Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
I want people to read what I write. If the headline gets them to read an article, mission accomplished. I pass on hundreds of article titles daily because the titles do not appeal. I am sure you do the same.
I want investors who own any stock to make money from the investment. But I have learned from experience, and I am sure many who read this agree, just because I own a stock does not mean it is a good stock or investment. My goal is to show the other side of the story.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Banks are a completely different business model. Pretty obvious since you do not have many banks with dividend yields of 12% plus. I do not hate mREITs, how they work is how they work and recent events show what happens when what they do does not work.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
If rates continue to rise, variable MBS should do better. However, ARM rates are tied to short term interest rates, so it will be interesting to watch how they perform.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Answer 2 to the question. I write about mREITs because I find the topic interesting and I want investors to understand some of the moving parts of how these companies work. At their simplest, agency mREITs are no more than lend long, borrow short schemes. This strategy can and has often throughout history blown-up when short rates spike or when long rates increase and values plummet.
Another point is that if the rates these companies earn starts to increase, there is nothing to stop the lenders that provide the leverage from increasing the cost of money.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Since I have been writing here, my opinion on mREITs has been that there are too many things that can go wrong for these companies. IMO, the whole business model as problems, since almost every item that affects earnings and book value are out of the management's control. Personally, I would jump into mREITs when there is blood in the street. Probably when at least one company screws up and runs out of cash flow or gets some of its portfolio repossessed by one of the lenders that is funding the leverage these companies use. Then pick up cheap shares of one of the companies I expect will survive.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Just because rates increase does not mean that ARR or any other mREIT will earn more interest. The rates they earn from their MBS portfolios are fixed and will not increase with higher rates.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
You know I am not a fan of CIM and also know that the company pushed the limit until the last week before the NYSE would have delisted the stock before coming up with an annual report for 2011.
As far as CIM goes, I have never seen a company so inept when it comes to filing the SEC required reports, something 1000's of other companies are able to figure out.
However, this article is not about that. It is about stocks with little control over their businesses and that bond market forces will determine what happens no matter what investors hope for. To me is seems that a stock with a declining dividend and dropping share price would not be an attractive investment.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
I definitely was wrong on CIM, of which I followed up with other articles. However, the company is still over a year behind in its financial reporting and anything could happen until CIM gets its act together.
Also, CIM is not an agency MBS REIT, so I am not sure of the point of comparison. This article just reports the numbers which are the core reason why mREIT share prices are falling and if the trend continues, the share prices will continue to fall.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Lee, thanks for the comments. I agree that one of the wild cards is whether or not bond rates continue to rise and prices to fall. It seems to me that at some point in time, investors will realize that low rates without capital gains does not do much for the portfolio, and the acceptance of very low, long term rates will stop.
I will be watching with interest how the hedging results turn out when the second quarter earnings season rolls around. Stay tuned for more of my semi-unbiased reporting.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Max, I have been writing about the dangers of how mREITs work since this time last year. It is just now easier to show the effects of the dangers that have been in place since mortgage and bond rates dropped to the recent low levels.
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Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
I want investors who own any stock to make money from the investment. But I have learned from experience, and I am sure many who read this agree, just because I own a stock does not mean it is a good stock or investment. My goal is to show the other side of the story.
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Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
I think I made it clear that what happens going forward depends on whether mortgage rates continue to rise, or the recent upswing is just temporary.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Another point is that if the rates these companies earn starts to increase, there is nothing to stop the lenders that provide the leverage from increasing the cost of money.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
As far as CIM goes, I have never seen a company so inept when it comes to filing the SEC required reports, something 1000's of other companies are able to figure out.
However, this article is not about that. It is about stocks with little control over their businesses and that bond market forces will determine what happens no matter what investors hope for. To me is seems that a stock with a declining dividend and dropping share price would not be an attractive investment.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
Also, CIM is not an agency MBS REIT, so I am not sure of the point of comparison. This article just reports the numbers which are the core reason why mREIT share prices are falling and if the trend continues, the share prices will continue to fall.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
I will be watching with interest how the hedging results turn out when the second quarter earnings season rolls around. Stay tuned for more of my semi-unbiased reporting.
Mortgage REIT Math, Or How Rising Rates Cause Investor Pain [View article]
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