CITIZEN COMMENTS ON FNMA in march 2017 19 the day and before

CITIZEN COMMENTS ON FNMA in march 2017 19 the day and before

lets start with laliasia.finance

FNMA FMCK Status quo  will remain unchanged till government can sell it common holding at a fiar price to profit to cover  and more the losses it has incurred in the past. Then able to release the GSE S  to do as they please.

when / who knows?

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Just want to remind everyone - in case you didn't know, Big Yank is a FAKE paid monkey. Everything he posts is FAKE NEWS paid for by those that want to destroy America. JMHO. Have a great day!

Bruce Berkowitz is a big investor in Fannie Mae and Freddie Mac preferred stock which currently account for 30%+ of his Fairholme Funds assets.

 Fairholme Fund is suing the United States regarding FNMA and FMCK and has been making the best progress of the current FNMA and FMCK lawsuits against the U.S.A.

What % of investable assets is too much for a concentrated bet on Fannie and Freddie common and/or preferred stock?

Anyone who follows the FNMA (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) saga or invests in either/both should be very familiar with the name Bruce Berkowitz. Bruce Berkowitz is a contrarian value investor known for his highly concentrated portfolio. He owns/leads Fairholme Fund (MUTF:FAIRX) which is suing the United States regarding FNMA and FMCC and has been making the best progress of the current FNMA and FMCC lawsuits against the U.S.A.

I believe Bruce Berkowitz currently has 30%+ of assets in Fannie and Freddie preferred. He also had a high weighting in these shares in 2016 (primarily FNMAS and FMCKJ as per its 2016 annual report which covered the period ending 11/30/16). The Fairholme Fannie Freddie outsized bet enabled the fund to report a 25.68% gain in 2016 (+13.72% vs. the S&P 500). The other side of the coin is how it has brought down the fund's performance YTD which stands at -.88%, -6.82%% lower than the S&P 500. Bruce Berkowitz was named coveted fund manager of the decade by Morningstar in 2009 and has a life of fund annual performance of 11.06% vs. 4.53% for the S&P 500 since its inception in 1999.

Fairholme lagged the S&P 500 big time in 2011, 2014, and 2015 which is not uncommon for concentrated portfolios. All it takes is one big bet that doesn't pay off like Sears Holdings (NASDAQ:SHLD) for Fairholme and your fund performance will suffer. Assuming the fund maintains its current position in Fannie and Freddie preferred, they could reach 60%+ of assets if/when they reach par again. If this happens in 2017, the fund could be +60% or more for the year regardless of S&P 500 performance which certainly will lag this kind of potential performance by a wide margin.

a philosophical question.?- How much is too much for investing in your best investment ideas? Sure, it can vary based on one's tolerance for risk, assets/income, age and working vs. retired. YES NO THEORIES POSIBLE How much are FNMA or FMCC common and/or preferred stock as a % of investable assets? All of us who read all Glen Bradford's insightful articles on Fannie and Freddie probably see he literally bet the ranch on Fannie and Freddie preferred. If he is right, which I believe he is, he will earn millions on his 100+% allocation of investable assets to Fannie and Freddie preferred. If he is wrong, he is smart and is still a young guy who still should have ample time to turn his financial future back around.

Getting back to Bruce Berkowitz, outsized bets are the norm in his Fairholme Fund. Allocations that rose to 40%+ in AIG stock at one point propelled the fund to a $2 billion profit in 2015 when AIG shares were sold. The sale also resulted in a huge tax bite of between 32 and 34% of NAV, ouch.

Even the great Warren Buffett which has an amazing long term track record of 20.8% over the last 51 years with his Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is known for heavier concentration by position (e.g. Wells Fargo, symbol WFC) and sector (banking and insurance). Here is the latest look at the current public positions owned by Berkshire Hathaway. Sure he has negotiated better deals than any of us could with his financial resources and reputation with everyone from Goldman Sachs (NYSE:GS) to Bank of America (NYSE:BAC) during the financial crisis and beyond. WE CANT !he is also privileged to confidential information due to his sheer position in the …

Billionaire Bruce Berkowitz became rich operating his Fairholme Funds which reached $19 billion in assets at its peak before crashing down under $3 billion beginning when the hot money left when his performance began to suffer in 2011. Fortunately he eats his own cooking and reportedly has much of his asset in the Fairholme Fund investments. Want some fries with that Fannie and Freddie stock?

If Bruce Berkowitz is right with his big bet on Fannie and Freddie preferred stock, he could see assets of Fairholme Fund rise big time sadly for the wrong reason and his net worth increase by many hundreds of millions of dollars. If he is wrong, perhaps his days will be numbered in the mutual fund business.

