Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Oh. Well, I don't believe in the wives tale, personally.
What's the significance of next Monday?
He's got 23 days left in office. His "support" means nothing.
Common's price has nothing to do with pfd's.
I'm in both. Not many of the juniors are offering 300% to par, at least none of the ones I'd purchase. I purchased for a lot less than today's share price, so for me it doesn't add up to 150% return on commons. It's much more than that.
I'm in both.
Of course not. It could be more or it could be less. The financial condition of a business changes from day to day and is reported on a quarterly basis. Further, I didn't say that $10 per share is a "max out". I said that's what I believe will occur. The goal to valuing a business should be to measure the downside, not focus on the sky. That's how one determines whether he'll make money or lose. It is possible to know the answer before you invest using reasonable assumptions based on your personal knowledge of the business.
Never heard of him. You have no idea who's valuation, which I haven't even shown mine, puts anything to shame until the event that's being valued occurs. According to history, we know a few things that carry a more reasonable expectation of occurring than not. One of them happens to be the fact that the company has never traded for 34x earnings.
In its 80 year history, it's never traded for 34x earnings. It's extremely difficult for a large company to produce high returns on invested capital, especially when they are at the mercy of interest rates and housing prices. $100 pps just isn't realistic no matter which way you look at it. At some point, you have to set the candles down and value the company as a business, which involves basic math. It isn't going to happen, even if the Treasury returned all the money.
But what could happen is still a nice payoff. $10 per share isn't a bad investment at all.
$60b recap / 0.60b shares = $100 pps
(1.76b shares * $100) + 19.13b pfd's = $195b market cap.
$11b annual earnings / 1.76b shares = $6.25 eps
$195b / $6.25 = 31.20 PE
Unless you think Fannie Mae will trade at a 31.20 PE, which it never has, I think the prospects of $100 pps is as close to impossible as one can get.
That may be true. The government has done some pretty wild things in the past. No greater thievery in my mind than how federal taxes came about.
Not the same. A tax refund isn't an actual exchange of cash. It's simply a forgiveness of an obligation that previously existed.
I wouldn't be invested if I didn't think it was a good investment. I just don't think the outcome will be anywhere close to $100 per share. It all comes down to the recap, warrants, & senior preferreds. Those three things will determine value. Never been a period in history where the government gave back money, so that doesn't even enter my equation.
Worry isn't the term I use. Has more to do with thinking. 50,000 shares is quite a bit :)
The effect I see is that it would create the additional need of new currency circulating in the market which means your buying power has been decreased, once again. For every action - there's a reaction, although it's true that you may not know what it is, there'll definitely be a significant effect in taking that amount of money out of government. That's not chump change.
$63b equals $672 per U.S. Tax Payer. How would it not affect the economy?
I think whatever happens, we'll do very well.
If $40b is needed to recap, 40b divided by 1.13b shares equals $35.40 share price. Add the already existing 1.154b shares outstanding to 1.13b shares and the new total outstanding is 2.30b shares. 2.30b shares multiplied by the capital raise price of $35.40 equals a market cap attributable to the commons of $81b. The par value of preferred shares is $19.13b. Adding that into the equation, the final validation for the business is $100b.
Result: if you believe Fannie Mae is worth $100b, a $40b capital raise would then equal $35.40 per share.
The scenario assumes warrants and senior preferred shares are cancelled.
Not sure who has and hasn't seen this. It's a great read in opposition to how the government has treated the conservatorship. It's by the CATO Institute (created by Charles Koch).
https://object.cato.org/sites/cato.org/files/pubs/pdf/working-paper-26_1.pdf
You don't think they spent the money already? If they did, where would they pull that amount of money from and how do you think it would effect the economy?
That's the daily short list. Doesn't have much to do with actual short volume that's reported bi-weekly. The daily list includes millisecond market maker trades which aren't actual shorts but are categorized as such until they can be separated from actual short sales.
$35 per share price assuming recap is $40b and the company is being valued for $100b.
$40b / 1.13b = $35.40
35.40 * 2.30b = $81b
+ $19.13b pfd. par = $100b company
Personally, I find it highly unlikely they'll be recapped at $40b, but it's anyone's guess right now.
Issuing 4.00b shares at $15 per share would be suffice.
Yeah, I know. I was thinking of Watt while typing Lew. Happens sometimes. Really not a big deal since most of us know what I was referring to. Relax, stud. It's ok. I don't do that bad for a guy who's had dyslexia longer than you've been alive.
