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Thanks for that info. My IRA where I do most of GSE trading is not margin. I suppose you need to read the fine print in the agreements you entered into with your broker. I do see where you can opt in to the Fully paid lending program - never even knew about that. The one thing I am sure is that there was a whole boatload of shades shorted the last 2 days .
I put some in at Fidelity & Schwab but price was $3 share . I think If you go over a certain percentage it stops you .
I believe the Financial establishment (big banks and their friends) have been paying brokers to short the GSE's for a long while now to keep them down and out.
Short interest jumped way up yesterday to 50% of total volume and today its probably higher. While naked shorting is definitely still gong on - a large part of this is probably regular shorting. IF YOU WANT TO STOP YOUR SHARES FROM BEING SHORTED - enter a GTC (Good till Cancel) order at a very high price and your shares cannot be lent out to be shorted. Just did this will all my commons - it will only have an impact if a concerted effort is made and some on you large holders get on board.
I'm sick of seeing the same damn thing happen every time the GSE's try to rally. GLTA
That’s what I’m saying. It would probably take Congress to approve this “affordable housing trust fund” - don’t set that happening . Don’t get me wrong I hope the $ motivates the Executive branch but not sure how they can actually use it.
I keep hearing this proposed as the government can access $150 B to use for affordable housing. However, how LEGALLY do they transfer money received directly by the Treasury (General fund) to the FHA (or GSE’s) ? Maybe there is a way - so if someone knows please comment.
So I guess yesterday was just shorts driving the price down to get in lower or was there significant developments in the trial today. Demarco is a total schmuck so maybe that’s starting to become evident to everyone else.
Preferred are getting killed - not much faith in this trial apparently. I expected better but not sure why after all this time.
I would think this stock would be edging up with the trial coming next week. Looks like most investors are pretty pessimistic. Pretty sad if you ask me.
Appreciate that info. There doesn't seem like a lot of information out there about her but she seems to have banking connections and have backing by the banking community which seems like a bit of a red flag. It does appear at least from that video (2018) she would like to see the situation resolved.
I do think one of the positives is that almost all market participants want to see some kind of resolution to this never ending conservatorship, if simply just for stability from administration to administration -so the next administration & director cannot just change it all up. There is too much power in the FHFA (right now as conservator) and that leads to too much uncertainty in the mortgage business particularly as we get closer to next presidential election. Question is what do we get ? I have given up on expecting anything from the court system.
Is that why the stock is dropping again b/c Mad Max is getting involved ? I think with Thompson we get more of the status quo and no rush to do anything with the conservatorship. This is why the financial establishment is behind her as she will do their bidding “keeping the stakeholders happy” . Calhoun sounds like he will push the public utility plan which at least gets them out . He also seems to understand the business side very well and supports the affordable housing push.
Except if the Sr Pfd is unwound and a remedy given (excess paid back) and hod part of the harm goes away and stock will jump - it will be harder to show you have been injured with a big increase in stock value - not to say people may try to file more suits and it could impede raising capital. If it were true that the government might settle other suits and offer to sell the warrants back at reasonable price the stock rockets and won’t need to sell so many shares to raise big capital.
Here’s my take - while I don’t post Ive been following this for long time.
All the P’s are non-cumulative so no back dividends but if common do well ultimately so will preferred. They will need to do a capital raise as the capital requirement keeps going up with the increase in the GSE’s book of business so retained earnings won’t get them there. There is no way they write off the P’s as they are equity and capital which they need - there is no benefit to doing that though they could convert them but more likely they just raise common equity. They also have to settle lawsuits to raise equity and that means honoring the preferred rights but doesn’t necessarily ensure par.
The question is even with a SCOTUS decision in our favor what tricks the government lawyers may try to bend this their way in the resolution and how long it continues to linger in courts. We can’t assume even with a victory there may be a new government over-reach. We do badly need Calabria out and a new lower capital rule - that will help stock price enormously. I own both common & pfd (mostly as a hedge to possible dilution) and I think if one does well they both do well - don’t see it as productive to take sides.
