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Rockie,
Sorry, I really didn't answer your question. I think you're asking about the advantages of owning a higher quantity of stock at a lower price versus a lower quantity of stock at a higher price?
The only way I view my investments are on a percentage basis--not on a quantity of shares basis.
So, most people don't invest 10 dollars b/c the cost of the trade would pretty much deplete the investment. If you only have $10 then I would rather save up until I had 100 dollars to invest.
Hence the reason why I'm happy with my 17 shares of Google. It's a lot of money and the return has been great.
So if you put 10 grand into P's, K's, or Q's in the end your account value will most likely be higher if you put into into the preferreds at this point unless the Q's get over 5.50/share. But hey, if I'm wrong then all classes came out big time on top and I'm happy for everyone. The broader market has a lot of people spooked still, especially after GS's accusation on Friday and I'm just trying to be as objective as possible so people don't feel like they were misled by a bunch of selfish pumpers.
Rockie
You've been on the boards forever so I'm not concerned about an investor like you. I started saying things last night because I felt that too many newer investors still feel that the 8 x 3 argument is legit and that at the least the FDIC is going to just throw 5-10B at WaMu to make things right. I just read someone thinking that commons will get a couple bucks and the P's will get between 50-100. It's not legally possible. I know anything can happen in a proposed settlement but it wouldn't be approved by the judge because it completely ignores the legal hierarchy of security classes.
I honestly hope everyone comes out rich but I just don't see all security classes coming out on top anymore looking at all the facts as a judge would under the totality of circumstances.
I wish someone would have pumped the H's more back in the day when the only thing I was hearing about were the P's and K's. Oh well. I hope commons do great but I felt the need to make reasonable arguments against the idea that U's have a better ROI.
But doing the math that would only be a six fold increase from here with the commons if they got $1/share and over a 13 fold increase for the P's assuming they get $460/share just to give the commons a dollar.
Right here it looks like commons are overvalued compared to preferreds on a realistic risk/reward basis.
Jerle,
People look up to you on this board. Thanks for being realistic. There's no way that I will take a 540/share haircut on my P's so that the commons can see a buck/share.
Tom Brady
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=49114514
This is what I wrote yesterday. I have written several since trying to debunk the myths of the WAMUQ.
Remember to never get married with a stock or with an investment thesis. This board seems to be much more realistic than that of the commons.
Thanks ND9 for teaching English lessons. Sorry I don't have spell check and there's a software company called symantec. So when I say semantics I mean whether the P's see 950 or 1000 it's the same thing-at least to me.
Here's a math lesson proving my point about the "haircut theory":
For the pref's to give up enough to commons for the commons to see $1/share, the preferreds (P's and K's) would have to give up $1.9B. That's more than half of the value of the P's and K's (assuming that their combined face value is 3.5B).
So lets say there was enough money for P's and K's to get paid full face but not enough for commons to see anything, in order for the preferreds to take a haircut for the commons in a settlement the P's would go from 1000/share to 460/share just so commons could see $1/share.
1.9B/3.5B= 54% (less money for pref's) 1000 * (1-.54)= 460/share
Do people honestly think this would happen?
Could be as long as politics are involved. But I said the fed as in the Federal Reserve. It wasn't very clear what I meant. But I was alluding to the radical idea that Bernanke will use GS as a second institution to control their policies as an example of what will never happen.
I do think GS will go private. I heard Doug Kaas make the prediction on CNBC at the beginning of the year and it makes too much sense now w/Obama in office trying to villify them to get his Financial Reform policy passed. Too similar to what he did with the health insurance companies to get his bill passed.
You're arguing symantics. You're right. It's not 100% true maybe just 99%, but my point is people have been stating crap on this board for too long that is completely unfounded and unrealistic.
Example: Commons will have a better ROI than preferreds, FDIC will pay WaMu billions to make up for the illegal heist, RICO charges on the FDIC, and my favorite--preferreds are a hedge to the commons.
Commons and preferreds are not brothers as others have alluded. We are there DADDY!!!! Hence the name "preferreds" There's precedent in out bankruptcy system that demands by law that prefs see money before commons. Why would a judge sign off on a settlement that doesn't satisfy this law?
Honestly, the odds that commons see 4/share but the pref's don't get damn near 100% is possible but so is the idea that Obama could be a robot built by the Chinese to gain internal secrets.
