This article only serves to reinforce a point made yesterday on the earnings expected in week #1, November being so important. If weak numbers are out, there goes the argument that no death spiral was appropriate and the McFarland numbers should have been given more gravitas vs. the decision to impose Amendment 3. The 10 year profitability put forth by Susan McFarland was then spurious, at best.
The recent Fed housing assessment linked on this board in the last 24 hours shows housing market weakness tied to reduced "for sale" inventory and rising prices. A weak market unable to generate real estate growth despite record low rates and plenty of bank liquidity (the GSEs are doing their job) seems to make recapitalization under any release scenario seem highly unlikely. That would also seem to make any further bailout requests to be ill-advised by FHFA Director Watt who alone has the authority to consider the GSEs ability to repay further UST draws and choose the receivership option.
That is why I believe we may be barely over a year away from a liquidation. This also is why I own preferred shares. Other options would be worth far more to me as an investor, but receivership is at least a safety net that would likely extend some kind of payoff, even if well below par value. If the Q3 numbers are strong, all the better. If not, I am at least basically hedged against a dire alternative outcome.
The Appeal panel judges are well aware of Freddie's shaky profitability in two of the last three fiscal quarters. I find it highly unlikely that they will remand under an order to rescind the 3rd Amendment. They could remand under a recommended limitation on either % or duration. That would be far more likely.
I keep saying that the delays and gambits are not favorable to shareholders who seem to greet each new court challenge with enthusiastic support and celebration. Time is running out.
JMHO.
