navycmdr
1 hour ago
$Boooom ! - Fannie And Freddie: My Favorite Trump Stocks
Jul. 03, 2024 10:00 AM ET - Chris DeMuth Jr. - Investing Group Leader
https://seekingalpha.com/article/4702129-fannie-and-freddie-my-favorite-trump-stocks?source=section%3Asummary%7Csection_asset%3Aall_analysis%7Cfirst_level_url%3Asymbol%7Cbutton%3ATitle%7Clock_status%3ANo%7Cline%3A1
.......... Summary ..........
--- Want a way to bet on Trump? There are bad choices but also good ones.
--- Here is my favorite way to bet on Trump at scale.
--- The major caveat is the likelihood of Democrats switching candidates.
--- But even with this risk, these securities remain undervalued.
--- I am Chris DeMuth Jr. I founded and run event driven hedge fund Rangeley Capital LLC,
a hedge fund specializing in value, arbitrage and event driven opportunities. I lead the investing
group Sifting the World which provides arbitrage and event driven ideas for long-term value investors.
Earlier this year, I wrote about several ways to get exposure to a possible second Trump term,
including Trump NFTs, Rumble (RUM, RUMBW), and Trump Media & Technology Group Corp. (DJT).
I disliked them all, especially DJT (DWAC at the time).
My views are unchanged since then. But I also mentioned a leveraged bet on Trump that I own and love:
There is a possibility that we see both the end of the Chevron Doctrine deferring to regulators at the
Supreme Court at around the same time as the end of the Biden administration. So, companies that
have suffered under aggressive regulatory burdens could flourish. One of the most leveraged bets
on Trump is Fannie (OTCQB:FNMA, OTCQB:FNMAS, OTCQB:FNMAT) and Freddie (OTCQB:FMCC,
OTCQB:FMCKJ, OTCQB:FMCCH); they've suffered under Biden but could have a route to realizing
value under Trump. Their prefs have more ways to win than common.
The Chevron Doctrine deferring to regulators was killed off by the Supreme Court today. But will Trump win?
Probably. I place the odds at least two out of three.
Will Donald Trump Win?
Betting markets have been remarkably stable until today’s volatility.
Poll averages show Trump ahead by about 2%, but I expect that margin to widen from here:
However, Biden’s problems are worse on a state-by-state basis. He is struggling
in sunbelt states such as Arizona, Nevada, and Georgia. That means he would
have to sweep the rust belt states of Wisconsin, Michigan, and Pennsylvania.
And then there was Biden’s debate disaster. It utterly validated special counsel
Robert Hur’s description of the president,
We have also considered that, at trial, Mr. Biden would likely present himself to
a jury, as he did during our interview of him, as a sympathetic, well-meaning,
elderly man with a poor memory. It would be difficult to convince a jury that they
should convict him—by then a former president well into his eighties—of a
serious felony that requires a mental state of willfulness.
Last night, he came across as every bit an elderly man with poor memory, incapable of a
mental state of willfulness. His handlers have been saying for months that he is spry and
alert away from the microphone. They have been lying.
Now what? Most likely: Biden loses and Trump wins. Biden’s weaknesses are difficult to
message. You are overtaxed? That isn’t a hypothetical concern that someone can explain
away. You see inflation at the grocery store? “No, you don’t” is hardly a convincing counterpoint. Y
ou were lied to about Biden’s fitness. A greater quantity of lies won’t improve their quality.
But this is a competitive system, and Democrats won’t go down with Biden if his loss looks
as likely as I think it is. California Governor Gavin Newsom was all over the post-debate spin
cycle, looking more in sadness than anger at the debacle, but also looking very presidential.
The Democrats could find a consensus alternative among the competent Democratic governors
such as Colorado Gov. Jared Polis or Pennsylvania Gov. Josh Shapiro (the Republicans are
more committed to Trump but could also switch out for a far more electable gov such as Georgia’s
Brian Kemp or Virginia’s Glenn Youngkin). An irony of this year’s political dynamics is that Biden
is the Republican’s not so secret weapon and Trump is the Democrats’. Any normal candidate
would obliterate the other party’s presumptive nominee in the electoral college.
A serious delegation, say, led by Pres. Clinton and Pres. Obama, could approach Biden
to step aside. If he balks, a compromise could be to replace the unpopular Vice President
with a consensus candidate, paired with a plan for Biden to step down shortly after a victory.
That could appease Biden’s ego and transition to a more sentient leader of the free world.
Caveat
Trump could lose or fail to privatize Freddie and Fannie if he wins. The chance radically
rises if the Democrats switch out Biden for a more electable nominee.
Conclusion
Trump has at least a two out of three chances of winning this election. If he does, he will probably
enrich Freddie and Fannie pref holders by privatization. And whether he does, the likelihood will
get meaningfully priced in if he gets elected.
TL; DR
I own some (FNMAS), (FNMAT), (FMCKJ), and (FMCCH); you might want to too.
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.
Like underpaying for bargains?
Here's one more.
