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Agree. No surprise that the opposition will push it's narrative just as they did during the campaign. Let's hope they're just as wrong now.
I have no problem with a utility model. Exactly what Ackman has proposed.
Please attach or provide the details if possible.
Yes - just posted that on TH717
Tim Rood CNBC segment
http://video.cnbc.com/gallery/?video=3000574296&play=1
"Indentured servitude" "About the most un-American thing you could do taking two private companies, nationalizing them and keeping the profits" "There's a huge opportunity there" - some quick notes
Then of course CNBC starts the music and ends the segment
No decision today
Unf-ingbelievable!Where the hell do they find these people? You could have true experts: Rosner, Bove, Howard, Berkowitz, Fiderer, etc., but instead as you said one calling for liquidation for companies earning BILLIONS and the other saying how getting rid of the 30 year might be a great thing for future generations. Seriously WTF!?
Appreciate the feedback. I haven't given a tremendous consideration to congress now only because of the new admin and Mnuchin's comments.
FYI - just saw an additional post from Tim Howard
"I’ve never said that I am with “fine” with the warrants being exercised. I also don’t dispute any of the misdeeds by Treasury and others that you cite, or that Treasury has done nothing to earn the 79.9 percent of Fannie and Freddie’s common stock it in essence granted itself, after bullying the Fannie and Freddie boards into accepting conservatorships they didn’t need while refusing to tell them the terms that would be imposed upon them in the aftermath. All that is true, regrettable and deplorable.
But what happens now? I believe that in a negotiated settlement between the Trump administration and plaintiffs in the lawsuits, it is more likely than not that the warrants will be exercised–although likely on terms different from and more favorable to shareholders than the original terms of the PSPAs–simply because that will be one of the components required to get a deal done. Do I wish it were otherwise? I certainly do. But what’s the alternative?
None of the plaintiffs in the net worth sweep cases challenged the original action by the government to take over the companies in 2008, or the terms imposed upon them by the PSPAs. (There is a reason for that, which I don’t agree with–and if asked won’t say what it was–but that’s done; “it is what it is.”) The “takeover and the terms” of the 2008 conservatorship WERE challenged in the Washington Federal lawsuit, but as I first learned from the Rule of Law Guy and have subsequently confirmed elsewhere, the lead counsel in that suit took it on contingency with a view to settling, and are highly unlikely to want to invest the significant amount of time and money required to carve themselves out of a settlement and pursue years worth of litigation on their own. Without credible leverage of continued litigation against the warrants, which so far I’ve seen no evidence of, I have to conclude that–as unpleasant as it is to contemplate Treasury being rewarded for its illegal behavior–the warrants most likely are in play."
Did the same. I try to email once a week for ages now fwiw. If every FnF investor inundated receptive outlets regularly maybe we could get some honest press like Bove video.
newsmanager@foxnews.com
elrushbo@eibnet.us
oreilly@foxnews.com
This makes solid sense to me. I just get stuck on the idea that a guy like Mnuchin wouldn't try to find a way to make some money for the admin., but maybe that is not the case.
Have you examined the possibility where they settle with prfd's and wipe out common, do a brand new offering under a totally new entity? Not even sure if this is possible, but trying to think about the "black swan" scenario. Similar concern would also be they just dilute the hell out of common. I don't see this, but I spend most of my time looking at what no one thinks will happen in terms of a negative outcome.
On a side note, what would be the downside outlier to owning prf'd right now? Granted it might be a lesser return, but aren't the prfd's basically guaranteed money right now. I don't see a downside in terms of risk.
Is there any proof that he still has the position today? I certainly hope that he does.
From Tim Howard over the weekend. This is basically exactly my opinion. BY - what you propose will happen would be terrific and I hope you're right, but the major players are not going to care if the gov makes money on warrants as long as their investments pay off. Most of the boards, blogs, article comments are loaded with peoples feelings about what should happen, what's morally right/wrong vs the likely probability of what will happen. Thanks for your feedback as I consider you one of maybe a dozen people who actually have the knowledge to make intelligent, educated analysis on the subject.
"There have been numerous points of view expressed and opinions offered about the best way to handle the warrants Treasury granted itself for 79.9 percent of Fannie’s and Freddie’s common stock. Whatever we may think about the merits of any of them, in a negotiated settlement what actually is done with the warrants will depend on what is agreed to by the principals of that negotiation–the plaintiffs in the lawsuits on the one hand and the designated representatives of the Trump administration on the other. None of us outside that small circle has any direct ability to influence the outcome (much as we/they may wish to.)
