Seeking Alpha

Panicky selling grips the mortgage REITs (REM -3.5%) as Treasury yields soar following the...

Panicky selling grips the mortgage REITs (REM -3.5%) as Treasury yields soar following the payroll report. American Capital (AGNC -6.9%), (MTGE -5%), Annaly (NLY -6.9%) Chimera (CIM -4.9%), Armour (ARR -3.9%), Invesco (IVR -2.7%), CYS Investments (CYS -3%). CYS' Kevin Grant was public a month ago about being a happy buyer as yields rose - a bit early on that call.
Comments (103)
  • tomlos
    , contributor
    Comments (1146) | Send Message
     
    I've been looking to put a couple of bucks into NLY, and wondering if this is a great price to start. Long term position.. any thoughts?
    5 Jul 2013, 09:42 AM Reply Like
  • bankingqueen
    , contributor
    Comments (135) | Send Message
     
    Been thinking the same thing with NLY, will have to wait to see how the price reacts. Do not want to jump in early I think it still goes a little lower.
    5 Jul 2013, 09:51 AM Reply Like
  • GaltMachine
    , contributor
    Comments (1144) | Send Message
     
    With you on this as well. Amazingly I was close to pulling the trigger a couple of years ago at $17.

     

    The theory was that the dividend was large enough to ensure that you could hold it in the event of price fluctuations!

     

    Well clearly that theory was debunked. Perhaps it is best to ignore the price changes but personally I couldn't stomach a drop of this magnitude.
    5 Jul 2013, 10:13 AM Reply Like
  • Ron Reed
    , contributor
    Comments (285) | Send Message
     
    While the div. is a plus side to the sector, you cannot look at it that way, the div is just the payoff for the risk. The only way to fairly value them is to look at BV and what the impact to BV will be with changes to the YC, lots of private investors look at the 15+% div and think "holy crap, gotta get me some of that" and ignore the reason for the high return. Never forget ECO101 that next to supply and demand is that the money always follows the risk, no matter what.
    5 Jul 2013, 10:17 AM Reply Like
  • ChuckJ
    , contributor
    Comments (78) | Send Message
     
    I think you should turn to technical indicators and I'm not buying now based on that.

     

    ChuckJ
    5 Jul 2013, 10:20 AM Reply Like
  • dongoldberg
    , contributor
    Comments (6) | Send Message
     
    Blood in the street as said by Warren Buffet. This is a great time to buy NLY.
    5 Jul 2013, 10:24 AM Reply Like
  • AggGrow
    , contributor
    Comments (194) | Send Message
     
    Interesting. I wonder if there's an index that compares the divergence of the technicals to the fundamentals.
    5 Jul 2013, 01:10 PM Reply Like
  • ka12345
    , contributor
    Comments (26) | Send Message
     
    Actually, it was Sir John Templeton that coined this phrase.

     

    Just sayin'
    5 Jul 2013, 03:38 PM Reply Like
  • ChuckJ
    , contributor
    Comments (78) | Send Message
     
    Who was it that said "don't catch a falling knife"?
    6 Jul 2013, 08:01 AM Reply Like
  • gl2238
    , contributor
    Comments (8) | Send Message
     
    Something wrong with this pix. If MRITS make money by borrowing at low interest rates and loan at long term rates, now going up, why are MRITS going down instead of flying up? Long term rates are going up while short term FED rates are still low and moving up at a much slower rate.
    5 Jul 2013, 09:47 AM Reply Like
  • SivBum
    , contributor
    Comments (1807) | Send Message
     
    what is MRITS?
    5 Jul 2013, 09:51 AM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (545) | Send Message
     
    It may be good at some point, but it's bad first. The values of their highly levered portfolios drop as rates rise.
    5 Jul 2013, 09:52 AM Reply Like
  • dougmccown
    , contributor
    Comments (31) | Send Message
     
    It's a typo. He meant GRITS.
    5 Jul 2013, 10:03 AM Reply Like
  • chuckf201
    , contributor
    Comments (16) | Send Message
     
    as long-term rate continue to increase while short-term rates remain constant then NLY's profit increases because of the spread between the two rate. Also, NLY has been buying back their own shares. Why and how is this stock being manipulated?
    Something IS wrong with this pic.
    5 Jul 2013, 10:43 AM Reply Like
  • sea0920
    , contributor
    Comments (4) | Send Message
     
