

 

wow, what an unpleasant man.

 

the moelis plan is not likely imminent.  perhaps hopefully more like a backup plan if legislative fails.  the common stock would simply not be where it was if the moelis plan was gaining any sort of momentum. 

 

EDIT:  this article (and more possibly to come) is likely why par isnt a realistic outcome imo for the jr pref.  60-80pct is a hopeful resolution to me.  there has to be some shared sacrifice optics even if many believe it's not fair.