Is the momentum trade back on ?
This was dead money for a few months now looks like traders want back in.
I read this article and think the desire to help the lower end of the market may bring Biden & Co to the table to renegotiate the PSPA - coupled with a loss in the SC could be a good setup for us to see the capital rule lowered and restrictions eased. The bigger point is the $3billion a qtr cap which is a designed (by Calabria no doubt) to kill there business volume and give more to banks its so obvious. Need to get rid of MC asap .
I am fine with the companies receiving the compensation as that will benefit all shareholders. I do think the government had the authority to take over the companies but they needed to either put them through receivership and transfer assets to a government owned corporation (not a practical alternative) or return them to private ownership once the crisis subsided. The fact that they have done neither makes it a taking at this point, in my opinion.
I just did a little research and was surprised how many times the government has nationalized companies in the US though most times it has been in case of war. The ability of the government to take over private companies in times of crisis for the public benefit is well documented but usually the companies were returned to private hands after the crisis passed.
The railroads have a long history of government involvement but a lot of these cases were also situations where the companies were at risk of bankruptcy and possibly could not continue as ongoing concerns without the government intervention (AMTRAK is one case). Government involvement in Chrysler, GM, the Airlines are all well documented but these were all bankruptcy scenarios. the GSE's were never and certainly not now at risk as an ongoing concern. The government could have tried to force receivership on the GSE's but for obvious reasons that was not undertaken. No they are trying to pervert the notion that a conservatorship means you can do anything you want without the injured parties having any recourse. I continue to be surprised how accepting the press & general public seems to be about this situation continuing for years without resolution.
Fourth amendment is really, I think , about unreasonable search and seizure and personal safety in ones home or in public.
The fifth amendment protects taking of personal property (including stocks & investments) by the government (for public purpose) without the just compensation. Implies they may have the right to take property but they gave to pay fair market value for it. Property is taken by eminent domain all the time to build roads & highways but they have to appraise the property and pay what it’s worth.
So the NWS was a taking under 5th amendment- no doubt and now they need to pay one way or the other
I think this may really mean that everyone has a fundamental right for shelter as in “ a roof over your head” not necessarily own the roof. Might be meant to battle homelessness and push her more lower income people owning homes. However, It would be very foolish to try to get everyone to buy a house plus many people these days don’t want to be tied down or have the responsibility
Calabria is an ideologue and in this case acting like a politician talking out both sides of his mouth. Yeah, he says they need to build capital and be released but he also went against the general industry consensus and imposed the 4% capital requirement which is nearly impossible to raise and if they do raise it they will have to price their business much higher which makes them less competitive and lose market share. He wants to cripple them all in the guise of helping them.
Once SCOTUS rules he will be out and that will be good. Biden admin will likely lower the cap rule to closer 3% so they don't hurt affordable/lower income housing goals. If the SCOTUS directs that the SPS is paid (or sends down with those guidelines for a remedy)then maybe we get out from under the SPS yoke. I don't know what will happen with warrants but if price can come up they can raise outside capital (and the price needs to be much higher to avoid huge dilution.
I'm not sure how they get all the lawsuits settled but the new admin can revise the Letter agreement if they see fit so maybe they clear the big ones and escrow for the others. Either way I still think you are looking at a few years before this gets resolved. the key is SCOTUS and if they wimp out it will be more purgatory.
It would be nice to get a FHFA Director who didn’t secretly want to shut the GSE’s down all the while claiming he wanted them released from Conservatorship.
What we need is business people running this operation not ideologues. Maybe we will get lucky and get someone better once SCOTUS rules - they will certainly at least lower the capital requirement as it’s been calculated to increase mortgage costs.
Well I sold some when it was dropping or I might be doing that too at this point. This looks like purely momentum trading ( unless there really is some news or leak).
