the classic 'just waiting till im even'. I'm holding myself from shorting today, waiting for the bounce, there is almost ALWAYS a bounce
Whether or not there is a bounce from here, it's funny watching this stock .... now a $3.9 billion company wanting to do a 5.5 billion offering
http://www.freddiemac.com/investors/preferred_stock.html July 2006 20 million preferred @ $50 = $1 billion http://www.freddiemac.com/news/archives/investors/2006/20060712_preferredstock.html October 2006 20 million preferred @ $25 = $500 million http://www.freddiemac.com/news/archives/investors/2006/20061011_preferedstock.html January 2007 44 million preferred @ $25 = $1.1 billion http://www.freddiemac.com/news/archives/investors/2007/20070110_preferredstock_price.html April 2007 20 million preferred @ $25 = $500 million http://www.freddiemac.com/news/archives/investors/2007/20070410_preferredstock_price.html July 2007 20 million preferred @ $25 = $500 million http://www.freddiemac.com/news/archives/investors/2007/20070717_preferredstock_price.html September 2007 20 million preferred @ $25 = $500 million http://www.freddiemac.com/news/archives/investors/2007/20070925_preferredstock_price.html November 2007 240 million preferred @ $25 = $6 billion http://www.freddiemac.com/news/archives/investors/2007/20071129_preferredstock_pricing.html Total raised in 2006 to 2007: $10.1 billion Total preferred shares issued in 2006 to 2007: 384 million
Despite the big falls in FNM on Wed and Thurs, it still manages to disappoint. When will FRE's CEO make the call to Paulson?
as the GSEs CDS spreads and mortages rates keep climbing it might be bernanke who gives the call to paulson who then pulls out the uncle's sam checkbook. its interesting that every housing related insurance financial is getting killed yet not to ABK and MBI, to them everything is going great, no need for more reserves, they think they are the GS of insurance. man these guys should be in jail
In some email exchanges with John Hempton, he pointed me a scenario that could sorta bail the shareholders out. If FNM FRE were to raise $30b in preferred stock yielding 10%, this would cost them $6b(4%+ more than the 6% rate that they 'should' be paying) for 5 years(he assumes the government will try to get the money back quickly so the gses would redeem the PFs) Now for a number of reasons I think its more likely a treasury bailout will send the stock down not up, they include -just before election and the republicans always hated the gses, so there is political pressure to not do a full blown bailout -paulson knows he will have to testify and will be interviewed and asked about this('you put $30b in tax payer money at risk') over and over again, he needs talking points -he will leave office shortly after and will not want to leave as the guy who made a massive bailout So hempton cheap offering is a possibility but it seems unlikely that the treasury would deal with moral hazard by giving a deal that the private market wouldn't give to anybody else(even the cheap offering costs $15b over 5y, $1.5b per company a year, their 'peak' pretax earnings are about $7.5b, so stock funds wont like the fact there will be little in earnings for some years). it seems likely shareholders will take some kind of haircut(perhaps a steep one) but I'm going to have to watch this closely because I might have to take profits before they go away if its a fullblown bailout
Daal, how can raising $15b to $30b of preferred stock be good for common shareholders? Interested in your thoughts.
like I said if they make a 'cheap' rate. if they raise PF at 6%. it will be a cost for the equity holders but its not huge. but I think its more likely paulson will price a penalty rate. maybe higher than 15%, fortunally I dont have to know
Barrons article about nationalisation: http://www.marketwatch.com/news/story/endgame-nears-fannie-freddie/story.aspx?guid={1C3BCA30-B3A9-430C-A7B7-AAA215724943} IT MAY BE CURTAINS SOON FOR THE MANAGEMENTS and shareholders of beleaguered housing giants (FNM and FRE). It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer's dime, availing itself of powers granted it under the new housing bill signed into law last month.
I'm not Daal but here is my take- Preferred dividends can be deferred in an emergency. Plus it is usually long term or perpetual. It's like getting debt that doesn't force you to go bankrupt if you can't pay it. Shareholders could view it as reducing bankruptcy risk and giving them a better chance to hold on until things improve. I'm curious if they could do some kind of auction to set the rate, where the govt makes a bid but other investors can take down some or all of the issue if the rate is high enough to attract them.