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  • mREITs: This Is Not The Time To Get Long [View article]
    Excuse me for not reading all 67 previous comments. I think I understand what the argument is about. Hedging strategy is vital. It's the main thing that distinguishes one agency mREIT from another.

    A professional analysis here would look at all the hedging possibilities. I've seen this done, and it's often discussed on the earnings call, or even laid out in footnotes to the financial statements in the AR. It predicts how the hedge book will respond to various possible scenarios in the interest-rate environment.

    So when you ask, 'why didn't the hedges work last year?', it's likely because they were hedging against an interest-rate increase which didn't happen. That's a COST. With the same strategy and rising rates, it becomes a BENEFIT.

    Hedging takes a combination of skill and luck. No one gets it right all the time. That's why there's always risk. No one knows what's going to happen in the next year.
    Mar 15, 2015. 02:58 PM | 6 Likes Like |Link to Comment
  • Monroe Capital: Can The Best Performing BDC Stay On Top ? [View article]
    Midget in market cap, giant in risk-taking. I can't wait to see how this shakes out in an economic downturn. Thanks for a very enlightening study.
    Mar 15, 2015. 02:43 PM | Likes Like |Link to Comment
  • What Type Of MLP Fund Should You Buy? [View article]
    Well done, John. I appreciate the clarity of your explanation of the different tax vehicles.

    Some issues I have, though.

    -- I didn't see your definition of "rate of return." Is that total return on price (market price gain + distributions)? Total return on NAV? Or something else?

    -- You equate "risk" with volatility. This is a very narrow view. Risk should be defined as the chance of a permanent capital loss, not a temporary price fluctuation. From that standpoint, one must consider things like
    • earnings that come from contracts with small producers who may not be able to continue honoring those contracts
    • counterparty risk in ETNs, i.e. the possibility that the sponsor will not be able to continue supporting the trade.
    • as noted by another reader, all risks are magnified by leverage. (This is probably reflected in the volatility, but could be treated separately).
    Mar 15, 2015. 02:05 PM | Likes Like |Link to Comment
  • What Could Replace PIMCO High Income Fund? [View article]
    I own PFN and agree with your conclusion, but the research here is incredibly sloppy. PFN is no longer a floating-rate fund. See http://bit.ly/1IwNLhL for the portfolio.
    Mar 12, 2015. 12:10 PM | 3 Likes Like |Link to Comment
  • Ellington Financial: The Turnaround Has Started [View article]
    Your statements about book value are very confusing, to say the least, as you show at least three different values for February. But it's just wrong to say that the value has gone up because they paid dividend. Dividends should come from cash flow, not book value.
    Mar 10, 2015. 11:10 AM | 3 Likes Like |Link to Comment
  • Ellington Financial book value slips a fraction in February [View news story]
    That's not a good way to measure. Dividends are paid from income. As their income accrues, the BV rises throughout the quarter.
    If their income is more-or-less equal from month to month, the BV should be rising at least 1/3 of they payout, around 22¢. So if it's only up 15¢, that's losing ground. So Mr ALpher is not wrong.
    Of course you can't really parse at this level of detail, since they may have payments coming in at different times during the quarter.
    Mar 7, 2015. 08:56 PM | 2 Likes Like |Link to Comment
  • Comparing Prospect Capital's NAV, Investment Portfolio, Dividend, And Valuation To Several BDC Peers - Part 1 [View article]
    Outstanding work, Scott. Thanks for compiling all these factors.

    A couple of glitches: in table two, it looks like a couple of the tickers got switched.
    And in the conclusions, it's confusing when you talk about being above/below a certain discount--it seems to say the opposite of what you mean. Maybe a "discount greater than/less than" would solve this.

    Thanks
    Mar 3, 2015. 10:15 AM | 4 Likes Like |Link to Comment
  • Apollo Residential Mortgage: Time To Consider This Serial Dividend Raiser [View article]
    The other big factor is hedging. This is often the biggest difference among mREITs. For example, EFC did very well on top-line income last quarter but ended up reporting a loss because its hedges were all wrong-way.
    So, for AMTG, I'd conjecture (someone should check on this!) much of their success might be that they were unhedged, and benefitted from declining 10-year rates. The same will probably not be true in the current quarter.
    Feb 20, 2015. 12:22 PM | Likes Like |Link to Comment
  • Medley Capital: Dividend Stress Test [View article]
    True, dat.
    Feb 20, 2015. 02:03 AM | 2 Likes Like |Link to Comment
  • Apollo Residential Mortgage: Time To Consider This Serial Dividend Raiser [View article]
    Thanks for a good start, but this is only a start. I would not be confident about this quarter's performance without knowing exactly how they are able to get such a good spread. Is their cost of capital less than other mREITs? (doubtful) Do they have higher-coupon mortgages? If so, does that mean greater forward-looking credit risk, or were they just lucky with opportunistically getting favorably-priced securities?

    And, as more of these mortgages get paid off, what's their strategy going forward for replacing the yield? (This is what has damaged so many mREITs recently, since you just can't get those lucrative junk-rated RMBS anymore).

    I know enough to frame the questions, but not enough to find the answers. Perhaps Mr. Davis can elaborate?
    Feb 20, 2015. 01:52 AM | Likes Like |Link to Comment
  • Fifth Street Finance's Results For Fiscal Q1 2015 - My Assessment [View article]
    I see $9.17 as last reported book value--didn't see this in the article but computed it from the SEC filing.

    Scott, what do you think of the fee expenses? That $8.7 M "incentive" fee looks huge next to the overall poor result, so I wonder exactly what it is that they are incentivizing with it?
    Feb 12, 2015. 02:21 PM | 1 Like Like |Link to Comment
  • Bill Gross Insider Trading: A PIMCO Exodus? [View article]
    Thanks for compiling these numbers. I've also been reducing my PDI holding. PCI is still a buy, as long as it has a discount.
    Feb 12, 2015. 10:19 AM | 1 Like Like |Link to Comment
  • Problematic Exposure To Energy Sector Loans: Added To PennantPark Investment At $8.2 [View article]
    Thanks for the color! The details about their oil industry exposure explain a lot.
    Jan 27, 2015. 10:00 AM | Likes Like |Link to Comment
  • Dynagas LNG Partners L.P. - An LNG Transport MLP For The More Risk Tolerant [View article]
    Good article. When I saw the fundamental metrics of this company, I was amazed at the valuation, and reached a conclusion similar to yours.

    I have a different take on the risks, at least for the short term. Since the vessels are already contracted out for years, the biggest risk would be if one of the counterparties could not pay, and had to cancel or renegotiate the contract. With the rapid fall in the fortunes of drilling companies, this seems like a credible threat.
    Jan 20, 2015. 08:59 AM | 3 Likes Like |Link to Comment
  • Closed-End Funds Strategies For 2014 And 2015: CEFs For Buying And Selling [View article]
    If only it were that simple!
    Jan 15, 2015. 10:05 AM | 2 Likes Like |Link to Comment
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