    Yeah. It's funny, isn't it? Eventually rate spread will help mREIT. The problem is that in the short term, existing MBS held by mREIT will not help company's revenue.
    5 Jul 2013, 04:44 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1358) | Send Message
     
    Panic and misunderstanding always makes money for me!
    5 Jul 2013, 05:21 PM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    I have been fully invested in REITs since 2007. I earned 25% in 2008, 13.7% in 2209, 14.83% in 2010, 14.56 in 2011, and 15.22% in 2012. I'm looking at 14.62% in 2013. From my perspective REIT's work with whatever the short term rates are and they do a fine job of maintaining a good spread. After all the management owns stock as well and you can bet they will do all they can to keep good dividends flowing.

     

    The dip works to our advantage. Just bought more MTGE and WHZ (Oil and Gas trust).
    6 Jul 2013, 10:58 AM Reply Like
  • speculative
    , contributor
    Comments (646) | Send Message
     
    Wow pinkrabbit, 13.7 in 2209 is advanced planning. Even I won't live that long.
    6 Jul 2013, 04:41 PM Reply Like
  • murray555
    , contributor
    Comments (321) | Send Message
     
    Pinkrabbit,

     

    I have been invested in mreits since 2008 and have enjoyed the same type of returns / income. This is a grest time to buy mreits, particularly NLY, AGNC, MTGE.

     

    I hear what all of the "pro's" are saying but my experience tells me otherwise. And BTW...the pro's didn't fare any better than anyone else in 2008/2009 when the tide flushed all stocks down.

     

    One more thing...you get paid for the risk of mreits. However, if anyone thinks they can't lose money on any investment they should just spend everything they have now. If you know what I mean. :o)
    8 Jul 2013, 08:46 AM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    OOPs. The other day I bought a new mattress that comes with a 20 year warranty. Given that I am 70 I'm pretty sure that do not have to plan on buying a new mattress at 90. Not being pessimistic just practical.
    9 Jul 2013, 09:15 AM Reply Like
  • gl2238
    , contributor
    Comments (8) | Send Message
     
    I meant MREITS. Mortage/Financial entities that borrow at short term rates and loan at long term rates.
    14 Jul 2013, 09:35 AM Reply Like
  • northhills24
    , contributor
    Comments (1598) | Send Message
     
    because the average investor does not UNDERSTAND this sector.!
    5 Jul 2013, 09:48 AM Reply Like
  • SivBum
    , contributor
    Comments (1807) | Send Message
     
    AGNC and Annaly borrow short-term to buy longer-dated mortgage-backed securities (MBS). When rates go up, it harms their business. That's because borrowing costs go up quickly, while the longer-dated MBS on their balance sheets decline in value.

     

    Not much different than junk bonds crashing of late.
    5 Jul 2013, 09:54 AM Reply Like
  • REIT Analyst
    , contributor
    Comments (481) | Send Message
     
    Yeah, and the billions of swaps they hold are just to look pretty, or are they supposed to turn their short term financing into long-term locked financing, hence pretty much insulating them from exposure to the curve?
    5 Jul 2013, 10:17 AM Reply Like
  • ark2
    , contributor
    Comments (71) | Send Message
     
    Pretty simple case here it seems of the market not believing the hedges are working. We will find out in the next few weeks. If the hedges are working today presents an unbelievable opportunity to buy these names. If not...the pain endured to date will be more permanent. I wish I wasn't already all in...
    5 Jul 2013, 11:10 AM Reply Like
  • COBeeMan
    , contributor
    Comments (1358) | Send Message
     
    SivBum - that only holds in the short term. As long as the short term rates remain low, the mREITs will make money as they roll and readjust their assets.
    5 Jul 2013, 05:24 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1358) | Send Message
     
    "The Market" is made up of people. Some of them are experienced with mREITs and some not. Some are risk averse and some are not so much. Some are looking for income and others are looking for short term gains. Some use programmed trading, but most don't. The market has had lighter than normal volume while much money is still on the sidelines, and today was even lighter volume because of the holiday. I could go on... There are many variables that are involved when someone talks about "The Market".

     

    I find that the market usually over reacts to most news (PANICS) and then corrects. Those that recognize such panic and correction patterns make money.
    5 Jul 2013, 05:31 PM Reply Like
  • xxavatarxx
    , contributor
    Comments (2606) | Send Message
     
    COBeeMan.
    I think now mreits are running the risk of losing money if they choose to sell MBS to rotate to higher yielding paper.
    So on the one hand you have a point about rising spreads, but they may also face realized losses on MBS that will eat into the spread income.

