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Yep...Some people just picked a lot of shares at a discount.
SCOTUS made a very thorough and complex opinion. They cleared the way for a lower court to be force to look this case.
Definitely concur. How many 10s of millions of shares will change hands today because people misunderstood the results?
The outcome.
1) They did not declare the conservatorship illegal. Too many people would be subject to lawsuits, etc. SCOTUS protected Legislative and Executive Branch powers to act in emergency situations. This part of the decision was pretty obvious
2) They did say the plaintiffs have every right to file suit for damages due to the third amendment. The big win. If the reason GSEs are still in conservatorship at this point is a lack of capital requirements then the recovered damages can be applied to the capital buffer. This is a very obvious path going forward.
3) The president has the power to remove to the conservator in certain situations. Not really a win or loss in my opinion.
In my opinion, the Treasury is already on the path to release the GSEs. They telegraphed it when they set up the capital requirements. It is an easy win for the administration if they can get the GSEs released from conservatorship and declare "Victory". There will be pressure to negotiate a settlement to give the GSEs some damages which will dig them out of the creative accounting hole they have been put in.
not anymore...4th dropped...R number assigned to all of the opinions
no R number assigned...you know the last when there is an R number filled out in the columns...so atleast 1 more (number 4) is coming.
Just because the SCOTUS calendar doesnt have another yellow day on it does not mean SCOTUS will not add another day later for MAY to release opinions. This one got put on the calendar on Friday.
This is Sparta!?????
We will see about the CAP rule. My guess is the two GSE will be regulated heavily in the near term.
I agree the stock will pop if SCOTUS rules favorably and the conservatorship ends. However, to the ranges you specify are hardly likely. The issue is not with the assets.
The issues are the liabilities on their balance sheet and the capital requirements the regulators have put into place. The conservatorship ending will not get rid of the regulators.
If the capital requirements remain in place at these levels it will be still years before the GSEs achieve enough a balance sheet to return dividends to shareholders.
Yes the GSE stock was worth more before the financial collapse..but they also did not have the same regulation and capital requirements they do today. The GSEs also had a change in accounting standards after the financial collapse and they had to claim a lot more assets and liabilities on their books.
To put it another way, the majority of stocks were overvalued in the financial sector and others. So the 70-80 dollar prices range before the theft is a bit inaccurate when you look at it from a historical perspective of the bad accounting which was happening at the time.
I am not saying the stock can hit the 100 dollar range in the short term based on good news...I am saying I know it will be overvalued and I should sell if it ever hit those prices in the next few years.
volume is light for there to be any news...I think this is more buy and hold to sell...then buy back in later...looks more like loading of shares in anticipation of positive news.
I was just pointing out there was good news coming in sideways....and made a case for why this is good for the GSEs
like I said...they are navigating a financial crisis at the moment without seeking additional funding from the Treasury...The narrative of keeping the GSEs in conservatorship because they need help is getting shot full of holes.
The only reason this stock is trading OTC is because the conservator took action to remove the GSEs from the major exchanges. They were forcibly delisted by the conservator.
There is some good news coming in sideways.
Wells Fargo / JP Morgan reported better than estimate quarterly results...The big takeaway was the reduction they were holding back for loan losses. IE they are not expecting the housing market to take a hit.
This means the GSEs are holding stronger than expected assets since they buy loans from the lenders. (WFC, JPM, etc)
In addition, this means the case for keeping the 2 GSEs in conservatorship is getting weaker if they are able to navigate this extreme financial situation without help from the Treasury. This is what is happening.
It appears it was a decision for relief until a lower court can make a decision. It wasnt an actual case. It involved religious freedom and right to assemble.. and COVID restrictions. The decision was per curiam (unanimous).
The GSEs are not competition to the banks.
The banks want the GSEs because they sell loans to the GSEs...the do this to because they can only loan so much money out at one time as part of their fiduciary requirements. The government created Fannie Mae to buy packaged loans from the banks to increase banks ability to lend and to ensure there would always be a stable place to sell their loans to.
The GSEs in turn bundle these loans and repackage and sell them as mortgage backed Securities(MBS)
quote from investopedia:
|In order to be sold on the markets today, an MBS must be issued by a government-sponsored enterprise (GSE) or a private financial company. The mortgages must have originated from a regulated and authorized financial institution. And the MBS must have received one of the top two ratings issued by an accredited credit rating agency."
