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You mean you didn't add more when it got cheap? I first bought at $7.07 but bought much, much more at lower prices. My lowest buy was Freddie at $.29 back in 2010... Of course I've bought and sold my float a few times since then, but my average price for shares I hold is still only around $1.60 according to Schwab.
Only sold a little today - less than I originally planned. My sell 1000 shares in each every time it goes up 20 cents rule has been replaced by sell 500 every dollar it goes up. Hope I'm not too greedy... I will accelerate this rule as it goes up...
I noticed that comment by Mnuchin. I think his point was even with the court decision they still think they can keep the warrants, and want to do a full accounting for money they gave and took for the senior preferred.
I don't see this as negative. I never saw any scenario where the warrants wouldn't be a big windfall for Treasury. Remember the warrants are already priced in - without the warrants the stock price would be 5 times higher.
Remember the valuations:
Last week without the courts rulings - $3
With courts giving F&F credit for overpayments add $15
Retaining profits add $20
Erasing the treasury warrants - multiply all above by 5.
So... best case $190 per share (not likely)
Most likely outcome - $38 per share... so still room for a Ten-Fer.
If everything goes as expected, what might this mean to the company's bottom line? It seems everything is so hard to predict on top of all the legal and administrative uncertainty.
More complicated than saying 9-7 ruling. On the 5 counts, each was a split decision and the judges for or against each count were not the same. It took me about 3 hours to read over the whole ruling, but it's worth checking out. There was a minority opinion to unwind the entire NWS, the PSPA, everything... and others said that the government should be able to keep all profits from fannie and Freddie in perpetuity. It really was a mix on all of the issues.
Looks like given the close decision Treasury will probably appeal this to The Supremes. That will suspend it going back to the previous court to decide how to stop the NWS, although it's not clear to me whether there would still e at least a temporary suspension of future sweeps like the one later this month.
What price do_you_want to open your short position?
If this really does go private - what might be offered for the stock? I mean - this is still trading down over the last year and down since July. I'd think a buyout would be at a higher price.
Is this a takeover or a takeunder?
As predicted this did hit a new high. But since June it's been on a pretty steady decline. Any ideas as to why?? Here in the US it seems to be hard to find current news about this stock.
Best line from the Benzinga article:
Fannie and Freddie shares are akin to extremely cheap options without an expiration date.
I often buy call options and you can make a ton - if they don't expire before the company recovers. In this case - they only "expire" if congress takes action to destroy the companies - and I think that risk is gone. So now I just continue to wait to cash in on these 10-20 year LEAPs.
F&F can't really buy the warrants like other companies did because they are not priced fairly. The other companies' warrants were all priced around where the stock would have been if they were not in distress. F&F warrants are essentially zero. When buying warrants you need to pay the difference between the warrant price and the stock price. In Fannie's case they would have to pay $2.70 per share - or more likely $20 depending on what the stock price is at the time. Say 6 billion shares at $20 - they would have to pay $120 billion.
Now - a better way to recap would be to cancel the warrants...
Or do as treasury suggested yesterday:
Eliminating all or a portion of the liquidation preference of Treasury’s senior preferred shares
That step would immediately add $180 billion or so to the net worth of the two companies - making them instantly fully capitalized and ready to release.
I forget the rest of the world is not up to speed on fannie and Freddie. While the news last night was amazingly good - the market wants action, not plans. And I forget that this is considered to be coming from the Trump administration - so nobody really believes it.
I still think odds are good they will raise the buffer before the end of September. That will be worth $3 per share or so (divided by 5 thanks to the warrants) so would expect above $3 by October. For the rest - we will have to see if the Trump administration is able to actually accomplish anything they promise.
I will be buying below $2.40 using the cash I raised earlier this week.
Yes - happy!
So happy my $3.08 sell didn't go.
This plan is fantastic for both common and preferred shareholders!
Let's hit a few highlights:
NWS is essentially over. The plan suggests:
Adjusting the variable dividend on Treasury’s senior preferred shares so as to allow the GSE to retain earnings in excess of the $3 billion capital reserve currently permitted
No NWS isn't officially over, but no cash will be swept.