I own Fairholme Fund and indirectly own Fannie Mae and Freddie Mac preferred shares, which have a large position in Fairholme Fund.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

             

I really like Berkowitz, a cool, decent guy and investor, indeed. Two remarks to the article. Berkowitz hasn't invested 30% of his fund in Frannie. The stake grew to 30% due to the stockprice appreciating. That's a big, important difference. It would not surprise me if Berkowitz has sold some into the post-Trump rallye. At least that's what I have done. I have bought the prefs around 4-5 $ and the common at around (2.20 average). I sold as many of them while they were above $10 and $4 resrectively, as to bank my initial investment.

That's what I do in general - and that's my second remark addressing the questions raised by the author of this article. I am fully aware that where you bought an investment is in reality totally irrelevant for the selling decision (except for tax considerations). But that is what works for me, mentally. I sell half of my stake roughly after a 100% price gain (recovering 100% of my initial investment), not always, but in most cases. It gives me the peace of mind to let the remaining stake run further.

I personally would never have more than 30% of my portfolio invested in a single stock but that is simply due to the fact that in most cases I simply cannot do such a deep dd and keep so close to all developments that I would feel confident and comfortable enough putting such a huge amount of money into a single investment idea. Yes, I know there is nothing called stop-loss, so investing 30% isn't equal to risking 30%. But having a stop-loss in mind (I never place a stop order in the market in the age of algos and that) isn't guaranteed to get you out in time, either. So no, I would personally never put that much into a single idea, be it long or short.

             

             

Bruce is worth 500 million but does it matter he manages 9 billion dollars and from 2000 to 2010 he was named fund manager of the decade.

             

             

I do own some common, too, besides the prefs. Wouldn't bet the farm on them, though. The govt could dilute the hell out of the common when they reshape the companies. It's not that easy to do with the prefs. I also do believe that the prefered shareholders have a better position in the courtroom regarding breach of contract and getting compensation than have the holders of the common.

             

Poor Dude

I think Brad gets it, when very few others do. I realize that most of the people here at Seeking Alpha are Wall Street types and not "average" people. And their thinking is skewed by that fact. They view the FnF situation as any old typical "save the failing company" type of thing. Where position in the capital structure matters, bankruptcy rules apply, and the accepted notion is that the unsecured creditors and the common shareholders get wiped out or nearly wiped out - while others are allowed to benefit from their loss.

But this isn't a situation like that. Not at all.

For starters, the government is involved and different rules apply to them.

Secondly, we're not talking about some "average" corporation out there, trading in the marketplace and encountering short-term difficulties (whether real or manufactured).

We're talking about the central pillars to the US (and indeed, entire western world's) financial system.

Kill the common shareholders in Fannie and Freddie, and you will concurrently drive a stake through the very heart of America. And Europe, by quick extension.

Does anyone REALLY want to go there?????

             

Poor Dude

Do it if you wish, for whatever your motivations may be. But know that in doing so, you are setting the stage for the Chinese-Soviet alliance, in coordination with the Middle Eastern cartel, to control all of human history for the next 1,000 years or more.

I'm sure THEY fully support "restructuring the companies" while wiping out the common shareholders. That'll simply add $5 to $10 trillion to the "US Government's" assets - to which they now hold direct legal title though their ownership of most of the US Government's debt obligations.

As a proud American, I hate to admit it. But it seems they bought us, fair and square ...

             

Paul Cheung

Commons may make 10-15 times, Pref can only gain 3-4 times. I own both myself to balance the risk.

             

Swing4Fence

exactly, Poor Dude. "position in the capital structure" got shuffled with the GM bailout when Obambam moved his union buddies to the front of the line. But that was hopefully just a different time. and a result of the worst president in history (yes, even worse than carter).

The government (all 3 branches) hold the cards... and change the rules as they wish...

I am just hoping that rule of law prevails... the Judiciary sides with Brown (and us)... the Executive recognizes the illegality of the conservatorship... and the Legislative gets their heads out of their arse... well... 2 out of 3 isnt bad.

Long commons and swinging for the fences!

             

fxfx

Dude, but that's what Obama and his government already did!? Berkowitz and others are fighting to reverse it but clearly, powerful political forces already did and attempt what you described. As for Russia and China: Obama, Hillary and the neocon war-faction around mcCain have never understood to this day that the real threat longterm is China, not Russia. Instead they have done everything in their powers to virtually force the Russians into China's arms. It's beyond stupid but a sound and wise and longterm guided foreign policy has rarely ever happened under any administration in D.C.. Brute force, blackmailing, bullying, organising coups and violent government overthrows ("regime change") have been the major foreign policy "tools" over the past decades to impose the will of the US on the entire world. The results have been terrible wherever you look. So no, I do not expect one iota of wisdom and farsightedness from the corrupt elites in Washington. I am highly sceptical that Trump is willing and/or capable to change that.

             

Poor Dude

I hope you are right in the long run, Sotiri. For both you, me, and every other American. The GM thing blew my mind, and I'm shocked that our courts went along. Same with AIG, and others. But all evidence to date would seem to indicate that it is you and I who don't quite "get it", when it comes to our "New World Order".