I wish I could be like Paulson and Co. and go to GS to find a client that owns commons so I could short them against my preferreds.
So what would the disadvantage be to the bondholders to pay off preferreds under your theory? In other words, why would bondholders not want pref's to get paid a higher rate of the NOL's? If pref's got 50 cents on the dollar what would stop bondholders from still taking over WaMu and running it?
Jerle, even if WaMu got $4/share it would still be less of an ROI than investing in P's right here and getting paid the full $1000 FV. P's would have to get paid FV for the commons to get $4/share so the better investment is a no-brainer.
Can you imagine the uproar by JPM shareholders if JPM did pay WaMu $4/share (or an extra 8B) to settle 18 months later? Lawsuits all over the place by investors for an injunction to stop the settlement, against their BOD, and yes, Jaime himself for destruction of shareholder value. SEC may even investigate to see if they misled shareholders about the deal like BAC/Merryl. It would take months maybe years for everything to pan out.
This isn't a Bear Sterns situation b/c the takeover happened almost 2 years ago, not last week and most importantly JPM bid on Bear Sterns on a per share level whereas FDIC handed WaMu to them. How could they say no?
Josh,
I 100% believe that the 4B goes to WaMu. The MOR has included the 4B which I didn't know about (and doubt many did either) at the time of the "settlement". We know that the 4B and even the portion of the NOL's that WaMu is to get back under the current "settlement" doesn't cover the 7 or 8 billion of debtors claims-- still not leaving anything to preferreds. Yes Starke said maybe 15-20% pref's payout but he prefaced the 15-20% with a 0%. But I don't believe the "settlement" is final and there's more money to be had probably 20-40% FV.
This is what scares me: WaMu's attorneys tried to settle by giving some of the NOL's to JPM and to the FDIC. This is a red flag to me. It makes me think that there are things that we don't know about as to why WaMu would feel comfortable giving FDIC and JPM billions of their dollars away to the same organizations that supposedly evaporated a 130 year-old solvent company.
I'm in law school. I know many attorneys. Yes we are greedy and love money, but we also are obsessed with our reputation and winning. Rosen, to be representing WaMu, must be extremely skilled, intellectual,competitive and greedy. He's not going to "throw away" billions of dollars in a settlement just to get the case over. In this economy, Rosen wants to stay on this case as long as possible because he knows many other skilled attorneys that are jobless. This is a landmark case that him and his firm will cite to for the rest of their lives to gain other muli-billion dollar clients. I do not think Rosen is corrupt. I think it's part of a strategy and/or part of a pay-off for some uncovered scandal that JPM and FDIC know about.
So in my opinion, preferreds will get paid but probably not in full. I just don't see anything going to commons unless pref's get near face and the commons get thrown 50 cents to at most $1/share.
If someone wants to invest (not flip) in WaMu today, 90-95% should be in preferreds and the remaining in commons praying for a short-squeeze.
Steve
Josh,the 4billion is included in the mor because rosen said so at the "settlement" hearing. Why do people think the FDIC is just going to pay WaMu 8billion? It's not happenening. There's been months and months, if not not years, of the same speculation that people have begun to believe as facts. I'm not trying to attack you but it's not fair for other readers to read info about stocks that's not ever going to happen. It's much more believable that the Fed will takeover Goldman sachs or that google will buy walmart than the idea that commons will have a better roi than preferreds. Why would the government pay out 8 billion on top of losing the NOL's that wmi gave to them in the settlement?
Josh,
At the current pps of the P's, you're opinion that U's have a better ROI is true IF they get more than $5.50/share. I don't care what anyone says--it's not happening and it's completely unrealistic. Why aren't people satisfied with a 30x increase at this price of the P's IF they get full value when the chance that the U's get over $5.50 on top of the prefs getting paid in full is about 1 in 10 billion?
People need to realize that preferreds aren't a hedge--the commons are. In buying the U's, you are hedging your bet that hell freezes over and the commons do indeed get an $8 bid from JPM or even the outlandishly comical $8 x 3 settlement so that you can catch a bit of the upside. Just like when people buy both commons and calls of a stock so they can capture a little extra ROI on those calls just in case there's a big pop to the upside.
