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The Sane Investor

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  • Annaly Dividends Should Benefit From The Current Interest Rate Environment [View article]
    >>[R]ather than continuing to invest in Agency MBS when interest rate spreads are tightening.<<

    Have you looked at the yield curve lately? Spreads are expanding.
    http://bloom.bg/eMLJq8
    Jul 9 12:23 AM | Likes Like |Link to Comment
  • Annaly Dividends Should Benefit From The Current Interest Rate Environment [View article]
    Sebastian, I actually came to a similar conclusion when I started investing in Annaly.

    The mREITs generally have lower leverage than bread-and-butter banks, and for the agency mortgage backed securities these are essentially risk-less from a principal recovery perspective, so any declines in book value are only transitory until the principal is repaid and lent back out at a higher interest rate. Presuming that you don't have a margin call on your short-term borrowings as the transitory declines in book value take place, everything will eventually bounce back.

    During NLY's February earnings call, Wellington noted:
    "We do get like I said even if you know prepayments cut in half you’re still getting 5 billion in principal pay down each quarter that you have to reallocate."

    So when you think about it, as long as there are no margin calls, mREITs like NLY can just keep rolling the principal forward at better NIMs and eventually book value will recover. In the interim, you have the cash flow from the interest.

    So there's essentially no credit risk, it's really just a question of:
    1) Will the interest margin be sufficient to pay out the dividend a given investor is expecting
    2) Could transitory declines in book value lead to a margin call that forces selling and generates a loss on sale
    Jul 3 02:40 PM | 1 Like Like |Link to Comment
  • Annaly Dividends Should Benefit From The Current Interest Rate Environment [View article]
    How is the short-term lending that mREITs like AGNC and NLY get any different than the short-term lending that banks get from depositors, outside of the fact that bank saving deposits are FDIC insured?

    mREITs are literally the exact same business model as a bank: borrow short-term at a low interest rate, lend long-term at a higher interest rate, profit off of the interest rate difference.
    Jul 3 02:25 PM | 1 Like Like |Link to Comment
  • Annaly Dividends Should Benefit From The Current Interest Rate Environment [View article]
    Why don't you just write a put option at an $11 strike? At least you'd be paid to wait that way.
    Jul 2 07:59 PM | Likes Like |Link to Comment
  • Why Corning Is A Sell Above $15 And A Buy At $13 Or Less [View article]
    I sold covered calls around the same price point you mentioned. It will be interesting to see if we can hold $14 / $13 going forward. Earnings at the end of July could be a catalyst either direction.

    We're in a situation where the 200 MA and yearly average price could actually provide a floor rather than a ceiling to stock moves, which hasn't been the case since 2011.
    http://bit.ly/10EKz3O
    Jun 21 05:12 PM | 1 Like Like |Link to Comment
  • Why Corning Is A Sell Above $15 And A Buy At $13 Or Less [View article]
    I've been a long time bull of Cornings, and I don't think there's any reason to sell here. That being said, this run has been way too fast and furious for my liking, and I am really hoping for a vented selloff for the long-term sanity of this stock.

    Here's the three year chart:
    http://bit.ly/14xInsi

    February/March of 2011 was the last time it was this overbought in the last three years, and we all know what happened to the stock after that.

    I think if you're writing calls then now might be a good time to look into that, but in terms of buying I see no reason why to start now with the stock this overbought.
    May 17 02:38 PM | Likes Like |Link to Comment
  • The Darkest Coal Moment Before Dawn [View article]
    Mark, I must say I find it hilarious you are continuing to write about coal, and that you've now changed the way you describe your PCX position to a "bet".

    For those not aware, Mark certainly did not consider this a bet before they filed. Here are some choice quotes of his on PCX, lest anyone be tricked that he has any idea what's going on:

    >>I have big positions in coal. I lost nearly a million dollar [sic] on paper just on coal alone in recent month [sic]. But it will all come back. We will see. This is the single biggest investment opportunity I see in ten years. A temporary paper loss is well worth it. I am sticking around.<<

    >>There is no possibility of PCX going bankruptcy given all the observations. The theoretically hypothesized quick bankruptcy could only exist in a different universe.<<

    >>All I ever heard these days are BANKRUPTCY BANKRUPTCY BANKRUPTCY BANKRUPTCY BANKRUPTCY BANKRUPTCY.