My largest fear is that EVERYONE is going to eventually catch on to the new reality, and then chaos will ensue.

I personally am prepared for that, but I know that most Americans aren't. And I still place faith in our judiciary - our last stand - even though they have disappointed us to date.

AIG, GM, Chrysler and others were big deals. But not so big that they threatened the very survival of our nation. However, Fannie and Freddie ARE that large. If they are handled improperly, their fate carries our nation with them.

             

Poor Dude

Comments (1305) |+ Follow |Send Message

@fxfx

It's just common sense. The more enemies you make, the more enemies you will have. While we are imposing our will around the globe through military force (and increasing the numbers of our enemies on a daily basis thereby), China HEAD DOWN ONLY ON BUSINESS is using all its national resources to create friends and allies all around the globe.

Common sense tells you where that will end up, in the long term. We'll be on an island, with the entire world arrayed against us.

And given the rate of technological advancement by everyone on the planet (enabled by for-profit corporations seeking only to improve their bottom line through "advancing humanity"), the point will eventually be reached (if it hasn't already) where our financial and technological superiority is no longer meaningfully superior to that of our potential adversaries.

And what happens then?

Does everyone agree to share the planet and its potential?

Or do some nations, full of self-importance, decide that it is better to end all of humanity than to relinquish their position of power to those who don't think exactly like they do?

We live in a scary world, these days. And have, ever since 1944 or so. Fortunately, I guess, most of us manage to block such thoughts from our minds while we go about our daily existence. And most of those who lead us, do so without a full understanding of what their daily decisions entail. Or where they may lead.

Such as with Fannie Mae and Freddie Mac, and those who invested their money into them. It is our natural tendency to believe in things which don't exist EG GOD . And absent firmly-entrenched (and stringently-enforced) societal rules, such beliefs ultimately get crushed - and chaos ensues. That is the history of humanity, and it isn't going to change unless we MAKE it change!

kyle2

             

E3rd

There is a political preference by some to take (tax) property and individual rights. I like the economic securities protected by the American Creed. My bet is that in the end even the philosophy of the current takers will find wisdom.

My bet is holding in the constancy of the Fifth Amendment and the Supreme Court if it goes that far. Generally in these matters one has to have the money to wage the battle. They parties fighting our battle see an ROI in their future. A risk based decision.

             

Leslie Luk, Contributor

If Hilary had won the election, i think both the common and the preferred would have got whacked.

I think Don's gonna look after his mates.

We are gonna be fine.

avgazn

The question isn't if but when. Don has a lot on his plate such as health care and tax reform

             

Legacy Legends, LLC

You might be on to something. Trump helps Bruce on sears.

http://bit.ly/2n3Zu7e

             

Eric Moore, Contributor

Bruce Berkowitz is a genius, he does incredible research and always invest with a HUGE margin of safety, I am long SHLD and FNMA

             

Leslie Luk, Contributor

Ackman's in this too.

Why ain't no one bringing him up?

             

BCofer

One word: Valeant

             

jumpoffus

Ackman is doing horribly but makes him better again with Fannie soon.

             

coach-g

As to Ackman-Even a broken clock is right twice a day-just staying put r saying the same thing!'

             

Leslie Luk, Contributor

Also, Berkowitz probably already knows what the government's intentions are.

             

fxfx

Ackman and berkowitz are buddies and both have a great track record but I think they are still different types of investors and have different personalities. Ackman bets big and has a sharp mind as well, no doubt, but Berkowitz seems to be way more focussed on risk and margin of safety than Ackman. That's one of the reasons why berkowitz usually stays within his circle of competence (financials, real estate) when it comes to large positions. (And btw, I readily acknowledge, retail comps fall not within that circle. But he didn't buy shld as a retail company investment.)

             

fxfx

"Also, Berkowitz probably already knows what the government's intentions are"

I seriously doubt that! He went in big while Barry was still in power and I think we can all agree that a Clinton govt would likely have different plans for Frannie than the Trump administration. Berkowitz has stated time and again that he trusts in the rule of law to ultimately prevail - that is what he is banking on, literally. As for the govt he simply notes (and he is right with that imho) that any govt has very very little incentives to shut down Frannie. They are way too important for the US economy. Which doesn't ensure of course that shareholders may not get screwed big time as happened under "the most transparent administration ever" (one of the many empty claims and outright lies from Barry)

             

DeepValueLover

Eric Moore,

Bruce Berkowitz is NOT a genius and his funds have shrank by over $10 BILLION due to his terrible investing record since 2010.

Anyone who owned his fund in a non-tax advantaged account got HAMMERED when he sold out of AIG. Geniuses don't let that happen to their clients.

             

Leslie Luk, Contributor

He bought before trump got elected, as did most of us.

My point was that he has access to the inner circle.

