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Thanks for the FITCH release:
I see a conflict that you may be able to clear up.
FITCH reports in the 4/06/18 press release that F&F Preferred Stock is NOW rated as C/RR6, which I understand is "worthless". And explained that it was a classification error back in 2008 when it was mistakenly rated as AA.
Another poster printed out that Fannie's Preferred Stock Credit Rating was C/RR6 in a document dated 6/30/2016. Also included was a D by Standard and Poor's and a Ca by Moody's.
DOES THIS MEAN THAT F&F preferred stock is classified as worthless and has been since 2008?
Sorry if I appear confused.
Johncm-In reading the set of view graphs presented lately I saw that NG had drilled a few thousand of the core drillings financed by the $8 million the BOD had authorized. This was intended to be more info on getting into mining sooner. I thought maybe you might be in touch with someone who would know more about the results. Just asking! hnstabe
Hello johncm- Just wondering if you or anyone has news about the success of the drilling program underway? thanks
Yes, Sec of Treas Paulson announced that the govt is seizing F&F and the GSE agencies executives have been ousted. We all know that they were threatened so they agreed to resign.
By the way, my opinion of the Moelis Safety and Soundness Blueprint is that it covers all the bases, including the shareholders interests. I vote to accept it as the settlement document.
Anybody else get it read?
This sample of documents seems both real and relevant. Our govt purposefully developed plans to wind down the GSEs. Quite a number of substantiating paragraphs about support for TBTF banks in the secondard mbs world, F&F not being the cause of the mortgage finance recession, etc. I may read it again tomorrow.
The 11,000 documents may blow the lid off the whole fraudulent nationalization effort.
Who Owns Fannie and Freddie? The US Treasury owns them, and since the US Government owns the UST, and since the Taxpayers own the US Government, the Taxpayers own Fannie and Freddie. Government is control and everything they do is expressed in terms of, "for the good of the taxpayer". All the shareholders can do is sue, write letters, wait, and pray that ownership will be corrected.
I have been waiting for a year. So, how much longer?
I cannot see Congressional housing finance reform until 2018.
I cannot see a 2017 court decision in favor of the GSEs even though our govt is guilty of SEC violations, 5th amendment takings, accounting fraud. misrepresenting fiscal conditions at F&F to the courts, using unappropriated monies to support Obamacare, etc.
I cannot see Donald Trump or Steve Mnuchin taking independent direct actions in 2017 that will reduce inflow of F&F earnings into the Treasury. The Treas will need the GSE money while other programs are incubating.
I cannot see the FHFA (Watt)as successful in stopping NWS without UST permission and even if he can that is probably 6 months away.
I cannot see F&F stock price affected by normal market forces. F&F are fiscally successful but since the government owns them and is taking all those earnings for themselves the shareholders are very disadvantaged and not participating in what should show as real stock value gain.
The bottom line for me is that I feel that the pps will continue to fluctuate in the current 25 cent range for another 6 months. So this is a 2017 forecast.
Some of my premises may not be valid or severely incomplete. If so my argument would be unsound and lead me to make investment changes not to my benefit in the long run.
I have written this hopeful that some of you would comment on my logic and accuracy. If not, it is ok. hnstabe
I remember that as well, but had forgot. Surely someone would have produced the permission wording by now if it exists.
You may be right but can you point out where it is written that Watt is allowed to withhold the NWS distribution.
Using some of my skills from a Creative Writing course way back when, I can get 5.1 to read as "Seller shall not make any other distribution with respect to any of Seller's Equity interests or set aside any amount for any such purpose." So he can not do it.
I do not think Watt will come through for us.
I would like to believe Watt about his authority to suspend or halt the NWS. However, I reread some of HERA and the SPSPA and it says two things of high interest:
--per my interpretation:
SPSPA 5.3-Conservator shall not without permission of the Treasury terminate the conservatorship other than in connection with a receivership...
and
SPSPA 5.1-Conservator shall not without permission of the Treasury make any distribution other than specified by the SPSPA or otherwise acquire for value any of the Seller's (Conservator) Equity interests, or set aside any amount for any such purpose.
I think 5.1 means that Watt can not acquire the dividend nor delay it unless Mnuchin permits it.
Hi rekcusdo, Since Watt has been there for the last 12-16 quarters he has missed all those opportunities to suspend the NWS and since he now says it has been legal along, he has not done everything he is legally able to do for 3-4 years now. Perhaps since the boss has changed we may now see Watt do it. Wouldn't that be stroke of good fortune.
But the pfds are not related to market price either. Isn't that why my fnmas are $8, not $50? Why would one use fair value on one type of share and not another?
Perhaps it is the valuation vs the market price. The pfds value is not related to market price so why is the commons? Or is it?
Yes, I know about the $19.13b for pfds. Then why not get the remainder of the mkt cap from the 5.893b commons. That would be a valuation of 160.84 / 5.893 = $27.29 pps. I do not see the link to the recap.
You showed me that calculation about a month ago. I think I followed most of it. But, please explain why the preferreds hold at the $19.13 b while the commons have to suffer a forward split to reach their share of the mkt cap?
to be continued. thanks
I like your schedule except it is a bit conservative.
When conservatorship is halted both the warrants and govt Preferreds are canceled. And a chunk of the $100 B overage paid to UST comes back to the GSEs.
The pps gets to $100 ahead of schedule and on to Patswil one year after NYSE listing.
Nice thoughts.
Would you please restate your expectations of Mel Watt's message. thanks.