The fact that preferred stock are getting killed and this is rallying makes no sense if there is some kind of news. It does make sense if someone or many someone’s think they can make a quick buck.
When this really takes off I would expect to see both common & PFD going up. I mean FNMAJ ( which I own) is at under 5 so that’s a 5 bagger when recapped fully - might take several years but still.
For the record I own both and want both to do well.
Working now - must have been technical glitch.
I will comment on run up - today it is still going up on light volume which looks suspect - unless no one wants to sell which is odd after a good increase
Now it (Schwab) says “ trading system unavailable” so this must be a technical web type problem
Schwab won’t let me buy FMCC or FNMA
- says the security symbol is not valid - wtf ?
Fidelity no problems . Anybody else notice anything weird going on?
As of 12/31 $9,015,000 shares
FINRA Short interest report comes out twice a month
Not to be confused with naked shorts which I understand is used by MM to move the price around and settle trades
That’s plausible but if that $20m share trade is real that’s twice the amount of outstanding short shares - so that must be real buying by a large investor (but who really knows with this stock but I guess we will find out if any follow thru tomorrow)
For full information on all kinds of preferred stock issues try the website : quantumonline.com
I will offer my thoughts (follow the board but don’t post often). I watched Pagiliara podcast and while it was meant to help shore up his investors confidence he made good points. I think the Gov will definitely lose at SCOTUS (and they know it) but it will be the APA claim that trips them up as they will say an “acting director “ did the Net worth sweep so they will only say the Director must be removable by will. The APA claim also says they exceeded their authority with the Sweep so losing at SCOTUS will give them cover to write down the SPS and allow recap. I think they keep the warrants as no one has really challenged them on that. Also the biggest risk on this trade is political and while they may be able to justify forgiving the SPS after a SC loss they will have a hard time doing that with warrants unless they are addressed in the remedy but not part of the case.
The problem I see is the warrants hanging over the recap will depress the price of shares and make it more difficult to raise $ . I also have had hard time seeing how a low price benefits the gov as they will get more for their warrants if the price is higher. But maybe they write down the SPS and exercise the warrants immediately if hold them of a portion for higher prices later. Or maybe they execute them and GSE’s but them back while price is low. Either way the market will then have clarity on the total outstanding shares. The problem I also see is the lower the share price the more shares GSE’s then have to sell in the capital raise and that could really hurt common. ( at $2 share they would need a boatload of shares).
Another thing TP overlooks (intentionally?) in the podcast is that the new admin can rewrite the whole PSPA amendment that Mnuchin & Calabria just did. Don’t know what to think about that. There are certainly forces who are hostile to us that have the administrations ear now - but many stakeholders now believe a strong recapped and private entity is necessary - just how to get there. The new admin will also want to lower the capital requirement (to the 3% ? that Treasury just put in the letter agreement) so that is a definite positive. That should be the right level to satisfy safety and soundness while not being economically infeasible.
I am still cautiously optimistic but this is a long term deep value play now and as Pagiliara says maybe it turns out as a contrarian play as well and starts heating up when the inevitable market correction kicks in - one can hope. For now we need the clarity of the SC ruling and more retained earnings. We can also have comfort that the GSE’s are not going anywhere ( they are critical to the economy ) and no feasible alternative exists.
Disclosure: I am long commons & preferred and have been since 2013. I think a rising tide helps both and hope both perform well but just hedged in case one does much better than the other.
Ok I will - I think I must have read that in someone else’s comments.
Don’t forget the complicity of the media in obscuring and spreading mis- information on this saga. Hardly anyone to my knowledge has attacked the government position and stood up for private property rights - its appalling.
I am pretty sure in the original agreement (don’t remember where) there was a clause but with the latest agreement they can now retire the LP with the sale of stock.