He would very likely be aware of Mnuchin's plans.

             

Leslie Luk, Contributor

Comments (295) |+ Follow |Send Message

It's hard to argue that Berkowitz is not concentrated in this.

Many of us are concentrated.

We just have a hard time believing that the government can get away with this.

Introducing the NWS right before the massive DTA reversals was blatant theft!

             

Swing4Fence

@fxfx

clearly berkie was already working woth the russkies to elect trumpie... while Obarrie was still in power. clearly.

             

fxfx

swing4fence, actually, berkowitz was set up by the russians back in 1999 and actually the Russians were also behind Trump's forefathers coming from Germany to the USA. It's all a giant Long term plot. I only haven't figured out yet who helped the Russians establish their first kingdom a cool 1200 or so years ago. That must be the real mastermind behind them all.

             

             

             

             

             

fxfx

Comments (1945) |+ Follow |Send Message

It's not. The court route is still the major avenue, imho.

If you have to rely on the actions of politicians for any investment to play out, then run away from said "investment" as fast as you can. (Except you are a guy like Elon Musk and can directly get the politicians to shuffle taxpayer funds into your companies)

             

Sotiri

The court cases hang over the Government like the sword of Damocles. Eventually, the rulings will turn heavily in favor of the plaintiffs because our justice system has more Judge Browns than it does Judge Ginsburgs.

             

rubicon59

Indeed.

Look at it from the Trump/Mnuchin perspective. They got so many huge things to work on.

Why would they want to continue to risk even a low probability of a disastrous court decision that could cost >$100b, when they don't really need to and can easily put it to rest while pocketing 10's of billions?

             

HaloHat2

Who needs red cents anyways?

GLTA Commons and P's

I am not a hedge fund however I am grateful they have the ability to fight for shareholders [except the crooked government shareholders who can rot in hell]

             

dlehnecke@nvusd.k12.ca.us

Mnuchin is a big part for sure Brad, but I think subsequent releases of documents via Sweeney's court will give him the political cover to do the right thing and recapitalize.

             

AlphaACK

             

And contrary to a clinton govt (which we didn't get, thanks god, for a variety of other reasons, too) - the Trump admin has little incentive to cover up the criminal actions of the treasury dept under Obama.

17 Mar 2017, 09:06 AM  Report AbuseReply2Like

             

Berkowitz has some risk that is not mentioned even if he is dead RIGHT. The most recent DC ruling came up with cockamame B.S. on who is actually 'damaged.' Cannot believe a Reagan appointee (who smoked dope and was rejected by the Supreme Court) sided with this nonsense. He who sells is trading his/her implicit claim to any recoveries -- past, present, future......Maritime law over hundreds of years backs this up. HOWEVER, if the Courts do a fu$karoo......many bets are off.

Shockingly Capitalism, its ideals, its payoffs, the concept of risk taking, is still under MASSIVE attack. The Courts are just not business/capitalism friendly.

Berkowitz is 'right' in investing with something Senior on the capital structure, granted subordinated to the sickening SPS, but 'senior' to the equity. He is smart that if the equity has $1 in value (theoretically, $0.01+) then he should be made whole.

I am with him, and note that the recent selloff just MIGHT be Berkowitz selling some shares either for a trade, or to book gains on potentially recent purchases. Many preferreds were more than a double, so it might behoove him to trade. I am curious if he 'files' as a large holder if he is allowed to actually trade S-T.

Looks like Ryan screwed the pooch with his (& Congressional Republicans' plans to

'fix' Obamacare. Personally, I am disgusted with their approach and what they came up with. The Libertarian in me sides 110% with Rand Paul on this.

Healthcare, Gorsuch, Tax Reform...THEN Fannie/Freddie...that is if something international doesn't happen or we experience some type of economic shock.

Buckle your seatbelts......This will be even bumpier than many of us expected.

Great luck to all....VM

             

UrAverageInvestor

Comments (3) |+ Follow |Send Message

I know a lot of people don't like to bet on the commons. Can I have someone's reasoning behind their worry of the commons risks?

BCofer

Commons will get paid last (if at all). So there are more scenarios in which preferreds get paid out in this situation. However, if the right scenarios play out, commons have a much higher multiple (due to the riskiness). It all has to do with the rights the govt currently has to the ownership of Fannie and Freddie.

             

Brad Foxx

It's highly unlikely that there's a massive upside for the preferred shares and the commons are worthless. The entire plan is recap and release which is good for everybody common or preferred. There's a higher multiple on the common shares, which is why Ackman chose them, as well as John Paulson, and Carl Icahn. Additionally the government owns common shares so if they choose to recap and release they won't do anything to hurt common shares as they own 79% of them.

Swing4Fence

author's previous article and prosposed release plan has commons being used as TP and new commons issued.

