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Circular reasoning
You assumed 12 per share valuation as par of your procedure to derive the result of 12 per share.
12b$x14/ (#presentshares + #warrantrelatedshares + #recapshares) = pps
Since # of recap shares is a variable what you have is function with inverse proportionality between pps and #recapshares.
Nor should you. I on my part assume it will be more of the same vague platitudes.
Nothing negative though, just some attention.
Usually, when news is given before market open, it is positive or neutral.
Jus sayin'
But hey you know if the price overreacts and goes high, it just gives you a better shorting opportunity, to be completed when the inevitable cool down comes.
YUGE
YUGE
YUGE
Is this a new document that has come out?
A small note:
The official policy of the DPRK is only to use nuclear weapons if attacked (and in fact a little more restrictive: Only if attacked with nuclear weapons).
This makes sense given there is little for them to gain in an offensive use of nukes and the resulting counter attack would mean the complete annihilation of Korea.
The main strategy is deterrence at a cheaper cost (They had a conventional military that could inflict enough damaged to make it unappealing to invade them, but nukes are cheaper in the long term than fully or partially mobilized troops and weapons, as well as the associated industrial complexes).
On the topic of the GSEs though, its hard to say whether or not anything will be done in the next month. So far many bill this admin has tried to push through congress have failed. On the flip side, reforming the GSEs doesn't for the most part require congressional approval (ending the NWS, recapitalization, etc.)
Here is a question:
Why is it the common aren't at least following the preferred? Normally before we would sit at about 40-55% of the pref price.
Now its more like 35%.
Maybe it is the banks themselves that should be in government control or ownership.
At least the federal reserve should anyways.
The warrants are owned by the treasury, not the banks; I'm not sure if that is what you were questionning.
While of course having the warrants cancelled gives us a fantastic share value over 50$ if the companies are recapped and released, I also think its quite unlikely, and makes it look like the government is serving only the interests of shareholders.
Yes ideally they could use part of the proceeds from the warrants as modest interest loan to help recapitalize the companies.
As you said though, even with a lousy recapitalization plan, we are still looking at 8-12. Current prices basically assign a high probability that the companies will be liquidated or that that common shareholders will be wiped out.
Exactly!
That makes sense.
To be honest I am happy with the utility model; Anything that guarantees shareholders won't be wiped out and actually have decent company.
Hell if they went ahead nationalized but gave reasonable compensation that too would be fine.
I think you are confusing the warrants for the senior preffered shares.
While NWS has covered the entirety of the amount for the sps plus a return above, the warrants are claims on common stock.
I believe that these warrants provide a direct financial incentive for the treasury to reform FnF in such a way that it benefits common shareholders (to the tune of some 15-20$ per share, a fantastic return whatever price from 0.3 to 6$ you purchased at).
And it can't be stressed enough:
The government and taxpayers win from this, because the warrants are then worth some 150-200 billion (FnF combined) when exercised.
This is crucial.
People often read things from their detractors or enemies in a catastrophic way. But here Fannie and Freddie continue to exist which is really what we as shareholders should be primarily concerned about, since its the possibility of their destruction )which the nws entails) that is keeping the share price so depressed.
Yeah, very little reason to sell at these levels.
Everyone is basically in the long term wait and see mode. Probably why our resident short went into shilling for buying, hahaha.
What they could do
is exercise the warrants, sell a large portion to the banks at a significant discount to make them happy, and then extend a loan from the federal reserve so as to recapitalize.
This would make everyone, even the banks, winners. Problem is of course that its not a maximum win for the banks and other financial institutions though.
The real questions is ''why though?''
What precipitated today's move? Pure speculation? Insider knowledge of an interview or of coming court cases? Nobody seems to have reliably answered the question for today, and hence keeps the question of why there would be a big move coming soon still unanswered as well.
Volume is extremely low today. I guess everyone is holding to see what will happen.
In other words, its bad news?
I mean someone who pushed awful loans onto the FnF having the treasury's ear doesn't seem good in any way...
Basically this.
One needs patience and discipline in these situations, especially in such a low news environment.
Ignoring the ''0$ NEXT WEEK OMG SELL'' and the ''60$ PER SHARE INCOMING'' and sit tight and quietly. A cash hungry government is unlikely in the end to pass up the 150-200 billion worth of warrants, and in a counter-intuitive way this lays the basis for a case of cautious optimism (combined to a lead belly).
Can you post a link?
Good news if true.
People are holding at this level
I believe basically because there is little reason to sell. Too much to lose; Little to gain. If we were at say 3.5 or 4 I could see it dropping. But at 2.5-2.7 most people who bought don't gain much, and might even be at a significant loss.
My main worry about the sweep in general
is that its continuation as is implies support for the destruction of the companies.
If at minimum Mnuchin were to announce the sweep is being put into a special fund to protect against bailout that would satisfy me: I can wait for a long time for reasonable pay-off. However, no changes implies my investment will be destroyed (and not only that, but that affordable housing finance would be likely be, because no investor would money into such as scheme afterward, and the 10000 competing interest lobbied congress isn't likely to create an SOE for the purpose either)
Because government doesn't have formal ownership and has policy of draining the assets of the company, I don't think it can be considered nationalization in any meaningful sense.