     

    We'll find out more when earnings come around.
    5 Jul 2013, 06:23 PM Reply Like
  • COBeeMan
    , contributor
    Comments (1358) | Send Message
     
    xxavatarxx - agreed, but I see that risk as temporary during the rollover and will probably be offset by the increased interest rate spread, and they have known this was coming and have prepared. However, we just don't know what will happen. High dividends are always payment for high risk.
    5 Jul 2013, 09:50 PM Reply Like
  • rocketman3
    , contributor
    Comments (31) | Send Message
     
    Maybe not, but the average investor does understand red ink.
    6 Jul 2013, 02:10 AM Reply Like
  • ChuckJ
    , contributor
    Comments (78) | Send Message
     
    If the earnings are going to be good, the price will likely turn before the announcement.
    6 Jul 2013, 08:07 AM Reply Like
  • rocketman3
    , contributor
    Comments (31) | Send Message
     
    Northills24: You are correct. The average investor is blinded by the yield and has absolutely no idea how they work. One has only to read the majority of the comments on this site about averaging-down on them and throwing more money at them to realize that. mREITS are extremely dubious structured products. My advice: Stay away from them.
    6 Jul 2013, 11:58 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3488) | Send Message
     
    I think you are correct that many small investors are not familiar with how the mREITs work.

     

    However, by what metric or observation can you tell these investors are blindly propping up a dubious structure versus exiting in panic? It would appear the same reasoning could cut both ways.

     

    If you you believe that the mREIT structure is ill-conceived and / or prone to collapse, why do you believe this? Do you think this due to concept or execution? Is NLY (the oldest mREIT) in the same camp as new cousins?

     

    I continue to read opinions and seek from those with clear data points: either in defense of mREITs or those prophesying their imminent demise.

     

    Interesting convo here. I believe some answers will be forthcoming in early August when NLY reports quarterly earnings and releases more recent financial filings.
    6 Jul 2013, 03:42 PM Reply Like
  • murray555
    , contributor
    Comments (321) | Send Message
     
    They should understand red ink since the average investor's "investments" are usually in the red. They are used to it. Buy high sell low!!!
    8 Jul 2013, 08:50 AM Reply Like
  • Van Hyder
    , contributor
    Comments (168) | Send Message
     
    I always find it funny when long term yields rise and it's "good" for the banks but "bad" for the reits. Wake up everyone, it's essentially the same business model - borrow cheaply and lend dearly.
    5 Jul 2013, 09:50 AM Reply Like
  • SivBum
    , contributor
    Comments (1807) | Send Message
     
    Only favorable for banks if the yield curve steepens, not when both short and long rated rise at the same rate.

     

    Banks can borrow at 0 at the discount window and lend out at 4%:
    Treasury Yield (%) Yield Change
    5-Year 1.56
    10-Year 2.68
    30-Year 3.65

     

    REITS borrow at higher short term rates in the market, not at the Fed's Discount Window.
    5 Jul 2013, 09:59 AM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    Just bought MTGE and considering AGNC. Still have mixed feelings about NLY.
    5 Jul 2013, 09:54 AM Reply Like
  • tomlos
    , contributor
    Comments (1146) | Send Message
     
    Any positive feelings toward the Crexus acquisition adding value to their residential portfolio?
    5 Jul 2013, 09:58 AM Reply Like
  • mrmedusa
    , contributor
    Comments (342) | Send Message
     
    Thinking about JMI. I like the $.23/share per month dividend, put the dividend into something else.
    5 Jul 2013, 10:08 AM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    Immediately sold Crexus, JMI, and NRZ. I would like to see some track record before buying and holding. Used proceeds to buying MLP refiners ALDW, CVRR and oil producer WHZ which is an Oil and Gas Trust. WHZ is a counter play to the refiners. Each reacts differently to the price of oil.
    9 Jul 2013, 09:25 AM Reply Like
  • trose178
    , contributor
    Comments (21) | Send Message
     
    Can't decide what to do with AGNC anymore. Been holding and want to keep holding until earnings, but there is a lot of time until then. Can't lose more than 20% on this before I get out. I was foolish enough to let it go this far.

