Seeking Alpha
Seeking Alpha Portfolio App for iPad
Finance
(1)
Market Currents

Liquidation in mortgage REITs picks up where it left off on Friday, with nearly the entire...

  • Monday, October 15, 2012, 10:03 AM ET
    Liquidation in mortgage REITs picks up where it left off on Friday, with nearly the entire sector lit up bright red. Leading today's decline is CYS Investments (CYS -4.6%) after being cut to hold at Wunderlich. No details are available, but presumably the analysts there read the papers: interest margins are declining and mortgage refinance activity (prepays) is on the rise.
Track new comments on this story

This news story has 48 comments:

  •  
    Nly is looking juicy at these levels
    15 Oct 2012, 10:08 AM Reply Like
  •  
    Buy when the people is panicky selling. And the winner is..........., you know what I mean, Mr. Warren Buffet.
    16 Oct 2012, 12:33 AM Reply Like
  •  
    ....and why is everyone so happy that REIT's are down because someone said sell them now and everybody jumped off the bridge?
    17 Oct 2012, 02:03 AM Reply Like
  •  
    because that gives us a buying opportunity?
    17 Oct 2012, 07:13 AM Reply Like
  •  
    All oversold, many top names down to book value or less. Buying opportunity.
    15 Oct 2012, 10:11 AM Reply Like
  •  
    ARR down 5% today
    15 Oct 2012, 10:14 AM Reply Like
  •  
    This sell off is utterly idiotic. So what if NIM and refi's on on the rise? Look at the yeilds vs any other fixed income or preferred alternative!! So what if yeilds are even cut in half? The credit quality is high and increasing...this isn't a bad sign.
    15 Oct 2012, 10:16 AM Reply Like
  •  
    The yield and stock prices are related. If the dividends are halved, the stock prices drop. This is not idiotic, it is fundamental. You may want to check out your total return. It is going the wrong way for you. The Nim is falling and prepays are not irrelevant, they are also fundamental. You own a leverred IO.
    15 Oct 2012, 10:58 AM Reply Like
  •  
    LOL, you just missed it. they are half-recovered
    15 Oct 2012, 11:04 AM Reply Like
  •  
    I agree with A.Y. above: sector looking oversold. But where is the bottom? Sold all my AGNC right after the latest record date, and I'm waiting for Q3 data on 10/29 to decide whether/when to buy back in.
    15 Oct 2012, 10:22 AM Reply Like
  •  
    The party is over. Blowing past the tech levels. Do not try to call the bottom. Good luck
    15 Oct 2012, 10:28 AM Reply Like
  •  
    things are crazy now
    15 Oct 2012, 10:30 AM Reply Like
  •  
    The little SeekingAlpha guy is selling, while the smart money is buying. Why don't you go ahead and cut off your own arm and add to the blood on the street. I keep my arm.
    15 Oct 2012, 10:31 AM Reply Like
  •  
    Please call the oral surgeon.
    15 Oct 2012, 10:32 AM Reply Like
  •  
    They've all taken long vacations off-shore!
    15 Oct 2012, 01:21 PM Reply Like
  •  
    I expect to get back in under book. I left over book. Its almost three months until the next x date.
    15 Oct 2012, 10:39 AM Reply Like
  •  
    buy buy buy, buy everything
    15 Oct 2012, 10:50 AM Reply Like
  •  
    May be oversold but its no fun trying to catch the falling knife. Most have good gains in these and would rather pay the current capital gains than whats in store Jan 1.
    15 Oct 2012, 10:53 AM Reply Like
  •  
    I'm out. This decline was totally unnerving. PReservation of capital. Looking for a better day. Asset values may be going up on the rise in mortgage bonds. That is what I currently own. Spreads are declining on new bonds/REPO credit for these mREIT funds. Current prospects to continue dismal for another year or more. Doubtful that the dividend would cover the decline in the value of the shares.
    15 Oct 2012, 10:55 AM Reply Like
  •  
    You can get in and out of these names around the x date without taking on the equity risk. Why not view them as a trading opportunity in the short run? Somebody big is selling. It's not worth being the last person into the fireplace. The die is cast on a technical level for these names.
    15 Oct 2012, 10:59 AM Reply Like
  •  
    "It's not worth being the last person into the fireplace"

    I've never heard it said quite like that. Would it then be better to be the first to enter said fireplace? Is this some sort of Harry Potter teleportation joke?

