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You lost it. Corker is NOT your friend.
This battle is against and in spite of him.
Comparing Munich and us together it looks like a new run. Take a look:
http://finance.yahoo.com/echarts?s=FNM.MU+Interactive#symbol=fnm.mu;range=5d;compare=fnma;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
What do you all think about Bill Maloni's latest post?
http://www.malonigse.blogspot.com/
It looks like JSstock was correct.
One thing we know by their own admittance... they expect an additional 50 billion inflow after net investment becomes zero. They documented this as a possibility if the 2 firms are kept longer. So from this document one may draw the conclusion that the government is OK'ing a profit beyond full payment.
Keeping it will almost look like expropriation.
That is the problem!
I will change your question to: What would be a valid reason -one that the media and the american public can take- for the government to convert and keep their stake in full without looking like a Chavez-style maneuver?
I do not know of any form of hedging for our positions on the Jrs. Unless one may consider -if possible- shorting the common in case all equity disappears. Most likely, we will have to continue to live with this fear. And some pepcid for the day and xanax for the nights. Right or wrong I still want to hold.
I agree with you that extreme profit by the government will make them look bad, will not be in tune with this country's history of administrations and may not fly as them "doing the right thing". It appears that the run that started on 3/15 has the smart money siding with you in that there won't be dilution. Or the run may be part of some manipulative forces with an ulterior motive. Definitely not the retail investor as in "401 k" buyers. It is all very strange. I can't see this going on for too long without news, either good or bad.
This aside, this country was founded on the notion of free enterprise and active capital markets. And markets seem to be speaking louder than Congress about what will happen. More interference by politicians may not be advisable.
It will all be a happy error in assessment on my part if they don't dilute as I have always considered that they will make an attempt to profit from their 79.9% stake.
This can probably help you. I am not sure if it is of any good to the rest of us. Note how he worded his plight as "shareholders who have held" meaning original ones who were the subject of a loss. As correctly as I could understand it, his letter does not apply to me. I know, I know... a share is a share and all the rest.
I am not sure whether you refer to the original Corker bill which does call for R or the new bipartisan one that is being worked out. The original one was written in the midst of completely different circumstances. Perhaps the new one has a different twist.
I mentioned Corker will look to make the most unsatisfied. He does not have to call for R to dampen our spirits. Just giving us half a bone will do, as most expect the top. But is hard to believe he will put forward legislation with which we will be thrilled.
http://www.treasury.gov/about/budget-performance/Documents/13%20-%20FY%202013%20HGSE%20CJ.pdf
Some of the information here is outdated but the Tsy published its Congressional Justification for the GSEs earlier this year in which they stated that the funding commitment granted to them eliminated mandatory receivership. One can argue, if the money commitment that impeded receivership is no longer needed, why or how Corker could now require receivership? When it was supposed to happen the Treasury stopped it!!
I think R is not really the point. The real meat is how Corker plans to restructure the companies and if in that restructuring old shareholders will be made whole or partially whole or nada. Still, what 20c said: a lengthy road for this or any bill and in the meantime DeMarco plows ahead.
Note: we now have confirmation from the horse's mouth. As understood by most here, we have NEVER been in receivership. Some journalists should stay out of the media!
If loobeyondbm is correct on his thesis of imminent conversion and commons get to $10, then we get what you posted. I only mentioned it as a mental exercise disconnected from reality. We don't know what will happen and one can question why the rush to convert now. I still believe most pieces will come together in unison.
Don't look at your account! I still drive my 12 year old Ford Focus just in case everything evaporates.
I'd say Corker is not your friend so a word of caution is in order. He will make sure nobody involved comes out ahead or completely happy. For us, it will be better if FF achieve net zero before he ever gets anything in writing. By then, shareholders' claim will be evident. The sudden urgency from Congress -behind the scenes- and the aggressive momentum of the share price of both commons and Jrs. looks almost like a race to see who gets first to wherever that finish line is.
8.333 common per preferred @ $3 per each common would equal RV for the $25. Twice the ratio for the 50's.
The most difficult thing...
...to sit on your hands.
Blue, if I may... it is impossible to compare/assess prices for the commons with the ones for preferred shares. Nominally -as you do-, you may think that $1.45 or $1 for commons may relate to $4 or $5 or $6 for Jrs. as simple numbers stripped off any meaning. Specially now that Jrs. are not paying dividends and it looks they have lost their "special aurea".
