Seeking Alpha

Ocean Man

View as an RSS Feed
View Ocean Man's Comments BY TICKER:
Latest  |  Highest rated
  • mREIT Concerns Are Overblown: Good Buying Opportunity [View article]
    The SEC rumors are the least of the worries for these. Operation Twist is very bad news and is being seen as more of a sure thing every day. It is already priced into the bond market, where the yield curve flattening is driving down the mREITs far more than the SEC rumors. There is also speculation that Obama could announce a national refi program on Thursday night, so the mREITs are getting bad news from three different directions.
    Sep 4, 2011. 08:49 PM | 2 Likes Like |Link to Comment
  • How To Deal With mREITs Plummeting Due To Rumors [View article]
    First off, let's remember that rumors only go away if they are false rumors. Second, if the market moves down on a rumor, and it turns out to be true, you missed the boat to sell. Third, if there are five rumored cataclysmic possibilities for a stock, only one needs to be true to demolish it. That said, enough about rumors, here are some facts:

    1) CNBC reported all day on Friday that Goldman Sachs had told all of their clients that Bernanke was going to announce later this month that the Fed would be doing Operation Twist. If you don't know what that means, read Todd's article titled "mREITs' 4 Worst Case Scenarios", as Operation Twist was one of his Worst Case Scenarios for mREITs.

    2) CNBC also reported that Morgan Stanley had been telling all of their clients that the Fed would be starting Operation Torque later this month, referring to something very similar to Operation Twist but not exactly what was done under that name in the 1950s.

    3) We've all heard many times how the bond market is "smarter" than the stock market. This refers to the bond market positioning itself for an upcoming move a day or two before the stock market does. The headline on Yahoo Finance all afternoon on Friday was that the bond market had positioned itself for Operation Twist. Both Yahoo and CNBC reported after the close that the 2-to-10 part of the yield curve had flattened to the flattest it had been since March of 2009. This flattening was another of Todd's 4 Worst Case Scenarios for mREITs.

    So not just one, but two of Todd's Worst Case Scenarios for mREITs have already started happening. The bond market has already priced in Operation Twist on Friday, and the stock market often moves the same way a day or two later.

    Those facts are bad enough for mREITs, very bad as Todd described and not fully priced in yet. But wait, a nationwide refi also has a decent likelihood of happening, and could be announced by Obama as early as his address on Thursday night. People are saying that he needs to do something quick and big if he is to have any chance of being re-elected. Since he can't get Congress to agree on anything, maybe he goes with the nationwide refi that doesn't need Congress approval. Plus it said in the Fed minutes released last week that Bernanke and the Fed blessed this idea in their discussions. In mREIT lingo, this would be accretive to Operation Twist in killing the mREITs.

    If that's not enough, notice that I haven't yet mentioned the SEC rumors that were being so hotly debated above. Sure, taking away the tax exemption or leveraging abilities of mREITs would be a huge blow to them, but it might be shooting a dead horse.

    I don't want to be too negative though, so I'll point out a bright side. If one were to sell their mREITs and keep the protective puts, one could make a killing if the above does indeed pan out.

    Good luck to all, it pains me to write this, these used to be my favorite holdings.....
    Sep 3, 2011. 09:55 PM | 1 Like Like |Link to Comment
  • How To Deal With mREITs Plummeting Due To Rumors [View article]
    James - I enjoy reading your articles, but you are way off suggesting that an mREIT would double if the threat of government intervention went away. They'd probably just return to 2011 highs at best. For them to double, their book value would have to double.

