JSmith5
3 시간 전
I am geninuely curious as to why anyone still uses that horribly outdated presentation as an investment thesis a decade later.
Because I am simple minded.
You quote $47, but that was the high end of his range. Why only use that number?
Because I am greedy.
But also because I believe it was based on a 10 year out prediction of about $29B in combined net income - which, magically, I believe that's where we are this year. And, as I said, its predicated on getting rid of the seniors. I acknowledge that the Juniors could get exchanged, but Ackman assumes dividends.
Other than that - I have said before that, based on the utility model - the $40-$50 range seems achievable if the seniors are no longer in the picture - but the warrants are exercised. ($20B of the net for dividends minus $2B for junior dividends divided 9B shares = $2/share annual dividends). So, regardless of how he got there, Ackman's estimate seems reasonable to me. Also, a couple of folks on the board were using a P/E - of 17 I believe - which would yield a higher share price. I checked the P/E for Duke Energy and it is 19.
Hope is not a strategy. Please don't anchor on the high end of Ackman's decade-old price range without realizing that the assumptions leading to it no longer apply.
This is not about hope. For each investor and potential investor, it's about their risk/return tolerance. Because it looks like release is back on track due to the election, we have overcome the first hurdle of status quo. With the juniors selling for about $35% of Par (or liquidation or whatever) the upside is 3 to even as much as 4 (if converted) of the price as it stands today. And I believe at least 3 ways to get there - They can turn on the dividends, they can get redeemed, or they can be exchanged for common. If the release goes forward, the probability of any of these (in my opinion) is high but not 100 percent certain.
But, as I have said ad nauseum, an investment in commons, at this point, is mostly about the fate of the seniors. Sure, the price of the commons would be lower if the Juniors were converted, and a capital raise affect it still more. But we are starting at just about the Mendoza line now, and there is still a lot of potential upside even if we don't get to $50. If we go to $10/share when the smoke clears, 4 times is at least as well as you could expect from Juniors from here.
Nats
kthomp19
8 시간 전
Why do you think that the US Government is entitled to receive more than $500 billion for making a $200 billion commitment available???
1) What you, me, or anyone else here thinks Treasury is "entitled to" means nothing.
2) The commitment was raised to a total of $400B by the second amendments to the SPSPAs.
3) Dividends do not pay down equity, so the money Treasury has already received does not affect the LP balance of the seniors.
4) Page 95 of the FY 2023 US Government Financial Report shows that they value the total LP at $236.2B as of September 30 2023. Why would Treasury just throw that in the trash and thereby blow a $236.2B hole in the budget, national debt, and national deficit?
That last point is rather important. The implicit assumption by some here that writedown should be the default and Treasury needs a good reason to convert the seniors is backwards. Conversion to common is the default method of resolution here due to the budget concerns (and it must be a conversion to common to let FnF exit due to the CET1 requirement); it's writedown that needs to be justified.
And please don't say "lawsuits" as a reason Treasury wouldn't convert the seniors to common. Your track record on actually filing lawsuits is abysmal, and the dismissal of all the NWS takings cases means a takings case over a senior-to-common conversion will have one foot in the grave from the get-go.
kthomp19
8 시간 전
they should at least read 12 words from the 5th Amendment to the Constitution: "...nor shall private property be taken for private use without just compensation".
The CAFC dismissed all the NWS and conservatorship takings cases and the Supreme Court denied cert. That means, legally speaking, the conservatorships and NWS were NOT takings. No matter what you or anyone else says.
NSW IS ILLEGAL
WARRANTS AT 100,000 SHARES FOR A SINGLE DOLLAR IS ILLEGAL.
SPS BALANCE IS ILLEGAL.
Then file your own lawsuit, shut up, or have the world know you are a hypocrite that expects others to do the dirty work for them.
Go read the Constitution yourself: you are not the arbiter of what is and is not illegal. That is the job of the judicial branch, with whom you clearly refuse to engage given your refusal to file your own lawsuit.
kthomp19
8 시간 전
What I'm hearing you say is:
- 85% chance the seniors are converted to common, and they will take between 90-95% equity
- 15% chance the seniors are not converted, in which case they will use warrants to take 80% equity
- 0% chance that something other than these two scenarios happen
You are giving 100% probability to an 80-95% window. No new/revised senior agreements based on future dividends or commitment fees, no partial exercising of warrants, no partial conversion or write-down to take a lower percentage than 90, just 2 scenarios and that's it.
