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

[muscleman]

FNMAS down 23% today. 5.7 now. If Trump couldn't win re-election, or if Trump catches the virus and die, I suspect that puts a lot of risk into this. People seems to assume that he will get re-elected, which seems guaranteed a few weeks ago. I am not sure now.

 

IMH, also down 33%. Anyone tracking  IMH's legal cases? The court differentiated the treatment of its two classes of preferred stocks. Curious if anyone tracks it. I've brought it up a few times already so this will be my last try.

 

 

[Luke 532]

Katy O'Donnell @KatyODonnell_

Calabria: "I don’t see [virus crisis] as greatly delaying what we’re trying to do with fixing Fannie and Freddie." If anything, he says, the stressed environment underscores need for getting them to safe and sound position.

 

Although Calabria did earlier say re-proposal delayed until mid-to-late May.

 

So, ironically, as seysmont and cherzeca alluded to, this crisis could speed up the process.

 

[Guest Covid-19_Survivor]

Fannie, Freddie to Suspend Foreclosures to Aid Virus Relief

https://finance.yahoo.com/news/fannie-freddie-suspend-foreclosures-aid-170000212.html

 

[Midas79]

The perfect time to convert the juniors to commons might be coming up soon. In a couple of weeks, the 20-day average price for the commons should be somewhere between $1.50 and $2.00. Offering a conversion at 80% of par at that price both gives the optics of a haircut to the prefs, but also gives them a huge conversion ratio because while the common price has crashed, the par value of the juniors hasn't.

 

Citi's prefs were converted when they traded around 20% of par, by the way.

[Luke 532]

The perfect time to convert the juniors to commons might be coming up soon. In a couple of weeks, the 20-day average price for the commons should be somewhere between $1.50 and $2.00. Offering a conversion at 80% of par at that price both gives the optics of a haircut to the prefs, but also gives them a huge conversion ratio because while the common price has crashed, the par value of the juniors hasn't.

 

Citi's prefs were converted when they traded around 20% of par, by the way.

 

If anybody on this board has some powerful contacts, get this idea in their hands pronto. 

[beaufort]

The perfect time to convert the juniors to commons might be coming up soon. In a couple of weeks, the 20-day average price for the commons should be somewhere between $1.50 and $2.00. Offering a conversion at 80% of par at that price both gives the optics of a haircut to the prefs, but also gives them a huge conversion ratio because while the common price has crashed, the par value of the juniors hasn't.

 

Citi's prefs were converted when they traded around 20% of par, by the way.

 

How do JPS holders agree to a conversion without a capital rule?

 

I agree that the ideal kitchen sink PSPA negotiation, conversion and lawsuit settlement is coming up, especially with the favourable news cycle.

[Luke 532]

Mark Calabria: "The reproposal will look a lot like the previous version, he says, adding that the goal will be to have a rule that makes the companies “economically attractive” while also being sufficiently capitalized to survive in a stressed environment"

[Midas79]

The perfect time to convert the juniors to commons might be coming up soon. In a couple of weeks, the 20-day average price for the commons should be somewhere between $1.50 and $2.00. Offering a conversion at 80% of par at that price both gives the optics of a haircut to the prefs, but also gives them a huge conversion ratio because while the common price has crashed, the par value of the juniors hasn't.

 

Citi's prefs were converted when they traded around 20% of par, by the way.

 

How do JPS holders agree to a conversion without a capital rule?

 

I agree that the ideal kitchen sink PSPA negotiation, conversion and lawsuit settlement is coming up, especially with the favourable news cycle.

 

Perhaps make the offer optional (but based on the common market price as of the day of the offer), with a deadline of some time in the fall to accept or reject? I agree that the capital rule is needed first, and the conversion would have to be completed before the re-IPO.

[Luke 532]

Mark Calabria: "The reproposal will look a lot like the previous version, he says, adding that the goal will be to have a rule that makes the companies “economically attractive” while also being sufficiently capitalized to survive in a stressed environment"

 

FHFA Will Delay Capital Rule Plan Until Late May, Calabria Says

By Elizabeth Dexheimer

 

(Bloomberg) -- The Federal Housing Finance Agency will delay seeking public comment on a new version of proposed capital rules for Fannie Maeand Freddie Mac until “probably the second half of May,” Director Mark Calabria says Wednesday.

FHFA is currently under mandatory telework concerns over the spread of coronavirus and so won’t be able to hold the kind of meetings it typically would during a rulemaking and public comment process, Calabria says in a call with the Exchequer Club of Washington.

 

“Our ability to hear from the public is compromised,” he says in explaining the decision to delay the seeking comment on the rule until late May

“We continue to do work on the new rule, and the rule will be ready, but we’re going to be cognizant of the fact that it’s going to be very difficult for people to weigh in,” Calabria says.

 

The reproposal will look a lot like the previous version, he says, adding that the goal will be to have a rule that makes the companies “economically attractive” while also being sufficiently capitalized to survive in a stressed environment.

[TwoCitiesCapital]

I'm hopeful that they can get this done quickly. Rolling the proceeds from the warrant sales into new bailouts that are also punitive would look great for the treasury.

