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Irrational exuberance definitely plays a role, and sometimes significantly. But, when value is $10, it's even difficult for such exuberance to get anywhere close to $100. Institutions who hold the majority of shares sell at proper value. That makes it extremely difficult for someone holding less than 1% to reach their expectations.
DRYS was valued at the spot price of cargo transportation. Every investor I know of properperly valued the business at what it became.
"If the government wants to ensure FnF are in stable operational condition upon release/privitization.
Yet have swept more than the initial investment of 187 billion away from them. Why in the hell would they exercise the warrants and keep the surplus money exceeding the loan + interest?"
Because the government views the situation differently than we do. They believe that the losses incurred by FnF were greater than the amount seeded. Those losses included the market value of the housing, unemployment, increase in social program expenditures, Tax losses, etc.
"23 Year GSE Executive & CFO values Fannie $75-$100"
No he doesn't. You've completely taken his statements out of context. I follow Tim on a daily basis and you've misinterpreted his statement.
Based on what assumptions do you value the business north of $65 per share?
Interest rates for 2017 have already been stated. They'll increase 0.75% for the year. Home prices need to increase as well.
Not a ridiculous comparison at all. The alt-a problem didn't exist pre-Clinton. Look at home sales pre-Clinton and compare what the GSE's value was at that time.
You've completely missed my point.
Counselor to the President is an official position, advisor is not. John Paulson, the hedge fund manager, is an advisor. Advisors have as much fiduciary responsibility as the the lunch lady at a high school cafeteria.
"Theses shenanigans of c-ship/manipulation certainly affected my path to prosperity."
Look to the AIG case and others to find the answer. Self interest doesn't supersede the law.
"I invested with the belief that c-ship was temporary and we shall see if the courts agree with us that the 3rd amendment profit sweep was illegal."
I believe the cases will be dropped long before any such ruling.
"Should be an interesting year - GLTA and hope you a have safe and wonderful holiday."
I believe it'll be a very interesting year. Thank you. Merry Christmas!
"Hope to see you all in Vegas next April."
Would be great. I'm there several times per year.
I don't believe they'll be capitalized like a bank. Right now, they're being treated that way and the requirement is currently $25b. If they were treated as a bank, as they are now, the company would be worth a lot more to the shareholder than what I believe will happen. I believe Tim Howard has the best solution for recapping the GSE's. Currently, that amount would be around $60b.
Earning a check by the U.S. does not deem you to be under the veil of conflicts of interest law. So far, Icahn's position is of an advisory nature and is not official. Making it official doesn't automatically change that either.
I don't think the issue is whether or not the shareholders will receive anything. It's more a question of how much.
Why are you under the impression that conflict of interest law applies to an advisor that does not serve in an official capacity and was not elected by the people?
"You dont think its a possibility of current shareholders being wiped out and a new stock being issued?"
Of course that's a possibility, however, I don't see that happening. There's no question that there'll be an issuance of additional shares. That's what a "restructuring" means which is exactly what Mnuchin announced on television a few weeks ago.
"I don't really see a scenario of the GSEs being recapitalized without major dilution."
Me either.
"You believe that Mnuchin will be able to speed this process?"
He certainly has the influence to lead in that direction. I believe they need to get rid of Dodd-Frank first though. I don't think this will be carried out as quick as the speculators hope. Certain things need to be accomplished before the company is released from conservatorship. One of them that is vital is regulation.
I agree with your time-frame.
Fidelity does that for me. Good feature.
Icahn plays a tremendous factor in regulation. Regulation influences the capital requirements for the GSE's which will be ultimately one of the factors whether this company trades for $10 per share or $30. Each advisory and cabinet position is intricately woven.
Well said.
I've never used them. I like that level II. Looks functional.
Your wind-down guesstimation isn't logical or realistic. No one else backs a 30 year mortgage which is the #1 selling mortgage product in America. You simply don't know what you're talking about, Adam.
My investment habits don't include feelings.
So you're valuing the business at $100b+ assuming a recap at $60b and no warrant dilution. Meanwhile, the company was only valued at $40b pre-conservatorship with a capital requirement of $25b. Whatever floats your boat.
What software is that?
It'll open for whatever the new share offering will be based on the amount of capital they will need in relation to the value of the firm. I believe between $8 and $10 per share.
His net worth was still HIS net worth. Some people achieve that by living beyond what is necessary, some modestly. What he earned per year is not relevant to what he ended is life with. He died with $12 million in the bank. That is all that matters concerning this topic.
Your argument was that he wouldn't have made it into Trump's cabinet solely based on his net worth. Clearly you were wrong.
Mick Mulvaney's net worth, as disclosed by the government, is $3 million and change. Albert Einstein died with a net worth of $12 million. I want leaders with a proven track record to represent my interests. I have that right now, so you'll have to forgive me for being optimistic about the future of our country.
The public school system is ran by the government. It's synonymous.
I agree. But wisdom generally surpasses this generation anyway.
Our public school system has done a tremendous disservice to this country.
When you're creating the Atomic Bomb, you hire Einstein, not the towns local math teacher. I believe most intuitive people understood that his goal was to hire the best of the best, not the guy carrying bags at your local grocery store.
