Saturday, February 7, 2015

Berkowitz on Fannie Mae

Berkowitz likened the amending of the bailout terms to a farmer whose farm was successful for decades, but when a drought came, was forced to accept an offer from a wealthy neighbor who was willing to loan the farmer money to keep the farm going. The deal he negotiated was tough, however – the farmer pays the neighbor 10 percent interest per year on his investment and gives him 80 percent ownership in the farm. Years later, when the farm conditions are better and the farm returns to profitability, the wealthy neighbor visits the farm and sees it flourishing – then changes the terms of the agreement, requiring the farmer to pay him 100 percent of the farm's profits from that point forward.
"It seems far-fetched, but this is precisely what has happened to Fannie Mae and Freddie Mac at the hands of the U.S. Treasury," Berkowitz said. "Some call it expropriation, others call it a de facto nationalization. Either way, it's illegal and unfathomable. This is America. We're not in Venezuela and it's not the Soviet Union."
A spokesman for Treasury declined to comment on the Fairholme suit, and the Department of Justice was not immediately available for comment. The government's position is that Treasury did not directly affect and control FHFA as conservator of Fannie Mae and Freddie Mac, and that the amending of the bailout terms was not illegal but rather "imposed a so-called net sweep," according to Berkowitz.
Berkowitz remained positive in the conference call about his company's future relationship with the GSEs.
"At Fairholme, we believe in America," he said. "We don’t bet against America. Fannie and Freddie are two of the most valuable companies we have in America. We own them, we own them at cheap prices, and we look forward to staying invested in them for a very long period of time."

Monday, February 2, 2015

Off Topic again: Russia and Fannie Mae

Russia July 2014

ruble = 33 to $1
1 barrel of oil exported = $100 USD converted to rubles = $3300 Rubles
10 mil barrels a day = 3.65 billion barrels a year or $365 billion USD a year INCOME to Russia
average income in Rubles for Russian worker = $665,000 rubles
1 IPOD = $100 USD or $3300 rubles
1 chicken = $10 USD or $330 rubles
1 used car = $1000 USD or $33,000 rubles
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Russia Feb 2015

ruble = 65 to $1
1 barrel of oil exported = $50 USD converted to rubles = $3300 Rubles
10 mil barrels a day = 3.65 billion barrels a year or $182 billion USD a year INCOME to Russia
average income in Rubles for Russian worker = $665,000 rubles
1 IPOD = $100 USD or $6600 rubles
1 chicken = $10 USD or $660 rubles
1 used car = $1000 USD or $66,000 rubles
===================================================

Take away:
Russia has to survive on a cut in half of its income from oil.
Russia citizens have lost half their buying power than they had 6 months ago.
Effectively, Russia if it were a person would have to live on half of his income while everything
it buys costs double.
This is the same as a US citizen who used to make $50,000 a year now makes $25,000, while the
food he used to buy for $400 a month now costs him $800.
If Russia were a person you can see it will not take long for him(Russia) to be bankrupt.
It is a game of chess and Russia seems to be down to a King (Putin) and a few pawns.
Unfortunately for the pawns, the Russian citizens,  their rent will be double moving forward and their
lifestyles will be very hard. As long as Oil remains under $60 USD a barrel.
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This is very similar to the depressive pricing done by the USA to our Fannie Mae share price.
The only reason Fannie is $2.20 a share is because our government wants it to be $2 a share.
Fannie Mae and Freddie Mac are among the top 10 companies in the world by profit per share.
Because the US Treasury is sweeping (TAKING) those profits it keeps the stock depressed.
The current price of FNMA is not the true value, it is the value that the USA government wants it to be.




Berkowitz’s Fairholme Fund Picks Up More Shares of Fannie, Freddie(common)

Berkowitz’s Fairholme Fund Picks Up More Shares of Fannie, Freddie


Thats right, He bought more fannie and freddie common.

According to the annual report, Fairholme bought nearly 3.1 million shares of Freddie Mac and more than 1.8 million shares of Fannie Mae between August 31 and November 30 last year. Because the share prices of Fannie and Freddie fell sharply during that period, the purchases maintained the fund’s weighting to the two companies at about 1.1%