Pretty close. 15% chance of 79.9%, 85% chance of 90-99.9%. Perhaps not equally weighted in that 90-99.9% range.
The 90% number comes from two sources: John Paulson's comments on live TV and one that just came out today: an interview with Mark Calabria in which he said "I don't know of any scenario where, you know, the American taxpayer doesn't own 90 plus percent of the companies." (start at 1:01:45).
The 95% number comes from two sources: the aforementioned Paulson interview and the FASB standards that would force the government to consolidate FnF's balance sheets onto their own if Treasury owns more than 95% outside of conservatorship. Treasury can still go above 95% during conservatorship and avoid consolidation, but they would have to get down to 95% upon exit so they might stop at 95% to avoid having to sell a chunk immediately upon exit.
I'm not saying that anything outside that band is absolutely impossible, but instead I think the chances of something outside that band are close enough to zero that I round it to zero in my estimate.
One other thing that I think you are misunderstanding: I think Treasury will end up with 80-99.9% of the final share count, i.e. after considering a junior-to-common conversion and capital raise. Your self-proclaimed "made up" scenario had Treasury only end up with just over 50% of the final share count, which would be an enormous haircut to their LP. I don't see that as realistic.
Regardless of scenario 1 or 2, you just need to state a % chance that JPS will get 90%+ of par, and then we can sticky this to see how accurate you are.
90+% immediately upon Treasury resolving its stake (via senior pref conversion or writedown and warrant exercise) or down the road?
I think the juniors could take the 18% haircut envisioned in the new Moelis plan and have only 82% of par immediately post-conversion, but that could grow post-conversion and thus let the juniors end up with more than 82% (and likely more than 100%) of par later.
This isn't a random variable.
Again, you missed the point. You're trying to pin me down on a specific post-restructuring share count, whereas I see a range of possibilities, albeit rather narrower than many.
Nobody is going to spin a wheel to determine how much equity the Treasury decides to steal.
What on earth does stealing equity even mean? Is this yet another accusation of illegality with no intention to file a lawsuit?
This will be a directive and decided by half a dozen people, or maybe less.
The result of a spin of the roulette wheel is determined by the actions of one person. That doesn't mean it can't be modeled like a random variable beforehand.
kthomp19
8 시간 전
If I needed to file a lawsuit in order to invest in this or any stock, I would not be in the stock market.
Putting words in my mouth again, I see.
I didn't say someone needs to file a lawsuit to invest. I said they need to file a lawsuit if they want a new and specific legal theory to be pursued, such as the supposedly illegality of the SPSPAs given language in those and the charters about fees. If they think the suit is such a slam dunk they should get off their ass and file it already, rather than talking about it here over and over and over. Put some skin in the game or be shown to be a hypocrite.
So we agree that a write-down would also be helpful, not just conversion.
Yes but you're missing the point, which is that converting the seniors to non-cumulative doesn't help with the CET1 requirement and therefore doesn't help FnF get out of conservatorship. Your first quote regarding that was "You like quoting what happened with AIG so much, why don't you explain to the class why the AIG Series D were exchanged for Series E (Non-Cumulative)?" and I did explain it. I see that it finally sunk in with you.
Someone looking for more security at the expense of upside would invest in JPS.
Not necessarily. If the juniors are exchanged for commons then the par "cap" disappears, in addition to diluting the commons even more.
We get it - you like the security of the JPS. Not everybody thinks like you.
Putting words in my mouth wasn't enough for you, now you're putting thoughts in my brain. You clearly don't know how I think since you can't even recognize the possibility of the juniors being worth more than par.
The agreements MAY get amended or revised because the equity doesn't serve that purpose anymore and may be written down.
What do you think the probability of that is? Bringing up the mere possibility of it is useless without a number.
So wait, Treasury has to take a haircut so that your JPS can be valid at par or near-par? Says who?
Page 54 of Fannie Mae's 2023 3Q 10-Q form says that the full LP of the seniors is $208.0B. If the market's implied P/E multiple on their roughly $17B annual earnings is anything less than 12 then Treasury will be forced to take a haircut in any conversion to common.
