Articles about the Fannie & Freddie preferred trade have been burbling around for a while and I’ve never understood it. The Journal has two good articles on it today, with this being a particularly clear explanation, and … I still don’t get it? Basically the thing is:
- the government seized Fannie and Freddie in 2008 and turned off the (non-cumulative!) preferred stock dividends,
- it recently swore that it would reduce their shareholders’ equity to zero, salt the earth on which they grew, and never ever ever ever unseize them or turn back on the pref dividends, so
- those prefs look like a screaming buy.
Or something? Per the Journal, “Paulson & Co. and Perry Capital LLC are among a handful of hedge-fund firms that have bought so-called preferred shares in Fannie and Freddie.” They’re selling at ~18-20 cents on the dollar, which I suppose reflects a, what, 30% implied probability that they get turned back on in the imaginable future?1 Does that sound like, um, this? Read more »
Second quarter performance. Read more »
Things have been going prettay prettay prettay well for Richard Perry these last six months. His fund, Perry Capital, is up nine percent year to date, his beastly neighbors have quit bitching about the fact that he was burning their eyes out, and this past weekend, his daughter got married to a HBS grad who could potentially take over the family business one day (the SIL is an analyst at the Baupost Group). And speaking of the nuptials! Richie can be credited with not only making sure the celebration had the puffiest shrimp money could buy and a cake that was to die for but delightful ambiance and riveting entertainment for his guests as well. Read more »
Bad news: We lost a little money. Good news: founder Richard Perry’s wife makes those sexy white leather man-purses he wears, so even if we were to go under– which we won’t– the murses are safe.
Investor letter after the jump.
Read more »
“[Richard Cayne] Perry represents a new breed of hedge fund manager…He has completed four triathlons, yet when he’s away from the office he carries a white patent-leather murse (that’s a man-purse) designed by his wife.”
Looking For Trouble [Fortune]