From Fannie Mae 2014 10-K:

Preferred shares have no voting rights. They're worth more because equity is currently twice the amount the total cost is to purchase all preferreds are and pfd's have priority over commons to the equity. Upon release, commons have voting rights, preferreds don't.



Here is one of the Fannie Mae preferred contracts. They ALL state the same thing:

Dick Bove is an accountant. He's also an advocate shareholder of GSE preferred shares. What he says is fact. Credit losses are a fact. That information can be ascertained freely and quickly. Give it a try.

It's not obvious. Put on your seat belt.

A 13D filing isn't required with companies under conservatorship. His SEC filings in 2014 were done so at his own personal discretion and weren't a requirement. There's no SEC requirement to list OTC stocks, nor companies under conservatorship. They are considered exempt.

I'm limited to posting once per day so I'm unable to respond to any requests.

The value of the warrants are de minimus. Because they have the option of exercising them at anytime, there is no rush to do so. There must be another reason for the NWS.

You're right, but wrong about the investment. Figure it out. You seem smart enough. The preferreds aren't a gamble at all unless you believe FnF will no longer exist.

Someday you're going to learn, most likely the hard way, that technical trading is a fruitless illogical endeavor.

The shareholders right to inspection of books and records weighs on the premise that the shareholder has a voting right to to their shares. That is what the issue is about and has nothing to do with the Net Worth Sweep. Each state has a "right to inspection" provision in their corporation bylaws. However, in order to petition the court to excercise your right to inspect the books, the shareholder must prove that he has a voting right (claim) to be authorized to inspect the books and records of the company. Being an owner of a stock certificate is not enough. It must be accommodated with the right to vote to satisfy the law. Because of conservatorship, that voting right no longer exists; which is why there hasn't been a shareholders annual meeting of the GSE's since conservatorship happened nor has any shareholder recieved a proxy form asking for their vote . So whether the NWS is stopped or allowed to continue, has no bearing on whether the shareholder has gained their rights to inspection back via shareholder voting rights. The only thing that does that is for the conservatorship itself to end. Currently, Pagliara is trying to find a loophole around the shareholders voting rights provision, which he may be (and I'm hoping) successful at.

$60b, if that is the amount the government will conclude is the reasonable requirement, will be raised based on the value of the company. The government isn't going to value the business at a particular amount in order to satisfy shareholders. They have to value a business reasonably enough that future investors will want purchase the new issues. Therefore, a number simply picked put off thin air, as you suggest, isn't going to happen.

The general rule for valuing businesses is based on the theory that value is equal to all future expected cash flows discounted back to the present. In the case of Fannie Mae, the answer is already supplied. Over the last 4+ years, the government has confiscated nearly all of their annual earnings while leaving some available for their cash and investment accounts. That is the amount they'll use to base the value of the company on. The rest, is simple math that I've gone over in detail in the past. The value of the business is extremely predictable and easy to ascertain. What it won't involve is simply picking a number out of thin air.

$255b has been paid back out of $187.5b that has been injected, leaving $67.5b as the amount of surplus recieved by Treasury. In that time period (8 years), equity has fallen from $44b to $6b which means value has been eroding because of the constraints placed on the business. However, they've been able to put away a little cash which equals $25.2b and the mark-to-market value of their securities equals $48.9b. Because $9.4b of that cash is already committed to short term interest obligations and because the majority of their $6b of equity comes from deferred tax assets which will be marked down by $13b in the next few months, the cash they have recorded on the books is not considered "excess cash" and cannot be used towards valuation.

It's simple math.




The GSE's haven't produced $255b. $187b of that amount was given to them by the Treasury which they simply gave back. What they've produced is the difference between the two amounts. Over 8 years, it equals $8.5 per year. Hardly enough to make a dent on a $100b per year expense.

That's what you said pre-12% decline. The fact is, markets aren't efficient and nothing is ever priced in; it's a fairy tale.

$60 pps is a fairy tale. $8 at most. The company has thrown off roughly $84b in cash over the last 8 years. While doing so, their equity value has gone from $44b to $6b. 5.8b shares outstanding and needing at least an additional $60b for recap. $19b of Preferential value is before the commons. That makes the commons worth very very little. The math don't lie. If you're in commons, you'll be lucky to break even. And...I'd bet $1,000 with anyone here that Icahn sold his commons, and if he still held a position, it definitely wouldn't be in commons. Berkowitz didn't increase his holdings of preferreds to $1.2b for no reason at all. He and Paulson have 10x the skillset of all the other investors combined.