This article was written by - Chris DeMuth Jr. - 37.66K Followers
Chris DeMuth Jr., is founder of event driven hedge fund Rangeley Capital. Its strategy is to invest in mispriced securities with limited downsides and corporate events that unlock shareholder value. Rangeley exploits the seams between other hedge funds’ mandates.
Chris runs the investing group Sifting the World, in which he shares his best ideas, deep research, extensive resources and real time updates as investments play out. The group contains an experienced community that shares specialized knowledge when members have local knowledge of opportunities under discussion. Learn more.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of OTCQB:FNMAS, OTCQB:FNMAT, OTCQB:FMCKJ, AND OTCQB:FMCCH either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
https://seekingalpha.com/instablog/957061-chris-demuth-jr/5549358-legal-disclosure
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Wise Man
12 hours ago
UPDATE. I've just read the amended complaint filed by the attorney D.Thompson with Wazee II in a district court on July 1st.
As expected, he not only doesn't challenge the ongoing NWS 2.0, but also he praises it the same way he did before: "FnF build capital at the same time the Treasury maximizes profits", etc.
All the same he has said in all his prior lawsuits:
- Talking about billions of dollars in capital that needs to be raised through issuances of common stocks.
- More common stocks sold after exercising the Warrant.
- Conversion of SPS to common stocks.
- He adds several statements from Calabria and Mnuchin, who represent the hedge funds' self-interests.
- Talking about the release from conservatorship required by the Trump Administration, just because he doesn't like that it was a law that required to the UST the end point of the conservatorship in 2011, and the 3-option Privatized Housing Finance System that came as a result.
In the end, he has elaborated a script taken from self-interest statements, disregarding the law in force and basic finance (no dividend available for distribution, out of Accumulated Deficit Retained Earnings accounts), and always making reference to "potential investors". Let me guess: Blackrock, Morgan Stanley, PIMCO, etc.
Instead of starting out the brief with the ongoing breach of the Supreme Court opinion, that required the "rehabilitation of FnF", no matter the road taken.
Wise Man
13 hours ago
The almighty attorney D.Thompson takes full control of Wazee after the expulsion of two co-plaintiffs and two of their attorneys, and announces on the deadline July 1st, an amended complaint in the district court. Only the attorney Hamish Hume remains, but he hasn't signed the document to stage who is in charge.
This omnipresent attorney to Fairholme, was already famous for seizing control of the remaining cases to control the narrative (Bhatti, Collins, Rop, Robinson), always seeking either a Mediation (Rop) or back dividends for his client Berkowitz's Non-Cumulative dividend JPS.
Now, he did it again with Wazee last week. The only case that challenged today's NWS 2.0 (SPS LP increased for free as compensation to the Treasury in the absence of dividends). A clear capital distribution (statutory definition #1), and thus, restricted.
I don't recall if I read it in the 1st, 2nd or 3rd amended complaint, all of them filed within a few days of difference and at the end of the Wazee case, but I'm talking about the Wazee case I, in the Court of Federal Claims with judge Sweeney, which came from a District court many years ago to join Fairholme and the 11 related cases when she requested for her court all the cases that challenged the United States, although it didn't join them formally, but Sweeney kept it as a satellite case.
I don't know if I read it in the 1st amended complaint and later the challenge to the NWS 2.0 was removed in the 2nd or 3rd complaint. Or I read it in the 2nd or 3rd complaint. That is, the attorney Hamish Hume playing a shell game. This Wazee case I was a Class Action.
This case in the CFC dynamited his other case in the Lamberth court, because it's a Class Action too, which has as prerequisite for CA that it must put an end to the controversy. A case with a fat bonus for the attorneys (by the way, the award in Securities Litigation judgments is another capital distribution restricted, #3 in the statutory definition of capital distribution inserted by the FHFA through regulation on July 20, 2011, CFR 1229.13), along with the case of David Thompson with Fairholme. This is why Hamish Hume relinquished the appeal in the Appeals court for the Federal Circut on the scheduled day, May 24th, filing a voluntary dismissal two days before.
Surprisingly, the attorney Hamish Hume had a second Wazee in a District Court of Pennsylvania running in parallel, which is the one being seized by David Thompson last week.
It's obvious that the Fairholme's attorney, David Thompson, won't challenge the ongoing NWS 2.0 in the announced amended complaint with Wazee II, not only because it dynamites his case in the Lamberth court, but also because he shamelessly used the NWS 2.0 in court with Collins on remand, to seek "constitutional damages", after praising it as Wonderland, where the UST gets rich with the gifted SPS every quarter, in an amount equal to the Net Worth increase and, at the same time, FnF are being recapitalized. Thus, he seeks damages because the "for cause" removal restriction prevented this scenario from happening sooner, firing Watt before.
This is a big lie based on the Financial Statement fraud in FnF that don't post on the Balance Sheets this SPS LP and its corresponding offset, reduction of Retained Earnings, that happens every time a company issues (or increases) stocks for free (without getting the corresponding cash), and already seen with the initial $1B SPS issued for free and debited from the Additional Paid-In Capital account (the shareholders' pockets). It occurs the same when a company grants stock dividends, etc.
