Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that were taken over by the U.S. government in 2008 after their collapse due to bad mortgage bets. They have been under government conservatorship for over 12 years. Bill Ackman, a hedge fund manager, has recently bought shares in both companies and is advocating for their return to private hands, arguing that they could be worth significantly more if privatized. This has reignited optimism among investors, especially with the possibility of a new Trump administration prioritizing their privatization.
Bill Ackman believes that the Trump administration, if re-elected, would prioritize the privatization of Fannie Mae and Freddie Mac. He argues that the government cannot continue to own these entities indefinitely and that returning them to private hands would unlock significant value for shareholders. Ackman has been actively tweeting about this to influence both retail investors and policymakers, suggesting that privatization could lead to a 1200% return on investment.
Privatizing Fannie Mae and Freddie Mac could reintroduce the risk of them failing again in the future, as they would no longer have explicit government backing. If they were to fail, the government might need to bail them out again, leading to a situation where private shareholders benefit from the upside while the government bears the downside. Additionally, mortgage rates could be affected if the implicit government guarantee is removed, potentially making mortgages more expensive.
MBA students at Indiana University's Kelly School of Business were tasked with creating a business plan for a golf resort in Puerto Rico as part of their capstone project. They consulted with a golf resort development company, Discovery Land Companies, which then decided to take over the project, outbidding the original developer. The original developer, who was an alumnus of the school, sued the students, the professor, and Discovery Land Companies for $1 to $2 billion, claiming his idea was stolen.
Hershey's is seeking to purchase over 90,000 metric tons of cocoa from ICE Futures U.S. due to severe supply shortages caused by extreme weather and aging cocoa trees. This move would allow Hershey's to take physical delivery of cocoa beans from exchange warehouses, which is unusual but necessary given the current market conditions. Hershey's has previously made similar moves during the COVID-19 pandemic when commodity markets were disrupted.
The cocoa futures market being in backwardation indicates that the current demand for physical cocoa is extremely high, driving up the price of near-term futures compared to longer-term contracts. This situation reflects the tight supply of cocoa beans, with Hershey's seeking to secure immediate supply by taking delivery from exchange warehouses. Backwardation suggests that the market expects supply conditions to improve in the future, but not in the near term.
Katie and Matt discuss the return of the Fannie Mae and Freddie Mac trade, a business school class project that came true in real life, and taking cocoa out of commodity exchange warehouses.
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