     

    Anyone else struggling with whether or not to sell recently? At this point even the dividends don't help if we are continually dropping like this.
    5 Jul 2013, 10:08 AM Reply Like
  • thalloran
    , contributor
    Comment (1) | Send Message
     
    I got out of AGNC a couple weeks ago, but held on to NLY. Annaly seems to have better management and a game plan for the future. I hope. The crystal ball is a little fuzzy on this one.
    5 Jul 2013, 10:50 AM Reply Like
  • aebragg
    , contributor
    Comments (2) | Send Message
     
    yes, same here! These Mreits had all the markings of a good investment. But it's not working out that way. So, sell & forget it or hold on?

     

    I also think Northhills24 is right when she said:
    because the average investor does not UNDERSTAND this sector.!
    5 Jul 2013, 11:21 AM Reply Like
  • RWMostow
    , contributor
    Comments (1422) | Send Message
     
    Trose-

     

    I am struggling whether to buy AGNC and MTGE. I have a max position in NLY, as tempting as it is to get more, so I will sit tight.

     

    -rwm
    5 Jul 2013, 11:28 AM Reply Like
  • Regarded Solutions
    , contributor
    Comments (16666) | Send Message
     
    Id like to know if she can explain what her thoughts are.
    5 Jul 2013, 11:29 AM Reply Like
  • COBeeMan
    , contributor
    Comments (1358) | Send Message
     
    You haven't lost anything until you sell. If you bought in for the dividends, and you think it will ever recover (as I do), don't sell now.
    5 Jul 2013, 05:37 PM Reply Like
  • murray555
    , contributor
    Comments (321) | Send Message
     
    Trose...I am holding AGNC. I think the stock price will go up over the next year. Adn in the meantime I will collect the divvys. Even if AGNC cuts their divvy again I will still have a double digit yield.

     

    I have owned AGNC since 2009. I see no reason to sell low as long as they continue to pay the divvy. I have heard the doom and gloomers many times ove my life disparage a sector or stock and sometimes I have listened to them. When that happened I lost money.

     

    I see no reason to sell now. In fact, I just bought more AGNC, NLY, MTGE, and CYS. I have had double digit returns on my money since 2008 when I bought my first mreit.
    8 Jul 2013, 09:08 AM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    I gradually cut my holdings of AGNC from 12% to 4% starting last October with selling prices ranging from $35 to $31 (When in doubt-get out). Too much negative talk about earnings and dividends although they did surprise me with the $1.05. I thought it would be more like $.90. In the near term, I still believe they will be in the 15% dividend range. I think $21 is a good buy price with an anticipated dividend cut.
    9 Jul 2013, 09:33 AM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    I bought more MTGE last week @ $16.61. There has been some inside selling at AGNC. The earnings forecast for 2014 for AGNC looks pretty good however. Need to see if those forecasts hold up. My dividend target for 2014 is 14%. I will do what I need to do to hit that target.
    9 Jul 2013, 09:40 AM Reply Like
  • Dividends#1
    , contributor
    Comments (2763) | Send Message
     
    Pinkrabbit,

     

    Insider selling? Are you referring to the pocket change selling by Kuehl?

     

    We already addressed his selling in a previous comment.

     

    If you have something else of significance please let us know. Thanks.
    9 Jul 2013, 10:48 AM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    Sorry I missed the comments on the inside selling. I'm not privy to the reasons why Kuehl sold some "pocket change" shares. Perhaps to buy a boat. Regardless only the insiders have a real feel for what is going on inside their business. In the absence of personally having that information, I watch the behavior of the management on all my holdings as well as look at the opinions of others and a number ratios and other financial data. Insider selling always makes me uncomfortable.
    14 Jul 2013, 10:17 AM Reply Like
  • Ron Reed
    , contributor
    Comments (285) | Send Message
     
    I think that manipulation is a stretch, lemme' explain. My initial thought is, "gee you know how many folks would have to be involved just to get that to work". Then I think, "well crap look at the LIBOR scandal".

     

    So, could it be? Yup, sure could. Is it? Hard to tell in today's time. I just don't know.