---
Recap plan may be a gift from Treasury. Plan suggests:
Eliminating all or a portion of the liquidation preference of Treasury’s senior preferred shares or exchanging all or a portion of that interest for common stock or other interests in the GSE;
Eliminate all or a portion of the liquidation preference? This alone adds about $100/share to the common stock price. Oh - if they do the exchange instead of eliminating, the stock may only gain $50... still not bad.
---
This one is kinda good for junior preferred:
Negotiating exchange offers for one or more classes of the GSE’s existing junior preferred stock;
It would mean that the juniors may not need to wait until full release before they get their par value.
---
All in all - I'd say this plan would mean commons are worth between $50 and $100, however that may be divided by 5 if the proceeds from the exercise of the warrants are retained by Treasury instead of being used to recap.
So where will this open on Friday? Somewhere between $10 and $100 in my opinion. I may put a sell in for $50 just to hedge my bet...
Bummer - my sell at $3.08 didn't quite go - now my buy price has to be 20 cents below my last sell so I can't buy until $$2.67... Almost...
Which debt is pari passu? Gasparino said investors consider "their debt" to be pari passu with treasuries. Was he talking about junior preferred or MBS or - ?
Just insurance... only selling a few thousand shares. If the news isn't good or doesn't come - I can grab a bunch back lower... If it goes up - well I'll be very happy!!!
My next sell kicks in at $3.08... I already sold some at $2.93 unfortunately...
Whern Gasparino was talking on Fox Business - the stock went down, but now it's going back up... I guess any news is good news.
Any ideas when EnBanc judgement might come?
I know we're all insanely optimistic on this board - but is there anyone with any real-world experiences with things like this that can weigh in objectively?
I'm assuming it's going to be the first half of 2020 before we hear anything. I think this is why Treasury and the White House want to get a recap plan going before that...
In either case - this seems positive for fannie and freddie. I did sell several thousand shares of each today - but will buy it right back if it goes below $2.30 again. If it goes up - I still have the vast majority of my shares to enjoy the profits!
Gasparino on Fox Business:
https://video.foxbusiness.com/v/6075327394001/#sp=news-clips
OK - so nothing new. No wonder it bounced back down so quickly.
How does he know it? You forget Fox News is part of the White House now.
So what's with the temporary rise to 2.32?
With 5 year wait what is value today?
For common shares here is my estimate for fannie after 5 years. I have rounded numbers for ease of calculation so you may need to add/subtract several bucks:
retained earnings = $100b = $100/share
earnings of $10b/year with PE of 8 = $80B = $80/share
Total common share value - $180
80% Dilution from warrants = $36
50% dilution from issuing additional stock = $18/share
Preferred assuming $25 par:
time value of money = 5% per year
compounded for 5 years = 25%
$25 * .75 = $18.75 value when paid off
Expected rate of return = 5%
compounded for 5 years = 25%
$18.75 * .75 = current value of $14/share
This makes common shares look like a better value since the common upside is 5x while the preferred upside is only 3x. I didn't adjust for the time value of common shares because the market may not wait 5 years to start pushing the share price up - maybe I should have? If I did then both common and preferred would have similar upside.
YMMV
True - a negative En Banc decision would turn this stock around in a heartbeat. I'd expect well below $1.00.
"How would a 30-35% dilution effect commons in your opinion? Is that why people are selling off this morning? "
I think it's well established that with exercise of the warrants the price of f&f would be in the $15 range. So 30-35% off would bring ultimate price to only $10. Only 4x today's price.
Some junior preferred are very lightly traded and can take days to get out of at a fair price. I recently sold some FMCCG at a price between the bid and ask, and it took a week to actually get sold. Many days there is not a single trade in some of those juniors.
On the flip side - you can often pick these up well below market if people are silly enough to enter a "market" trade. Remember that trade of a share of FNMFO for a mere $1000 a few years ago?
Deception by FHFA. I think they were just trying to shake us up before they shook our lunch money out of our pockets.