    The only way you're going to get a double on these is if they flash crash to half their book value and then get good news, which could happen.
    Sep 3, 2011. 09:04 PM | 1 Like Like |Link to Comment
  • 10 Stocks Currently Yielding 14.4% And Higher [View article]
    Hey Todd. I've been commenting about the mREITs in your "4 worst case scenarios" article the past few days. I sold all of my mREITs Wed morning. Saw the article saying Bernanke and the Fed gave their blessing to the nationwide underwater refi plan which started to confirm my fears. Then saw the WSJ article after the bell today saying the SEC wants to give the REITs the choice of losing their tax exemption or their ability to leverage, either would be a killer - you now need to add a 5th worst case scenario, which unfortunately is worse than the other 4. We've seen that a threat or scare on these can cause a big move, so waiting for confirmation of the rumors might be too late. Glad you're hedged. Selling and getting back in when the water has calmed works too. It will be interesting to see if the hedge funds get out..... I could see a lot of people saying "I do not want to hold these over the 3-day weekend".
    Sep 2, 2011. 02:16 AM | 1 Like Like |Link to Comment
  • REITs And The Cost of Regulation [View article]
    The WSJ article on this topic said the SEC wanted to give REITs the option of giving up their tax exemption or giving up their ability to leverage. Either one would be a significant blow to the highly-leveraged mREITs. So I don't think this is the type of regulation you're looking for. These mREITs have the ability to flash crash the minute there's danger on the horizon as nobody wants to be the last one out.
    Sep 2, 2011. 01:50 AM | Likes Like |Link to Comment
  • Stocks That Shine For Profit And Stability In Any Market [View article]
    Bob J - I see your point, and agree that retired and not-yet-retired investors could have different views on waiting for dividend growth. Robert S makes a good long-term point too.

    But I still say c'mon! I could see not taking a 1.5% yield or a 2.0% yield if you want 3%. But we're talking about a 2.8% yield that most would agree has about a 99% certainty of being raised to over 3% two short months from now. MCD has raised their dividend by at least 10% the past two years. The premise of your article is that MCD does well in both sunshine and stormy weather, i.e. it doesn't have big dips.

    Buy it tomorrow and if you don't have a 3% yield on cost by the end of November, I'll buy you a Big Mac!
    Sep 2, 2011. 01:34 AM | 1 Like Like |Link to Comment
  • mREITs' 4 Worst Case Scenarios From Ben Bernanke's Speech [View article]
    There was an article in the WSJ today after the bell titled The End of REITS?. Said the SEC wants to tell REITs that they can either lose their tax exemption or lose their ability to leverage. Some commenters questioned the SEC's power to rule this, so it's far from a sure thing, but either choice would cut the value of mREITs dramatically. As we all know, all you need is a scare on these and everybody jumps out. If the hedge funds sell, they'll fall fast and then the little investors' stop-loss orders will kick in. This could get ugly. Especially with people not wanting to sit on the risk over a 3-day weekend
    Sep 1, 2011. 11:22 PM | Likes Like |Link to Comment
  • Dividend Danger Zone: 4 Yields That Look Unsustainable [View article]
    PBI's problem isn't so much their earnings, or cash flow, or any other numbers... it's a stigma issue. They're just seen as the dying dinosaur of snail mail, and stock price does reflect popularity. I was actually impressed with PBI's most recent quarter, but there is just no way to get people excited about PBI's prospects for growth. FTR has the same problem, and even Intel has a bit of that problem. Yesteryear tech stigma. It's unfortunate.
    Sep 1, 2011. 03:09 AM | 2 Likes Like |Link to Comment
  • 'Buying Dividend Stocks For Income' Arguments Don't Make Sense [View article]
    Cheesehusker - are you not aware that you can re-invest a bond interest payment into something that pays interest or a dividend? You don't have to keep that money in your pocket until the bond matures.
    Sep 1, 2011. 02:24 AM | 2 Likes Like |Link to Comment
  • Stocks That Shine For Profit And Stability In Any Market [View article]
    I totally agree with you that these are great stocks, but I disagree with waiting around for those prices. We just saw the market drop 20%, and KO and MCD didn't reach those prices you're targeting. Now, the market has only recovered half of that 20% drop, yet KO and MCD are trading 2 to 3 dollars higher than they were before the 20% drop. Using crude math, you'd need another 25% drop in the market from today's already depressed levels to get your price. That's just being overly greedy. A better rule would be to buy these if you see them dip slightly and take the 2.9% or even 2.8%. A few months from now you'll be happy with that price. Plus, you'll be over 3% yield the next time they raise the dividend, which is November for MCD.
    Sep 1, 2011. 01:34 AM | 2 Likes Like |Link to Comment
  • Are Dividend Investors Benefiting From Stock Buybacks? [View article]
    I don't think it's been mentioned yet, but one thing to consider is the advantage of yield support in a down market as an edge for a higher dividend over a buyback.
    Sep 1, 2011. 12:27 AM | 2 Likes Like |Link to Comment
  • Dividend Danger Zone: 4 Yields That Look Unsustainable [View article]
    I sold CTL, FTR, and PBI over the past couple of months, so I agree with you that they're not buys or holds, even if they don't cut their divvies, which is fairly likely but maybe a year off still.