I do think it's possible that the junior prefs will be asked to take the same haircut as Treasury to get the deal done, but as opposed to four years ago when that haircut was 70%, this time it would be in the 0-20% range and therefore much more likely to be accepted. I have seen excerpts from a new Moelis plan where the two scenarios involve the juniors taking either a 0% or 18% haircut, so that number isn't just me making things up.
Your words: Every dollar they allow current shareholders to keep is one fewer dollar in their pocket. But apparently this doesn't apply to your investment, just those that invest in common.
It applies to everyone: Treasury, junior pref shareholders, common shareholders, and outside investors. There is one pie and it will have to be divided between them. The difference between the juniors and commons is that the juniors will have a seat at the negotiating table while the commons won't. That's why Treasury only negotiated with the juniors in late 2020, and why the juniors were able to kill the conversion.
Treasury could wipe you out just as easily as common and just start over.
Wrong. A junior pref wipeout would require either receivership or specific Congressional action. What probability do you assign to those events? For me it's zero (or again, technically not impossible but close enough to zero to not affect my decisions and thus round down to zero).
That's the primary difference between the juniors and commons: the juniors have specific contractual rights regarding liquidation preference and dividend preference with the existing companies that cannot be bypassed if the companies are released in their current form (which is the only possibility without receivership or Congress). It's those specific amounts that the commons lack.
Please explain the rationale why I would believe your investment thesis over that of Ackman?
You, specifically, aren't going to believe anything I say no matter what. That is abundantly clear.
As for the more generic "you": because mine is much, much more recent and relevant. Also, Ackman himself bought junior prefs after that presentation because he basically admitted that the juniors could outperform the commons in a restructuring and that he wouldn't be able to do anything about it.
Are you as involved with the GSEs and the upcoming Administration?
Just as much as he is. Ackman's involvement with the new government is extremely overblown.
Donotunderstand
10 시간 전
The answer - Accounting
Right or wrong - the GOV put in say 200B rounded
Call it a loan (non declining balance)
Call it Senior EQUITY so that it get a dividend first
AND I AM NOT ARGUING THE GOV DESERVES OR DOES NOT DESERVE OR FAIR OR NOT - JUST MATH - USING THE LOGIC OF THE GOVERNMENT --- AND BLUNTLY GAAP AND THE US GOV ACCOUNTING WINS UNTIL IT IS SHOWN TO BE WRONG (I.E. I CAN ARGUE IT IS WRONG OR ILLEGAL OR WORSE --- BUT THE GOV KEEPS THE BOOKS)
The future value of 200B - 16 years later is $900,000,000,000 -- at 10%
OK - so lets cut that dividend or interest level down to a more normal 4% for a healthy company
The future value of 200B - 16 years later is rounded to $350,000,000,000
Again - this is not a personal wish or belief - it is math - not me
GOV argues and has not lost in court on this core issue that it invested 200B into F and F
GOV argues that it is entitled to 10% a year - dividend or interest
I suggest we use instead 4% instead
And I argue that the GOV can wipe out any obligation against the > 300B of cash sent to them by F and F
But GOV does not have to do that. The GOV has the agreement - and they keep the books
So I never ever said they deserved 500B ---- and above at different interest rates I show what the math says
And i have said 150 times = not less = I believe if it wants to - the GOV can declare the 200B investment paid off for 300B cash received - IMO (non attorney) Treasury (which is owed the money on behalf of tax payers) can say PAID OFF. Clearly DJT can issue an executive order it is paid off and use Math similar to mine and note the help F and F gave the country so it owes zero !! I do not see any need for Congress or the courts. Ball has been in POTUS office for DJT and Biden and neither has done shist - so let us see what DJT does this time --- does he rise to the occasion ?
mrfence
21 시간 전
And I'll tell a something, the GSE's will be freed, so fast, so fast. Yah wanta know why? I'll tell yah, nobody in the WORLD wants to be locked in one of my cells, I mean No Body. Yah know I've had some of the worst criminals, really bad people, really bad say to me, "Please Sheriff, send me to Levenworth, Alcatraz, Guantanamo Bay to be tortured in solitary confinement. Just don't put me in one of your cells. I'll do anything you want Sheriff, I'll say infinite Hail Mary's until I leave this earth if yah just don't put me in one of your cells." That's what so many have said to me. So I don't want anybody to worry about the GSE's. They're gunna be fine, just fine.
