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Life won't be looking too good soon for the Average Joe's investing on Hope that the Government will do the right thing.
As the price of Commons slowly whithers away into the oblivion, and the desperation of the AJ Pumpers reaches its capitulation point, we will see who's left standing -- Commons or Preferreds.
Life will be good for one class of shareholders, while the other wakes up to realize they need to start fighting the government in court when the Statute of Limitations has already expired
#DontBeAnAverageJoe
Liquidation benefits Preferreds. Commons are at the bottom of the Totem Pole. So if a LLRE liquidation occurs, it only bolsters the investment thesis behind Preferred shares rather than Commons.
There won't be anything left for Commons.
Not by any stretch of the imagination. Receivership is very much so still in play and it has Common shareholders absolutely terrified.
The market agrees with this thesis, hence the current pricing of $FNMA and $FMCC.
If by the end of Q2 '19 Commons are still trading above $0.50, I would be absolutely shocked.
- Simple Jeff
With some accounting magic, Receivership could easily occur. Let's not forget all of the fuzzy math the FHFA did to justify the Net Worth Sweep.
With only $3 million on their balance sheets, it wouldn't take a genius to wipe out the current capital buffer and declare Receivership.
My Cousin Vinny said it's coming. And Vinny is almost always right.
- Simple Jeff
If that's the case, then Commons get Cancelled without a doubt. I sure hope that doesn't happen! But what's bad for Preferreds is equally bad, if not significantly worse, for Commons.
Thankfully, the market allows everyone to hedge their bets similar to what Ackman did and re-position themselves based on the facts.
Definitely worth a gamble, but that's all this is. No guarantee by any means, not for anyone.
Even Preferreds are a lottery ticket at this point. Commons are like buying a Call Option on the Lottery Ticket -- talk about a mega gamble.
Sadly, so many here think this is a Lock. A fear many will be in for a very rude awakening. Sure hope no one is taking out loans or taking out a 2nd mortgage / equity to purchase shares
Would you mind running YTD %'s for us? I'm curious how year-to-date performance of the GSEs matches up with the major indices.
Please also add FNMAS and FMCKJ to your calculations as that would be helpful information. Thanks in advance!
Marriage in Receivership might be the only outcome. Assuming the Admin decides the GSEs need to hold 5% Capital, and considering the GSEs only have a few million in capital, Receivership could be declared very quickly.
Bankruptcy is still very much on the table, and a complete Cancellation of Common shares as well.
#ScaryStuff!
Sell da Pops, because the Drops keep coming.
Not a recco
New Multi-Year Lows on Deck. Cheapies are incoming!
Couldn't even make it to resistance (~$1.30) before falling back down.
Above average volume and Red again. No bueno
You make a good point. If there is another spike down in Commons, that might signal The End of Commons (ie: Cancellation of Commons). Maybe we'll get lucky and see a big spike up on massive volume -- probably wishful thinking though.
But with the GSEs being in "Wait and See" Mode, it's quite possible (likely?) that they continue to trade sideways to down until there's clarity into the Admin's intentions.
When Capitulation occurs, there will be a great trading window in Common shares. We are still a long way from that, though. We need at least a 25 million volume and a 20% down day to say the long-awaited AJ capitulation has occurred.
Let's get this over with so we can all enjoy fruits of our labor.
Agreed, Warrants and Sr. Preferred Conversion strong possibility with Otting and Calabria at the FHFA. If Calabria comes in with his 5% Capital requirements for the GSEs, Commons will have already seen their max potential at $5 and will be lucky to see $2 ever again.
The capital raises are going to be a painful lesson for a lot of people that don't understand capital structure (ie: Preferreds > Commons)
With Otting & Warrants looking like a sure-thing, shareholders are starting to come to terms with their poor decision to remain in Commons. You can sense the uneasiness about the uncertainty of Commons future.
Sadly, we won't have any more clarity likely until mid-December. And by that point, the tax-loss selling could have brought FNMA down to sub-$1.
Get ready for those cheapies, they're coming!
This guy says Otting is next FHFA Director, but will only be the interim director. So speculation will still be out there for the permanent director.
Mnuchin, Otting, and Paulson all go hand-in-hand. So this is excellent news for Preferreds (probably great for Commons too since Moelis is the best Plan for Commons also). The Good Ol' Boys Club is going to make Moelis happen!!
Tweet Link:
News Soon from Trump on the FHFA Job? #FannieGate pic.twitter.com/23aaYjxBoK
— ズüωレภﻉነነ (@kuwlness) November 29, 2018
Watt's term is up in January, why is there a petition to remove him? The petition should've been brought about years ago, not now when he's leaving in a few weeks.
Maybe there should be another petition to stop the NWS, and one to return the over-payments to the GSEs, and one to elect CatBird to the Board of Directors.
Let's see some progress!
Damn right! Another decade in Conservatorship beats Moelis. $100 ($1000?) per share or Bust is what the Average Joes are promoting.
However, I think most people do support Moelis and want this ordeal to be over once and for all. Especially considering some of the Alternative Plans barely see Commons worth more than where they're trading at now.
Other Plans could even see Commons worth less than current prices.
#DumbDumbDumbDumbDumb
5% Core Capital will crush existing Common shareholders. It's definitely something that can't be ruled out if Calabria gets the job.
At this time, Moelis is really starting to look like a best case scenario, especially for Commons. There are countless other recap scenarios that could potentially occur; however, none of them have Commons doing anywhere near as well as Moelis.
The scary thing is, there are numerous scenarios where Commons barely see $2 (depending on what % of Preferreds convert to Commons and when they convert [pre- or post-Warrants being exercised]).
#It'sGoodToBeInPreferreds
Hallelujah! The Stars are aligning. Assuming Calabria gets the FHFA Director job (preferably permanent rather than Temporary), Moelis is a LOCK!