The GSEs are not the only game in town though. There are private companies which do the same thing as the GSEs. However, these other financial institutions did not have the same standards as the GSEs prior to the financial collapse.
Before the financial collapse the GSEs were a significant but small fraction of the MBS market... Ive seen 20-30 percent...after the collapse they almost 75-90 percent depending on who you want to source.
As people have pointed out on this board, new articles, books, etc the GSEs did not need all those funds from the government. Mainly because their MBS's at the time of the collapse were good for the most part. However, the government took over the GSEs to bailout the rest of the secondary mortgage market...and bought all the loans from banks to allow the banks to keep lending...
What some people do not understand is the GSEs bought assets at fire sale prices. And it took years to sort through. Yes, the bought some crap but they also bought a huge chunk of good assets at discount prices.
I honestly have no issue with the government stepping in to help. But I have issue with it being a loaded gun to the head to sign over the two companies into conservatorship.
The Treasury could have done something as simple as giving the GSEs a revolving credit facility like banks do with companies all the time. Tell them you can borrow up to this much money. Basically borrow when they need it. In simplistic terms, its the equivalent of credit card. You only use it when you need it.
Instead the government gave the GSEs huge loans they did not ask or no where need for at extreme interest rates.
Life lesson: The first reaction is almost always an over reaction.
The chances of 10 dollars are better than the chances for 200 or 500 dollars!
Considering the GSEs hit $6 dollars a share a few years back after only rumors of good news.... A SCOTUS ruling in the favor of shareholders would be good news.
Would hit it the same day? *Shrug* maybe.
Would it take several days? Better odds.
Would it take weeks...even better odds
When you have guys like Ackmann and Berkowitz probably espousing the more logical valuations in the short term. 10 dollars a share is on the low end of their valuations.
It will depend a lot on how the decision comes out.. The details will matter not just perception of the ruling.
Freddie Mac was broken off from Fannie Mae when they went public to ensure there would be competition and not a monopoly. So a merger would be counter to the original release of the two entities.
Tied to together in stock price with banks is a ridiculous assumption.
Yes good news does helps stock prices...just as bad news hurts stock prices.
But to tie the GSE exiting conservatorship to helping Bank stocks is just not sound.
The capital requirements for Banks and the GSEs are set to different standards. The analogy would be the government mandates everyone to have a savings account...the regulators set different rules for different individuals....and some individuals do not have rules at all.
The Banks are not GSEs...and the GSEs are not banks.
And many banks perform different financials services and offer vastly different financial products than other banks.
You can tie Fannie and Freddie together because they literally due the same business. But even in stock price...someone is going to eventually come along and do proper valuation and realize Freddie is a bit smaller than Fannie and this why historically Freddie's stock price is less than Fannie. Someone is going to look at the books and perform a book value of each stock.
Another example of two stocks which perform the same function are Visa and Mastercard. And when you do the valuation math you will see the reason they are so different in price comes down to how many shares of stock have been issued.
Yes...Bank of America and the GSEs have a relationship...but that relationship is not tied to stock price.
The banks sell loans to the GSEs and other institutions so they can keep lending money. Yet you say Bank of America and the GSEs should be the same stock price is ridiculous because the GSEs and Bank of America do vastly different things from a financial perspective ..and they have different amounts of assets and liabilities.
Plus mortgages are only a small portion of what Bank of America does now. Also, BoFA added Merrill Lynch inside their portfolio during the financial crisis.
Release of the GSEs does nothing financially for banks.. unless the banks are invested in the GSEs through stock ownership. The basic relationship between the banks and the GSEs doesn't change just because SCOTUS drops the gavel on the conservatorship.
However, ending the conservatorship does do something for the GSEs.
I agree with you. In addition, I think it should be noted many stocks achieve all times highs and are considered overvalued at those prices at that particular time.
I am not saying the GSEs wont see those prices...However I am pointing out the all time highs were in the 2006-7 time frame...and the next year the entire stock market collapsed...
Many stocks in the financial sector have yet to see their prices achieve the same level since the financial crisis. Bank of America has yet to hit the same price (although it is getting closer).
The GSEs will probably follow a similar trajectory...
