Ugly Chart of the Day: Lumber As Housing Proxy [View article]
Lumber got up to 320 because of a supply problem, not a demand issue. Very wet weather this winter hampered the spring cuttings and everyone was running with low inventories. A bit of demand from the tax credit and POP up it goes!.
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
Higher mortgage rates would be a positive for NLY as it would increase their spreads and thus their dividend yield. Higher long term rates would also discourage a housing recovery and extend the zero interest rate period, another benefit to NLY.
Regarding how long short term rates will remain near zero; look at the graphs in my piece again and check out my blog. Money supply growth is negative, lending growth is negative. The US cannot lever up anymore and is now going through a debt destruction period. Until loan growth is positive it is my contention fed fund rates will be near zero.
The euro is falling because when (yes, WHEN) Greece defaults it will crush the German and French banks. The declining euro also helps the Euro manufacturers as mentioned above. The austerity programs announced throughout Europe will not help growth.
The Fed's QE is effectively over and now is restrictive as the MBS bonds are repaid.
Dr. Copper is very sick right now.
I'm basically out of the equity markets. If for some wierd reason we get back up to the previous highs I'll consider that a gift and get so short the gnomes of Switzerland will look talk to me.
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
I have asked you numerous times for specifics and every time I get how the world is ending for NLY. If their only source of returns is evaporating then why is their return on assets still high last quarter even with the abnormally low OAS spreads to treasuries and a declining total leverage ratio? Please argue with a 75 cent quarterly dividend.
How can you make any judgement on NLY without discussing their relatively low leverage ratio (as compared to past leverage ratios of the company) , how they are selling pretty close to book value, or an expectation of when / if short term interest rates will start to move higher?
I own the stock, a lot of the stock. Why? Because it is a well run mtg REIT and my studies cause me to conclude short term interest rates will be very low for a very long time.
Higher mortgage rates would actually be a long term benefit for NLY. They have kept their leverage ratio low for the very reasons you have proposed why the stock price should go down. If / when mortgage spreads widen as compared to treasuries they can purchase more and actually earn a higher spread!
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
That's a tough one. Analyzing the stock market is tough enough. Analyzing the mind of politicians??? I'd rather not :)
Right now the Fed has the same securities on their balance sheet as NLY does. This provides quite a bit of 'political risk protection'
I agree with you the way mortgages are sourced and held in America needs some serious work and less government involvement. There is a structure called 'covered bonds' in Europe that has appeared to work well but that is for another very long discussion.
Hopefully after this housing mess finally resolves itself over the next several years we will learn from our mistakes.
Timber! Lumber Prices Hitting the Ground [View article]
That's funny :)
Lumber is a different animal than other commodities in some ways. Unlike other softs you can decide not to harvest your 'crop' and wait another year. The wood also grows during that time, becoming more valuable as you wait.
The capital costs for this stopping / starting are also very low compared to others like the metals. Lumber has some appeal because of this and sometime in the future I'll most likely own timber companies. Just not now.
Fannie and Freddie bought out non paying mortgages out of the pools which speed up payment rates. NLY lowered their dividend and people freaked out. Storm passed . .. stock went back up again.
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
You can try to play the volatility but until:
The US govt starts having problems selling debt (not there yet) The Fed sells off its FNMA/Freddie Mac MBS portfolio (not there yet) Lending picks up (really not there yet)
I think you should keep it and collect the dividends. That's what I'm doing.
Timber! Lumber Prices Hitting the Ground [View article]
The smaller family lumber shops are getting crushed. I have a client who is in the home building / lumber business and they are having a hard time of it right now. Like you have observered, they have also seen several multi decade competitors in the region go under.
When the business eventually turns those that survive most likely get a higher margin but this is a tough business considering the volatility.
Copper Markets Are Still Decoupled From Reality [View article]
I think you are right regarding short term supply disruptions because of the Chile earthquake. Most of the major mines lost power for at least 24 - 48 hours which shut down production.
Seasonally the first quarter is strong for copper and my theory is this is when companies make their purchase commitments for the calendar year / building season. Between the end of the quarter and China bubble blowing it should be an interesting year for copper.
Copper Markets Are Still Decoupled From Reality [View article]
Technically Copper doesn't look too good either. It did not make a new high after the downdraft ending in early Feb. I'm still effectively short copper right now.
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
NLY's repo agreements/securities are kept at a trust bank. As an example, when Refco trading failed a few years back Annaly was able to get their collateral within 7 days (I spoke to Annaly about this during the panic as I was investigating the company)
The US government backstopped Fannie and Freddie with more cash on Dec 24,2009: www.washingtonpost.com...