             

Swing4Fence

Comments (107) |+ Follow |Send Message

see author's previous article on his proposal for recap and release.

preferreds made whole. commons invalidated. Companies IPO and govt magically gets 79.9% of new commons. 20.1% goes to recap and former commons owners can buy new commons at 45% discount.

             

gdacostap

That was quite magnanimous of a preferred shareholder to allow the true owners of the two companies to buy what is taken from us at a discount.

             

Ron Murphree

Brad....I agree 100% with your comment. I think at least some of the warrants are exercised by UST as part of recap and release. But I am holding firm to my 40k of FNMA .....

             

fxfx

Brad, in a nutshell, the potential reward is higher for the common but the risk is higher for them, too. And much higher than for the prefs. For the prefs, the "only" thing that has to go right is that the rule of law is ultimately prevailing. the upside for the prefs from current prices is abot 3.5 times plus dividends. That's a nice potential return, even if it took another year or two before it happens.

As for the common stock, a lot depends on if, when and how the govt is going to deal with Frannie. Imho the potential gains are allover the place, depending on the scenario happening. it could be anything from a 90-100% loss to a couple 1000% gain.

All in all the risk-reward is still better for the prefs, imho.

             

koryzuck

@Brad Foxx

I though Paulson & Co, were weighted almost 100% Preferreds?

Did they buy into the Commons?

             

Brad Foxx

Paulson owns commons there's articles out there stating it

             

Brad Foxx

So what you are basically saying is that the government will admit it was not fare to preferred shareholders and make them whole again. And they will say screw the common shareholders we don't owe them anything. I find that highly unlikely. I find it unlikely that the government screws over Carl Icahn and Bill Ackman

             

mobreezy

Brad

The other big point that people seem to be missing is that with common you are coinvesting with the government with their warrants. Also the less % they exercise the more they end up with due to less dilution. Let's say they only exercise 40% and cancel the rest and do a capital raise now at a higher price? So instead of 80% of a $xx stock they own 40% of a much higher price stock (just has to be at least double in price to B/E) in a company in a better capital position. Do the math. Less is more and there is enough here for everyone to win!

Brad Foxx

That's logical, I think at the end of the day we have to look at their track record in the past. Which has worked out well for common shareholders in the same situation. I also consistently have faith the Carl Icahn sees this same logic which is why he purchased Berkowitz's common shares. If they make preferred shareholders whole again they will do so for the common as well. Let's pray that Steve Mnuchin doesn't forget where he came from(Wall Street).

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Ron Murphree

mobreezy.....I agree with you 100%...there will be some dilution of Commons but no all 79.9%...IMHO

             

Kapone78

             

Mark--

I believe that you posit a question without ever answering it in a meaningful way. All investments are based upon a risk/reward assessment. There is little identification of what the risks are; there is no credence given to the pending litigation. (Winning just one of the dozen or so cases could be huge.) It is really only a discussion of what Fairholme Fund is doing.

There are no two ways about it--for the average retail investor FNMA and FMCC are extremely high risk investments. They do not make a product like widgets. They are impacted by the housing market, something which they have no control over. At the present time they are under an extremely repressive and regressive conservatorship controlled by the federal government for its own uses and purposes. They are sending a trainload of money to the U.S. Treasury for which they are receiving nothing in return.

There are only three possible ways for the shareholders to make money on these investments.

1)      The Treasury, in its magnanimous and generous heart decides to release these companies from the conservatorships and return sufficient funds to allow them to be able to operate on their own-where is he money?? Coming from??

2)      ) One or more of the lawsuits are successful in forcing the government to return/restore the companies to what they would have been without the conservatorships.

3)       

4)       A settlement is reached between the government and the litigators/shareholders which removes the companies from the conservatorships.

The investment thesis for the individual investor is the risk/reward calculation of which of these alternatives will happen.

roulette table gamble

 The risk is similar to putting a bet on a single number on a roulette table--high probability of a complete loss but huge return if the ball drops onto the number.

I am long FNMA, but it is less than 2.0% of investible assets.

Just a thought or two.

             

Ron Murphree

peace....I think option 3 is the most probable. so the reward is based on the terms of the settlement, particularly the terms of recapitalization and the warrants.

             

oilyolin

Anyone know about James Donovan? Mnuchin has him as his 2nd in command in the treasury. I looked up his bio and he is another Goldman Sachs guy that teaches at UVA. 4kids, and wife and he is a long time republican and contributed $95,000 to Mitt Rommney's campaign and advised him at Goldman. I can't find any papers or speeches by him on the GSEs though. It would be nice if anyone could tell us what his mindset is on them. He will be working on the restructuring of the GSEs with Mnuchin.

I read FNMA sold 4 nonperforming loan traunches and Goldman Sachs bought 3 out of the 4. Big bucks has their fingerprints all over FNF. They have 4 guys now on the inside of #Trumps inner circle now. Does anyone out there know about Donovan's take on the GSEs?

