Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Anyone planning to add to FAIRX or FAAFX? Charles, perhaps? I don't have all that much dry powder, so I want to wait to see if it falls more first, though I suspect tomorrow we'll see at least a little rebound, the famed dead cat bounce if nothing else.
Ouch..that really hurts. About 10% of the holdings took a 50% haircut. All the other holdings were also down. That's what a concentrated portfolio can you for/to you.
Won't sell right away, but may certainly reduce on a (dead cat) bounce.
Morningstar is really slow in this. The other services have the correct numbers in place. M* has the correct quotes for Fannie and Freddie but not for FAIRX. I just checked this minute.
email I got: Fairholme has been receiving inquiries about yesterday's D.C. District Court decision regarding Fannie Mae and Freddie Mac. I want to make sure that all shareholders have the relevant facts. While we strongly disagree with the court's conclusions, we remain steadfast in our belief that – at a minimum – shareholders are due just compensation for the Taking that has occurred. That is, the D.C. District Court judge is either wrong or the law is unconstitutional – the issue is now quite simple. In this respect, our ongoing litigation in the Court of Federal Claims seeks to remedy this matter. We will continue to pursue our legal rights with the same conviction held in our other G-SIFIs (global systemically important financial institutions) – AIG and Bank of America – deemed essential to our way of life.
VF, investors such as Berkowitz, Ackman,.. were suing in order to get the gov to restore dividend (or something along those lines). The gov won in this case and will keep all profits (for now, we shall see). so stocks got creamed. FAIRX owned mostly pfd which I am assuming is preferred. I guess that got creamed also.
Freak...I am not a lawyer and did not stay at a Holiday Inn express last night. But here is my high level interpretation.
The US government issued an add-on to the original bail-out agreement for F&F, essentially modifying that to claim profits should be swept to the Treasury, beyond the point of original funds having been fully returned.
BB said...wait a minute...the US had no right to modify that agreement, and as such, the government is now taking control of assets rightly due to shareholders of F&F....violation of existing contracts...etc, etc.
Courts said, No...lawsuit against the government is dismissed. Shareholders lose. Money continues to go to the treasury. F&F has no right to their profits...Uncle Sam gets that.
VF, investors such as Berkowitz, Ackman,.. were suing in order to get the gov to restore dividend (or something along those lines). The gov won in this case and will keep all profits (for now, we shall see). so stocks got creamed. FAIRX owned mostly pfd which I am assuming is preferred. I guess that got creamed also.
Sorry if I'm being dense. Government not restoring dividend. So people who bought stock thinking government WILL restore dividend, decided to sell. I think I got this.
Now my question is when stock gives dividend, doesn't it's price drop by equivalent amount? So how much dividend really were investors expecting that they got pissed and knocked stock down so much?
VF, so I am not an expert but here is my thought. FAIRX owns preferred. So if preferred won't pay a dividend, my guess is that it is worthless and was priced as such. However, FAIRX and others bought preferred a while ago hoping to sue the gov and restore dividend. I guess others pilled in the trade hoping to make some money and thus driving price of preferred up. when suit against gov failed and the gov will keep all profits/dividends from fannie and fredie, people sold their preferred shares driving shares down again.
VF, so I am not an expert but here is my thought. FAIRX owns preferred. So if preferred won't pay a dividend, my guess is that it is worthless and was priced as such. However, FAIRX and others bought preferred a while ago hoping to sue the gov and restore dividend. I guess others pilled in the trade hoping to make some money and thus driving price of preferred up. when suit against gov failed and the gov will keep all profits/dividends from fannie and fredie, people sold their preferred shares driving shares down again.
"The Obama Administration wants to wind down the mortgage giants that have been operating in conservatorship since receiving $188 billion from the Treasury Department amid the financial crisis. But Fannie and Freddie paid the bailout out money back and are now hugely profitable. Perry and Berkowitz bought Fannie and Freddie junior preferred securities a long time ago in the hopes that some of those profits would eventually flow to them. "
Government response: "Yeah....that would be a no."
"Pershing Square has about 11 percent economic exposure to Fannie Mae and Freddie Mac shares based on common stock outstanding, a stake first disclosed last year. While lawmakers are weighing methods to wind down the companies, Ackman said mortgage rates would jump without the government-sponsored enterprises.
“There is no viable alternative,” to Fannie Mae and Freddie Mac, Ackman said today in a Bloomberg Television interview with Stephanie Ruhle after the Sohn presentation. “Preserving the 30-year prepayable fixed-rate mortgage -- it’s like the bedrock of the housing system -- is critical."
We think the only way to do it is by preserving Fannie and Freddie.” $23 to $47... or zero. Because while there may be no viable alternative, Ackman forgot one key thing: his adversary is the US government... "
And I thought this stuff only happened in China...
This is a little fuzzy.
AIG did stupid things. Government took tax payer money and bailed them out. AIG recovered, paid Government back. All that time investors gambled on AIG stock. They still are.
Fannie and Freddie were quasi-government agencies. That doesn't really say anything much because they were also publicly traded stocks. They got into trouble and again Government took tax payer money and bailed them out. Government is now recovering their money back.