If we are being rational and using common sense ( which does not always pay when analyzing this deal) then most certainly SCOTUS will rule that the SPFD is paid - with maybe some $ going back to GSE’s. That then frees the GSE’s to raise capital and the Gov still has the warrants to make out like bandits. Perhaps Mnuchin already knows the result or he just sees the writing on the wall. He also gets no blowback from the whole thing when the GSE’s can raise capital and escape. Calabria should be safe until SCOTUS rules and then he is certainly gone but it will be pretty irreversible at that point.
There is one thing that is pointed out and that is the original PSPA said the SPFD could not be paid back (don’t remember the details of under what circumstances it could be retired) but that could be a problem. I always thought that was an illegal part of the agreement so thought the courts could reverse but not sure that is part of this case. Any remedy will have to consider how to get around that , I think.
It seems to be a lot of people have done much work to get to this point only to give up at that last minute / maybe there is a deal that’s been negotiated and it will now play out / but then again I may be guilty of wishful thinking again .
I think it could be possible to create a new class of common stock (like B shares) that have different rights and sell them in the market or to a few large investors.
One thing discussed (which I don’t think happens because it’s complicated) especially in regards to setting them up as a utility would be to transfer the assets to a “Newco” then the original stock is the legacy and they can issue new with different classification. Because of the sensitive nature and size of the bond market I don’t Think they go down that road but who knows.
I think they are only limited on their “ retained portfolios” / that is the whole loans they own as opposed to the total amount of MBS that is guaranteed. The more concerning part is limits that only a percentage of a lenders business can be sold to GSE’s ( if I’m reading that right). The aim (by FHFA) is ultimately to shrink their business and let banks and other financial operators siphon some off. Keeping GSE business high quality however is a good thing in my mind.
I’m thinking this sell off is overdone and white it will take much longer this does open the door to a path forward. Obviously SCOTUS must rule & Gov lose but I think both sides are now incentivized to settle & the Gov going to have to write off part of their stake. Question is will they be able to raise capital without a write down of the SPS. I can see them converting JPS but that will probably require the settlement & restructure - lots of questions and not a good feel for Yellen and company
Gabby Heffesse works for ACG Analytics which is a DC consulting firm - They specialize in government policy driven business issues and have done a lot of in depth analysis on the GSE issue. Pretty knowledgeable though I’m not sure they know what’s going to happen any more than we do at this point
I can definitely relate to the “tired of the gov boot on the neck” . I’m going to wait also but this one has tried my patience.
They really can’t do without them and there is no reason to stop them building capital but I foresee a long recap as I’m not sure they can entice new investors with the way they have dragged this out, fought tooth and mail in court and mis treated investors. No one trusts the gov to do the right thing - can’t blame them.
I think long term these companies get resolved but now the specter of Congress getting involved again is also adding to the negativity. Talk of a government sponsored utility model would be Ok in the long run but to get there they would have to restructure and possibly use a limited life entity and that might be real bad for existing shareholders. Hopefully, Mnuchin will act but I can also see them waiting for SCOTUS but that still leaves the whole thing up in thee air as to remedy. I think we may get something to put them further on the path before 1/20 but not sure what - its obvious for now people don't want to wait - I think I will wait it out.
I owned FNMA & FHLMC preferred pre-financial crisis but sold when they completely tanked (at that point I thought the whole system was coming down ) lost about $75K. Now have approx 20% of my IRA invested in common & pfd about 50/50. Never would have imagined this would go on this long. GLTA
In my opinion the silence by Mnuchin and Treasury is deafening and very disconcerting. People are bailing - no confidence in the Gov to follow through. Or perhaps there is a plan but no one knows and this is to drive the price way Down so a few big players can get in low. Retail investors are last to know anything and first to get burned. This is just a thought as I don’t know anymore than anybody else. Hope for something positive is fading however.
My point was he is not going to be driving this deal - he has other concerns - I am hopeful Mnuchin has the balls to do it and if so his cronies (and himself) stand to make a lot of money. We hopefully will share in the wealth. I just don’t see any of them being motivated by altruistic purposes.
I think that just showed he owned some bonds - probably purchased by a financial advisor.