$FMCC~ $FNMA~
mrfence
22 시간 전
Ending GSE conservatorships a ‘show-me story,’ says BTIG
BTIG says a “considerable amount of our time is spent thinking and talking about” Fannie Mae (FNMA) and Freddie Mac (FMCC) because those “mortgage behemoths are integral to the housing market,” though with President Trump returning to office in just a few days there has been a pronounced increase in questions and conversations about whether the government-sponsored enterprise conservatorships will be ended. Following “years of missteps and no steps, ending the GSE conservatorships is a ‘show-me story’ with the first step being signs of policy alignment” at the Federal Housing Finance Agency and the Treasury Department, argues the firm, which needs to see signals of those two entities pursuing the same goal. The Treasury Department’s senior preferred position is “concrete on the top of FNMA and FMCC’s capital stacks,” which must be addressed, BTIG added in a note to investors.
https://www.tipranks.com/news/the-fly/ending-gse-conservatorships-a-show-me-story-says-btig?utm_source=markets.businessinsider.com&utm_medium=referral
All I have to do is lock up FHFA and UST together in the same cell
until they unlock the GSE's cells.
$FMCC~ $FMNA~
Rodney5
1 일 전
Red Cloud if I may chime in on this…
Straight from the Treasury Secretary’s mouth and the Federal Reserve Board with no reservations plainly stating the companies would be used to help prop up the housing market.
Paulson said it best himself, when he told the Financial Crisis Inquiry Commission, “[Fannie and Freddie], more than anyone, were the engine we needed to get through the problem.” Treasury needed Fannie and Freddie to help keep the financial system afloat, and it simply took them, under pretense of a rescue. (nationalized)
The Federal Reserve’s program purchased MBS issued by the GSEs. The Treasury / Federal Reserve freely admitted the GSE's were used to help prop up the housing market.
It’s been argued the GSEs did not purchase toxic securities, (worded toxic or not), will not void the fact the GSEs were used to funnel purchases made by the companies to the fed.
From Board of Governors of the Federal Reserve System
95th Annual Report 2008
Quote: "since the November 25 announcement of the Federal Reserve’s program to purchase MBS issued by the housing GSEs and Ginnie Mae, and they currently stand at 5 percent." End of Quote page 19
Link: https://www.federalreserve.gov/boarddocs/rptcongress/annual08/pdf/AR08.pdf
Quote: "It's a big event that the Federal Reserve is offering to buy up nearly 10% of the agency mortgage market," said Art Frank, a mortgage strategist with Deutsche Bank Tuesday morning, the Federal Reserve announced that it would buy up to $500 billion of mortgage bonds guaranteed by Fannie, Freddie and Ginnie Mae, providing the ultimate support to prop up the $4.8 trillion market of these securities. The central bank also will buy $100 billion of the mortgage finance companies' debt securities, including that of the Federal Home Loan Bank, through reverse auctions starting next week. So far, other initiatives to prop up the market including a plan to have both the government-sponsored enterprises buy nearly $200 billion of these bonds and the U.S. Treasury's unlimited purchase of these bonds have done little to stop the weakening of risk premiums on mortgage bonds. As a result, mortgage rates have remained at elevated levels with little relief to consumers." End of Quote
Link: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=33791597
Red Cloud
1 일 전
Paulson & His Banking Friends...
Something occurred to me regarding this very topic the other day. Fannie and Freddie, NOT being TBTF banks, were a perfect vehicle to be used for bailing out the Big Banks. My understanding is that it is well understood that the Great Depression was caused by massive bank failures, and apparently Ben Bernanke is an expert on this very subject. Conceivably the GSE's ( or potential failure of the GSE's ) would not have resulted in the same systemic catastrophic failure as collapse of the banking system. This notion also validates the idea ( more evidence ) that Fannie and Freddie didn't need to be "bailed out" since their failures, should they have happened, would not have caused the same level of economic damage as the Big Banks failing.
So the GSE's were used to bail out the Big Banks precisely because they weren't Big Banks - you can't use a sinking ship to save a sinking ship.
Lots of blame for the Conservatorship is placed on Hank Paulson and James Lockhart, but viewed from this perspective it looks to me as if Ben Bernanke's fingerprints are all over the Conservatorship
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