I say when hell freezes over because that is the day that everything goes "perfect" with a bet against the government by winning a Federal Racketeering charge against the FDIC. Looking at all the facts from a judges perspective (not from an investors)it was reasonable what the FDIC did under the totality of the circumstances. Maybe even slightly unreasonable but not to the point RICO will apply and an additional $16 will be added to the pps of the commons.
I understand that a "wipe out" doesn't mean that prefs won't see a dime. I just don't see why DR says prefs are in the money when this was just a proposal. Basically it's a misleading statement.
Now it does make me feel good about my P's and K's knowing that when the debtors claim WaMu is insolvent they feel there's still money for the prefs when generally that isn't the case w/other BK's.
Do you know Jerle, or anyone else, how much these liquidated trust interests are worth or valued at? Or really do you know what they are?
First thing that came to mind was that the initial capital received from the Caymen's would be liquidated and be distributed back to P's and K's effectively canceling the Cayman's and making them worthless. I'm probably wrong but spreading a few billion back to the P's and K's would make me happy.
DR, why would you say preferreds are in the money? This was just a proposed plan from the debtors. Now, this makes me feel better knowing that the debtors are trying to pay something to the preferreds even though we've been told that the debtors want to wipe out equity (and preferreds to my understanding) claiming WaMu was insolvent.
Question to all: How much would these distributions of trust interests be valued at?
Here is what Dr was referring to when he said preferreds are in the money:
"The debtors asserted in their Motion to Disband that they were insolvent and the Committee had no economic interest in these Chapter 11 cases."2
2"Curiously this assertion is contrary to the debtor's own plan of reorganization dated March 26, 2010, which provides for the distribution of liquidating trust interests to preferred equity holders."
All responses appreciated
Steve
Rockie,
You probably just punched it in your calculator wrong.
77,500/1000 = $77.50/share.
The K's were at 4% per year or 25 * .04 = $1/year or .25/quarterly
It was per year. If it was 77.50 per quarter it would have been yielding over 30% per year at 1000/face.
Thanks Kirby. That makes sense. I'm just trying to figure out why Rosen isn't fighting for the last drop. I know his firm is being paid by WaMu so it's not like he has an incentive to get this over with unless he's got something going on in his personal life (but in that case another attorney would just step in) or his firm worked out a fixed hourly billing amount plus some type of bonus structure with WaMu that varies with the recovery amount.
It's been my experience that Wall Street attorneys that work multi-billion dollar cases are where they're at for a reason and I don't buy this talk of corruption and potential disbarment.
My idea is that maybe talks had stalled long enough so Rosen just agreed to a settlement knowing that the EC's intervention would increase value because he couldn't do it alone. Almost like a 1 on 2 situation, where Rosen was pinned against the FDIC and JPM and now bringing in the EC makes the fight even.
Attorneys will scrap for almost anything in this economy and it just doesn't make since why Rosen and his firm would potentially leave billions on the table. There's got to be something that we don't know about. Either this is pure strategy or some illegal activities that WaMu participated in that the FDIC and JPM know about that this case has exposed. My guess is both with a heavier weighting on the former.
Steve
And how much of the 7B that the press is mentioning that will be paid to debtors are the WMB bondholders claiming?
Look, I've been a holder since Oct 2008, but when the person that got screwed comes up with a settlement to be made whole, how often does their proposal get rejected b/c they're not asking for enough? Or in a civil suit how often does the judge just tack on a couple extra grand onto the plaintiff's damages because it would be more just?
Maybe I'm missing something but a part of me feels that the bondholders completely control this suit and we (preferreds) really don't have much of a voice. We're taught to leave the 99 sheep and go after the 1 that is lost but I don't think the 7 debtors are going to walk away from a 100% payout to save the 8th (us).
Someone please explain to me where legal precedence would say otherwise. I really want to be wrong...
Thanks,
Steve
Has anyone thought of the possibility that classes 2,3,12, and 14-18 would approve the POR since they would effectively be made whole essentially throwing the preferreds (class 19) under the bus?
I doubt the vote of approval has to be 100% b/c it would be impossible to please everyone especially those at the bottom.
What would the odds be that the Walrath doesn't sign off just because the preferreds got shafted but all other classes are satisfied?
Steve
Hardasset,
What was the percentage of face value that the Worldcom preferreds received?
