Daniel Jones

GSEs: The Tail Wagging the Credit Market Dog?

What's the worst-case scenario if the book values continue to erode? JP Morgan can't come in and buy FRE or FNM for $10 a share...these two will have to access the capital markets and pay up for that capital. That usually means a dilutive event for present shareholders. Does the present market price reflect this potential?

I like your analysis of the historical price / book. Are there other, smaller regional players in the banking sector that represent compelling price / book opportunities?

Next To Fall: The Publicly-Traded Government-Sponsored Mortgage Lenders

Meanwhile FRE is floating $500 million tranches of preferred stock in order to support its common via buybacks. Interesting tact to alter the balance sheet and fund the losses to equity that are happening.

Disclosure: Long FRE and FNM puts. (and writing about it on seeking alpha too).

Daniel Jones
Nice Job Michael.

Freddie Mac: Capitalize on Subprime Chaos

I have to heartily disagree. Labeling analysis of three quarterly losses as "misrepresentation" and "noise" is itself misrepresentation and noise. Perhaps you are one of the analysts like the Freidman Billings person who thinks "GAAP economics don't apply here". Utter nonsense. FRE is very much like the Bear Hedge funds that have now blown up. Using their delays in reporting and accounting machinations, they can mask their losses & hope for better days. Heck of an investment strategy.

FRE may soon be relegated to only providing for affordable housing loans. That enhanced business model, unchanged from the 80's as you put it, needs to radically change. This turkey is cooked. Stick a fork in it.

I'm long puts - would you care to disclose your position?

Daniel Jones
e-bluewater.com