Market Currents
"Rates go down you get killed, rates go up you get killed," says hedge fund manager Brad...
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Tuesday, October 16, 2012, 10:49 AM ET"Rates go down you get killed, rates go up you get killed," says hedge fund manager Brad Golding, summing up the situation for mortgage REITs. The days of double-digit yields are over - at least at Annaly (NLY) - where new co-CEO Wellington Denahan-Norris calls it "fantasy" to think the company can just jack up leverage to replicate the returns of the past.
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This news story has 68 comments:
agenda ! ! !
you are right, those shorties are in deep trouble.
that's why they keep slamming the Reits.
Look, these Reits have been in business for years,
they are good, and divi never stops, maybe more or less divi, but never stops.
These Reits beats almost any other stocks in terms of DIVIDENDS, anytime. That's for Sure.
GLTA.
LONG : ARR, NYMT, TEU, DCIX, BRD.
Rgds
return goes down 10% from say a return of 10%. So your now getting 9% on your money but its actually only $9k now so you don't get 9% of 10k you get 9% of 9k. This happens a few times and the return will quickly start to move from the original 1k return on your 10k to something more like 500 on your 6k or something like that. So now you get 500 bucks to offset the 4000 you lost in principle. The savings account might be lookiing better.
you are 100% right about that.
I have Reits for many years, got all my investments back already.
With divi-reinvestment, get back all money fast.
GLTA
You are talking about short term, not long term investment.
Most of these REITs give out good divi, even in bad years.
I have all my original investment back already after about 5 years with divi-reinvestment, real cool.
Like Buffett siad: "Always invest for the Long Term."
He is quite right about that.
GLTA.
IF you have reinvested your dividends, you have not gotten anything back YET. It's on paper but not in your pocket, so to speak. IF my original investment was 1000 shares @$10 ea or 10K and through reinvestment it is now 2000 shares or $20k what happens? IF the price of the stock goes down 10% it would be a loss of 1k without reinvestment and 2k lost with reinvestment. Looking at it another way, the return translates into 2000 shares @$9 ea you could cash in for $18k but if you had pocketed the dividends you would cash out for $19k. (your 10k original minus the 10% decrease in price + 10k in dividends) Have I made a mistake in my math? I tried to keep it simple. I didn't account for any interest on the dividends in the bank or whatever and I left the share price level except for the 10% drop before actually selling everything.
If you had pocketed the dividends all along the way, you would have had to find another investment to pay you 12 to 15% return to equal the 2,000 shares.
If you look at NLY since its beginning, in 1997, you will find it's paid a great rate of return over its life. What's going on now, hopefully, is short term (a couple of years perhaps).
Long NLY and staying long and perhaps picking up more if the price drops enough. Dividends paid from 2001 to 2011, 11 years has been $20.71 per share. That's better than a 100% return no matter how you slice it over that time period.
So we repeat it alot.
Election years ending in 2 in odd decades, for some reason, have statistically less impact on the market than other election years. So since this is 2012 the election will most likely not cause the market trend to change directions. IF it's headed down now the election won't turn it around and vice versa.
Sounds like witch craft right? If you check all election years and what the market did in them you will find what happened is either random or not. But it is a fact that elections in 1892,1912,32,52,72 and 92 did NOT effect the market direction while 1902, 22, 42, 82 did have an effect. pretty strong coincident? Love to hear someones reasoning on why this has been happening for a century.
The 26 percent contraction in dividends and earnings priced into the stocks is ”overly bearish,” Cheryl Pate and Vincent Caintic wrote. Their base case forecasts a 4 percent dividend cut for REITs that buy agency debt in 2013 and a 15 percent increase for the so-called hybrids that purchase both types. These will benefit from higher asset prices for non-agency debt and quicker prepayments on debt bought below par."
From Bloomberg: Investors Abandon Home Loan REITs Under Fed Assault: Mortgages
As a holder of American Capital Mortgage (MTGE), I appear to be a beneficiary of the good fortune predicted for hybrids. Goody! Goody! Can someone give me a better idea of why this should be so, thereby providing a reason not to dump this stock in favor of, say, PSEC?
I'm seeking shelter, on the lee side of the mess. When the dust settles, I will sneak out. If you don't HAVE to have dividends to survive, consider hiding for a month or two.