What this attorney is doing is another backdoor negotiation with the DOJ, playing the fool and treating FnF as Mutual Funds, when he just requested a cash refund in early conservatorship, and omitting the Restriction on Capital Distributions, its exceptions, the FHFA-C's rehab power, the original UST backup of FnF as a last resort, etc.
The self-proclaimed "unsophisticated lawyer" in a Conference Call hosted by Tim Pagliara, thinking that now he can scrap all the financial concepts: Capital; Dividends, a distribution of Earnings; Etc.
22:30 mark:https://web.archive.org/web/20200619174039/https://investorsunite.org/wp-content/uploads/2020/01/1-24-IU-Teleconference-Audio.mp3
With respect to capitalization, I am not a regulatory lawyer. I am a litigator....That's being watched by a number of sophisticated lawyers...
Wise Man
14 hours ago
"Privatizing" refers to being subject to the same capital standards as the fully private financial institutions, better known as the Basel framework for capital requirements, which, in FnF, it came into effect on February 16, 2021 after being proposed and reproposed several times.
It's when the current UST backup of FnF in the Charter Act upon "Capital Deficiency", is pointless, and the Charter Act can be revoked, remaining private shareholder-owned companies as always.
No government-sponsored private corporations anymore.
It has nothing to do with a Conservatorship. They just happen to be intertwined, since the UST chose a Privatized Housing Finance System revamp for the release, and guarantee fee increases to that end.
The FHFA chose overtime in the conservatorship, in order to get rid of the JPS (AT1 Capital), commented yesterday, and authorized "in its best interests" for this Housing Finance System revamp. Which makes me believe that it chose the Calabria's path when he recommended a Taking at the stocks' book value (Difference between Assets and Liabilites. Called "Common Equity" for the common stocks), by the UST. It can't be a purchase "on the cheap" (forcing the insurers FnF to buy insurance -CRTs-, etc.), as everything would be adjusted.
A "back-end Capital Rule" enabled by Calabria when he crafted HERA, with the objective to conceal that FnF are in the process of building capital, also known as the Transition Period that comes after a Federal Agency (or the Federal Reserve), proposes changes in the Capital Rules. Now, the Transition Period occurred before.
HERA amended the FHEFSSA stricking down the Risk-Based capital requirement, directing the FHFA director to come out with a new formulaic, and also, when it authorized to change the weights of the Minimum Capital level and add new capital metrics (CET1 and Tier 1 capital), but Calabria didn't include the typical 18-month IMPLEMENTATION when a law requires changes to Federal Agencies, as seen, for instance, in the very FHEFSSA of 1992 when it imposed the Capital ratios (prior formulaic of Risk-Based Capital requirement), capital classifications, definitions, etc., for the first time.
N/A in the Risk-Based capital requirement as a result in the FHFA Reports to Congress, which wasn't a problem in early conservatorship, with deficit capital available, but necessary later on.
By the way, the Critical Capital level wasn't changed, so it's a felony when it's absent from the ERCF. They are 3, not 2 capital requirements.
Not meeting a capital level called "critical" bothers to the plotters peddling the "rehabilitation of FnF" with an adjusted $-194B core capital available every quarter, due to the ongoing Common Equity Sweep (NWS 2.0). Only the SPS LP increases in their Net Worth, a debenture.
A Critical Capital level called "irrelevant" on day one, because it triggers a conservatorship during a conservatorship. Good. But it doesn't mean that you don't have to publish it anymore.
But, what can we expect from Calabria, who also struck the prior MANDATORY release from Conservatorship, when FnF are declared Capital Classification Undercaptialized, implying that FnF have to build capital? It's already written in the FHFA-C's power: put FnF in a sound and solvent condition, but that can be twisted or concealed by those playing the fool. Undercapitalized: Core Capital or Tier 1 Capital > 2.5% of Adjusted Total Assets, with the new weight.
Calabria knows quite well that the process towards Charter revoked, is achieved building capital.
He also knows that, if you inflict the insolvency in a public company, is a felony.
This is why he can only play the fool, jointly with the Pagliara's boys: "We've been robbed!", tweeted by Guido on a daily basis.
Likewise, Calabria knows that the CRT operations, other than the PMI and commingled securities, are barred in the Credit Enhancement clause of the Charter Act. Let alone that the FHFA doesn't have authority to implement a Housing Finance System revamp on its own.
This is why he just pretends that the Charter Act doesn't exist, as we saw recently claiming that the MBS aren't backed by the government, without specifying that it's a clause in the Charter Act.
Because it's unlawfull, it's pretty obvious to me that the CRT expenses are, simply, funds sent to Treasury under the Mnuchin's slogan "the taxpayer be appropriately compensated", thinking of a different Charter Act, because in this one, there is a PROHIBITION.
Double Charter violation in this case. $20B in CRT expenses/recoveries, net (a deductible expense, now it pays taxes), is due. The Common Equity necessary to aborb future losses, that is, for their rehabilitation.
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