             

berniewolfe06@gmail.com

His Goldman Sachs background and present(?) affiliation should give us a clue. Just saying.

             

oilyolin

Another article reading that fannie,freddie and ginnie now hold 61.6% of all single family mortgage debt.The commercial banks are pulling back. Also the federal reserve put said there is $10.266 Trillion now in mortgage debt.

16 Mar 2017, 03:08 PM  Report AbuseReply6Like

             

E3rd

There is no sure bet, ever. However, I hold one constant and that is "Do not bet against the Creed of the

American Juggernaut!" Particularly when the Creed must be followed as after a financial crisis!

Most citizens unloaded equities after the damage. Others started buying.

The FNMA model is the back bone of the housing industry which is the back bone of the country.

The Fifth Amendment is part of the Juggernaut's Creed.

Do the math!

FNMA shares never stopped trading. Every citizen could have loaded up. Think about that! Of so little faith in what God has provided the citizens. So little understanding.

             

Trampoline

Good points made. I've seen and been in this since '06 and asked the same thing when it went to under $0.30 per share and stayed there. Their time to take it out for good was then, not now.

             

InTheTube

Has anybody checked fanniegate for the Trump budget? Some interesting bits in there like the power for the Secretary of the Treasury to end bailouts. Take a wild guess who the last two remaining bailout recipients are.....

             

Ron Murphree

inthetube. ..this budget was too high level to see if the NWS was still in there...I did research Obama's last budget submission and they definitely included the NWS as incoming funds.

             

InTheTube

i'm reading 'ending bailouts' as 'ending conservatorship, NWS and everything that goes with it (hopefully including warrants).

             

ricknagra

I own 100% commons. If the preferred do well then it is reasonable the commons will also do just as well. There is plenty of money in the pot to go around. In addition government needs us shareholders especially the commons to buy more stock in the GSE's once conservatorship ends. Best not to leave a bad taste in one's mouth. There is no role for Listermint here.

             

rubicon59

They can't replace and they won't wind down.

This leaves Recap and Release.

The easiest, least risky, and most profitable path for the Gov is to recap and release on the current shareholder structure.

The Gov really has no other practical way.

Folks seem to forget that.

What method to   do- to recap?? Another tights? What price? More warrants? More shares??

             

fxfx

" If the preferred do well then it is reasonable the commons will also do just as well. "

No, it is not reasonable to expect that. It is a gamble to bet on that. Everybody can attach his preferred prbabilities to that, but the only reasonable expectation is that the prefs will do well, wenn the common do well. Not the other way around. I am aware of the expected values thrown around for the common shares but all these assumptions could be way off the mark if the govt recapitalizes by way of massively diluting current common shareholders.

             

wolverines

             

Sotiri

Also the esteemed John Paulson is a large holder of these investments.

The large banks do wield massive power, but there is plenty to keep them busy (and rich) such as the possible nascent infrastructure bank and talk of health care securitization (bonds). I think they will let Fannie and Freddie be reformed (into a utility model) then recapped and released. It's the easiest way to go at this point, and a better model has not emerged. But of course, I could be wrong.

Good luck to all. Long FnF preferred and common and FAIRX

             

oilyolin

We need to find out about James Donovan who is going to help Mnuchin with reform the GSEs. Goldman is buying delinquent home loans from Fannie with their subsidiary MTGLO Investors LP. In the last 11/2 years buying 2/3s of $9.6 billion loans-or roughly $4.5 billion for26,000 loans paying 50 to 90 cents/dollar. Generally they make 5 to 15 cents/ dollar. They aren't really trying to rework the loans but instead foreclosing the properties because home prices are and have been rising. Goldman is in this bigtime! I believe the fix may be in for the GSEs dealing with Goldman.

             

philipmax

BIG-they'll be selling out before you can blink your eyes

DONT TRUST AMERICA

The trouble with trusting the big Hedge funds is that they usually get the low-down first. If the decision is negative, they'll be selling out before you can blink your eyes. They will think nothing of sticking it to you. JUST DON'T TRUST THEM. They are out for themselves ONLY.

I am not betting on any of them. If this investment skunks out - I'll never ever trust the USA or any of its institutions again. Because, if what happened to F&F, does not get redressed, it is a symptom of a decayed and rotten society. NO ONE SHOULD BE INVESTED IN THAT ROT.

Sotiri

Philipmax, And who will they sell to? Their massive stakes are too large for retail investors and if they dumped their shares the market would plummet. They bought their stakes from large institutional investors, who will not be in a rush to buy them back. There's just no simple way for them to sell/dump their positions. They're in this for the long haul with Mnuchin. The only question is when and how FnF will be released.

             

Philipmax

front-run the press release

, they will dump their shares at even at 1 cent, just to clear the books. I've witnessed this before.

AND SAY HEY WE HAVE NO-SHARES? WE KNEW !

