Ace Trader
1月前
Yes they are continuing too out preform commons for now. This has always been a horse race over the years. With certin info released the common seem a better beat then pop, info comes out that makes JPS a better beat.
All in all both came be a great investment. I’m hold my JPS for dividends in the future if the GSE’s get released and that now shows in the price range as the talok now seems that the Gov will want to cash in the warrants but cancel the SPSA.
FOR THE RELEASE TO HAPPEN, everyone needs to get a piece of the pie in the deal !
Everyone includes:
Current shareholders common and JPS
Large hedge fund investors
All current Plaintiffs in all court cases
There’s lots of ideas that has been put forward by board members and public with different levels of information be it first hand or second hand info and prospectus on the out come.
With that out of the way let me chime in from what I know ( Not much) and where this could end up ( wild guess on my part). But a gut feeling based on events so far and the behaviour of a few in the new DJT Admin.
Just to be clear: I own both JPS Fannie and Freddie & Freddie common shares and want both to do well !!
Since working for a Large New York family construction/ developer who builds, Condos, Multi use buildings Hotels and casinos for over 10 years being in around that indirectly and be given full access to 2 multi million $$ hotel/ casino projects all the paperwork war legal side of it and all the hoops you have to do before you even break ground is mind blowing. That’s where these types of guys aka DJT, Bill, John, Buffet etc etc pride themselves on the, as DJT wrote a book about it ( THE ART OF THE DEAL)
I’ve met DJT on 2 occasions as he and my boss were building a casino together in Atlantic city a few years back and like my boss he was a sharp talker and shot from the hip. It was all about making a deal and getting the best out of the deal with a little give and take on each side. That’s how it works in NY with these guys.
So lets look what we have on the table from Investors side aka Bill, John and other large investors, maybe Buffet but that’s a long shot.
Both or all have large holdings of common shares and large holdings or JPS to hedge against if the common deal didn’t go there way.!!
Putting up $100’s millions on a gamble is not how these guys operate not even close! Their plan all along was to buy enough of the float band together and negotiate with the Government on a DEAL !!
That deal could be anything but we know that the DJT admin wants to release the GES’s and these big investors want a deal.
So what will most likely happen is :
1, So it would be to forgive the settlement money and settle all other cases in exchange for the SPSA and the release of the GES’s.
2, Gov to convert warrants to common and IPO them to investors first @ a discount ( aka) the big guys and settled cases with plaintiffs . The discount is to offset the dilution in drop of share price. Keep that in mind it’s very important part of the deal ( The discount of new shares is to offset the dilution and drop in share price) Why you may ask?? At the time of the TAKEOVER common shares in both were around $20-$30 and dropping !!
By the Gov converting the warrants to common shares they are getting (FREE MONEY) Remember the Gov has loaned the GES’s $100 billion. The other $87 billion came from the cash the Gov stole from the companies when the took them into conservatorship in Sept 2008. That part has never been challenged and it really pisses me off how the Gov can steel $87 billion in cash from private companies without the 5th amendment in play. The Gov knows it’s been paid back well over what they loaned.
Remember this! page 7
In summer 2007, as subprime mortgage defaults escalated, issuance of non-agency mortgage-
backed securities. Fannie & Freddie only had $300 million of these loans on there books!
By the end of 2007, the two firms owned over $300 billion of non-agency
mortgage-backed securities.
QUOTE: page 2 https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr719.pdf
U.S. taxpayers ultimately injected $187.5 billion into Fannie Mae and Freddie Mac.
REMEMBER THAT NUMBER $87 BILLION of share holders money !!!!
THE GOV DIDN’T LOAN US THERE MONEY THEY BORROWED IT FROM THE FEDERAL RESERVE @ A DISCOUNTED GOV RATE THEN CHARGED THE COMPANIES A 10% INTEREST ON THERE 2.5 % LOAN INTEREST + 10% ON OUR (COMPANIES $87 BILLION)
COUNRT CASES
DJT Admin will not appeal the Federal Court of claims jury verdict for shareholders 8-0. They lost big time and to fight it would NOT be in the best interests of both parties. Remember both parties including us shareholders want our companies back.
All these court cases have standing and eats up time so the Gov will settle out of court sell at a discount IPO these these people and hedge funds , companies. With the new shares and release this group will recoup a large amount of what they lost when the Gov stole the GES’s.
3, That leaves all cases settled with Plaintiffs and Plaintiffs shares. Large investors with more share @ a discounted rate to offset there large investments and current share holders with a small pice of the pie but roughly the same share price at time of conservatorship Sept 2008.
It’s up to the DJT to release the GSE’s not congress as per
6 The 79.9 percent ownership stake was selected to avoid the necessity to consolidate the assets and liabilities
of Fannie Mae and Freddie Mac onto the government’s balance sheet. See Swagel (2009, p. 37).
7 The senior preferred stock purchase agreements also included various covenants. Specifically, Treasury
approval is required before: 1) purchasing, redeeming or issuing any capital stock or paying dividends; 2)
terminating conservatorship other than in connection with receivership; 3) increasing debt to greater than 110
percent of that outstanding as of June 30, 2008; or 4) acquiring, consolidating, or merging into another entity.