Its more of a from of transfer from one set of private owners to another, with the government getting a kind of temporary tax. Its not wholly dissimilar to what the Nazis did actually (not to go argumentum ad-hitlerum); Take over domestic (public or private) assets of the region seized and then give them away at a fraction of the value to German capital.
But in any case its effects are net negative compared to alternative paths.
I think its important not to frame what has happened to FnF as nationalization.
Why? Because nationalization would convey legitimacy: A systemically important institution was taken over by the country so as to safeguard public or national interest in a time of crisis.
However that is not what happened. What has occurred is a form of plunder justified on the basis of scapegoating for the crisis, and likely to the eventual benefit of large private financial institutions. Ultimately current policy goes against public interest by slowly destroying a systemically important institution and a national asset via plundering its capital reserves.
The analogy with what happened with Pemex in Mexico is quite relevant I think.
A very realistic and modest way of doing it.
Definitely agree they can present it in the very agreeable way you suggest. Just a simple suspension of the payment on the basis of protecting the taxpayer and building up a government asset, all the while buying plenty of time so that the large scale reform can be pushed back way down the line.
I really hope the delaying in announcing the sweep end is just so that insiders could load up over the course of the month + (a million shares every day for 30 days x10$ pps means a profit of some 210 million dollars if they bought in at 3$). Still, I have nagging feeling that inertia more than anything will prevail and the sweep will go through without even so much as a comment on it by the treasury.
:(
Here is a question for everyone:
Let me preface it: There are plenty of reasons for the treasury to suspend the NWS payment that is coming up: For one, to prevent a another bailout that might occur because of the changes in the tax assets, which would cause unneeded instability in housing markets. For two, to start building up an asset that the treasury implicitly owns via warrants, to short or long term benefit. For three, to potentially abate all the pending legal cases that cost resources to continue and could potentially embarrass a lot of people. For four, to keep consistency in Mnuchin's perceived position by many people, and to prevent political fallout from many people who supported the president, as well as militancy by many lobby groups, including fairly on the ground ones which want to safeguard affordable housing.
So the question is the following: Given so many reasons to stop the upcoming NWS payment, with what possible narrative can the treasury, presidency, etc. to save face should it allow to go through?
I ask this because I have the nagging feeling is that it will go through, but I can't really come up with much in terms of how they will justify it.
Clay has posted his chart video many more times than he usually does;
In hte video suggests there may be a breakout (to somewhere around 3$) from a technical perspective.
Doesn't help me personally all that much since my avg. cost is 3.65ish. But hey if you bought in recently it could mean good things for you!
You missed one:
The treasury and the exchequer would then also benefit from having a 150-200 billion dollar set of assets (because in essence they would stop slowly destroying the companies they implicitly own)
Like most here I am long for FnF, but hey wouldn't it be great if we saw a little light come end of March beginning April.
Patience otherwise is key.
When did this happen before?
Can provide some links? I am curious to see.
---
To my mind the NWS will end sometime in the next year (It has to prevent another bailout, which will be seen badly and cause a negative reaction in markets which are dangerously over optimistic already)
Still one needs a strong stomach to deal with the ups and downs in the interim.
Plz Based-Mnuchin, save us, save the companies, save a government asset, save all from panic this March!
But therein lies the whole issue
Namely: When.
Suspending the NWS immediately allows for greatest amount of recapitalization during a presidential term (since it starts immediately from the quarter before the administration came in)
Why they aren't coming out and doing it immediately is not only unnerving but also potentially shows lack of resolve. After all suspending the NWS not only makes sense, but is far, far, far simpler than GSE reform itself.
This makes sense actually.
IF the NWS is ended or suspended, its likely that the justification will be recapitalization or preventing future taxpayer exposure.
Hence unlikely that dividends would be restarted until the capital reserve requirement is met. Moreover, I wouldn't be surprised if after that the deal was that they would buy up preferred shares at par, to be replaced with newer ones at a lesser interest rate (instead of 8-9%, maybe 3-5%)
Still, ending or suspending the NWS is bullish because it means they no longer intend to slowly destroy the companies (a policy which again, makes no short or long term sense with the treasury as implicit shareholder of 79.9% of the stock)
DOEET! CAMMAN DOEET NAO!
I don't have cable, just internet.
I need every spare penny made from late night gas station work to be ploughed into FnF after all. Surely you understand.
Do you have a link?
Thanks in advance!
I second the idea:
They should exercise the warrants immediately if they intend ever to do so. Moreover, then ending the NWS becomes even easier to justify (Hey look we now have formal ownership of 79.9% of the compnay, let's not destroy it further)
But even beyond that the sentiment about removing the limbo is on point: Either 0$ or 15$. Enough with the dilly dallying, hahaha.
You forgot to specify the mechanism.