The dollar figure assigned to commons shares has a direct impact on the final figure of the market capitalization of the company. The dollar figure assigned to preferred shares has no relationship to market capitalization of any kind. So although both "are numbers", they are not reflecting the same concepts. Thus, it is impossible to put them together as "equals". Preferred shares along with debt are measures of the enterprise value, not of the market capitalization. Comparing commons and preferred shares in an equal footing is like -literally- comparing apples to oranges. They are different instruments with no direct correlation, except if done in an arbitrary fashion (like when saying a conversion would take place at 7:1 preferred for common, which forces a relationship).
Better think twice. The fact that they currently do not pay dividends does not make them common shares. They still keep all other attributes that makes them preferred shares.
If dividends are ever restored and you bought Jrs. under a buck the yield will be orders of magnitude higher than whatever appreciation commons may achieve, over the years and with compounding.
There, is the limit for commons: mkt cap. All companies have a ceiling.
And none for the Jrs. > dividend compounding. Keeps going and going and going.
Dreaming time :)
You mean a national emergency like the one described here?
http://www.gpo.gov/fdsys/pkg/FR-2012-03-22/pdf/2012-7019.pdf#page=1
Confiscation of all water resources lol.
Here it is everyone...
“I’m not aware that there’s ever been an instance in 200 years where equity shareholders in a company that’s currently profitable were forced to take 100% losses,” says Rob Zimmer, a former Freddie Mac lobbyist who has his own government-relations practice.
http://dealbreaker.com/2013/05/fannie-and-freddie-preferred-stock-slowly-finding-its-way-back-into-the-hands-of-people-who-dont-know-any-better/
Found it at G groups posted by ski but 5baggers may have posted this too.
Read that too. It was analyst explaining the hedge funds' bet, I think. Let me go look..
Wait... confused again.
Layton, speaking in the article, is the CEO of Freddie. Isn't he? The new hiree is David Lowman from JPM.
http://www.housingwire.com/fastnews/2013/04/10/freddie-mac-hires-david-lowman-evp-single-family
JPMorgan Chase & Co. mortgage chief David Lowman
I read the article this past week but for some reason I overlooked the following:
They may be tiny compared to the GSEs but they were part of the group at the congress hearing related to the privatization of Fannie and Freddie. The guy representing them was very convincing. This was the hearing where Millstein introduced his ideas too.
Bill Maloni on...
net investment?
http://www.malonigse.blogspot.com/
Some more rough back of the envelope... (Just for Fannie)
Last column are annual payouts.
FNAML 4.75% IPO - 6/5/2003 - 8.00 Million Shares @ $50.00/share. Market Value $ 400 Million = 19 M
FNMFM 5.10% IPO - 4/15/1999 - 3.00 Million Shares @ $50.00/share. Market Value $ 122 Million = 6.22M
FNMAN 5.125% IPO - 4/29/2003 - 6.00 Million Shares @ $50.00/share. Market Value $ 300 Million = 15.375M
FDDXD 5.25% Company's SEC EDGAR Filings Not Available (Perpetual) = ??
FNMFO 5.375% IPO - 1/4/2005 - 25,000 Shares @ $100,000.00/share. Market Value $ 2.5 Billion = 134.375M
FNMAG 5.375% IPO - 10/23/2002 - 6.00 Million Shares @ $50.00/share. Market Value $ 302 Million = 16.23M
FNMAK 5.50% IPO - 9/18/2003 - 4.50 Million Shares @ $50/share. Market Value $ 225 Million = 12.375M
FNMAM 5.81% IPO - 4/6/2001 - 8.00 Million Shares @ $50.00/share. Market Value $ 404 Million = 23.47M
FNM-C* 6.45% IPO - 9/20/1996 - 5.00 Million Shares @ $50.00/share. Market Value $ 255 Million = 16.45M
FNMAI 6.75% IPO - 10/1/2007 - 15.00 Million Shares @ $25.00/share. Market Value $ 375 Million = 25.31M
FNMAJ 7.625% IPO - 11/21/2007 - 20.00 Million Shares @ $25.00/share. Market Value $ 500 Million = 38.125M
FNMAS 8.25% IPO - 12/6/2007 - 280.00 Million Shares @ $25.00/share. Market Value $ 7 Billion = 577.50M
FNMAT 8.25% IPO - 5/13/2008 - 80.00 Million Shares @ $25.00/share. Market Value $ 2 Billion = 165M
FANIP* 8.75% IPO - 5/6/2008 - 45.00 Million Shares @ $50.00/share. Market Value $ 2.2 Billion = 192.50M
FNMAP Variable Rate IPO - 3/20/2000 - 12.00 Million Shares @ $50.00/share. Market Value $ 600 Million = ??
FNMAO Variable Rate IPO - 8/8/2000 - 5.75 Million Shares @ $50.00/share. Market Value $ 286 Million = ??