    It's pure fearmongering. It takes many years of adverse market condition in a sector to drive any players to bankrutcy [sic] at all. I expect quick turn around in the coal sector. There will be no bankruptcy in any coal names.<<

    >>When the bond price drops it only means the yield is going up.

    If I were a bond holder it makes sense to sell the bonds and use the cash to buy dirt cheap shares instead. That can explain why the PCX bonds fell. Isn't reaping a 10+ fold gain in equities in the next one year better than holding the bonds yielding less than 10%? <<

    >>PCX controls 1.922 billion tons of proven and probable coal reserves. If you value each ton of coal reserve for just $2 per ton, PCX should be easily valued at $3.8B worth but it is now valued for only $224M. That means PCX's share price can easily go up 16 fold given a more fair market price of coal. That is being conservative! I think the coal reserves underground should really be valued for at least $10 per ton. <<

    >>Right now some one is selling PCX for $1.86 a share. The same people bought those shares at double digits a few months ago. They will come back to buy the same share at $60+ a year from now. But today they are selling at $1.86. I wonder where these people come from. Of course these folk would call me insane because I refuse to sell here but instead am buying more. <<

    >>[...]if PCX drops by 50% tomorrow and every one is selling, I am going to double down and move a bigger chunk of my portfolio into PCX. It is a very worthy bet to put more money into it while every one is selling like they are seeing the end of the world. <<
    Jul 11 05:32 PM | 15 Likes Like |Link to Comment
  • Why I Am Sticking With Patriot Coal [View article]
    Mark, you made a gutsy call and you were incredibly, incredibly wrong. I suggest you take some time off from writing and reflect on where you went wrong. You clearly DO NOT understand the coal industry.
    Jul 10 09:09 PM | 1 Like Like |Link to Comment
  • Why I Am Sticking With Patriot Coal [View article]
    Whoops!
    http://yhoo.it/McM6k9
    Jul 9 10:04 PM | 2 Likes Like |Link to Comment
  • Is Patriot Coal Headed For Bankruptcy? [View article]
    Closure
    http://yhoo.it/McM6k9
    Jul 9 10:03 PM | Likes Like |Link to Comment
  • Standard & Poor's downgrade of James River Coal (JRCC -15%), which forecast deteriorating liquidity for the company based on the likelihood of weaker coal markets through 2013, is reverberating through the coal sector, also sending peers plummeting: PCX -7.6%, ACI -5.1%, ANR -2%, BTU -1.1%.  [View news story]
    Have you been following the price of natural gas? That is what crushed this industry.
    Jun 26 05:16 PM | 2 Likes Like |Link to Comment
  • Standard & Poor's downgrade of James River Coal (JRCC -15%), which forecast deteriorating liquidity for the company based on the likelihood of weaker coal markets through 2013, is reverberating through the coal sector, also sending peers plummeting: PCX -7.6%, ACI -5.1%, ANR -2%, BTU -1.1%.  [View news story]
    Pretty sure the credit for destroying coal goes to nat gas
    Jun 26 05:15 PM | 3 Likes Like |Link to Comment
  • Patriot Coal: Standing At The Precipice [View article]
    Great find Junc Bond
    Jun 5 09:15 PM | 1 Like Like |Link to Comment
  • Patriot Coal: Standing At The Precipice [View article]
    Mark,

    This is probably one of the more ignorant things you've written.

    At this point, the bonds pretty much are equity because in chapter 11, guess who owns the company? The bondholders!

    The notion that someone higher up in the hierarchy for getting a payout in the event of bankruptcy would somehow want to be lower on the totem pole as the risk of a default increased is sheer lunacy.
    Jun 5 08:33 PM | 5 Likes Like |Link to Comment
  • Patriot Coal: Standing At The Precipice [View article]
    pete123, you are 100% correct. Buying Patriot and CHK are both gambles on extremely idiosyncratic, company specific risk outside of the market. They represent different idiosyncratic risks (Patriot: that management can refinance, CHK: that they can sort out corporate governance issues and complete asset sales) but they are definitely moving to their own tune.
    Jun 5 08:20 PM | 3 Likes Like |Link to Comment
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