    I like WIN a bit better, but it's one of my smaller positions. I prefer VOD, TEF, VZ, and T in telecoms, but WIN gives you a few extra points of yield over all of those but TEF.
    Aug 31, 2011. 10:59 PM | 2 Likes Like |Link to Comment
  • mREITs' 4 Worst Case Scenarios From Ben Bernanke's Speech [View article]
    I sold all of my mREITs today. I realize that I've been a perma-bull in regards to these, but here are my reasons:

    1) They've returned to their pre-August levels (referring to AGNC and NLY). This limits their upside while many alternative stock choices still have 3/4 to 1/2 of their August loss yet to regain.

    2) They've already received the most perfect news they could possibly get - that short rates would be held low for two years, longer than what most previously predicted. The range of possible new news is almost entirely negative from that point.

    3) As tempting as the next dividend is - only 3 weeks away for AGNC and 4 weeks for NLY, there are too many opportunities for bad news between now and then. Bernanke will be speaking again, and almost any announcement would be worse than what he previously said. Some Fed possibilities would be very bad for mREITS. Obama and Congress will be looking to make significant changes in the next few weeks to address unemployment and housing, their two areas of focus for stimulating the economy. Many of these possibilities would hurt mREITs and few would help. Even the fear of something worse as these announcements get closer could lead to panic selling, as we've seen before. Nobody wants to be the last one out of these.

    I view the next few weeks as somewhere between "nowhere to go but down" and "far more negative news scenarios than positive" for these mREITs. I'm just going to sit a few weeks out and see what it looks like after ex-div or the next SPO.

    If times were normal, I might stay in, but there are just too many underpriced stocks right now with absurdly high yields. I bought T today on a big sale giving a yield over 6%. I'm looking at ALSK with a yield over 11% and tremendous upside. DSW is paying a $2 special dividend in a couple weeks above its normal 15-cent dividend after stellar earnings a few days ago. I also like HUN and PCX for regaining big August losses and both are takeover candidates.
    Aug 31, 2011. 10:46 PM | 1 Like Like |Link to Comment
  • Caterpillar Strong, But Facing Headwinds [View article]
    Has the need to rebuild Japan increased any analysts' earnings estimates for the rest of 2011 and 2012? The US might need to rebuild after Irene as well.
    Aug 27, 2011. 01:22 AM | 1 Like Like |Link to Comment
  • mREITs' 4 Worst Case Scenarios From Ben Bernanke's Speech [View article]
    Let's not forget that people started defaulting on their loans more than 5 years ago. A very high proportion of those who can't afford their loans are already gone. What's needed is an incentive to buy a home, not help those who are underwater. The only incentive to buy is rising house prices. Many of the solutions above don't meet that objective.

    Converting to natural gas powered cars would employ hundreds of thousands, reduce our reliance on foreign oil and use domestically abundant nat gas instead. The solution has to be jobs based.

    We've all seen how people don't want to miss the boat when the stock market starts shooting up. People will rush to buy homes if they think the bottom is behind us. Prices will shoot up and a lot of people won't be underwater anymore.

    That's the roadmap. Giving aid to the people underwater might slow the down, but it doesn't force the up.
    Aug 25, 2011. 11:19 PM | 3 Likes Like |Link to Comment