[investorG]

The perfect time to convert the juniors to commons might be coming up soon. In a couple of weeks, the 20-day average price for the commons should be somewhere between $1.50 and $2.00. Offering a conversion at 80% of par at that price both gives the optics of a haircut to the prefs, but also gives them a huge conversion ratio because while the common price has crashed, the par value of the juniors hasn't.

 

Citi's prefs were converted when they traded around 20% of par, by the way.

 

Very low odds, for all of the obvious / well known reasons.  He won't even release a capital rule proposal.  This crisis gives them cover to avoid what we know is a time-intensive and difficult process (admin reform).  I wouldn't expect anything meaningful (positive) until November if then.    And in the meantime the market will have to ponder how badly this crisis will impact FnF's earnings in addition to the postponement of any potential material administrative action.  Like others here, I wish it wasn't so but it's how things are playing out at the moment.

[Guest cherzeca]

Mark Calabria: "The reproposal will look a lot like the previous version, he says, adding that the goal will be to have a rule that makes the companies “economically attractive” while also being sufficiently capitalized to survive in a stressed environment"

 

so why the F repropose?

[Guest Covid-19_Survivor]

I doubt HIGHLY that anyone in Washington or involved with GSE's, like Calabria for example, has given a moments thought about FnF for awhile, except how to use us. At this point, the issue to us may be what can they get away with legally.

 

Otherwise it was nice, kinda, to see CMO, NLY, MFA, etc., etc., get trashed today. We have company!

[Guest cherzeca]

does anyone know whether fhfa will delay the publication of the new proposed rule or only delay the commencement of the period (usually 90 days) during which comments may be received?

[orthopa]

I'm to the max I want with the preferred but will probably add some more here.

 

Not surprising that the capital rule was delayed in the shit show the world is today. I think the risk that trump may not get elected has increased due to the virus. At least as of right now. It seemed to me more likely then not he would get re elected up to a month ago. If things stay hairy with the economy into the fall and it looks real close going into the election that may spur a little more action just before Nov 8th.

 

Doing as much as they could just before the election and if losing in the 3 months afterward may have been the plan all along anyway. The selia case is still the most important on going thing of course.

 

 

[Luke 532]

I'm to the max I want with the preferred but will probably add some more here.

 

Not surprising that the capital rule was delayed in the shit show the world is today. I think the risk that trump may not get elected has increased due to the virus. At least as of right now. It seemed to me more likely then not he would get re elected up to a month ago. If things stay hairy with the economy into the fall and it looks real close going into the election that may spur a little more action just before Nov 8th.

 

Doing as much as they could just before the election and if losing in the 3 months afterward may have been the plan all along anyway. The selia case is still the most important on going thing of course.

 

In a recession the incumbent very rarely wins re-election.  But given what was said at the Goldman meeting 2-3 weeks ago (source: Managing Director at major inv bank), and corroborated with what ACG is hearing (I know, I know, not everybody trusts them), the actions will be irreversible even if Trump loses.  And they expect some of those actions to take place after the election, but during calendar year 2020.  I verified with 3 lawyers that agencies can, in fact, take irreversible actions in a lame-duck period.  So I don't think the election is all that big of a deal anymore.  At the very least, it is only a fraction the importance it would be if irreversible actions didn't take place.

[onyx1]

 

Check out this gem from Democrat Proposed Responses to COVID-19, March 18, 2020

 

"25. No Federal Rulemaking During the Crisis. Federal financial regulators would be prohibited from adopting rules not directly related to responding to the coronavirus for the length of the crisis."

 

https://financialservices.house.gov/uploadedfiles/fsc_covid-19_legislative_package_-_03.18.20.pdf

[Luke 532]

 

Check out this gem from Democrat Proposed Responses to COVID-19, March 18, 2020

 

"25. No Federal Rulemaking During the Crisis. Federal financial regulators would be prohibited from adopting rules not directly related to responding to the coronavirus for the length of the crisis."

 

https://financialservices.house.gov/uploadedfiles/fsc_covid-19_legislative_package_-_03.18.20.pdf

 

Calabria would probably just say this rule is in direct response to the stressed environment the virus has caused.

 

Mark Calabria: "The reproposal will look a lot like the previous version, he says, adding that the goal will be to have a rule that makes the companies “economically attractive” while also being sufficiently capitalized to survive in a stressed environment"

[Midas79]

I'm to the max I want with the preferred but will probably add some more here.

 

Not surprising that the capital rule was delayed in the shit show the world is today. I think the risk that trump may not get elected has increased due to the virus. At least as of right now. It seemed to me more likely then not he would get re elected up to a month ago. If things stay hairy with the economy into the fall and it looks real close going into the election that may spur a little more action just before Nov 8th.

 

Doing as much as they could just before the election and if losing in the 3 months afterward may have been the plan all along anyway. The selia case is still the most important on going thing of course.

