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

[muscleman]

OMG. No way. Our cheerleader Glen just wrote a book about this!  :o

 

 

https://www.amazon.com/Adequately-Capitalized-Second-Million-Fanniegate/dp/1089209967/ref=sr_1_1?keywords=first+second+million&qid=1565625663&s=gateway&sr=8-1

 

"The Treasury Plan that is coming in the next month or so and it is how I plan to make my first second million dollars. Today is 8/8/2019. Most authors write about what's happened. I try to write about what's going to happen before it happens while it still could be relevant to your life."  ;D

[blackcoffee]

OMG. No way. Our cheerleader Glen just wrote a book about this!  :o

 

 

https://www.amazon.com/Adequately-Capitalized-Second-Million-Fanniegate/dp/1089209967/ref=sr_1_1?keywords=first+second+million&qid=1565625663&s=gateway&sr=8-1

 

"The Treasury Plan that is coming in the next month or so and it is how I plan to make my first second million dollars. Today is 8/8/2019. Most authors write about what's happened. I try to write about what's going to happen before it happens while it still could be relevant to your life."  ;D

 

Isn't that like #4 in the series?

[muscleman]

OMG. No way. Our cheerleader Glen just wrote a book about this!  :o

 

 

https://www.amazon.com/Adequately-Capitalized-Second-Million-Fanniegate/dp/1089209967/ref=sr_1_1?keywords=first+second+million&qid=1565625663&s=gateway&sr=8-1

 

"The Treasury Plan that is coming in the next month or so and it is how I plan to make my first second million dollars. Today is 8/8/2019. Most authors write about what's happened. I try to write about what's going to happen before it happens while it still could be relevant to your life."  ;D

 

Isn't that like #4 in the series?

 

what do you mean by #4 in the series

[Midas79]

Treasury responded to the Perry plaintiffs' motion to compel today. Is it right to call them the Perry plaintiffs when it's Fairholme's and Arrowood's names on the motion? In either case, we're talking about the case that is (back) in Lamberth's court.

 

https://gselinks.com/wp-content/uploads/2019/08/13-cv-01053-106.pdf

 

Basically, they claim to not be subject to the discovery process because they have been dropped as a defendant. Big deal, little deal, or no deal?

[Guest cherzeca]

no big deal.  discovery is always contentious and resisted. Ps should have a lot of these docs re Sweeney discovery.  i don't see Lamberth giving treasury a free pass, though he might impose on Ps some scope/date limitations.  this is normal stuff

[Luke 532]

Fitch rating commentary regarding GSE reform plan (attached)...

[WB_fan82]

The GSE stress test results were all out by now in previous years.

 

Looks like the administrative plan isn't the only thing being delayed?

[Midas79]

Fitch rating commentary regarding GSE reform plan (attached)...

 

Thanks for posting this.

 

• I don't like them putting FnF's undrawn funding commitment in terms of percentages of Watt's proposed capital levels. One, it seems to conflate credit with capital (something Calabria at least knows the difference between). Two, Watt's standards might not be applicable, though I expect Calabria's to be in the same ballpark.
  
• I do like them taking Treasury's line of credit into account when setting the ratings. That means that if the MBS are rated AAA now with FnF having $6B in capital and $250B in credit from Treasury, then they should maintain that rating if they are recapitalized to the tune of $100-200B while keeping that same line of credit. Maintaining that line, with an appropriate fee, checks many of the boxes from the presidential memo and more importantly does not require Congressional approval or action.
  

[muscleman]

For those who are interested, my TA goes from neutral to negative. I am expecting a break down here once we get a close below the $11 level on FMCKJ. If it holds, then we may get a base here and go up. So the bull case isn't dead yet, but I assign a 30% probability to it. (And you get a 100%-130% gain when you hit the jack pot of this 30% probability winner).

I don't short stocks, so I just watch it for fun here until I turn bullish again.

 

Regarding FA, I know little about it. I just read my TA and make up the story for the FA. So my current story is:

1. Treasury plan will be a big disappointment.

2. Collins will fail. (I think the most sensible explanation for Calabria to change his tone on the FHFA constitutionality is that he already knows the judges are writing negative outcomes for Collins, so he thought he had better throw in the constitutionality defense to give himself until 2024 to do the admin reform, which he should expect to get because judges writing negative outcomes = siding with government = agreeing with him that FHFA is constitutional.)

[investorG]

For those who are interested, my TA goes from neutral to negative. I am expecting a break down here once we get a close below the $11 level on FMCKJ. If it holds, then we may get a base here and go up. So the bull case isn't dead yet, but I assign a 30% probability to it. (And you get a 100%-130% gain when you hit the jack pot of this 30% probability winner).