My math is fine. $34m in the bank guarantees that fact, bud. Goodluck. You'll need it.

It rained in Tulsa which caused a meteor shower in Zimbabwe. That's why.

John Paulson's March letter.

No we wouldn't. Not even close.

A -0.34% drop is nothing compared to what's coming. If that disappoints you, prepare for what's coming. Preferred shares have been giving hints all week. The NWS isn't illegal until a court rules it's illegal, no matter what anyone's internet law degree says. That isn't going to happen anytime soon.

It'll continue.

There's nothing logical about that assumption. Can't even wrap my head around how someone could conclude that.

No question about it. Mnuchin was very clear that GSE reform wouldn't occur until after tax reform is passed hopefully by august. NWS will continue for at least two more quarters and a DTA impairment is inevitable which will drop the price of all shares tremendously. Modifying the NWS is an act of reforming the companies. Anyone that thinks otherwise is in for a tidal wave of a surprise.

Fannie & Freddie's MBS portfolio's make up 25.79% of GDP. Total housing market (including farms) is 75.80% of GDP.

I'd hold your perspective if I were to believe the market is efficient and the collective majority are able to properly value businesses. History has shown that isn't the case which is why there is a plethora of research papers compiled showing that the majority of participants in the stock market do not profit (i.e. Brandes Institute).

Goodluck with that. Hasn't been going our way in court for several years now. I rather deal with things that are reasonably certain than to place bets based on outcomes of legal rulings, which is one reason I never started investing until Trump became President knowing that his Treasury pick was Steven Mnuchin well in advance.

The event that could land them in receivership is the DTA impairment to the degree that it requires an additional capital investment in the GSE's. That is based on the SPSPA which is already being argued in court and not to the benefit of shareholders thusfar. If you believe commons have a better chance of overriding that agreement anymore than what is currently being argued, goodluck with your thesis. I prefer to wager on a more reasonable expectation which is easier for me to do without the existence of greed which has a tendency of warping the logicality of the mind.

When there's currently shareholder equity of $6b and junior preferreds have $19b of liquidation preference, simple math dictates that currently there's nothing left for commons in a liquidation situation.

It's pretty simple. Liquidation preference. In a worst case situation of receivership, commons do not have a contractual liquidation preference, whereas preferreds do. During a restructuring, commons can be completely wiped. Preferreds can not. I'm not advocating whether commons will be, just stating the contractual facts.

He joined the company in 2015, 6 years after Paulson left the Treasury. Hardly a Paulson plant.

I don't see that happening either. Makes more sense that recap will involve the issuance of common shares.

It won't be suspended.

https://www.sec.gov/answers/shortsalevolume.htm

Daily short volume has little to do, and most often nothing, with the actual short volume. A large percent of MM trades are temporarily recorded as short sales when they in fact aren't. Seems a large majority of home investors continuously are confused of this fact.

By April 3rd at 4pm est.

Of course. But, to assume he needed that money free in order to purchase more shares of the GSE's is a huge presumption considering he's had $5b free for at least the last year. He reports all this information on his website.

He holds $5 billion in cash, almost at all times. He didn't need to free up any money, especially $300m, when he already had $5b to use if he needed.

As is often the case, commons are the last to figure things out.

Just trying to warn folks. The NWS isn't going to stop and DTA impairments are on the way. It will crash the commons.

That's your prerogative. I won't feel sorry for you, I assure you.

That means commons will experience a bigger fall when they find out what smart money knows :) Get ready, it's coming.

It has nothing to do with it. There were a heck of a lot more companies than the GSE's that were bailed out yet you've surmised that a bailout is only applicable to the GSE's. The secretary treasurer was given ultimate power to bailout companies without congressional approval. This simply reverses that rule. That's it. Nothing more. Nothing less. It was a rule who's intended purpose was to be temporary anyway. If you studied history, you'd know that.

You're gonna be disappointed.

I realize that which makes it all the more perplexing how anyone could possibly rationalize a conclusion of anything based on this generalized document. Dumbfounded.

There's nothing on page 38 that has anything to do with the GSE's NWS.

Nobody cares about 12,000 shareholders. I guarantee shareholders are the last thing government has ever cared about. The GSE's will be structured so that they best serve the economy of the United States. Making some greedy little have-nots become have-somethings is the last thing on anyone's mind. 86.9 million homeowners is the focus, not 12,000 hundredaires hoping to get a free lunch.