I think we all acknowledge the volatility of the mortgage REIT sector and the unpredictability of consistent shareholder mortgage REIT returns. I often ponder how such a highly leveraged sector can produce marginal returns when compared to equity REITs that carry much less leverage, yet they consistently outperform. A recent Seeking Alpha article (by Valuentum) summed up the mortgage REIT conundrum:
Though we admit mortgage market dynamics are inherently difficult to predict, we think the odds are stacked against many constituents in the mortgage REIT industry. Participants must deal with tightening interest rate spreads and deteriorating investment portfolios (book values) in the event of a rising interest rate environment. By extension, declining net asset values will pressure the capital decisions...
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