Somewhere on 7th street there are some guys browsing this discussion board saying "Fooled ya! Made you look!"
Well - different is usually good in the case of fannie and freddie since all news so far has been bad, but sometimes different is just bad in a different way.
Quote:
Sweep posted more lies and deception .......
It is odd that FHFA has not updated the dividend report, but then again - why make it say TBD and then update it again with the actual date? Waste of time - everyone knows the date.
They have always updated the report on the date it was paid - typically between 4 and 6pm. But just because they wait until the next business day - won't mean the NWS ends. However if no sweep is on the report by the time Fannie and Freddie open for trading on Monday - well... that would be something.
I agree - no sweep this Friday. Normally a week or two before the NWS date the FHFA Table2 starts showing the upcoming NWS date as TBD but not this time.
For example according to the Internet Wayback Machine the date for the Q4 2018 sweep was added on December 13th as: TBD = to be determined but not later than 12/28/2018
I have never seen this document not show "TBD but not before" at least a week before the due date. Often 2 weeks. This is the first time no upcoming NWS date has been posted this close to the due date. This is... different.
Or maybe they are just snoozing at FHFA... forgot... focusing on other things...?
This reminds me of the quote by Phil Connors from the movie "Groundhog Day":
Phil: Something is... different.
Rita: Good or bad?
Phil: Anything different is good..
I can buy/sell OTC and pink sheet stocks in my Schwab IRA. Made a few fannie trades this week in fact. No problem. Been buying/selling fannie and freddie in my IRA since 2007. However I cannot do options in my IRA nor can I use margin. For that I have to use my normal Schwab personal account.
I have another IRA that buys investment real estate...
The $19B number for junior preferred was pulled from the liability side of the balance sheet on fannie's last quarterly report. It has not changed since 2008. That is the total par value of all outstanding fannie junior preferred, not just fnmas.
And if I said market cap that was an incorrect term. Market cap (if that term applies to preferred stock) would be the outstanding shares times current price. I was referring to the total liability that all of the junior preferred represent based on their par value.
Wow DRYS shows what multiple reverse splits can foretell. In 2007 that stock was $1,500,000,000.00 per share split adjusted. Yeah - $1.5 billion. Today it is $3.16. Now that was a bad one. I don't know the history though - there may have been dividends or spin-off's or a merger that contributed to that drop, but wow.
We all hope Mr Cooper does not follow that pattern.
Some rambling thoughts on this board.
This board is the best source of breaking news on Fannie and Freddie I have found. The media, financial sites, brokers, etc are useless for 95% of the news affecting this stock - and a day late. When I see a big move in the stock price, this board is much more likely to give timely insight into that move than any other sources I know of - short of spending every minute of the day searching every site out there.
I don't separate news and discussion about common stock from discussions about junior preferred. Right now both have their prices mainly affected by the same news and what FHFA/Treasury/Congress do. This is why I laugh when people try to apply charting to this stock. It would be counterproductive to try to separate the discussion between JPS and Commons.
It seems the junior preferred are closing in on the end game. Their prices are now about 50% of par. Most of the money to be made in juniors has now been made. Common stock is still 1/10th of what I feel it will ultimately be. The delta was mainly due to the risk of liquidation in the past, but at this point I think liquidation is off the table. With this change in risk/reward, I for one am moving from a 50/50 split between juniors and commons to overweight commons. Just like I started moving from AIG warrants to AIG commons in May. Why park my money in a disaster like this for just a 50% return in maybe 2 years? And the commons still hold out the chance for a ten-bagger or even a hundred-bagger if all the stars and court opinions aligned.
I know I'm not the biggest investor on the board but these stocks are about 50% of my stock portfolio and about 5% of my net worth so these stocks are important to me. I mostly invest in real estate - which brought me to Fannie in the first place.
I feel I'm in the minority by investing in both commons and juniors.