     

    I do know that the whole MRIT sector is being hounded. I don't know if there is enough support from the outside interest to beat it down on an institutional level, I don't know if the FED is trying to soak up the sector in hopes of playing the same game and making money (or those connected to the FED really, not the FED itself, before someone mis-reads my intent). Time will tell.
    5 Jul 2013, 10:13 AM Reply Like
  • itscalledcommonsense
    , contributor
    Comments (650) | Send Message
     
    I wonder which one is going to go bust first?
    5 Jul 2013, 10:24 AM Reply Like
  • Dividends#1
    , contributor
    Comments (2763) | Send Message
     
    itscalledcommonsense,

     

    Keep wondering, it will not make you a dime! Wonder is not very helpful in the world of investing in the stock market.

     

    I wonder which one is going to go bust first?

     

    I wonder which one will double first?

     

    I wonder which stock will be the next AAPL?

     

    Not very helpful.

     

    Wonder is good in other areas of life.

     

    Just a little common sense.
    14 Jul 2013, 08:17 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8659) | Send Message
     
    The mREITS are hedged against rising rates. They've been preparing for this for four years.
    5 Jul 2013, 10:25 AM Reply Like
  • billcharlesdixon
    , contributor
    Comments (1740) | Send Message
     
    I think (hope) that this is an opportunity. I like AGNC, NLY, and NCT.
    5 Jul 2013, 10:29 AM Reply Like
  • Javimanic
    , contributor
    Comments (239) | Send Message
     
    NCT actually UP at this time...wow!most of my reits are down between 5% an 9%. this has been quite a slide...testing my faith daily. I was officially down 25% overall thanks to reits today---but I am holding long term 5 to 15 years is my plan.
    5 Jul 2013, 03:31 PM Reply Like
  • Watercayman
    , contributor
    Comments (8) | Send Message
     
    I sold my last mREITs this morning. Sadly, my timing was perfect... to only lose money, as I came in to this game in April.

     

    While I agree that there are many factors involved in the pricing, the current perception on just about any news is pressuring the prices only downward. I just don't see any catalyst to change this. I'd love to 'buy the dip', but it seems that the next dip which comes from just about any news, is going to take my buy-in price and hammer it.

     

    At least I got out first thing this morning before they really cratered. I love the idea here, but my stomach can't take this anymore.
    5 Jul 2013, 10:29 AM Reply Like
  • jbbson
    , contributor
    Comments (737) | Send Message
     
    I invested dividends in AMTG at 16.6 last week. It is now almost 2 pts lower. These past few months is the longest ride down I've ever seen. It's not over until the 10 yr hits 3.5%. Right now a point doesn't mean a thing. I expect AMTG to bottom around 11. It's under 15 today.
    5 Jul 2013, 10:37 AM Reply Like
  • teeth26
    , contributor
    Comments (64) | Send Message
     
    These prices on AGNC, MTGE are a gift with those yields alone. Interest rates are still a gift to these companies. They will still make a ton of money in lending just not as much when the 10yr was less than 2%, but 2.5% for the 10 yr is still very cheap, historically the 10yr is 3.5
    to 4%. Panic selling, Buy on the cheap!
    5 Jul 2013, 10:49 AM Reply Like
  • wiseone123
    , contributor
    Comments (191) | Send Message
     
    Spreads are widening not tightening, but the effect of this will not show up in the form of a possible dividend increase until the January 2014 payment. There is always a time lag. NLY investors need to be patient, read and analyze all SEC filings, and carefully listen to the quarterly conference calls. This requires research and understanding of how MReits operate, not trading on emotions. BVs can be expected to fluctuate rapidly, but accept this as part of investing in this business. Note that in 2011, NLY sold $5.4 billion in new equity to improve stockholders equity. Unfortunately much of the proceeds were invested in declining yielding MBS, while short term borrowing costs were only marginally declining. With the acquisition of CreXus, management now has the option to increase capital into commercial real estate loans rather than increasing MBS purchases if spreads are tightening. This is very encouraging long term news.
    5 Jul 2013, 10:59 AM Reply Like
  • Regarded Solutions
    , contributor
    Comments (16666) | Send Message
     
    Unbelievable buying opp IMO:

     

    http://seekingalpha.co...
    5 Jul 2013, 11:21 AM Reply Like
  • RWMostow
    , contributor
    Comments (1422) | Send Message
     
    RS-

     

    Your suggestions, pls.