#WOOT!
Treasury Secretaries usually only last for two years if you look back at the last few decades. Mnuchin is already on borrowed time. The Clock is quite literally ticking for all GSE shareholders.
If nothing happens in the next 6 months, this investment is dead until we get closer to 2020 when Sweeney & Lamberth might finally rule on the cases in front of them. And then you have another few years of appeals even if Courts rule in our favor.
We all need Mnuchin to act or Commons will soon test their all-time lows and Preferreds will also take a beating.
#PutUpOrShutUpTime
Almost 3 million volume and down yet again. Yikes! $FNMA is still churning larger than average volume near multi-year lows.
Does not look good at all. Sub-$1 might be coming before December at this rate
Cancel Warrants, Cancel Sr. Preferreds, and the NWS Money is all waiting in a Super Secret Escrow Account waiting to be returned to the GSEs.
Ohh, and the Jr. Preferreds get Cancelled too. Didn't you read the Average Joe Plan Blueprint?
Twitter straightened him out quick. Now he's uber bullish on Admin Reform, LOL!
I thought it was extended but can’t find anything to confirm that the bill was amended. Therefore, I’m very bullish on administrative reform in 2018! Thanks for straightening me out.
— Tim Rood (@tim_rood_) November 27, 2018
Makes sense. Let them finish stealing so we can move on. It beats the alternative -- indefinite Conservatorship with NWS continuing in perpetuity, at least until a few weeks before the Warrants expire (2028). Then exercise the Warrants, sell off the shares, and run the GSEs through Receivership afterwards.
Warrants and Sr. Preferreds getting stuffed down our throats beats the alternative ... well, at least for Jr. Preferreds it does. Commons don't fair well in either scenario. But they're betting on $100 ($1000?) a share or bust anyway, so I guess their opinion doesn't really matter as they're just gamblers speculating while the real investors are sitting with the FHFA discussing possible re-capitalization plans
$FNMAS is UP 5%, $FNMA is DOWN 35% over the last three months.
Heavy volume, no price movement. Likely Shorts re-positioning, AJs Rotating into Commons, and/or some of the AJs finally throwing in the towel and taking their 50+% Loss.
I expect more of the same as we enter December. The Tax Loss harvesting is only going to increase from here.
The only way $FNMA doesn't see sub-$1 is if there's Admin Action prior to Dec. 31st; otherwise, Commons can put a fork in it.
It's the most overpriced Preferred along with FMCKJ. FNMAS is aligning itself with the other Preferreds.
I prefer the $50s anyway -- FNMFN and FMCCT.
Calabria hanging with the Fellow Travelers and one of the first things he says is Fannie & Freddie are insolvent and Receivership is justified. Considering the GSE's have less capital now than when this was recorded should absolutely petrify GSE shareholders, especially Common shareholders.
http://www.aei.org/events/what-should-be-done-with-fannie-and-freddie/
Guess who's going to be selling millions of Common shares?
It will be FnF.
Fixed it for you
Heavy volume churning near multi-year lows. Doesn't bode well at all. This is likely short re-positioning to trick investors into thinking the bottom is finally in. It is not, we still have a long way to fall to find our bottom.
Based on my patented algorithm for deciphering these types of situations, I would say there's about a 85% chance that $FNMA breaks down to new lows by the end of the 1st week of December.
Not a Reco, but mark this post.
The GSEs had more capital in the history of their existence prior to being thrown into Conservatorship. Then the FHFA used accounting fraud to make things seem worse to justify the Net Worth Sweep.
I'm sure with a little fudging of the numbers the FHFA can make the profits disappear. Not to mention, the GSEs are operating with only $3B in capital and would need more funds from the Treasury if they have a few bad quarters.
Receivership would be quite easy to justify with a little accounting magic
That would depend on which path Calabria wants to take things. Would he push the Twins into Receivership (Cancel Commons)? Or would he shove 5% Capital down their throats (Insane Dilution)?
That's why there's two possibilities with Calabria. Which route he will take is up to him and the Administration, not me.
But those are the top two scenarios with Calabria in charge of the FHFA.
White House Contemplating Calabria for the FHFA Job? Big or Gradual Changes in the Wings?
This doesn't sound promising at all. As I had previously speculated, Calabria likely equals Receivership and Cancellation of Commons. Best case scenario, Calabria will require the GSEs to maintain a 5% Capital level, which means ridiculous dilution to existing Common shareholders ... OUCH:
White House Contemplating Calabria for the FHFA Job? Big or Gradual Changes in the Wings? #FannieGate pic.twitter.com/KqtUBiAXjY
— ズüωレภﻉነነ (@kuwlness) November 26, 2018
Good chance Commons get Canceled, JPS get Converted to Common Shares of the NewCo, and the Admin uses Moelis style recap to raise funds from new investors.
Then JPS get it both ways and Commons get zero. Commons are left holding the FNMAQ bag and trying to battle the Government and the Statute of Limitations.
The market is also suggesting Calabria at FHFA is a high probability. This might be the most likely reason Commons have been taken to the wood shed these last few weeks.
Calabria is another risk factor for Commons. Even if he only gets the interim Director title, I think Commons will panic even further.
This article is from Inside Mortgage Finance today: https://www.insidemortgagefinance.com/issues/imfpubs_imf/2018_44/news/White-House-Contemplating-Calabria-for-FHFA-Job-1000048513-1.html
If New Capital pays $0.50, they'll be happy with Commons trading at $2-5. That's still a massive return on investment for them.
Sr. Preferreds and Warrants are two different topics. The concern has always been the Gov will take the Sr. Preferreds on top of the Warrants.
Hopefully they don't do that, but they will surely exercise the Warrants. That's guaranteed at this point in time.