Just like MY opinions, most opinions on this board are really not helpful. The vast majority are by people who don't understand how money works, how the legal system works, how markets work or how politics works. I occasionally glean a bit of useful info about something I had not thought of or that I misunderstood, but 95% of posts are almost not worth reading except to read overall mood and provide the occasional laugh.
Us on this board are a tiny minority of F&F shareholders - and we don't think the way almost all big shareholders think. So big moves usually go against what the membership of the board expects and take us by surprise. Well only surprise for half of us - the other half says "Finally! The market sees I'm right!" This always brings lively discussions which are entertaining and informative.
Being a contrarian I usually bet against big money, so in a way this board fits my investment style pretty well. Today I'm oversharing, but I do try to read over at least the title of all of the posts every day or two and keep most comments to myself.
I guarantee they will release the EnBanc rulings before the end of next month.
Ask me in July and the date will not change - before the end of next month.
Same answer in August, September, October...
More than just appeasing congress. If congress thinks that FHFA or Treasury will recap and release f&f without new laws they may rush to pass a bill like "Jumpstart" that messes things up and ties their hands. So all this talk about wanting new GSE's, etc, etc is to calm them down and prevent them from doing anything stupid while FHFA and Treasury drag their feet.
And there won't be any competitors. Look at f&f. If they have to tie up $150B in reserves, the opportunity cost of all that cash at a market rate of 5% is $7.5 billion per year. Add to that the expected fee for explicit guarantees and you will see a huge hit to profits. If you add competition which reduces their footprint and profit - they may struggle to break even when released.
Nobody is going to invest billions in a new business that is assured to not make a profit.
I'm not day trading, but recently started selling a thousand or so shares every time it goes up 20 cents, and buying 1000 every time it drops 20 cents. I'm not getting rich but it's fun to make $200 a few times a week while I wait. Almost makes me root for Along4zride...
Calabria reiterated the desire to charter more competitors in his shot at the GSE's. I'm not sure that is new, but it's interesting that it's about the only thing he said about f&f. I knew they wanted more competition, but I don't remember having more GSE's chartered being mentioned recently.
To truly meet the needs of people in underserved areas, we need to open up our mortgage finance system to more competition – because competition drives innovation.
One way to do this is for Congress to authorize FHFA to issue more GSE charters so more players can enter the industry and compete with one another.
There is already evidence that this kind of reform would succeed if enacted. Today's reemergent private mortgage insurance industry shows a strong appetite and capacity for private capital to bear mortgage credit risk.
And as more competitors enter the mortgage market, as a regulator, my job is to create a level playing field and subject everyone to the same set of rules.
Fannie and Freddie should be successful because they have the best management, the best execution, the best business practices – not because they have the rules and regulations stacked in their favor.
To be fair to everyone else in the emerging marketplace, no one is going to get any special favors.
So, I will be taking administrative action where I can. And I will be consulting with Congress, the Administration, and other regulators wherever necessary.
And this is new - fix housing by having more people live in RV's and campers:
States like California are a case study of this problem. Almost half the country's homeless population with no shelter whatsoever live in California. And many cities are making it even worse.
We saw this recently in Berkeley, where officials made it illegal for people to live in their R.V.s and campers, even though the city's homeless population has risen by more than 40 percent over the past two years.
Some updates at @HousingShowcase and #IHS2019 on twitter, but I don't think it's being streamed anywhere.
Latest update is:
@FHFA
3 minutes ago
FHFA Director Mark Calabria @HUDgov & @NAHBhome’s Innovative Housing Showcase 2019: It is going to take all of us working together to build a mortgage finance system that is strong and resilient enough to continue lending through an economic downturn. #IHS2019
My point exactly! If JPS were cancelled the common shares would immediately jump by $16.50! I would love to see that jump. Pretty important to follow them.
Junior preferred are critical to the future of Fannie and Freddie. They represent a liability of $19B to Fannie compared to the total market cap for the common stock of about $3.5B. So what happens to the junior preferred can affect the common stock price by about $16.50.
I'd say anything that changes the common stock price by $16.50 per share is a pretty important thing to follow.
Not to mention they will also play a critical role in the upcoming recap and possible release.