The representatives of the Trump administration will in my view want to be able to extract some additional money from the settlement (over and above the $67 billion the government already has received through the 10 percent after-tax dividend on the companies’ outstanding senior preferred stock), while plaintiffs will want to receive full value for the outstanding junior preferred stock and also maximize the value of Fannie and Freddie as going concerns. Given that, I now think it most likely that the warrants WILL be converted, but at a strike price and over a time frame that balances the need to recapitalize the companies with allowing the government to extract value for their warrants without excessive negative effects on the companies’ stock prices (which would both jeopardize the recapitalization and reduce the proceeds to the government from warrant conversion). Fortunately, this sort of balancing act is what the investment professionals who now will be on both sides of this negotiation are good at, and we will have to wait and watch to see how they plan to pull it off. If it makes us feel better we can all express our opinions in the meantime, but speaking for myself I don’t pretend to know more about how to do this than the people who will be sitting around the table negotiating it."
You're missing the point of reality. I don't disagree with anything you've said, but what I'm telling you is that Mnuchin will structure a deal that the major players agree to and it's over. I made this investment in FNMA and FNMAS to make money. If the majors are happy then I think that there's a very high probability that I'm happy too. Many investors in this have far to grandiose hopes of what they're ultimately going to get in terms of damages, etc. IMHO
What you're saying makes sense to me, but I just don't think with the infrastructure spending, deficits, etc. that guys like Trump/Mnuchin leave a big plum on the table when they could structure a deal that would make a small fortune for treasury (over the small fortune stolen already) and please the shareholders as well. There have already been enough improvements in terms of risk to FnF so they transition to a utility type model. Why wouldn't they do this? The admin looks like hero's for ending conservatorship and fostering affordable housing, they bash Obama with the future docs/ammo and they make a bunch of money.
Big Yank, Navy, Patswil and anyone else who cares to comment: I asked this on another board and I'm curious what your thoughts are.
I believe the senior prf’d outstanding is $187B and jr prf’d is around $17B. I think it’s a strong possibility that the excess over the 10% original dividend is returned through reducing/eliminating the senior prf’d. Anything beyond this where people are talking about damages and all other is nonsense IMO. Assuming above, how does the recap take place? It would seem that treasury might raise the exercise price on it’s warrants as a way to get the highest pps and encourage investment in the common. I don’t think that right or wrong a guy like Mnuchin doesn’t take advantage of the warrants. The biggest shareholders and litigants don’t care about the warrants as long as they get a pps that they find acceptable. So the cases are settled and the gov wins along with the shareholders. This is how I see this playing out. If there are smaller suits that want to keep fighting in the courts for years, then I guess they do that. In the end, if the pps is high enough, I think most shareholders (including myself) are happy with the investment. Would I like to see everyone involved pay a price for what they’ve done in terms of a moral case, absolutely! I just don’t think it’s realistic given the situation and all of the variables involved.
Dick Bove and Gasbag on Fox Business now on FnF
Agree. I have read all of Tim's work and often message him. Big Yank also raised a very valid point regarding the increased rates and how that would dramatically increase FnF profit enabling a much quicker recap potential. Just putting it out there to get feedback as I think the biggest mistake an investor can make is feeding their own bias. As a result, I like to look at information that opposes my own view as this is where the best analysis and answers lie. "Tell em bro", "back the truck up", "the boats at the dock" doesn't cut it for me....LOL. JMHO
It was in reference to the baseless, hollow response devoid of any fact or coherent reason.
You must be a lib. Suck it up cupcake. This isn't a safe space.
Example of intelligent response "bro"
in my opinion there could be 2 flaws with the kbw analysis:
a) he might assume all of the capital proceeds need to be raised immediately rather than over time
b) it's circular, if the stock price rises then far fewer shares need to be issued, creating a higher current fair value
in addition, there is some small chance the warrants are not exercised.
the analysis of this investment is time consuming and stressful ---- many people don't want the career risk to be associated with this call, and thus they come up reasons (that sound good) to stay away.
Full disclosure, I'm in FNMA at $1.71 pps and FNMAS at $3.50 pps. Intelligent analysis of opposing views isn't "tell'em bro" and "boats on the dock". The only thing that truly sucks about this board is people arbitrarily cheer leading and hoping instead of working to analyze various situations, possibilities, concerns, etc.