Hedge funds are really not funding this lawsuit out of their own money. No matter what the court(s) decide, the legal fees will be paid from the companies. Since the Hedgies have heads-up on you and me, they will front-run the press release. If its negative, and sometimes it is, they will dump their shares at even at 1 cent, just to clear the books. I've witnessed this before.

There is definitely something cooking behind the scenes. I hope it's good good news.

             

robertdsands

I think the Frannies are quite a risky proposition for us non-billionaires at this point. There was a learning experience, however, looking back, of taking a speculative position of say 10,000 or 100,000 shares of FNMA common at 29 cents/share in February 2013 when, I believe, it had a P/E ratio of 1!

             

InvestSavvy

Still all in and riding this out! Millionaire in my 20s or bust and the Great USA is sadly gone!! Long FNMA FMCC commons

             

Swing4Fence

that's right, buddy. swing for the fences!

             

barrystutner@yahoo.com

Fannie Mae should be released forthwith without any federal guarantee and without any exemption from federal securities laws. The existing $4 trillion in MBS should be transferred to a new entity that carries a federal guarantee -- and these assets should be allowed to mature. The new entity can be eliminated in less than five years. [This is the plan Berkowitz proposed in 2013).

FNMA is then free to follow whatever business model it wants and it can again hire Franklin Raines and his CFO, Tim Howard, to run things like pricing credit risk based on volume and not on borrower credit history/down payments.

And the Libertarians/Capitalists can buy yachts with their profits.

             

Maverick_Investor

I find it useful, for my own due diligence, to review different perspectives and the following 5 page US Senate budget report explains the overall history pretty well I think:

http://bit.ly/2n4BVvl

The final paragraph summarizes:

"Through dividend payments, each of the two GSEs has paid back more than it has received in bailout money. Yet this money does not pay down the debt to the government owed by Fannie and Freddie. Meanwhile, the money that the two GSEs previously set aside to cover their losses is slowly being depleted, as required by the net-worth-sweep amendment to hit zero on January 1, 2018."

So in 9 months from now (whether legally right or wrong) the government will have socked away enough to do the mortgage guarantee function that these companies would have failed at (according to this government budget report).

             

Swing4Fence

your mistake is assuming the government needing to "sock away" anything. It has no problems running in the red. Or printing more money.

And the NWS money has already been used. see obamacare + GSE articles.

             

eluzar

By your same logic of the govt having no problems running in the red, the govt could just as easily terminate the NWS and the warrants.

             

DSotoGto

Hard to see how the government recapitalizes Fannie and Freddie without extracting a pound of flesh from the holders of commons. The government made up an excuse to take over the GSEs and can pass any law it likes to legitimize it's continued theft of profits. Save for a SCOTUS review and overturning, Congress will want to make up any excuse to keep the profits skimmed to date.

I was a holder of FNMA, but exited at a small profit and I see more risk than reward at this time. Money in the GSEs are a lotto ticket, so folks should treat their investment in GSEs as such, but many are emotionally attached to their trade based on what I read in this blog. Pushing a bad position is risky, especially knowing how flaky Congress is with regard to the GSEs. But to each his own. I still think LYG is a better bet long term over Fannie and Freddie, at least Lloyd's of London will exit their receivership very soon as the UK government now holds less than 3% of shares and is quickly going to zero. After that, with a better balance sheet and growing profits (that it gets to keep), LYG should outperform the US GSEs.

Just saying...

             

Ron Murphree

DSotoGto....I agree that some dilution of common stock will occur as part of a recap plan...but at worse case it's a 5 to 1 deal and the common stock should still have considerable value...for FNMA, full dilution would be about 4.68 billion shares for a total of 5.85 billion. At $12B earnings and a PE of 15 would yield a per share value of $30.76

             

tom58st

it all comes down to that sweep,,, will trump stop it,,will see on or before March 31,,,,

             

Brad Foxx

Why March 31st

             

wolverines

March 31st is the day the NWS is scheduled.

             

tom58st

because that's the day fnma pays the treasury, the sweep

             

wolverines

Comments (98) |+ Follow |Send Message

I believe we are at a point now where it's down to the fundamentals. How else can you handle the twins. They are too important for the housing market and the economy where else is there to go. They have been bled dry but are solid earners. Time to leave them alone so they can recap.

17 Mar 2017, 08:07 PM  Report AbuseReply3Like

             

Poor Dude

@wolverines

And give back what has been stolen from them.

If they prosper, America prospers.

If they fail, America fails.

The "gamesmanship" has run its course, and it is now time for our government to either poop or get off the pot. No one will wait any longer for their decision.

Come 1 April, look for a major reaction in the world's financial markets if the US Government sweeps Fannie and Freddie's profits from the last quarter of their operation under Obama's term. To the world's investors, that will be an unquestionable indication that the US financial system is going to go "officially" bankrupt within 9 months. And they will react accordingly.

