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The mortgage REITs are lit up bright red (MORT -1.9%), again led by American Capital Agency...

The mortgage REITs are lit up bright red (MORT -1.9%), again led by American Capital Agency (AGNC -3.5%) and American Capital Mortgage (MTGE -3%), with Annaly (NLY -3.1%) not far behind. Yes, the 10-year Treasury yield is a 3 bps higher, but there's also rare action in Fed Funds futures, now pricing in a whopping 50 bps in rate hikes by this time 2016. AGNC presents at the JMP Conference at 2 ET.
Comments (39)
  • I wonder what Ray Lucia is saying???
    13 May 2013, 12:44 PM Reply Like
  • Article in the WSJ over the weekend thats hitting the stocks. $AGNC is likely below book here.
    13 May 2013, 12:45 PM Reply Like
  • 50 basis points in 3 years?


    Hoo-rah. I'll take that guarantee any day.
    13 May 2013, 12:49 PM Reply Like
  • Thats then we will be 4 trillion more in the red....not good..
    13 May 2013, 12:51 PM Reply Like
  • clearly overreaction
    13 May 2013, 01:00 PM Reply Like
  • Time to start moving a little out of REIT's and into Oil and Gas MLP's. All up today. Big fan of NTI, LGCY, and ETF SRV. Buying WHZ on the 16th (Ex Date). Starting to see the sell off now for that stock.
    13 May 2013, 01:01 PM Reply Like
  • I actually have been moving a little more IN to the mREITs. Best to buy sectors when people are dumping them en masse. I can't imagine this selloff is warranted based on something that might happen in 2016. The management at these firms is very competent to account for this
    13 May 2013, 01:08 PM Reply Like
  • "all up today?"


    BBEP down .10
    EVEP down 2.00
    LINE down .24
    QRE up .10
    VNR up .05


    Which ones are you referring to? Most of the Alerian index is showing red, with the exception of shipping companies.
    13 May 2013, 01:14 PM Reply Like
  • Moving out after a fall ? Thanks dude, I will buy your cheap shares than.
    13 May 2013, 02:07 PM Reply Like
  • Plus Bernanke's talk, mentioning mREITs not in a nice way, which I think is helping fuel this sell-off.
    13 May 2013, 01:06 PM Reply Like
  • What did the chairman say regarding mREITs?
    13 May 2013, 04:44 PM Reply Like
  • "Bernanke also repeated concerns about short-term wholesale markets, which have the potential to dry up in another Lehman Brothers-like situation. While Bernanke did not draw the link in the speech, the potential for these markets to dry up is a reason regulators are concerned with mortgage REITs."

    13 May 2013, 05:10 PM Reply Like
  • "O" is up 40% since I bought in Nov. 2012. Think I may stick with the equity REITs and look for another entry point on another one of them.


    On the other hand, maybe not. Decisions, decisions. :)
    13 May 2013, 01:18 PM Reply Like
  • yeah I took a stab at O under 38 as well..... so pissed it was a "stab" and not a real dive in
    13 May 2013, 02:05 PM Reply Like
  • Sold O today @ 53.28 after buying last Nov. Yield is to close to dipping below 4%. Purchased NLY @ 14.59 on today's overreaction.
    13 May 2013, 02:12 PM Reply Like
  • O is a buy it and forget stock. I know people that timed it and got out in the 40s before it dropped to 37. They also missed the run up to today :) O has been hitting new highs daily for week since the beginning of the year when they upped the divvy 18%.


    I added to NLY below 14 last year. I'll hold off until then
    13 May 2013, 02:16 PM Reply Like
  • My equity REITs are all up huge. ARCP, OHI, WSR, and a few others, been a nice run. I went all in on ARCP, probably every client I represent. Never touched the mREIT's, don't think I will. Does anybody remember the total collapse of the overnight and super short term debt markets in 2008/09. All those leveraged ETF's got killed.
    13 May 2013, 05:53 PM Reply Like
  • NLY actually did ok during the mortgage crisis. The key is that they were dealing with agency mortgages,
    13 May 2013, 09:23 PM Reply Like
  • I know, looking back over the history of NLY you can see lots of rate environments, it's very interesting and impressive. My point was that credit markets can be a problem at times and in surprising ways. It's just tough to sleep at night with that much dependence on an orderly credit market.
    13 May 2013, 09:28 PM Reply Like
  • Every central bank on earth is focused solely on keeping the credit markets open. Its hard to imagine short term credit markets drying up with the Fed and Japan both printing trillions of dollars a year.
    13 May 2013, 09:30 PM Reply Like
  • Good point Mike, equity REIT's need stable credit markets as well. I worry too much. What if the long side just went to zero, like a 10yr note at 0.75%? I'm worried that capital flight or a stock down draft will move large amounts of money to a "safety" trade. Those trillions could move a coverage ratio in a hurry.
    13 May 2013, 09:35 PM Reply Like
  • Since when in being down between 1-3% for the day considered being "lit up bright red?"


    (NLY) is down 2% currently.