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr719.pdf
I my view if the world was honest, The Gov would return what it stole from the companies and pay back all the money it stole from the compaines but that’s never going to happen!
Bullish
Fanatical Infidel
4月前
Fannie Mae Preferreds Offer Election Opportunity
https://seekingalpha.com/article/4723054-fannie-mae-preferreds-offer-election-opportunity
Summary
Preferred stock of Fannie Mae and Freddie Mac should rise sharply if Donald Trump wins.
Recent prices are out of line with the election odds.
I estimate the potential gains and losses for investors in the immediate aftermath of the election based on the 2016 and 2020 patterns.
In July, I wrote about why junior preferred stock issued by Federal National Mortgage Association (OTCQB:FNMA) and Federal Home Loan Mortgage Corporation (OTCQB:FMCC) were a good bet in the event of a Donald Trump victory in November and possible recapitalization.
The article received more than 100 comments, with some disagreeing with my thesis that a second Trump administration would release the two mortgage guarantee firms from government control, since it failed to do so the first time around.
One difference is the Trump team would no longer have to surmount obstacles such as the objections of Mel Watt, the anti-release head of the Federal Housing Finance Agency, for much of the term. Legacy agency directors are no longer an issue due to a Supreme Court decision that allows presidents to replace such officials before their terms end. Trump blamed Watt in a 2021 letter to Senator Rand Paul urging "full privatization."
The Wall Street Journal recently reported that Trump allies including economist Larry Kudlow are working on a privatization plan.
In this article, I want to go beyond the July one by quantifying the expected gains and losses in the immediate aftermath of the election.
While the politics were complex in the immediate aftermath of the 2008 conservatorships, the Democrats' wish to keep them in government hands has been clear since the Obama administration imposed a net worth sweep on the companies' profits in 2012, requiring them to return virtually all profits to the Treasury.
After a period in which some Congressional Republicans seemed to favor abolishing the two mortgage giants entirely, the Trump administration made its position clear by ending the net worth sweep in 2019, allowing the companies to rebuild capital.
There have been two elections since the sweep was imposed, with one win for each party, and the stock prices have reflected this.
The following chart shows the closing prices of some highest-volume preferred issues the Friday before the 2016 and 2020 elections, and again at the close of the inauguration week the following January. The effect on the share prices was almost symmetrical.
Issue Coupon Liq. Pref. Recent price % of Pre-2016 2017 Inaug. % gain Pre-2020 2021 Inaug. % gain
full value election price price election price price
FNMAS Floating 25 4.31 17% 4.09 8.85 116% 9 4.44 -51%
FNMAT 8.25% 25 3.92 16% 4.05 8.58 112% 8.2 5.02 -39%
FMCKJ Floating 25 4.189 17% 4.05 8.28 104% 8.8 5.52 -37%
FNMFN Floating 50 6.48 13% 6.8 14.75 117% 14.31 9.06 -37%
Sources: Yahoo Finance, author's spreadsheet
Let's use FNMAT as an example. Note that the recent price of $3.92 is similar to what it was when Barack Obama was president, just before Trump scored his upset victory.
In the next three months, the price more than doubled, to $8.28 on the Friday following Inauguration Day. This is the same party-in-power swap that would occur this year if Trump triumphs.
But when Democrat Joe Biden won in 2020, the price declined 39% to $5.02 by Inauguration Week. The path was bumpy, as investors were unsure of the outcome until Congress confirmed the result in the early hours of January 7, 2021.
With the current odds of the race around 50-50, this looks like a straight-up bet. If Trump wins, a doubling is likely before the inauguration.
Risk Factors
Since the result wouldn't be as much of an upset as 2016, the move could be somewhat less.
If Kamala Harris wins, expect prices to fall nearly in half as investors will likely have to wait at least four more years for a recapitalization.
A double from 4 to 8 is worth twice as much as a halving to 2 costs, so the odds seem favorable as long as Trump has better than a 33% chance of victory. (If there were three elections and Harris won twice, the $4 total loss would equal the gain from the one Trump victory.)
In theory, one could hedge against a Harris victory by buying a stock or ETF that would likely benefit from continued Democratic control of the regulatory agencies, such as in renewable energy.
Note that this analysis only covers the period until the inauguration. Once the new president takes office, price changes will depend on the progress (or lack of same) toward recapitalization, which likely would see them converted to shares of a new common issue at liquidation preference value.
FNMAT is only selling at 16% of liquidation preference, so this would mean a gain of sixfold. Former Federal Housing Finance Agency director Mark Calabria has estimated it will take two to three years for the recap to take place.
In some ways, my analysis is similar to that of SA's main expert on the GSEs, Glen Bradford. However, I view the underpricing as being natural because of the risk-aversion of the market as a whole, and thus believe the stocks are unlikely to rise significantly until after the election unless Trump's odds improve to near-certainty.
Conclusion
Investing in Fannie and Freddy preferreds is risky, but if you think Trump has at least a 50/50 chance of winning, it could make sense to buy them as a short-term play, regardless of whether his administration ultimately succeeds in returning the mortgage insurers to private hands. If you also think Trump would complete the recapitalization, the trade would become a long-term investment.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
This article was written by
Vlae Kershner
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