 

In a recession the incumbent very rarely wins re-election.  But given what was said at the Goldman meeting 2-3 weeks ago (source: Managing Director at major inv bank), and corroborated with what ACG is hearing (I know, I know, not everybody trusts them), the actions will be irreversible even if Trump loses.  And they expect some of those actions to take place after the election, but during calendar year 2020.  I verified with 3 lawyers that agencies can, in fact, take irreversible actions in a lame-duck period.  So I don't think the election is all that big of a deal anymore.  At the very least, it is only a fraction the importance it would be if irreversible actions didn't take place.

 

The main thing we need is for the seniors to go away, whether by conversion to common or cancellation (could be some of both, i.e. partial conversion). That would truly be irreversible; the seniors cannot be reinstated once they are gone. This also ends the NWS, because NWS payments have been to holders of the seniors.

[muscleman]

I'm to the max I want with the preferred but will probably add some more here.

 

Not surprising that the capital rule was delayed in the shit show the world is today. I think the risk that trump may not get elected has increased due to the virus. At least as of right now. It seemed to me more likely then not he would get re elected up to a month ago. If things stay hairy with the economy into the fall and it looks real close going into the election that may spur a little more action just before Nov 8th.

 

Doing as much as they could just before the election and if losing in the 3 months afterward may have been the plan all along anyway. The selia case is still the most important on going thing of course.

 

In a recession the incumbent very rarely wins re-election.

 

But what about war time? Do incumbents have a higher chance to win re-election in a war time?

A recession is possible here but it is not Trump's policies causing the recession.

 

 

[Wiggins]

I appreciate reading these disparate thoughts on how this is going to play out politically. I don't know the answer with certainty but want to offer yet another scenario to add to the mix, which is how I think this plays out:

 

The virus is not contained virtually anywhere on Earth, a major exception being South Korea where they have exchanged one problem (immediate infection) with another (delayed second and third waves and a protracted process overall). Excepting South Korea, other areas on Earth are not contained and looking at a maximum virus infection somewhere around May 6th, give or take, and then a rapid drop off from there as an equilibrium takes place between no one left to infect on one hand versus herd immunity on the other. The different infection rates around the Earth (e.g. Italy vs NYC vs North Dakota) are merely a consequence of being at different points on the same trajectory. Thus, we're all headed for a very, very rough patch followed by an equally rapid and dramatic falloff. With this as a backdrop, while Trump mishandled the early stages badly, the point is ultimately there was very little he (or anyone) could have really done to stop it. Furthermore, what this suggests is that the really important part is how the US and everyone else handles the situation NOW (e.g. ventilators, other medical support, supplies, beds), and the Trump admin still has the opportunity to step up and do some good. Italy and other parts of Europe are paving the way to show the world what to do and what not to do.

 

The world has been inoculated. China never contained it and is lying through their teeth. When they locked down Wuhan they gave an 8 hour advance notice before doing so and thousands left and inoculated the rest of the country. Wuhan is recovering because they are on that point of the trajectory described above. People in the far reaches of China are still dying and their media is covering it up. Italy also gave advance notice before locking down Lombardy and the same thing happened: 10,000 people left and inoculated the rest of Italy and some went over the Alps. We're all inoculated and there's nothing we can do about it. The extensive lockdown procedures around the world are mostly not helping and are just causing major economic damage. It's all understandable given we've never been through something like this and people are scared.

 

Good luck all and stay safe. The good news is it will be over sooner than most people think.

 

 

I'm to the max I want with the preferred but will probably add some more here.

 

Not surprising that the capital rule was delayed in the shit show the world is today. I think the risk that trump may not get elected has increased due to the virus. At least as of right now. It seemed to me more likely then not he would get re elected up to a month ago. If things stay hairy with the economy into the fall and it looks real close going into the election that may spur a little more action just before Nov 8th.

 

Doing as much as they could just before the election and if losing in the 3 months afterward may have been the plan all along anyway. The selia case is still the most important on going thing of course.

 

In a recession the incumbent very rarely wins re-election.

 

But what about war time? Do incumbents have a higher chance to win re-election in a war time?

A recession is possible here but it is not Trump's policies causing the recession.

[Guest cherzeca]

"In a recession the incumbent very rarely wins re-election."

 

I agree with MM here.  this bad patch we will be going through for next 6[?] months is not the cause of potus policies.  indeed I expect trump to make hay out of fact that he closed travel from china early and Biden criticized him for it.

 

I actually think, assuming we are through crisis and into recovery by fall, that trump's reelection chances will improve vs status quo.

[investorG]

Why would Calabria mention going to congress today for help given the sr pref capacity still exists?

[Guest cherzeca]

Why would Calabria mention going to congress today for help given the sr pref capacity still exists?

 

dont know but I like it.  maybe he sees the senior prefs as something that is so yesterday...

[Guest cherzeca]

"In a recession the incumbent very rarely wins re-election."

 

I agree with MM here.  this bad patch we will be going through for next 6[?] months is not the cause of potus policies.  indeed I expect trump to make hay out of fact that he closed travel from china early and Biden criticized him for it.

 

I actually think, assuming we are through crisis and into recovery by fall, that trump's reelection chances will improve vs status quo.

 

praise from Omar!  https://nypost.com/2020/03/19/ilhan-omar-offers-trump-rare-praise-for-coronavirus-response/