Even if Fannie and Freddie are wound down or converted into mutual companies owned by the banks that send mortgages to them there will always be Ginne Mae securities which are completely backed by the US government so NLY would have other MBS to purchase (and not end their business model)
I'm not trying to claim the mortgage markets are fine or home prices are going to rebound and there's sunshine and skittles at the end of the rainbow. America is in for a tough haul over the next couple of years and if I'm going to buy a financial company I want it to hold what the Federal Reserve is holding.
Check out Annaly's blog: www.annaly.com/blog/ They are aware its going to be tough sledding for America. I'm sure this is one reason their leverage ratios are still low.
Is a Steep Yield Curve Leading Us Astray? [View article]
I think all the above are good questions which tie into my article's (unmentioned) main point. The rule of thumb that a steep yield curve thus means future economic growth is broken. I brought up the lack of lending. You are mentioning sovereign risk which really wasn't on people's radar screens until very recently.
Ugly Chart of the Day: Lumber As Housing Proxy [View article]
merrillovermatter.blog...
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
Regarding how long short term rates will remain near zero; look at the graphs in my piece again and check out my blog. Money supply growth is negative, lending growth is negative. The US cannot lever up anymore and is now going through a debt destruction period. Until loan growth is positive it is my contention fed fund rates will be near zero.
Time to Be a Contrarian [View article]
stockcharts.com/h-sc/u...
There is a huge overhang of delinquent home loans / real estate owned by the GSE's that will have to come on the market.
merrillovermatter.blog...
Money supply is collapsing:
merrillovermatter.blog...
Bank lending is NOT growing:
merrillovermatter.blog...
The euro is falling because when (yes, WHEN) Greece defaults it will crush the German and French banks. The declining euro also helps the Euro manufacturers as mentioned above. The austerity programs announced throughout Europe will not help growth.
The Fed's QE is effectively over and now is restrictive as the MBS bonds are repaid.
Dr. Copper is very sick right now.
I'm basically out of the equity markets. If for some wierd reason we get back up to the previous highs I'll consider that a gift and get so short the gnomes of Switzerland will look talk to me.
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
Is Annaly's Remarkable Run Done? [View article]
I own the stock, a lot of the stock. Why? Because it is a well run mtg REIT and my studies cause me to conclude short term interest rates will be very low for a very long time.
Higher mortgage rates would actually be a long term benefit for NLY. They have kept their leverage ratio low for the very reasons you have proposed why the stock price should go down. If / when mortgage spreads widen as compared to treasuries they can purchase more and actually earn a higher spread!
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
Right now the Fed has the same securities on their balance sheet as NLY does. This provides quite a bit of 'political risk protection'
I agree with you the way mortgages are sourced and held in America needs some serious work and less government involvement. There is a structure called 'covered bonds' in Europe that has appeared to work well but that is for another very long discussion.
Hopefully after this housing mess finally resolves itself over the next several years we will learn from our mistakes.
Timber! Lumber Prices Hitting the Ground [View article]
Lumber is a different animal than other commodities in some ways. Unlike other softs you can decide not to harvest your 'crop' and wait another year. The wood also grows during that time, becoming more valuable as you wait.
The capital costs for this stopping / starting are also very low compared to others like the metals. Lumber has some appeal because of this and sometime in the future I'll most likely own timber companies. Just not now.
Annaly Capital Seen Holding Levels [View article]
Storm passed . .. stock went back up again.
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
The US govt starts having problems selling debt (not there yet)
The Fed sells off its FNMA/Freddie Mac MBS portfolio (not there yet)
Lending picks up (really not there yet)
I think you should keep it and collect the dividends. That's what I'm doing.
Timber! Lumber Prices Hitting the Ground [View article]
When the business eventually turns those that survive most likely get a higher margin but this is a tough business considering the volatility.
Copper Markets Are Still Decoupled From Reality [View article]
Seasonally the first quarter is strong for copper and my theory is this is when companies make their purchase commitments for the calendar year / building season. Between the end of the quarter and China bubble blowing it should be an interesting year for copper.
Copper Markets Are Still Decoupled From Reality [View article]
Copper Markets Are Still Decoupled From Reality [View article]
Good article.
High Conviction: An Attractive Residential Mortgage REIT (Yes, You Read That Right) [View article]
The US government backstopped Fannie and Freddie with more cash on Dec 24,2009:
www.washingtonpost.com...
Even if Fannie and Freddie are wound down or converted into mutual companies owned by the banks that send mortgages to them there will always be Ginne Mae securities which are completely backed by the US government so NLY would have other MBS to purchase (and not end their business model)
I'm not trying to claim the mortgage markets are fine or home prices are going to rebound and there's sunshine and skittles at the end of the rainbow. America is in for a tough haul over the next couple of years and if I'm going to buy a financial company I want it to hold what the Federal Reserve is holding.
Check out Annaly's blog:
www.annaly.com/blog/
They are aware its going to be tough sledding for America. I'm sure this is one reason their leverage ratios are still low.
Is a Steep Yield Curve Leading Us Astray? [View article]