I don't short stocks, so I just watch it for fun here until I turn bullish again.

 

Regarding FA, I know little about it. I just read my TA and make up the story for the FA. So my current story is:

1. Treasury plan will be a big disappointment.

2. Collins will fail. (I think the most sensible explanation for Calabria to change his tone on the FHFA constitutionality is that he already knows the judges are writing negative outcomes for Collins, so he thought he had better throw in the constitutionality defense to give himself until 2024 to do the admin reform, which he should expect to get because judges writing negative outcomes = siding with government = agreeing with him that FHFA is constitutional.)

 

I'm not expecting a Collins reversal, unfortunately.  It would have likely been already out by now, Willet gave the blueprint and the dissenters would have written a few page rebuttal copying from the other circuits.  At best, we're hoping for a remand on the APA claim, and at worst, well, we've seen this movie before.  the constitutional side doesn't seem helpful because there's no material relief even with a win.  the preferred shares are down ~25pct in 2 months - so some others out there likely share this view, but not all, so naturally further volatility is to be expected.

[Wiggins]

@muscleman

There's another rational explanation for why Calabria supports the constitutionality of HERA, and that's the fact that he helped write it and appears to support it and be proud of it. He still keeps an old dog-eared copy remember? And his prior essay on why the NWS was illegal was that HERA does not support it; thus it follows that he believes HERA is lawful. That makes more sense to me rather than he knows how the en banc will rule.

@investorG

The longer we wait to hear the more that supports a reversal by the 5th, according to others who have analyzed their rulings. There's just no concrete evidence of a bad ruling (and unfortunately no evidence for a good one, either).

 

 

 

 

[allnatural]

Admin plan being delayed from June to September + Bloomberg / Reuters pieces that the admin is getting cold feet ahead of elections + the market being in risk off mode this summer + general investor fatigue in this trade (fool me once.. twice..), would explain this latest move down for me. Everyone just waiting for the plan (if that ever comes out) and Collins at this point. This has become very binary in the short-term based off those 2 events.

[blackcoffee]

For those who are interested, my TA goes from neutral to negative. I am expecting a break down here once we get a close below the $11 level on FMCKJ. If it holds, then we may get a base here and go up. So the bull case isn't dead yet, but I assign a 30% probability to it. (And you get a 100%-130% gain when you hit the jack pot of this 30% probability winner).

I don't short stocks, so I just watch it for fun here until I turn bullish again.

 

Regarding FA, I know little about it. I just read my TA and make up the story for the FA. So my current story is:

1. Treasury plan will be a big disappointment.

2. Collins will fail. (I think the most sensible explanation for Calabria to change his tone on the FHFA constitutionality is that he already knows the judges are writing negative outcomes for Collins, so he thought he had better throw in the constitutionality defense to give himself until 2024 to do the admin reform, which he should expect to get because judges writing negative outcomes = siding with government = agreeing with him that FHFA is constitutional.)

 

I'm not expecting a Collins reversal, unfortunately.  It would have likely been already out by now, Willet gave the blueprint and the dissenters would have written a few page rebuttal copying from the other circuits.  At best, we're hoping for a remand on the APA claim, and at worst, well, we've seen this movie before.  the constitutional side doesn't seem helpful because there's no material relief even with a win.  the preferred shares are down ~25pct in 2 months - so some others out there likely share this view, but not all, so naturally further volatility is to be expected.

 

so what are you hanging your hat on here? The big plan?

[hardincap]

collins lower court opinion barely moved the share price, and same with en banc grant. this is all about the treasury plan, and the key authors (calabria and mnuchin) have given numerous consistent clues that this is a recap, and definitely not a receivership. i dont see how the prefs get hurt in a recap scenario other than by time decay (tho this is a significant risk imo).

 

mm: you keep saying treasury will disappoint but thats vague. how specifically do you see it disappointing? receivership? earnings-only recap?

[Guest cherzeca]

I think you can discern nothing about the collins en banc from the time period for release.  there are 16 judges and four separate claims (including relief).  a win for the Ps would be a big deal and big deal opinions/dissents take time.  a slap in the face of Ps is quick.  I am impressed that @IG knows that an APA dissent would have just referred to Perry, which of course takes 10 seconds to write.  inasmuch as the collins merits just did that in the majority, one would have thought that a dissent would have been a little more thoughtful, right @IG?

 

as for the plan, I think the delay is actually promising...if it were bland, it would have been "easy" to put out.  the delay is attributable imo to Mnuchin being really busy on matters not GSE and that it is actually raising eyebrows among the reviewing party...now whether those reviewers emasculate it I know not.