    This is not a "burning platform " moment for mREIT's, but that's my opinion. Insert fire analogies below.
    15 Oct 2012, 12:26 PM Reply Like
  •  
    On the flip side, these may do well when qualified dividends no longer receive tax favored treatment
    15 Oct 2012, 11:00 AM Reply Like
  •  
    Selling looks like theres a little big of panic going on in AGNC. Picked up some calls with it down 7%, I'll wait to see what management says on the earnings call before I decide what to do, but I see book value, which should be above $30, as a floor, and dont expect the dividend to drop below $.90
    15 Oct 2012, 11:00 AM Reply Like
  •  
    OPened a position in AGNC for the long haul here.
    15 Oct 2012, 11:02 AM Reply Like
  •  
    Duh! They just figuring that out now? Where have they been since QE3 was announced??
    15 Oct 2012, 11:05 AM Reply Like
  •  
    Dividends getting to over 16% now on several of these + the drop should equal buy interest. Coming off their lows so far. Looks like AGNC is among the first to report the qtr- then we'll see if Kain's planning helped at AGNC.
    Also wondering if AMTG will payout that special distribution this quarter or push it into next yr.
    15 Oct 2012, 11:12 AM Reply Like
  •  
    I love capitulation days!!!!!!!!! Did a lot of buying this morning, AMTG, MITT and DX and NYMT
    15 Oct 2012, 11:34 AM Reply Like
  •  
    Happy Monday Morning. I've been holding on thru the last couple weeks, since this decline began, but this is indeed getting unnerving.
    15 Oct 2012, 11:50 AM Reply Like
  •  
    For every share of an mReit Sold there was a ready, willing and greedy dividend buyer. That should say something to the doom and gloomers out there. Interest rates will rise ans the spread will widen. the number of HARP loans are limited just as is the credit worthiness of the holders of those loans. It is simply too early to pass any judgement on QE3 what it is doing, has done or will do.
    15 Oct 2012, 11:54 AM Reply Like
  •  
    Time for a comment on the carnage in the mreit sector. I defer to Mr. Buffet here "...be greedy when others are fearful." Time to buy and I am remaining long NYMT, DX, TWO, and will add to positions. The scared money is bailing on an analysis of the sector that I think is fundamentally wrong....just my opinion.
    15 Oct 2012, 01:19 PM Reply Like
  •  
    My idea of book value is what I paid for the stock, not what fodder they might feed me as to their book value. I have had a good year. Great dividend and very good stock price appreciation. I am now 99 and 44/100% cash. Just waiting for the best time to get back in. It might well be after earinings and the elections. Sort of a wait and see attitude.
    15 Oct 2012, 01:28 PM Reply Like
  •  
    I,m hanging in. been there before. Will buy more if these level continue.
    15 Oct 2012, 01:55 PM Reply Like
  •  
    just picked up some NLY at 15.5 The dividend was awful during the housing boom and it still offers a decent yield on the current share price.
    15 Oct 2012, 02:04 PM Reply Like
  •  
    10/15/121 - 12:50 PM
    Sterne Agee upgraded American Capital Agency (NASDAQ: AGNC) from Neutral to Buy.
    15 Oct 2012, 02:02 PM Reply Like
  •  
    This is what "big money" and short selling does to the retiree, trying to make his money stretch to end of life! I would even vote for Obama if he would promise to ban short selling of equities. Folks, the deck is stacked against us!
    15 Oct 2012, 02:18 PM Reply Like
  •  
    short sellers take advantage of mispricing in the equities market, just like long value investors do.
    15 Oct 2012, 02:20 PM Reply Like
  •  
    Agree, those high frequent trading, short sellers are just wrong, evil !!!
    15 Oct 2012, 02:54 PM Reply Like
  •  
    Someone has seller's remorse, AGNC, AMTG,TWO & MTGE have come up about 6.7 to 8.7 % from lows-- might lose some of that- but still a very encouraging recovery.
    15 Oct 2012, 02:32 PM Reply Like
  •  
    AMTG is positive now at 21.36!1 after being more than 6% down this morning My congratulations to those who bought it at 19 83 ! Panic selling doesnt pay off
    15 Oct 2012, 02:34 PM Reply Like
  •  


    Everybody needs to take a chill pill because the Dividends at these companies are dictated by the MACRO economics of the whole market. Dividends won't be cut unless MREIT profit is declining, because MREITS are forced to pay shareholders 90% of all profits. The decision about dividends is outside of Board's ability to control.

