Kamil Kolacek

Long only, value, deep value, long-term horizon
Kamil Kolacek
Long only, value, deep value, long-term horizon
Contributor since: 2014
Amtrak was never profitable, not so with FNMA & FMCC.
'Usually market solutions work a lot better and lead to higher prosperity than those dictated by fiat.' Key world in that statement is 'usually,' my friend. Not in this case. In this case unfortunately there is no alternative to a government-backed, bullet-proof, Uncle Sam balance sheet guarantee!
There isn't a single private entity on Earth large enough to credibly guarantee almost $6t in mortgages.
LOL - no offense, but are you insane sir ? You state, 'Fannie/Freddie can be cancelled with no meaningful consequences to the economy...'
Ha, that is the most ridiculous statement I have ever read on SA! These two firms are without question THE MOST important companies in the United States and are the ballasts for the one of the most critical sectors of the US economy, housing. Without FnF the 30 year fixed-rate mortgage would cease to exist and owning a home would be out of reach for a majority of American households.
No, the profits are returned to the Treasury to reduce the Federal Budget Deficit my friend.
LOL - on saying Buffet is delusional and has no knowledge of the impact of rising rates! Come on buddy.
Fannie is leveraged over 300x+, and Freddie about 150x+ if my memory serves me correctly.
The only entity that can plausibly well capitalize these two behemoths is the United States Government, whether we like it or not. There simply is no other realistic alternative, that is why both of these firms have been in this zombie state known as conservatorship for so long. In theory we would like the free market and private enterprise to set the market rate for mortgages, but in reality, private enterprise does not have the capital or the will to guarantee $5+ trillion of principal and interest payments on millions of American homes.
As unpalatable as it is, there simply is no other game in town for the 30-year fixed rate.
If these Co's were well-capitalized they would actually be some of the most profitable Co's on the planet, due to the unfair advantage of having an implicit government guarantee on millions of American mortgages.
Nah, you got it all wrong my friend, it is the other way around. Short YHOO / Long BABA. BABA is a tremendous growth stock for the future!
Good article, but you are taking on a lot of risk for just $5-6 dollars of upside based on your estimates? I guess if you throw in the dividend the bullish investment thesis is not that bad, but then again just to maintain the dividend they will likely borrow more and I don't think a dividend cut is out of the question. I guess it all depends on how long this China slowdown lasts and how deep it really is.
You don't think there is a good possability that FB will still end up buying SnapChat?
1.3b stay-at-home-moms and boomers in the world? I don't think so. I also have a lot of friends that went off FB. They were all back before 6 months. It's similar to those who vow to dump their iPhone, get an Android phone and are back to Apple within a year!
Bingo!
You think all 1.3b people will just decide to logoff one day?
You could have argued the same thing about Google 10 years ago and even to this day. It essentially has one stream of income through search advertising and could thus be categorized as a 'wipeout' risk.
Two bankrupties and back on track, that is inspiring!
Covered calls you could lose it and selling naked puts is dangerous.
Actually, very much sense on takingscalps part.
'Anyone who understands that nearly all of Google's revenue is advertising revenue, sees the potential in FB's reach.'
That one sentence is THE KEY to many a shrewd investor likely becoming quite wealthy from FB shares ownership in the future my friend!
With time, it wil be your funeral!
Why? It's usually better than a humans! :)
Hi Steven, thanks for your comment. Look in all honesty, if you think about it, these firms should likely not even be public in the first place. That is, the relatively small pool of equity capital that shareholders provide is quite trivial and not even necessary for the GSEs to function. Perhaps that is Uncle Sam's fault for even floating them. The implicit guarantee by Treasury and US taxpayers backs up over $5 TRILLION in mortgages at the moment!
The total shareholder equity Fannie is about $4b. The simple fact of the matter is, that there is no other entity on planet Earth that could provide a CREDIBLE backstop (insurance) on the timely payment of over $5t worth of US mortgages. The relatively small public GSE shareholder base could not do it, nor could any HF, asset manager, sovereign wealth fund on the planet combined.
Not only are these firms "Too Big Too Fail," but they are also too big too operate without an implicit and better yet, EXPLICIT US Goverment guarantee.
$200 a share? Really? Now, that is a stretch sir. I don't think so.
Whoa - amazingly well written and researched article. I've never seen anything like it on SA. Man, you should be working for Goldman. I say that with all seriousness, as a compliment and not a diss! Well done- very impressive.
Perhaps so, but I do not think that my letter was either arrogant or malicious. Ackman is a big boy, he can take it, and as many commentors here have pointed out, probably does not care (and very likely the letter probably did not reach him).
The market penetration of PMI's (private mortgage insurerers) has never been significant, at most it has been a little over 2% of total mortgage balances. According to Ackman's own research PMI at its maximum represented only 15% of mortgage originations. At their height in 2004 the combine market capitalizations of the private mortgage insurers was only $16b. Compare that number to amount of mortgages guaranteed by Fanne & Freddie, estimated to be above $5 trillion!
Yes, I agree, but to state the obvious, if that rule of law change does not come to fruition he will lose a lot of money on his positions. This is more of a speculative legal / political trade then.
They are not taking it back for nothing, as it stands shareholders have about $2.20-2.30 in equity value per share.
Quit the opposite my friend. The 'implicit guarantee' means EVERYTHING when it comes to Fannie & Freddie. It is thee ONE & ONLY reason for their very existence and why g-fees were so low for decades (20+ bp)!
I argue that they are trading right about fair value for public shareholders. A vast majority of the value though should be attributed to the US Government. $2-5 a share is about right for public shareholders.
That is about the equity split or capital cushion that shareholders vs the US Government could provide in the event of large scale mortgage defaults. Actually that split is quite generous on the shareholder side. All public shareholder equity would be wiped out real quick in the event of another mortgage crisis as it was in 2008.