FNM-J* Variable Rate IPO - 11/21/2002 - 12.50 Million Shares @ $50.00/share. Market Value $ 624 Million = ??
FNM-K* Variable Rate IPO - 3/12/2003 - 7.00 Million Shares @ $50.00/share. Market Value $ 350 Million = ??
FNMFN Variable Rate IPO - 1/4/2005 - 50.00 Million Shares @ $50.00/share. Market Value $ 2.5 Billion = ??
FNMAH Variable Rate IPO - 9/25/2007 - 40.00 Million Shares @ $25.00/share. Market Value $ 1 Billion = --------- 5,360B of capital raised that pays a variable rate.
Total money raised: $21,943,000 + FDDXD
Total yearly payouts: $1,241.93 + FDDXD + variable interest on $5,360,000 of capital.
If we use the highest yield of 8.75% for the variable interest (outrageous) on 5,360B of capital -just as an exercise-, this would add 469M to the annual payout for a total of $1,710.93b or $427.73 millon per quarter.
What do you all think would be a fair yield for the government Srs. in normal markets if they ever decide to keep them forever? Around 4%? This would then add 117 x 0.04 = $4.68b to the annual payout or 1.17b per quarter for a combined total payout of (1.17b + 427M) $1,597billion per quarter.
Has anybody imagined a scenario by which the Government decides to keep the Srs. forever? Fannie would need to produce 1.6b of profit per quarter or 6+ billion a year for years to come,if not decades.
NOTE: Not counting FDDXD into the picture and estimating very high variable rates.
Anybody has a problem sharing profits with taxpayers for eternity?
Great find. Thank you.
Thank you to the visionaries on this board.
The old yahoo board, that is. You know who you are.
http://thehill.com/blogs/on-the-money/1091-housing/299147-mortgage-profits-could-sap-will-in-congress-for-reforms
Who would have thought we would read some of this and so soon. Net investment is beginning to be taken for granted. The pressure to amend the PSPA in the second half of this year will be enormous.
Your numbers are correct. If Freddie activates the 30b then it might achieve net zero before Fannie. But they may follow Fannie and only activate a portion. Still, all indicates 2013 might be the year.
Thanks for the article.
This guys loves nobody. On one side there are the vulture investors and on the other one blood-sucker politicians. He needs a new mother! This aside, we are reading the incipient seeds of a -perhaps one day- potential amendment to the PSPA (between Tsy and DeMarco) by which sweep is no more and rebuilding capital is allowed. Something key to ever considering again dividends on Jrs. More heavy-weight media on this subject would help shaping the way the public considers the subject.
On second thoughts, the author must love FF management.
Please, please... let's all show some civility. Being millionaires does not make you less human.
Now, Hillary... you were saying that the government could declare chapter 11 on companies sustaining a 5 trillion mortgage market? And what do you think it will happen to the real estate market, or markets in general?
Aha!
Don't Make Waves
Come August we will have:
Fannie 117 bill - 95 bill = 22 bill firm
Freddie 72 bill - 36 bill = 36 bill pending of DTA
Freddie could activate the DTA at 30bill or so. For the remaining of the year we may then see 22B + 6B= 28B minus whatever dividend comes out from operating earning, say another 7-8B for both for the June quarter. My back of the envelope... There's a serious shot at NV zero by 1Q14 if nothing else is worked out (reverse of loss reserves, bank settlements, etc.)
Camden Fine
Does anyone else have the feeling that something else went on with Camden Fine in his historic meeting with Geithner and his dealings with Barney Frank?
After reading the Post article I couldn't help to think the Jrs. must have been mentioned in both discussions. Can you really envision Fine not saying anything about them?
Here is the link again just in case...
http://www.washingtonpost.com/business/economy/act-of-congress-how-barney-frank-foiled-the-banking-lobby-to-form-a-new-financial-watchdog/2013/05/05/94d93ed2-b0eb-11e2-9a98-4be1688d7d84_story_1.html
The fact that commons are doing well only reinforces the idea that the Jrs. are golden. I still pass the commons.
4 trades so far
8.44.11 4M $4.65
8.44.16 4M $4.70
9.06.58 6.27M $4.65
9.07.06 6.27M $4.70
Note how yields start to increase as the crisis approaches denoting more difficulty in accessing funding. These were markets rates at the time and are obligations assumed that can't be modified. Just an opinion with no legal background.
If they are ever to pay dividends these are the rates. In which case the companies have the option of redeeming the expensive ones or swapping them (redeem/reissue).
Another theory on price not moving is that the market (whoever that is) is waiting for a confirmation on the reversal of the valuation allowance of the DTAs and how much that figure will be. This is key to getting close to 20c's finish line.
That's exactly right. Delisting was a wonderful opportunity.