Everything can't be dismissed as "paid to write", "working for the shorts", etc. I'm LONG FNMA and FNMAS and substantially so, but it pays to look at everything that's contrary to one's own opinion and bias (my own included). So how about applying facts and math to dispel this article as opposed to cliche one liners?
Just saw this. Opinions?
By Felice Maranz
(Bloomberg) -- (Corrects headline to reflect value of
shares rather than actual price of shares)
Even in "best case scenario" of Fannie, Freddie privatization
with 2.5% capital requirement, capital need would "meaningfully"
dilute common shares’ value, suggesting little upside from
current levels, KBW’s Bose George writes in note.
* Still believes most likely scenario is one in which common
shares have no value
* Notes FNMA, FMCC rallied on Steven Mnuchin comments about new
administration wanting to get GSEs out of government hands;
resolving GSE issue was top 10 priority for new administration;
but KBW believes share movement has been based on "unrealistic"
earnings expectations as there hasn’t been enough focus on lack
of capital
** Even if GSE litigation were successful and Trump White House
decides to let FNMA, FMCC go back to prior business model, with
2.5% capital, shares already trading at ~10x pro forma earnings
** Under best case, assuming 2.5% capital requirement, FNMA
would need >$75b, FMCC would need >$50b; if this were to be
raised at ~$5 a share, share count at both would grow by ~4x;
est. fair value would then be ~$4 (current level); if capital
level were set at 5%, fair value would fall into $2.50 range
** Also notes if third amendment to the GSEs’ senior preferred
stock purchase agreements were overturned, GSEs could replace
sweep with periodic commitment fee (meant to compensate Treasury
for ongoing commitment via $400b credit line)
Nothing today. So much for premonition.
Totally agree! I'm just saying that the docs the AC already has clearly shows that the entire Lamberth argument was built on a lie, i.e. "death spiral" vs "salt the earth", "golden age of profitabilty", etc. Lambert constructed his argument while missing so many key facts on this case. The judges should in no way ignore this fact.
Anything's possible, but I'm just not sure they would wait on info from another case. Anyone know the precedent for a similar situation they can point to?
I think the delay is because it is not unanimous and probably Millet is writing the dissent.
If they have enough now they reverse and if not all of the docs will be discovered under a remand with an admin record. Who knows, just my opinion.
I don't think the DC Appeals is waiting on another court. They have all the ammo they need to at the very least remand for a full admin record and maybe enough already for reversal.
No. The Fairholme case moves on until settled.
Obama could release and settle to bury the docs and prevent giving Trump from taking credit. Long shot, but I wouldn't put anything past Obama being the crooked bastard that he is.
It does have that feel. See how the premonition gauge is working.
I don't see how Perry can affirm Lamberth given that judges know the entire argument made to Lamberth was a lie. The additional docs they have show the false narrative. The clear and responsible thing to do would be to remand with an order for a full record, but I still think there is a good chance for a reversal IMHO.
Best name yet!!! GasBaganino
Gasparino such an idiot. Tells half the story. Talks about going back to same old model that "blew up". No talk of a utility model with protected secondary market, no talk about illegality of net worth sweep, no talk about lawsuits, no talk about Obama exec and pres. priv. docs and/or Sweeney. Douche bag!!
Anyone catch Issa used "receivership" when talking about FnF on Fox Business?! Totally missed it myself.
http://video.foxbusiness.com/v/5230731870001/?#sp=show-clips
How would that make any sense? They need to build confidence in shareholders for further investment. Killing common's is something Obama would have done.
Main point I liked is they should be free from gov control. As far as his other BS, it's Trasury/FHFA that will act outside of congressional control.
Watch at 7:22 Darrell Issa on Fox Business
http://video.foxbusiness.com/v/5230731870001/?#sp=show-clips
What do think about FNMFO?
This makes sense. I can't see them doing something to damage shareholders when they need to build a level of trust to bring in additional investment. I think that a merger of Fannie Mae and Freddie Mac could be in the cards. Tremendous cost savings. Excellent point on the effects of 100 basis point rise.
Completely agree! I added preferred's yesterday and plan to add common today.
One concern I have is how likely do you think it is that congress could impose capital requirements so high that they would greatly hurt shareholders? There are way to get around such a scenario, but curious if you've looked at this.