If you've done your homework, you'd recognize Carl Icahn has been draining the swamp for longer than you've been alive. He's an activist investor. By definition, an activist investor takes an active role in the companies they invest in which primarily include cutting costs in order to help the business operate more soundly. That also usually involves the restructuring of debt which creates more value for the business while paying less in expenses. With today's credit card mentality, I'm sure that's a hard concept for many to understand and accept. However, it's still the best way to create value and provides less risk in the market place.
The universally accepted definition of long term among the financial world is one year plus one day. Anything less than that is considered short term. Hence, the marginal tax rate on capital gains works the exact same way.
"He said nothing about Fanny, but did we really expect him to?"
He didn't have to. If you were listening, you'd pick up some pieces that directly relate to the GSE's. He talked about banking regulations hampering the U.S. economy. Capital requirements is banking regulations. Currently, the capital requirements for the GSE's are taken from the banking standard which is Basel III Accord. This was a very optimistic statement by Icahn that directly affects the value of FnF.
"IMO - Its like going as fast as you an to get to a gas station, before you run out of gas"
The end result is that you'll still run out of gas. The false premise that somehow driving faster is going to provide more distance is wrong. And that's all he's saying.
When the entire market is valued 40%+ higher than the total amount of revenue being produced by the United States (GNP), clearly the market is over-valued.
Correct, with the exception of what some very good reporters reveal, annual shareholder letters from hedge funds, and interviews (audio & video).
Since 4Q 2010, Hedge Funds haven't been required to report the GSE's in their 13F-HR, SC-13G, or SC-13D filings due to the exemption rule applied to 13f-1(c) of the Securities Exchange Act of 1934.
So, unless they do what Ackman did in 2014 out of the kindness of his heart, you won't see the GSE's on Hedge Fund quarterly filings.
"As with all math, it depends on the starting point and the ending point of the BASE assumption. In a linear base, your comment is correct. In a vector it may or may not fall under the mathematical assumption you make."
I'm talking about balancing a checkbook. Nothing beyond linear algebra is required.
"Theoretical analysis can make for true or untrue results and all you're doing is thinking point A--> B and no other variable. You put C variable in the mix and you get a differing result just like in investing in stocks; Got it? You analysis might be flawed, brother."
Not only do I include A & B, I include C, D, and E as well.
I've been doing this long enough, and with a great degree of success, that I'll take my chances. The old way of valuing a business has been tested for over 120 years. It's stood the test of time. Thank you.
"AS far as I know WB believes in buying distressed and highly under priced stock against the current value of the company."
He use to transact business that way. Now, he looks for a business with a durable competitive advantage (moat) who produces increasing "owner" earnings over long periods of time, that is ran by a competent and trustworthy management team, and is selling for no more than equal to the value of the business. Much different than the way he use to invest.
"That implies that Fannie and Freddie are definitely under priced by a factor of at lest 20 times."
It all depends on what the government induced hurdle rate will be.
"I therefore conclude at a $4 share price they are really worth $80."
You are free to conclude anything you desire.
"Its all about the government hold they have that is holding the price down."
That's definitely not all.
"Once we get freed from government control the math will dictate an $80+ price tag. With all the enthusiasm about it, will surely reach $100 pps."
:)
"Putting all your math aside, would you say that Fannie or Freddie with all the business and profit they make are only worth $4?"
Math dictates valuation and I don't engage in pure speculation. Therefore, I can't answer your question on your terms. On my terms, I could see where it could be valued at $3.
"People invest in what they believe and also what is."
I completely agree with that statement.
"Sometimes the two are equal and other times they are not."
Agree with that as well. Benjamin Graham defined these vicissitudes as Mr. Market.
"I invested here in FNMA with all my guts/money"
Most people that operate from the gut have short careers.
"because I believed in the Fannie and Freddie business model, their valuations and their future value"
I as well.
"If I thought the shares will never go higher then $4"
I would have still invested at a 67% margin of safety, pending I found nothing else more attractive.
"But I believe they will go much, much higher"
I believe they'll be priced at what they've historically been priced at; 8 - 10x earnings. Why? Because a logical argument can be made that they've traded as such for the last 20 years and the real estate market hasn't produced a positive return to the same extent that would imply anything beyond that.
"and that is why I stuck to my guns for the big payday and holding all my shares."
Can't and won't fault you for that. It's your bet. My bet is mine.
"You are wrong in saying they will not get to $100."
We will find out sooner than later.
"They will and they are worth it with the revenue/profit they bring and their valuations as a company."
The math doesn't add up, and frankly, I haven't seen you produce any math yet. The beautiful thing about math is that it leaves no room for speculation. 1 + 1 will always equal 2, no matter the circumstance.
"So you are half correct. Most people invest because they believe in something mostly and then because they see present and/or future value. That is me. If we did not see future value, most of us would not be here."
Intrinsic value must be confirmed through math. If it is not, it's pure speculation. The entire premise to being successful, more often than not, is to make logical conclusions based on evidence with as little speculation as possible. If your entire thesis is based on speculation, you lack a sustainable platform for long term success. That's just the way life works in general, regardless of the subject matter involved.
"You see I am wiser then I seem. Even though you will not give me credit. But one day you will. Its coming."
It's not my job to validate you it's yours. You will do so based upon the decision you make in life, regarding all things; not just in regards to earning capital.
LOL. Exactly.
I'm already invested in FNMA and FMCC pfd's. Thanks.