Darn.
Is that tweet really from Sean Spicer? Stunning that he would have the guts to address Mnuchin directly. The "You are Fired" letter may come from D. Trump.
You just reminded me of another reason to bail. I did this morning and saved a few bucks. Only down $486 today. I really liked the GSEs and their chances of providing multiples on the $2.50 or so I paid last summer. But, I am pretty ancient, and do not have time to recover if I lose my entire investment.
I have read a lot, and learned a lot. A few of you guys are really knowledgeable but the external influencing factors and financial wrinkles are just too many for me to see what's over the horizon.
Good luck to all you investors in F&F.
hnstabe
Yes, I saw that but I leave for a tennis game at 6:45. Well, I hope the interview is spectacular and everyone is chatting about it when I get home at about 9:45. GLTA
Thanks.
What Time on Fox Bus Channel is the Mnuchin interview scheduled?
OK, I saw you had the $82B recap. That was the assumption that I missed. BTW. How does the $12 pps relate to the market price?
How did the $12 pps come about - I see it is part of the recap number. Is it a variable to reach the desired outcome?
So what is the difference between issued and exercised?
Does this apply to warrants only?
the 5.8 Billion shares is factoring in the 79.9 % as outstanding shares. I think.
I think your $12.31 is earnings for both F&F, while the l.l6 B outstanding shares for Fannie only. Big differences in math.
I used FNMA at 1.6 B and $7B earnings. How does the recap figure into it?
I had not thought my investments through considering the probabilities of release vs receivership. I just covered both events at 50/50 without the payoff in each case.
Release: Commons-pps is $3 investment today.
future pps say a year out = $7B / 1.8 sh x 15 PE
= $87
Multiplier = 87/3 = 29
Preferred-pps is a $7 investment today
future pps at par say a year out = $50
Multiplier = 50/7 = 7
So if release happens, I get a 4:1 better return per dollar invested with commons.
Receivership: Commons-zero return
Preferred - pay off at par. $50
Multiplier = 50/7 =7.
So if receivership happens, I get 7 times my investment in preferreds, but I lose the 50% invested in commons.
OK, consider if I have $10,000 to invest.
If release happens:
all $10k in commons at $3/sh = 10000/3 x $87 = $289,000
all $10k in preferreds at $7/sh = 100000/7 x $71,400
1/2 commons, 1/2 preferreds = $144,500 + $35,700 = $180,200
If receivership happens:
all $10,000 in commons at $3/sh = ZERO
all $10,000 in preferreds at $7/sh = $71,400
1/2 commons, 1/2 preferreds at $7/sh = $0 + $35,700 = $35,700
It is straightforward to see that I can risk 1/2 of my $10,000 investment on commons and still increase the total investment value to $35,700 minimum. That is not bad if I am risk adverse.
Then, do I pass up the chance to pick up $144,500 more by buying $5,0000 of commons or just buy $5,0000 more of preferred and pick up another $35,700.
The primary question is the probability of Release vs Receivership. All you bright guys on politics and law can make that guess better than I. Is it 3:1 for Release or what? With that in my back pocket my wallet can get fatter or not. I do not really expect an answer.
I know this whole exercise is sort of stupid but it's raining and my golf game is even cancelled for tomorrow.
GLTA
Maybe I get it. There is $19B+ available (true equity-depends on tax changes) for shareholders in receivership. Since the preferreds have preference for most of that there will be relatively no equity remaining for the common stock. So the bottom line is, get out of commons and into preferreds just in case receivership wins.
Should release win, then the gain on commons is perhaps significantly better than gain on preferreds. What's the multiplier?
So depending on ones financial situation and risk tolerance the call is up to each individual investor.
How far off am I? an inch or ten miles?
I did read it but I don't see why the shareholders have rights to legal recourse different than now and we do not have those rights now. Curious about the 80% ownership rights in finding a new buyer. Where does recapitalization come in with the new entity?
You must be tiring of this. Me too, going to catch the NFL draft news.
OK, but existing shareholders are kaput.
I will take a further look>
I read page 109. It seems there are two possibilities. Release or Receivership. If Release, then we are wealthier. If Receivership, then HERA reads "no shareholder shall have any right or claim .."
I understand that. Doesn't no shareholder mean no shareholder?
Why then have you chosen preferred? Please continue the dialogue for the benefit for some of us that are paying attention.
That was a great summary of the housing costs over time. One additional factor that I have dealt with is the geography. What would happen if you located the starter house in Kansas City verses in San Mateo? Crazy price situation in some locales.
Well thank you for the explanation of the free phones for the low income population. I presumed it was at govt expense. Now I can correct misconceptions of others.
I placed a small sell order on FNMAS and Fidelity took the order. However, they do show no action on the chart.
Yes, I remember reading that as well and there were a couple of comments about it. It is very strange that the GSEs would have the privilege of gatekeeper on documents. Defeats the whole purpose. But, I do not know where it is referenced officially.
Well, I stumbled onto the tax relief changes. The standard deduction is shown as being doubled. WOW! Big change for me. My estimated tax payments will much easier.
hnstabe
you write, .. They are doubling the personal exemption...
I do my own taxes and use $15,100 for standard deduction. or are you referring to Exemptions $4050 x number on 6b = $8,100.
Which is it that is being doubled?
thanks
I remember that 600 or so community banks had substantial capital investment in GSE preferred stocks, which I think was referred to as Tier 1 Capital. There is lots of data in the report. That was 600 out of 7000.