    Will there be a Market Current update or will this one stand to drive these stocks down further?
    13 May 2013, 01:28 PM Reply Like
  • Mike
    For us less sophisticated-- What is WSJ
    13 May 2013, 02:08 PM Reply Like
  • Wall Street Journal
    13 May 2013, 02:30 PM Reply Like
  • Buying opportunity, or cut your losses and bail?
    13 May 2013, 02:09 PM Reply Like
  • I bought ARR at 6.05 BV recently reported at 6.66. AMTG pres says BV concerns are overstated and BV is already recovering from the end of quarter. Current fundamentals are good for my holdings. That should support them, but the trading ranges on these things is wide. This is no place to be if you lament every down tick.
    13 May 2013, 02:41 PM Reply Like
  • My thoughts exactly. I listened in to Gary Kane's conference call, and came away the same feeling. I just wanted to get a pulse from my fellow investors. Thanks for posting :)
    13 May 2013, 03:24 PM Reply Like
  • Do I really need to concern myself today with this issue? Three years in today's market is a "LIFETIME" away. May I suggest that we examine this issue, on a quarter by quarter basis?
    13 May 2013, 02:12 PM Reply Like
  • I'd appreciate if anyone out there could explain something to me.
    Are the "talks" of the FED of unwinding QE3 the cause of these sell-offs? Wouldn't it be better for REIT'S like AGNC when the FED actually gets out of the way? So, why all this fuzz? I think the market is overreacting way out of proportion. What do you think?
    13 May 2013, 02:12 PM Reply Like
  • daniel, when mortgage rates go down as they did in the latter half of 2012 following onset of QE3, the book value of the mreits' holdings go up, even though the earning power of the existing assets is unchanged and for of new money is going down. Some of the mreits like AGNC made a big deal out of the big gains in their book at the end of 2012. When rates when back up in Q1 13, AGNC's book value to a hit and the stock dropped. Others may differ, but I tend to agree with you-- it's better for the mreits if the Fed gets out of the way
    13 May 2013, 02:48 PM Reply Like
  • jpm1jr....Thank you for your answer. But kindly correct me if I'm wrong with this assumption.
    Let's picture the FED stops QE3 and the mortgage rates go up, wouldn't that give mREIT'S more space to make even more profits?
    (spread between short and long term rates, I mean).
    Therefore being able to increase their BV and even pay more in dividends , all at the same time?
    That's what I was thinking when I stated that I thought getting the FED out of their way will be actually more profitable for them.
    Please correct me if I am wrong.
    Kind Regards.
    13 May 2013, 04:54 PM Reply Like
  • in my opinion, you are right, but it depends in part on how the Fed exits and what that does to the shape of the yield curve. If they hold short rates down, while allowing long rates to rise, that should be good for the mreits, even if the higher rates depress their book value a bit
    13 May 2013, 05:14 PM Reply Like
  • 50 basis points in 3 years is whopping?


    Lordy let's hope they're correct about that. As I understand it it's not the absolute rate that matters....the spread is still there.....rather the adjustment period. If that's so the REITs can adjust beautifully at that snail's rise and make just as much money as they are now.
    13 May 2013, 03:19 PM Reply Like
  • My picture? My picture is about as convincing and enlightening as the ongoing analysis of the mreits.
    13 May 2013, 03:33 PM Reply Like
  • Recent book value drops are the flip-side of the big gains in NAV you saw from QE3. I'm usually all for trading these with an eye to book value, but here I think you have to keep your eye on NIM/ spreads. Even if there's a 10% decline in NAV, does it make sense to sell out of a co like WMC, with a NIM of 200 bps, CPRs in the 3.5% range, and close to 20% annualized ROE? MTGE is also starting to look like a screaming bargain down here.


    Want out? I'll take your cheap shares...
    13 May 2013, 03:37 PM Reply Like
  • Thinking of getting into REM below 14.
    13 May 2013, 04:48 PM Reply Like
  • Think I'll wait until rates start to rise. The mREITS behave a lot like bonds it seems. I may buy in within the next 12 to 24 months, after the smoke has cleared on how the market will react to rising rates. We are at historical record low interest rates. I want them to get back to close to normal before I think about diving in.
    13 May 2013, 04:51 PM Reply Like
  • Does anyone SERIOUSLY think all these MREITs are going to sit around with their thumbs up their collectives for three yeas doing nothing? At the end of three years, you will get a better total return from a decently managed MREIT than you will from a junk bond fund, hands down.
    13 May 2013, 05:29 PM Reply Like
  • I'll just stay pat and collect my $1.25 quarterly dividend (for now) and not worry about the stock price. Over the past 3 years the stock has traded around $30/share give or take a few dollars. It is now close to book value and had no business trading at a high premium over the past year or so. I don't worry about mark to market quarterly changes in security values and their effect on book value. Rates will fluctuate but they aren't going up to stay anytime soon. I expect a dividend cut later this year perhaps to $1.10 to keep it in line with net income.
    13 May 2013, 11:53 PM Reply Like
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