The cost of US Government borrowing (and Fannie and Freddie's, since they are now "wards of the State" at the present time)? I don't know. 8%? 12%? 15%? And within 12 months or less.

The math no longer works, long before we get there.

The USdollar / Euro will lose its status as the world's reserve currency. What will replace it? I don't know. Probably the currency of any nation which backs their money with gold and/or silver. Everything else will be worthless. Chinese citizens will be able to buy 100 US dollars for 10 Yuan on the international FX markets.

Same for the Euro.

We will truly have that "New World Order" that America's and Europe's leaders have yearned for, for so many decades. But much to their chagrin, they WON'T be in control of it ....

             

Brad Foxx

Let's not forget how the government exited AIG, General Motors... they held common shares and sold them off that's the logical outcome here if the decision is made to recap and release

             

wolverines

That was quid quo pro under the previous administration. I guess they felt they needed something in return for a bailout that was put forth from cooking the books. I don't believe the status quo will be the same under the current administration in regards to the past AIG and GM situations. JMHO.

Long FMCC and FNMA

             

wolverines

Quid pro quo.

             

tom58st

I pray you right

             

wolverines

I have stood strong and stood long on these two companies for many years. I am standing my ground.

             

Poor Dude

And I ride them to my grave.

             

fnma-fmcc

one last month to buy at these low prices.

             

gdacostap

Last day, perhaps.

             

Brad Foxx

Can you elaborate further on that

             

obelai

This is true.

             

fnma-fmcc

next month some govt documents will see the light and will reconfirm publicly the biggest fraud of all US history

             

gdacostap

Brad - if your comment is addressed to me, I expect both FNMA & FMCC to jump way over $3 Monday and not look back. If FHFA is illegal, agreements signed by the director of FHFA are also illegal. No more NWS. I am drawing a parallel here between FHFA and CFPB.

             

Brad Foxx

So a significant decision will be made Monday?

             

gdacostap

Brad - please see attached. http://bit.ly/2nzptVm

I'll let Peter Chapman take over:

"Peter Chapman writes, "In an amicus filing in PHH v. CFBP, No. 15-1177 (D.C. Cir.), today, a copy of which is (linked above), the Department of Justice doesn't support the way the CFBP is structured. By implication, the Department of Justice would not support the way FHFA is structured. Our government's arguments today in PHH v. CFPB do not square with our government's arguments on a Reply filed on Feb. 27, 2017 -- see http://bit.ly/2mHCQi7 -- in Collins v. FHFA which challenges the constitutionality of the FHFA. Incredibly, Chad R. Readler, Acting Assistant Attorney General, is the same lead lawyer in both cases!"

18 Mar 2017, 07:31 PM  Report AbuseReply1Like

             

ziaakbari

long fnma

             

Brad Foxx

The biggest mistake Berkowitz and Ackman made was relying on the government(court) to convict the government(treasury) of wrong doing. Justice will prevail. However we know that's not the case in the government. I was involved in conversation where they had chances to lobby congress(hire lobbying firms) 5 years ago and they didn't want to spend the money. Now everyone is shocked that court is not convicting the treasury. If they had of campaigned a strong lobbying effort this would've already be over.

             

Poor Dude

@Brad

Politics and lobbying be damned. If the elected leaders of our nation are so short-sighted that they don't know what to do without being told by lobbyists and special interests, then our nation doesn't deserve to survive anyways.

             

Brad Foxx

Unfortunately that's the world we live in John Paulson was a major contributor to the trump campaign and major Fannie shareholder.... what would you call that?

             

Poor Dude

Smart, given the absurdities of our current situation.

             

Sotiri

The hedge funds that bought stakes have been lobbying for years. A simple Google search will confirm this.

             

Brad Foxx

Well I know most of them and 5 years ago they said no we will not hire lobbying firms we will fight it in court. So that's not true.

             

Sotiri

http://bloom.bg/2nzoIeJ

http://bit.ly/2mHNZze

http://bit.ly/2nzqz3c

             

oilyolin

The good news IMHO, since the same gov. lawyer handling the PHH vs CFBP case has switched sides and now says the CFBP structure is unconstitutional that means the FHFA is also. In other words IMHO Trump wants the right to remove the head of CFBP . If he can remove the head of the CFBP it's so long Mel Watts of the FHFA. #Drain the swamp. Obama's programs look like they are being dismantled along with his appointees. Looks like fast work for Trump. He may be keeping another campaign promise.

             

gwojtaszek

I don't know where this is headed - but it can't be a bad thing.

Long a boatload of FNMA, FMCC and FNMAS....

We will prevail... eventually.

             

gazerbeam

Maybe a few other laws and agencies will be deemed unconstitutional as well...

http://wapo.st/2nywHsy

             

Reply1Like

             

KillrV10

Long FNMA and FHLMC and most importantly, patience!