My perspective, based on conversations with lawyers involved with these cases has evolved since the scotus ruling. Before the scotus ruling, I generally expected commons to be worth $5-8. In fact, I thought maybe $10-12 was possible early on, but now not so much. $5-8 is SPSPA writedown, which I understand is off the table now; so I see commons getting basically obliterated; hence my updated explanations that the only investible security in these capital structures is preferred.
But yeah, my perspective is based on conversations with lawyers and their evolving analysis of what is what since I got into this in 2014. Originally I came in as a common shareholder but switched to preferred a few years into this when I began to understand that FHFA was going to jack capital requirements basically absorbing the scenario where commons had any chance of ouperforming preferred.
If admin reform is going to happen before the elections, along with ST's nomination being rushed --- I think we would see the prices begin to reflect it in the next 90 days.
Then again, who knows, maybe all this hurry up offense over at FHFA to fire Calabria and get ST in as permanent director and Sherrod Brown's utility commentary and all the republicans pushing for exit from conservatorship and the note from treasury that it is taking the 2019 housing finance reform plan recommendations into consideration, and the proposal of the capital planning rule immedately after white house nomination all is happening inside of a vacuum where this stuff predicates inaction, haha, I sincerely doubt it. I doubt it based on the Senate Banking hearing conversations. All the pieces are out there for anyone and everyone to see, ST outlined all the steps required for admin reform, DOJ/Treasury/WH conversations -- but that isn't going to happen until after FHFA finalizes its version of the capital rule.
Anyway, to your point, I don't know if I'd be in this investment if there were not multiple legal avenues for resolution that were pumping --- but at this price, I probably would. Treasury is stuck. They currently get nothing out of their equity position. If they want to get money out they need to restructure.
At this price, the preferreds I pick out to own trade at like 8 cents on the dollar and I expect par at a minimum in a restructuring, which could be as soon as this year based on this potential fast track, might take a few years and result in 150% of par if the government flubs this and ignores economic incentives of $100B spending to help win the midterms. I think that your legal calendar --- if this pushes into the time frame after the midterms --- I think we would be sitting on legal rulings where jps would not want to settle for par anymore, the price just went up!
I enjoy your posts and think that there has been so much going on behind the scenes the past 6 months for this --- and I look forward to the next 90 days. I expect to see stuff sooner than that, but that's kind of the window --- I'm curious to see how quickly ST gets confirmed out of Senate Banking committee and then the full senate. I don't think they need to rush this part, just want to get it done in the next 30-45 days while she continues to work through stuff in the background --- and then when everything is ready I expect her to get pushed through like a trojan horse.
