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  • Should An Intelligent REIT Investor Buy CapStead Mortgage? [View article]
    I think the right way to frame this question would be in terms of spread volatility on the particular assets that CMO has been holding. Period.
    Then this would raise the question of ARM vs FRM production, future home price growth (only driver of net mortgage production), and refis from ARM into FRMS or reciprocally, which will depend on the slope of the curve.

    Also as a side note, the book's duration, given that it's presumably hedged, has essentially nothing to do with the required spread.
    Mar 25 09:17 AM | 1 Like Like |Link to Comment
  • CYS Investments: Potential Total Return Of 20% Makes An Ideal Buy [View article]
    Still, if you were correctly hedged (ie reflecting CYS's effective duration of over 20 yrs) and had the right amount of 10-yr trsy shorts, you would have been about flat today.
    Investing in mREITs without a proper hedge for residual interest rate exposure just means taking an unknown amount of interest rate risk.
    Mar 19 07:49 PM | Likes Like |Link to Comment
  • CYS Investments: Potential Total Return Of 20% Makes An Ideal Buy [View article]
    CYS might go to 1x book, but what if book drops by 20%?
    Mar 19 01:54 PM | Likes Like |Link to Comment
  • How Does An Intelligent Investor Navigate Mortgage REIT Risk? [View article]
    Ever heard of hedging interest rate risk?
    Mar 19 09:30 AM | 4 Likes Like |Link to Comment
  • Hatteras not a fan of Kain strategy [View news story]
    This argument that they would lose control of the hedging is BS. As if hedges changed significantly in an unpredictable manner.
    Feb 12 11:31 AM | 8 Likes Like |Link to Comment
  • A Genius Move By American Capital Agency Corp [View article]
    I think there is an additional parameter you did not address: opacity. CYS is fairly open about its positions, which makes its performance predictable. ANH barely gives you a sector distribution. So because of this I would expect CYS to be a more natural target.
    Feb 11 03:37 AM | 7 Likes Like |Link to Comment
  • American Capital Agency: Conference Call Turned Circus Act [View article]
    I'd think the backwardation on 3.5s is because the market prices in much less issuance than before, so you would only get delivered the more seasoned stuff that pays faster, which, given their $ price and steepness of the forward curve, is a benefit.
    Feb 10 07:23 AM | 3 Likes Like |Link to Comment
  • American Capital Agency: Conference Call Turned Circus Act [View article]
    Wrong.
    I think it is a safe assumption that AGNC knows how to hedge these REITs they're buying. And you would not know how.
    Feb 8 06:08 PM | 5 Likes Like |Link to Comment
  • How Mortgage REITs Hedge Interest Rate Exposure [View article]
    Rob,

    This would make perfect sense indeed, but management is generally paid as a % of equity, so buying back stock, in spite of its accretive effect, does not compensate the loss in fees in most cases.
    That is why in general it take a much deeper discount to see a buy back than a premium to see a secondary.

    Back of the envelope, if you get 2% of equity, but the equity is down 10%, now you only have 1.8% of the prior equity so you lose 0.2% of equity in fees. If as management you own ~5% of the stock (and that would be a lot, I think), you stand to make 5% x 10% (share of stock bot back) x 20% (discount) = 0.1%. So it does not make sense.
    Jan 2 10:29 AM | Likes Like |Link to Comment
  • Assessing The Q4 2013 Dividend Of Western Asset Mortgage Capital [View article]
    Typo above, I mean low 14s for the BV. Basically I take 16.76 they stated end of Nov, update that a bit because MBs prices went down vs swaps (say shave off 0.50), and take out the 2.35 -- trading at ~15 now, they are just as rich as they were before.
    Dec 26 01:05 PM | Likes Like |Link to Comment
  • Assessing The Q4 2013 Dividend Of Western Asset Mortgage Capital [View article]
    The drop in BV will be around 2.35 I think, so updated BV is likely in the low 40s, which makes it still overvalued. People will realize progressively as they see the actual BV published, per share then outstanding.
    Dec 26 09:31 AM | 1 Like Like |Link to Comment
  • Assessing The Q4 2013 Dividend Of Western Asset Mortgage Capital [View article]
    Premarket, WMC around 14.75...
    Dec 26 08:47 AM | 1 Like Like |Link to Comment
  • Assessing The Q4 2013 Dividend Of Western Asset Mortgage Capital [View article]
    ark,

    I think the short answer is in the negative convexity at the book value level brought by WMC's large IO positions and lack of swaptions, versus AGNC or NLY for example. I'd reckon WMC has 3x more. So you're right on the money, in a very stable rate environment WMC would benefit, being short so many more options. But if realized vol is anywhere near its recent levels, that will most likely be bad news.
    Dec 25 06:09 PM | 3 Likes Like |Link to Comment
  • Assessing The Q4 2013 Dividend Of Western Asset Mortgage Capital [View article]
    Scott,

    "I feel grouping this analysis with the rest on S.A. is a misnomer."

    Well, that is because your article is a good prototype of what "analysis" actually is!
    Much stuff on SA (and on REITs) is simply not "analysis" but rather "opinion", or "views", or "predictions", or something else.
    Dec 25 06:04 PM | 5 Likes Like |Link to Comment
  • Assessing The Q4 2013 Dividend Of Western Asset Mortgage Capital [View article]
    tstreet I think you are missing the fact that the analyzes in question (bv vs px) have two moving parts. You can be right in saying that BV trading at 80% of px is cheap, but if rates go up and BV goes down it does not do you any good.
    Well, of course, unless you hedge your positions properly. Being simply long some mREIT because it's at a 20% discount, or short because it is at a 20% premium, makes no sense unless you are properly insulated against the BV's big moves.
    Dec 24 10:50 AM | 3 Likes Like |Link to Comment
COMMENTS STATS
472 Comments
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