Articles of Note

There are a few articles of note worth reading.

Reuters published a story on a bail out for mortgage servicers.

Supposed billionaire Tilman Fertitta is offering 15% for a term loan. You can be sure that this is going to be a common theme in the months ahead–we all know how leveraged these companies have been–and any disruption would cause problems–certainly the mother of all disruptions will bankrupt many.

15 thoughts on “Articles of Note”

  1. I work for a large bank. There is some talk about readying some war chests to buy banks if they falter.

  2. Interesting reading on Tilman’s 15% loan facility. If that were packaged in a bond in $25 chunks, wonder how many here would buy it.

    Any volunteers? How does this compare with buying NLY-F yielding 10%+ and 20% potential gain in q few quarters?

  3. What do you guys think of the Tanker preferred at this point. Glop, CMRE-c

    Any life in them or stay away

    1. I don’t think it is worth risking principal for a 15-20% yield here on the preferred. GLOP common is in the toilet (down 90% in the last year). If they get strapped for cash I wouldn’t be surprised to see them suspend the dividend for both the common and the preferred . Even though the preferred dividend is cumulative, it is gambling, so if you are betting, I think the common is the way to go here. If the company survives (and I am guessing it does), you’ll easily get 300+ % return. If it doesn’t you’ll lose it all on the common or preferred.

  4. Looks like the only safety line being thrown is by GNMA to agency mortgage companies- in particular, NLY & AGNC should be in the forefront.
    But bailouts can go sideways- especially with time lags, and we are seeing plenty.

  5. Tim; Along the lines of this article I wonder just what % of their business is with mortages regarding all the big banks. Since I own all the Big Mega Banks preferreds obviously Iam interested. Don’t know how to find that info out??? All the big talking heads on CNBC say all the big banks are well capitalized now compared to 2008/09 crisis. But of course life doesn’t give any guarantees does it??? Thats why I have been asking if there are any BANKERS on this site. Would also like to know more about Citigroup too.

    1. >Don’t know how to find that info out???

      Read their 10Q/K’s. First step to researching the companies 🙂

      1. or… you can simply watch CNBC with the squawkers, as anything they say, well it’s gotta be true. Now that i think about it.. is it squeekers ?
        Same thing as if you read it on the internet, it is probably true as well.
        Both of the above are the “easiest” path to knowledge of sorts.

    2. Chuck P–I don’t know the answer, but most residential mortgages are owned (or guaranteed) by Fannie and Freddie. On the other hand the banks all have large portfolios of commercial mortgages–which are dicier.

      1. With so much money sloshing around there are going to be offers to some of these desperate companies that will be structured with high rates of return. All that will do is prolong the bankruptcies.
        Article on Apollo group board of directors approving 2 of its fund mangers back in March something like 8 billon from their 8 and 9th investment groups to buy distressed assets and debt of companies. I don’t know any friends whose net worth would qualify them to invest in those groups

      2. Thank You Tim for your reply. I got a kick out of Mr. Luckys reply. Had a good laugh over that one. Well I did do a little googling and found out that the banks I do own are all in the top 15 of the largest banks in the USA and found out their assets, deposits, etc etc. Not too worried atleast as of yet. Like my CPA told me (who also owns some of them) if the loans go bad then they will become “Landlords” as they evict the home owners and rent the places out. LOL PS I would venture to say that people will do their level best to stay in their homes. It doesn’t benefit anyone on either side to give them the boot out the door. At some point down the road they will get a vaccine for this nasty virus and things will start to look up. And like one of the guys on CNBC said in the meantime the Government is throwing a “Money Orgy”. I’ve heard numerous times that it could go as high as $5 or $6 TRILLION. This truly should be a valuable lesson to all of us as to how we do business in the future with China. They certainly have not gone out of their way to be helpful on this.

      3. I suggest great caution on assuming that both Fannie and Freddie loans will be made whole. They might, but only after they have legally defaulted on their interest payments to bondholders. It has the potential to be larger than the 2008 GFC from a mortgage standpoint. We are depending on The Fed/Treasury/FHA to PRE-EMPTIVELY bail this paper out. Are you feeling lucky?

        Highly regarded bank analyst Chris Whalen has the latest:

        “With the GSEs backing away from the very markets they are meant to support, is there any question that the FHFA is following the wrong policies? Without immediate action to provide liquidity to servicers of both conventional and government loans, the US mortgage market is going to seize up. When the servicers cannot fund their operations, then the new issue market will come to a halt – as it has now.”

        https://www.theinstitutionalriskanalyst.com/post/calabria-s-fhfa-fans-the-fires-of-contagion

        While this is going on, some of the hedges are blowing up INCLUDING on Fannie/Freddie paper.

        1. Tex–not making that assumption–but that is how the mREITs trade–agency or non agency and their is an investor presuption of safety.

    3. Listening to CNBC is a good way to go broke. The Youtubes Cramer made right before the FC (buy!) and right as the market bottomed (sell!) are still available.

      Seriously, if you want to go broke listen to CNBC. It will cause mental health issues, too.

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