Thanks for pointing that out. I forgot about reading that. In any event, because both events have to occur, it's up to Mnuchin to convince what seems to be a reluctant director to go along with his plans.
Just to be clear, the majority of FnF investors are being "taxed" twice. No matter how often the government has tried to make a distinction between the tax payer and the shareholder; both are the same.
I'm in total agreement with Tim Howard on how to recap the companies. The capital requirement should be truly risk-weighted, as opposed to the banking standards that are not. The same inherent risk to a 748 FICO score does not exist to the same degree as a 660 FICO. The MBS portfolio should reflect that. When a simple measurement of risk involves the assets of the business, you also must dissinclude the problem that was easiest to manipulate: intangibles. Those values should not be included in determining risk. There is no financial risk in intangible assets. When the average-weighted FICO score of the MBS portfolio is 748, which it currently is, the company should be rewarded for that and the statutory requirements should reflect that, rather than the banking standard of Basel III. Also, it's important to note that FnF do not operate as a bank. They are a reinsurance company and should be treated as such.
1. Accelerating safety and soundness weaknesses, especially with regard to credit risk, earnings outlook and capitalization;
Hypothetical argument based on FHFA's future expectations of an event that did not occur, but was only assumed to occur.
2. Continued and substantial deterioration in equity, debt and MBS market conditions;
They were still meeting their core capital requirements despite the assumption.
3. Our current and projected financial performance and condition, as reflected in our second quarter financial report and our ongoing examination by FHFA;
Again, a future expectation that never transpired.
4. Our inability to raise capital or to issue debt according to normal practices and prices;
The recession wasn't a time period in which "normal practices and prices" were afforded to anyone, and yet this assumption still never transpired.
5. Our critical importance in supporting the country’s residential mortgage market; and
Which they were doing, despite the fed adding to the liquidity crisis.
6. Concerns that a growing proportion of our statutory core capital consisted of intangible assets.
This was the point that later showed PwC and Deloitte's role in the game. The statutory requirement was based in part on the assets of the business. The government hired these entities to cook the books, which caused PwC to settle out of court.
I didn't read the actual case dockets. I plan on doing that. Can't answer your question because I don't know the details required to answer your question. You bring up a good point about the credit agencies.
I was under the impression that you believed the statutory minimum capital requirement was the heart of the issue. Maybe I read your statement incorrectly.
That's why the FHFA was created. To be solely in charge of the companies without congressional input. I suppose they knew they'd meet opposition from free-market capitalists so they were bypassed.
Absolutely agree. That document is being used in court against them, and rightfully so.
Well, that was a quick second. Lol
Source: https://www.treasury.gov/press-center/press-releases/Documents/fhfa_consrv_faq_090708hp1128.pdf
Q: When will the conservatorship period end?
A: Upon the Director’s determination that the Conservator’s plan to restore the Company to a safe and solvent condition has been completed successfully, the Director will issue an order terminating the conservatorship. At present, there is no exact time frame that can be given as to when this conservatorship may end.
"Director" is in reference to the FHFA Director which is his official title.
Because it's up to the sole discretion of the director, and the current director (Lew) is 100% against the release and has approx. 2 years left on his appointment, this is a rather large obstacle standing in the way of Mnuchin.
I'll try and look up the link that I found a few months ago. I think I saved it but I have a lot of documents saved to weed through. Might take me a minute.
No. This was specifically an accusation by shareholders that the books were cooked by FnF's auditors which led to the illegal seizing of the companies.
Specifically, the suit alleges that PwC "assisted government regulators and officers of Freddie Mac to destroy the value of Freddie Mac stock" by "manipulating the books . . . to overstate losses and understate its assets by hundreds of billions of dollars."
http://fortune.com/2016/10/26/freddie-mac-pwc-auditor-suit-settled/
The Mulvaney Bill calls for 2.5% which is $75b for Fannie Mae. Tim Howard (former CFO) says them risk-weighting should be based on FICO scores of the MBS portfolio with a minimum of $60b. He believes the Mulvaney Bill is too high. Hard for me to disagree with the man that was Fannie Mae's accountant for 15 years.
I'd be interested in seeing your link. From what I've read on the Treasury website, the FHFA has ultimate say on its release from conservatorship.
PwC was already sued by Freddie. They settled out of court. Deloitte is being sued right now by Fannie. It's one of the reasons why the judge ruled to unseal the documents.
http://fortune.com/2016/10/26/freddie-mac-pwc-auditor-suit-settled/
That's a lot more than what's currently before congress and that the former CFO says is needed.