    If you think the Macro Economic future of MREITS are in trouble, then sellout. I feel not much is going to change with respect to MREIT profits and dividends. The 10yr will remain around 1.5% until the Fed ends QE3. And QE3 isn't ending until the economy gets growing at 3% or better for several quarters in a row.

    People are also in fear of Refi's destroying MREIT profits. And no doubt, ReFi apps are on the rise. But think about it, lending requirements have been jacked up so the majority of people trying to ReFi won't be able to either qualify or will be offered a much higher rate which makes refi'ing to save a few hundred bucks not worth it when the Closing Costs will run thousands of dollars. Some folks might also be forced to obtain PMI (insurance) which will negate any gains from a refi.

    At the end of the day, MREITS will be doing just fine. And the Fed's MBS purchases will only increase Asset values at MREITS in exchange for a marginal decline in dividend yields.
    15 Oct 2012, 03:29 PM Reply Like
  •  
    Never saw AGNC tick below $30, but the day's range shows trades as low as $29.63. With the stock $2 higher than that right now, its yet another example of why to only use limit orders when trying to sell.
    15 Oct 2012, 03:34 PM Reply Like
  •  
    I am out too. I made a couple of percent on NLY from appreciation and more from dividends but I am not holding the bag. The fundamentals may look OK but the technicals are terrible.
    15 Oct 2012, 03:41 PM Reply Like
  •  
    "The fundamentals may look OK but the technicals are terrible. "

    Which is why there are Traders and there are Investors. Investors can weather the technical storm and always come out on top. Technical traders are always looking at crystal balls and jumping from stock to stock, likely paying more in commissions than earning profits.

    Fundamentals always rule the day.
    16 Oct 2012, 02:31 PM Reply Like
  •  
    If you can,t stand heat you should not be in the kitchen .I sell nothing and keep collecting div:
    15 Oct 2012, 04:58 PM Reply Like
  •  
    Thomas Flaherty (see above) got it right. While it's true that even if the distribution of a stock such as AGNC goes from, say, 15% to 10%, it's still a terrific return in comparison with most alternatives, the market is not going to pay the same for a reliable 10% return as they will for a reliable 15% return. So, although you still have a superior return, you will have suffered a potentially significant hit to the value of your asset. AGNC and MTGE are still priced at a historically high price/book, which might be appropriate in an environment where book value is increasing (which it might or might not) and the dividend is safe (which it's probably not), but that's certainly not the case at this point in time. Both AGNC and MTGE normally sell for around a 5% premium to book, so they still have some room left underneath the current prices. The fact that we do not even know the Q3 book value makes simply adds to the speculative nature of holding either stock at these levels. It puts holding or buying these stocks into the "gambling" category. If book goes up, you win. If book stays the same or retreats, you lose. One would think that because of the Fed's buying spree, book would go up because the value of the paper would go up, but if these company's have increased their leverage, it could minimize that gain or eliminate it altogether.
    15 Oct 2012, 07:02 PM Reply Like
  •  
    AGNC will have book value > $30 in the coming earning report. Considering the great managing team (position themselves nicely before QE3) and high leverage, 10~15% premium is reasonable.
    15 Oct 2012, 08:55 PM Reply Like
  •  
    Lets also not forget, that those factors which drive down the dividend yield also increases the book value of the company.
    16 Oct 2012, 02:33 PM Reply Like
  •  
    I'm watching this carnage in the reit sector as I am loaded up with them. All the panic selling out there tells me that a lot of folks are amatuers at this and are playing right into the hands of the large institutions by selling now. If I haven't learned anything, I've learned that panic selling is absolutely the stupidest thing one can do. In addition, since the government rewards borrowers and punishes savers where else can one go to get these kinds of yields?Hang on and all these stocks will come back.
    21 May, 02:06 PM Reply Like
LATEST|
TODAY SO FAR|
YESTERDAY
Other date
DJIA (DIA) S&P 500 (SPY)
Latest Articles on Financials
More Latest Articles »