 

but all of this is just speculation.  as is this investment

[muscleman]

collins lower court opinion barely moved the share price, and same with en banc grant. this is all about the treasury plan, and the key authors (calabria and mnuchin) have given numerous consistent clues that this is a recap, and definitely not a receivership. i dont see how the prefs get hurt in a recap scenario other than by time decay (tho this is a significant risk imo).

 

mm: you keep saying treasury will disappoint but thats vague. how specifically do you see it disappointing? receivership? earnings-only recap?

 

I am not good at FA so I really have no answers to this. But I know most FA investors build a bull, a bear and a baseline case whenever they invest in anything. Mind sharing your bear case for the treasury plan?

[hardincap]

My bear case is Mnuchin is fired or resigns, there is a trade war escalation or some other economic shock that deprioritizes housing reform, or treasury pursues earnings only recap. I’m sure there are others.

[Guest cherzeca]

My bear case is Mnuchin is fired or resigns, there is a trade war escalation or some other economic shock that deprioritizes housing reform, or treasury pursues earnings only recap. I’m sure there are others.

 

that's bearish

[muscleman]

My bear case is Mnuchin is fired or resigns, there is a trade war escalation or some other economic shock that deprioritizes housing reform, or treasury pursues earnings only recap. I’m sure there are others.

 

So you think as long as the treasury plan exists, it has to be bullish and make preferred to par quickly?

Can there be a case where the plan requires 8 years to get preferreds to par?

Or can the plan be in such a huge resistance by the big banks that it is not able to raise the equities, and it was forced to be delayed over and over?

 

The IBankers want the IPO fee for sure, but if they could kill it and take over, the longer term profits are much greater. Could they be trying this and delaying it post 2020 to see if they can get a Democratic president in and give them what they wanted?

[hardincap]

As long as Treasury pursues recap with earnings AND capital raise, as Mnuchin said is necessary, its hard for me to see pref shareholders getting hurt from these levels. Of course the caveat is capital raise needs to happen in the near term, otherwise time decay will drag returns. A capital raise years away is the same as an earnings led recap to me.

 

I’m not counting on par. As I mentioned before, ~60-75% of par is good enough for me to get out.

 

 

 

[Eye4Valu]

My bear case is Mnuchin is fired or resigns, there is a trade war escalation or some other economic shock that deprioritizes housing reform, or treasury pursues earnings only recap. I’m sure there are others.

 

So you think as long as the treasury plan exists, it has to be bullish and make preferred to par quickly?

Can there be a case where the plan requires 8 years to get preferreds to par?

Or can the plan be in such a huge resistance by the big banks that it is not able to raise the equities, and it was forced to be delayed over and over?

 

The IBankers want the IPO fee for sure, but if they could kill it and take over, the longer term profits are much greater. Could they be trying this and delaying it post 2020 to see if they can get a Democratic president in and give them what they wanted?

 

Is it time for MM and Emily to go hit up the gym?

[hardincap]

Regarding FA, I know little about it. I just read my TA and make up the story for the FA. So my current story is:

1. Treasury plan will be a big disappointment.

2. Collins will fail.

 

Mm lets see you put some odds on each of these.

[muscleman]

My bear case is Mnuchin is fired or resigns, there is a trade war escalation or some other economic shock that deprioritizes housing reform, or treasury pursues earnings only recap. I’m sure there are others.

 

So you think as long as the treasury plan exists, it has to be bullish and make preferred to par quickly?

Can there be a case where the plan requires 8 years to get preferreds to par?

Or can the plan be in such a huge resistance by the big banks that it is not able to raise the equities, and it was forced to be delayed over and over?

 

The IBankers want the IPO fee for sure, but if they could kill it and take over, the longer term profits are much greater. Could they be trying this and delaying it post 2020 to see if they can get a Democratic president in and give them what they wanted?

 

Is it time for MM and Emily to go hit up the gym?

 

It is pretty insulting to put me in the same rank as Emily.

[muscleman]

Regarding FA, I know little about it. I just read my TA and make up the story for the FA. So my current story is:

1. Treasury plan will be a big disappointment.

2. Collins will fail.

 

Mm lets see you put some odds on each of these.

 

I can assign an overall bullish/bearish odds, but for these specific events, come on, I have no clue how to analyze those, and as I said, I read my TA, and make up the story for the FA.

[hardincap]

“Treasury plan will disappoint”. Are you 51% confident or 90%?

 

Without putting some rough odds isn’t your statement basically useless?