Capt. Brian
The Lost Navigtor
agree with you.
Those Market-Makers are very greedy.
But, with SEC Hearing going on now,
those greedy ones will be caught and punished BIGTIME, just watch. Election coming, you know.
GLTA.
Then in on day AGNC saw 42,000,000 shares trading on one day when the avg. is only about 8,000,000......Someone knew something for the big share holders to sell off so quick.....
Why was the average investor not privilage to the same information that cause these big fund companies to sell off...??????????
In regards to the AGNC pop in volume, many institutional investors probably put 2 and 2 together as some of us did and liquidated their positions. Also, some of that is probably the fidelitys and Merryl Lynches of the world who got flooded with calls saying sell sell sell when customers saw their "stable low risk" mREIT take a 4% hit in one morning.
in this business world, it's never equal.
Shareholders need to write to the SEC & the US Congress and ask them to enforce the rules.
That's why now the SEC Hearing is going on.
Check it out, and push them for more straight & tougher Rules.
But ask those Congressmen to check on the enforcement side because the Congress wrote and passed those Rules & Laws.
If we don't care, who else will ??
GLTA
there are always some weak-hands who got scared out of their shares easy.
Those greedy crooks know that.
Always beware of "Tree Shaking."
Never use the "STOP LOSS" feature, a trap to be used by those greedy crooks.
GLTA.
More indicative of a day trading artifact than large investors running before the noise traders
So if you don't mind, let me know the site(s) you go to that presented information indicating there were problems and you may want to consider selling ....
I would appreciate your input......because this site never indicated a problem large enough that a 42,000,000 share sell off is possible....One third of the total outstanding shares..
Please I would really like the site information you used to prompt you to sell and also how you knew how much to sell...
Thanks
I would like to know where "JLesinski" (above) got his information to sell when he did and why he choose the amount to sell...
Hameed
I want to be tied into the sites you used for your information...
“Investors’ appetite for even a reduced dividend is still pretty high,” Wunderlich’s Ross said. “Where else are you going to get that? Greek debt?”
Morgan Stanley also sees the recent declines in mortgage REITs as overdone, driven by retail investors that are basing their decisions on “negative newsflow rather than new data points,” analysts at the bank wrote in a report today.
http://bloom.bg/R32ZUT
those misinformations are from the Greedy Crooks.
That's why we all need to check on the SEC and make sure they don't do favor for the Greedy by keeping a blind-eye on those who broke the rules and get away with it.
Keep writing to the Congress and ask them to check on the SEC, make sure no political favors.
It is hard, but at least it help a bit.
GLTA
me too, agree with Kingdad's comment 100%.
GLTA.
If the yield continues to decline into the 8% range, I would guess the share price would be single or close to single digits at that time? Doesn't sound like you would make money to me. Not with what I am experiencing.
If NLY continues to cut its dividend, I'd anticipate to continue to see it's share price decline. Not sure what today's announcement of a share buyback program would mean. If it stabilizes the price, then fantastic. But it'll take me a year to make back some of what I've lost with the share price drop. At the current dividend level and current price, another year's dividends would get me back to a 6.75% return annually, unless I buy more, which would help a bit. Not great, but a lot better than my current return.
But, if the price continues to drop with each dividend cut back like it has recently, I'll just have to fold and sell all of it.
I bought more today & yesterday too.
Thanks to those weak-hands who got scared out of their shares.
Quote from Peter Lynch : "DON"T GET SCARED OUT OF YOUR SHARES."
GLTA.
you are right.
If Reits drop their yeilds to 5% - 8%, all other stocks will drop their yields also.
Currently feel like an idiot for not selling, but hanging in to learn from the experience. Thinking of forgetting of investing in individual stocks and putting it all in mutual funds and letting the "professionals" manage it.
True.
Thanks to those who got Scared out their shares.
GLTU.
Long MTGE and TWO, for the 10% plus dividends.
Hopefully if you did sell it was right at the beginning
of the latest 'Bear scare', because if you waited for
a stock like MTGE to go under 23 to sell you're probably
looking at todays bounce and sayin' 'what was I thinking?'.
Yeah, the spread is thinner, but these Mreits, still have
money to spend on dividends, soooo... be careful, but
please don't get caught up in panic selling, it just ain't putting
bread on the table.
snow