Berkowitz bought AIG stock. Berkowitz bought Fannie/Freddie stocks. He gambled. He lost. If the type of "shares" Berkowitz owns is same as the type of "shares" Government owns, then clearly the judge is stupid and we should go live in China. I'm thinking Government owns "special shares" just like Buffett did in GS and BAC, and he got preferential treatment too.
There is reason people buy government bonds too. All goes to hell, government takes care of itself.
Well if you like FAIRX and Bruce Berkowitz, you should like them a LOT more today. And see it as a big opportunity to buy your favorite manager and fund at a large discount. That's the value investing way. But I'm not sensing this........Surely FAIRX investors knew the risks of investing in Fannie, Freddie, and the other risks in FAIRX.
Well if you like FAIRX and Bruce Berkowitz, you should like them a LOT more today. And see it as a big opportunity to buy your favorite manager and fund at a large discount. That's the value investing way. But I'm not sensing this........Surely FAIRX investors knew the risks of investing in Fannie, Freddie, and the other risks in FAIRX.
I don't like anyone. I'm a first class B******. If I could trade daily I would buy ETFs. I only invest in mutual funds because I don't have a viable alternative that fits my lifestyle.
These concentrated or focused funds seen to be a good bet for anyone wanting to put a small allocation in them. But we are all different with differing risk profiles. So investing in these funds will be good for those who believe in the manager and his/her direction. But the red flags have been flying on this one for a while now. Sears was the hot topic recently but that changed with this lawsuit deal.
What will happen tomorrow and for the rest of this week may tell the story here.
“Common and preferred stock in Fannie and Freddie slumped in response. But the breadth of the ruling, and the likelihood that other courts will come to similar conclusions, mean the shares probably have much further to fall”. WSJ
“Common and preferred stock in Fannie and Freddie slumped in response. But the breadth of the ruling, and the likelihood that other courts will come to similar conclusions, mean the shares probably have much further to fall”. WSJ
Comments
http://news.morningstar.com/all/ViewNews.aspx?article=/MW/TDJNMW20141001152_univ.xml
edit: Derp. I should read more posts...
-6.72%
Won't sell right away, but may certainly reduce on a (dead cat) bounce.
FAIRX Fairholme -9.6%
FAAFX Fairholme Allocation -10.8%
FOCIX Fairholme Focused Income Fund -6.72%
While we strongly disagree with the court's conclusions, we remain steadfast in our belief that – at a minimum – shareholders are due just compensation for the Taking that has occurred.
That is, the D.C. District Court judge is either wrong or the law is unconstitutional – the issue is now quite simple.
In this respect, our ongoing litigation in the Court of Federal Claims seeks to remedy this matter.
We will continue to pursue our legal rights with the same conviction held in our other G-SIFIs (global systemically important financial institutions) – AIG and Bank of America – deemed essential to our way of life.
The US government issued an add-on to the original bail-out agreement for F&F, essentially modifying that to claim profits should be swept to the Treasury, beyond the point of original funds having been fully returned.
BB said...wait a minute...the US had no right to modify that agreement, and as such, the government is now taking control of assets rightly due to shareholders of F&F....violation of existing contracts...etc, etc.
Courts said, No...lawsuit against the government is dismissed. Shareholders lose. Money continues to go to the treasury. F&F has no right to their profits...Uncle Sam gets that.
Now my question is when stock gives dividend, doesn't it's price drop by equivalent amount? So how much dividend really were investors expecting that they got pissed and knocked stock down so much?
Government response: "Yeah....that would be a no."
http://www.zerohedge.com/news/2014-10-01/ackman-berkowitz-slammed-after-fannie-mae-plunges-60-court-ruling
"Pershing Square has about 11 percent economic exposure to Fannie Mae and Freddie Mac shares based on common stock outstanding, a stake first disclosed last year. While lawmakers are weighing methods to wind down the companies, Ackman said mortgage rates would jump without the government-sponsored enterprises.
“There is no viable alternative,” to Fannie Mae and Freddie Mac, Ackman said today in a Bloomberg Television interview with Stephanie Ruhle after the Sohn presentation. “Preserving the 30-year prepayable fixed-rate mortgage -- it’s like the bedrock of the housing system -- is critical."
We think the only way to do it is by preserving Fannie and Freddie.”
$23 to $47... or zero. Because while there may be no viable alternative, Ackman forgot one key thing: his adversary is the US government... "
AIG did stupid things. Government took tax payer money and bailed them out. AIG recovered, paid Government back. All that time investors gambled on AIG stock. They still are.
Fannie and Freddie were quasi-government agencies. That doesn't really say anything much because they were also publicly traded stocks. They got into trouble and again Government took tax payer money and bailed them out. Government is now recovering their money back.
Berkowitz bought AIG stock. Berkowitz bought Fannie/Freddie stocks. He gambled. He
lost. If the type of "shares" Berkowitz owns is same as the type of "shares" Government owns, then clearly the judge is stupid and we should go live in China. I'm thinking Government owns "special shares" just like Buffett did in GS and BAC, and he got preferential treatment too.
There is reason people buy government bonds too. All goes to hell, government takes care of itself.
What will happen tomorrow and for the rest of this week may tell the story here.
http://www.marketwatch.com/story/sears-to-raise-380-million-from-sale-of-sears-canada-shares-2014-10-02?link=MW_home_latest_news
Fannie Mae and Freddie Mac down another 10% or so each.