There's no way the Senate won't look into how the bank's failure was handled and exactly what role the FDIC and JPM played. The author only mentioned that the Senate will look into deceptive loan practices to boast about his past articles building credibility with his readers. There's nothing new that the Senate would learn now after hearing people like Angelo Mozilo two years ago and dozens of others since about these practices that fueled the financial meltdown.
Senate beginning their investigation on WaMu. This could eventually be the Bear Stearns'-like catalyst we need to get JPM to pay up.
http://huffpostfund.org/blog/2010/03/17/senate-inquiry-open-probe-washington-mutual
Jerle,
What numbers are you crunching? It seems like you've abandoned your mini balance sheet that you got from the MOR b/c of yesterday's price action. I've read everyone of your posts for the last year and a half and according to you we were 1.4B in the hole. Now that we just got 6B what has changed? I'm pissed at the EC also but I think we're fine. Thoughts?
Steve
Bluebird,
I thought I'd reply so others can read this. I get all my numbers from the Jan MOR. According to my numbers, Rosen is our hero. What does everyone else have for their numbers? I'm hearing b/t 175MM (5% face for P's &K's) and 700MM (20% face) left over for disbursement. I don't see why. Steve
Assets: 6.93B
Liabilities* (8.31B)
Settled Trust Pref's** .337B
Total (1.043B)
Proposal w/deposit
and NOL's 5.9B
Total for
Disbursement 4.857B
Wampq and Wamkq's total face value is 3.5B. Paying P's and K's in full, there's 1.357BB left for litigation, accounting fees, and common shareholders.
*6.56B in bonds (senior, subordinated, and junior subordinated debt). Hence Kirsten Grind saying bondholders who claim about 7B would be paid from the proposal. Also includes the 16.8MM post petition liabilities that sounded like were settled.
** Capital trust preferreds Wahuq's are subordinated unsecured debt so the proposal will decrease the liabilities by between 337.68MM (10.08MM s/o x 33.5/share) and 503.7MM (full face value--10.08MM x 50/share). This doesn't include Cayman's b/c I don't know their value.
So what are your numbers? Based on the January MOR we're positive 4.2-4.4BB based on today's proposal. After paying off the P's and K's there's still some for the commons b/c H's are assumed by JPM. I'm not being a jerk just wondering what numbers you are using b/c I don't know what other numbers to use. Thanks
Steve
The man representing EC testified that he hadn't heard of this agreement. Why is everyone assuming that the EC weren't part of the negotiations?
Clearly Rosen, JPM, and the FDIC can't be that stupid to not fill the EC in on negotiating points. Maybe they were up to par last night but one or several negotiating points changed? Doesn't anyone think the EC would have filed something w/the court/UST/THJMW if they were truly kept in the dark the whole time? Nobody would truly be that dumb to not raise hell w/as much on the line as they have.
Important to note that this is a settlement. Both sides gave up something. By handing over the 4BB deposit JPM and FDIC concedes that it was taken unjustly but WAMU forfeited a potential unjust enrichment claim (there goes the Q's 3X damages claim). Hell there was 10BB at stake and we got 60%. I feel great except when I look at the pps today. Of course, aimho.
Plus, sounds like some of those liabilities got assumed by JPM. We have to be looking at a 40-60% of FV on the preferreds still. H's are now positive. Time to double down. Thoughts?
Steve
I was listening in my car thinking when I get home and check pps we'd be b/t 300-400. I'll hold until everything's divided up by the judge. Maybe buy more...
According to what I heard, WMI just got about 6B...the 4B deposit and about another 2B from the NOL's. Am I wrong or does this put WMI in the Black?
Testimony that JPM and Citi took down Lehman. If there's no settlement then we have precedent that JPM colluded to take down the Wall Street vulnerable.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ab1XUybpK4Vg
I've been in since Nov. 2008 and I've read almost every post. To the usual posters on this forum. Thank you. You've helped pay for someone's law school and hopefully a lot more.
Steve
If the panel review rejects it does that mean it's over or does it mean CTIC will have to tweak some things before the FDA meeting? I'm trying to figure out the pps based on the two scenarios of the panel review. Any thoughts appreciated. Steve
HYG and JNK are great income etf's and they pay the div monthly. If you're in a high tax bracket HYD (muni bond etf) would be tax free. If you're in a lower tax bracket look at high yielding mlp's like line, epd, or ns.