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Ray Merola  

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  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Yes, I see. Apologies. Your original comment had me thinking the article was negative. ("laid out a lot like...")

    Having now read your article, Capstead appears to be run a bit differently, though NLY and CMO are both mREITs.
    May 12, 2015. 10:55 AM | 1 Like Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    MobilePreacher

    Indeed, management / shareholder potential conflict of interest isn't limited to Annaly. It's symptomatic of a number of REITs.

    As the largest and oldest mREIT, I would like to see Annaly's management address the issue head-on.
    May 12, 2015. 10:14 AM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Evidently not throwing in the towel; a good thing!

    However, the purchase (and those of other directors/officers) doesn't justify the weak earnings CC remarks.

    The stock is undervalued, and she added to her position.
    May 12, 2015. 10:11 AM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Thanks for sharing, User12690101

    A few corporate execs/directors have purchased NLY common shares on the way down. It's a positive that CEO Denahan has completed a significant buy transaction recently.
    May 12, 2015. 09:33 AM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Jrp2x

    Thank you for the kind remarks. CWM's article was a motivating factor for me to write this one.

    My reaction to your question regarding the convertible securities: I'd prefer to see these paid off. As a common shareholder, I would like to avoid share dilution. Issuing new shares not only dilutes current shareholders, but it adds dividend burden on top. We know Annaly under-earned its current dividend

    Paying cash to settle the convertibles may shrink the balance sheet, and hence book value. However, I'm not sure if these convertibles are carried as a liability or equity. If a liability, then there may be no hit to book. Cash would be paid (reducing assets) to sunset a liability (and a corresponding reduction) leaving net book flat.
    May 12, 2015. 07:45 AM | 1 Like Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    That's what makes a market, tomsable

    By Book Value, the shares are certainly cheap. A 22% discount on readily determined asset prices is unusual. It would appears investors have a very negative view of the company and the shares.

    For the record, NLY common shares fell below $10 in late 2013; settling as low as $9.66.
    May 11, 2015. 10:41 PM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    I would like to learn what some of the large institutional investors think about their Annaly investments.
    May 11, 2015. 10:37 PM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Reasonable approach, wdchil
    May 11, 2015. 08:19 PM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Languy

    Your base assumption is correct. Recently, fellow-contributor Chuck Carnevale wrote an excellent article about the merits and demerits of share repurchase. As usual, his views are logical, measured, and spot-on.

    http://seekingalpha.co...

    Within his article, there's a quote from Warren Buffett that I believe is instructive:

    "Charlie [Munger] and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company's intrinsic business value, conservatively calculated."

    In the case of Annaly, the company has ample funds / liquidity to manage its business needs if a share repurchase is enacted.

    Buffett's second point, for NLY common shares, is most interesting. In this case, we are not suggesting Annaly stock trade at any multiple of book; thereby implying there is little to no ongoing business value. Indeed, net book is may be likened to "wind up" value if all securities and other assets were liquidated and distributed. By Annaly's calculation, this is $12.88 per share effective 3-31-15.

    The stock now trades at $10.01 per share.

    Simplistically, Annaly management may either try for maximum net investment income, or protect book value. This is done through various derivatives, leverage, and duration. Improving one cause generally hurts the other cause.

    Sans any financial management, if the long part of the curve stays flat, as you postulated, book value should remain in-line. If short rates go up concurrently, net investment income may get hit due to further spread compression, but not net book.

    If long rates go up, and the spread opens up, net book may suffer but NII should improve.

    In any event, Annaly management is paid big bucks to manage the situation. Their incentive agreement rewards them for protecting shareholder equity. The shares are currently trade at a 22% discount.
    May 11, 2015. 08:18 PM | 1 Like Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    wallstreet368841

    To be fair to management, their fee / remuneration is well-outlined in the 2013 resolution. Excerpts of it are found in the article.

    The agreement was ratified by Annaly shareholders. There was no sleight-of-hand.

    It clearly states that the fee is based upon a percentage of total shareholder equity, as calculated within the document. Other performance metrics are not a factor.

    I would prefer to see the largest and oldest mREIT lead from the front and propose a fee structure that could align shareholder and management interests.
    Currently, there is no chance of a share repurchase plan.

    Here's a hypothetical question: the current price discount to book is 22%. What if it rose to 50%? What if Annaly's book value per share was $14, and the shares traded for $7 each. Could management continue to argue that it would not be in best interests of shareholders to consider a repurchase plan?
    May 11, 2015. 05:59 PM | 1 Like Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    JmJ

    The current management team do not appear to have followed in Mike's footsteps, though several were his proteges.

    While I disapprove of the current situation, I believe the shares are too cheap to sell now. The P/B is just too low.
    May 11, 2015. 05:50 PM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    On some calls, I do see analysts asking the tough questions. The Annaly call was not one of them.
    May 11, 2015. 05:41 PM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Donald

    Sometimes I get the impression that Annaly management considers itself above the fray: we are just those "pesky shareholders."

    The management agreement is only part of the problem. Agreed, the shareholders ratified it. Also agreed, the shareholders can demand changes.

    Over the past couple of years, Annaly senior management ranks has seen a relatively high level of turnover. Is the tone at the top symptomatic?

    Who's Silverfox?
    May 11, 2015. 04:14 PM | Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Thanks for the tip, IZZKUBE. I've found NLY management somewhat impenetrable thus far. Maybe that approach may yield results.
    May 11, 2015. 04:08 PM | 2 Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    Since the enactment of the new management agreement, NLY common performance has lagged peers significantly. This coincides closely with the late Mike Farrell's departure and the rise of current CEO Wellington Denahan.
    May 11, 2015. 01:42 PM | 1 Like Like |Link to Comment
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