When the speculation of the release was at it highest point after the financial crisis FNMA got barely over $6 dollars a share. Stock valuation is a roller coaster. You should get off or take some off the table when you think this stock is way over valued.
I will take some profits if this thing hits obscene levels of valuation. I will still hold the stock...just not as much. I see the price point seesawing for years especially on positive SCOTUS news.
IMHO The news alone cannot do it. There are several technical reasons...but the main reason is there wont be enough money to fuel it.
1) Institutions have restrictions on what they can buy...This not being on a main exchange is one of them. (the GSEs were removed from the main exchanges... they would have to reapply...this will not happen fast)
2) Hedge funds do not even bet the whole ranch on 1 or 2 stocks. They also will take some profits along the way.
The wild card would be how well private investors can execute trades on OTC stocks from a process standpoint. Some trading platforms require actual phone calls and confirmations to make trades. Ie Can and will the Robinhood traders be able to execute..
Bottomline: If SCOTUS rules in favor of shareholders...this will go up.. but there will be a limit to how far it can go...until some other technical barriers get removed. This will take time.
The most obvious reason is recovery from COVID. If you look prior to COVID this stock was much higher. As the population gets vaccinated and everything reopens the downward pressure should unwind.
The upcoming SCOTUS decision is playing a part...but we were expecting SCOTUS action prior to COVID. Just do a look back and we were much higher prior to COVID. To me this is more of a technical rebound based on the economy opening up.
I see they put the R in now
lol...we are now at 3 opinions today...another 10 minutes
we have to wait 10 minutes to see if another opinion is delivered or not
looks like we have to wait another 10 minutes...lol...I looked back for 2020. Those most decisions in one day was 4.
could be more issued...they release every 10 minutes.
Actual news moves this stock in 20M+ volume range. So this is speculation the SCOTUS opinion will be delivered tomorrow.
This is all speculation there will be decision tomorrow.
The volume is too low to be definitive of a decision in favor of shareholders.
Absolutely no real news...just people placing bets before tomorrow.
something is doing it....we are in profit taking /tax lose selling time of the year.
If anything I would think the GSE would go down not up. Unless of course there is real news.
COVID has not been bad for housing....once the lemmings figure it out..money will come back in.
I am just listening and seeing the 15 minute delay in here in IHUB and what is happening real time...The volume is almost double in real time..lol
volume is definitely light today
I agree. Those stalling the release will be forced to take a backseat. There will be no point politically for anyone to fight to keep them in Conservatorship.
A SCOTUS ruling in favor of ending the Conservatorship will force their release and will prevent them from being in purgatory during the next administration.
Judges spend a lifetime learning and applying the law.
The problem is they do not spend a life time learning and applying accounting and finance.
So it will depend upon how well they understand the arguments being made to them and how well the lawyers communicate the information to them.
I would say the GSEs were not worthless at the time of the conservatorship being implemented. The judges may not perceive it that way.
I think they will find fault with the Government's actions. They will not necessarily apply punitive damages.
However, forced nullification of the government's position in the GSEs could be an outcome. This would effectively, form the basis for ending the conservatorship since this would end the Governments implicit ownership stake in the GSEs.
Transcripts same day...audio end of week. Also states transcripts are not final products...so the quality will be DRAFT language.
I am just giving you my two cents...I have 48 hour turn around ...for final products...and its a team review. Tone gets watered out the transcription.
You will want to hear how they ask the questions.
The audio will be a better thing to listen to....tone is a huge indicator of opinion.
I do transcription work for the Government. My job is documentation of meetings and decision.
so even later...oh joy.
So definitely plenty of time for speculation to occur.
Monday is Oral Arguments:
So no decision but we will hear the arguments for and against things. So expect a Shakespeare play called "Much ado about nothing" to occur. Both sides of the issue will claim victory. Speculation and over speculation will occur...but no decision from the SCOTUS for months...so February at the earliest. Due to the complexity and the almost certain politicization of the issue, I expect it will take longer. I would be happy to be wrong.
The Justices questions will matter more than speeches by the lawyers arguing each side.
I keep seeing posts like Monday will be a launch day...but the transcripts wont be posted until after close of business and we will be reliant on those able to connect to the briefings for their interpretation of events.
So expect early interpretation to be skewed.