     

    -rwm
    5 Jul 2013, 11:32 AM Reply Like
  • Regarded Solutions
    , contributor
    Comments (16666) | Send Message
     
    Hi RW, I am not selling and I am planning on adding today. I MIGHT sell puts for an even more ridiculous entry price. Time will tell if I am right about this.
    5 Jul 2013, 11:35 AM Reply Like
  • RWMostow
    , contributor
    Comments (1422) | Send Message
     
    Hi RS-

     

    You always have my best wishes for good luck and thank you.

     

    PS: In my previous comment about my max position in NLY, I am limiting it to no more than 2% of my invested portfolio. That is my standard max for mREITs and eREITs. I'd like to take a flyer on more, but my Dad would kick me from what ever cloud he's perched on today. -;)

     

    -rwm
    5 Jul 2013, 03:34 PM Reply Like
  • jjjamblaster
    , contributor
    Comments (3) | Send Message
     
    NLY has been through this before and has always worked through it. I own NLY and was going to sell but decided to hold on , I am a long term investor and I'm going to hold on and forget about it..
    5 Jul 2013, 11:25 AM Reply Like
  • trose178
    , contributor
    Comments (21) | Send Message
     
    I am in the same boat with AGNC. Down a lot, but see the potential in the long run. Just not sure it's worth it right now. Down almost 20% and can't pull the sell trigger.
    5 Jul 2013, 11:30 AM Reply Like
  • COBeeMan
    , contributor
    Comments (1358) | Send Message
     
    Make sure you're DRIPing during these low prices!
    5 Jul 2013, 05:43 PM Reply Like
  • Javimanic
    , contributor
    Comments (239) | Send Message
     
    like TV's Ronco CEO Ron Popeil says "set it and forget it". haha
    6 Jul 2013, 10:48 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3488) | Send Message
     
    I have been a bit puzzled by what appears to be panic selling. While I understand that many retail investors do not really understand how mREITs work, NLY is now at a share price that has eclipsed the 2008 financial crisis lows. The shares are close to the 2005 lows, when the Fed was tightening short rates while long (mortgage) rates would not come down. Today's situation certainly does not appear as dire as either 2005 or 2008, both of which Annaly management navigated quite well.

     

    We shall see.

     

    Long NLY.
    5 Jul 2013, 11:31 AM Reply Like
  • GaltMachine
    , contributor
    Comments (1144) | Send Message
     
    Ray,

     

    That is certainly a very interesting observation.

     

    In retrospect it would seem that when rates bottomed on the 10 year it was time to hedge. I always "know" what to do I just never seem to do it :)

     

    TBT would have been a great way to protect against the risk.
    5 Jul 2013, 11:46 AM Reply Like
  • jpmist
    , contributor
    Comments (329) | Send Message
     
    I think one aspect to figuring out why the reaction to tapering is so much more violent than the crisis in 2008 is the growth of the mREIT sector. The second largest mREIT, AGNC didn't even exist back then and since 08 Annaly has doubled its holdings.

     

    I just checked and HTS, AGNC and NLY all have close to 50% of their shares held by institutional investors. I consider this fast money whose bonuses are tied to quarterly performance and as such are going to be first out the door and in large quantities.

     

    I hate to use the word bubble, but I think I see one in mREITs. Instituions were buying up a great deal of the growth in mREIT assets over the last 6 years. They're bailing out of MBS and anything connected to them. So, lot of sellers, no buyers, the price plummets.

     

    The interesting thing is that while the supply/demand environment for mREIT shares is the worst it's been in years, the actual fundamentals of the mREIT business model is still as valid as it was 6 months ago. And while there's every reason for the fast money to sell now to preserve their bonuses, there's no reason at all for longer term retail investors to sell. Once the rate volitility settles out dividends are going to hold up and even improve with the wider spread.
    5 Jul 2013, 12:54 PM Reply Like
  • speculative
    , contributor
    Comments (646) | Send Message
     
    WOW...the big question is, who is running for the hills in fear and who is taking advantage of this manipulated price drop?
    5 Jul 2013, 11:52 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3488) | Send Message
     
    I am not convinced anyone is manipulating the market. Perhaps many retail investors are selling at panic lows.

     

    If NLY didn't have leverage and hedges, I would think differently. What would seem to be happening now is NIMs should widen, and BV should drop. However, that assumes no leverage and hedging.

     

    Check out the most recent NLY 10-Q and read Section 3, page 43 about Interest Rate Risk. This does not appear to jibe with the market action.

     

    We shall find out more at the end of the month.
    5 Jul 2013, 12:03 PM Reply Like
  • speculative
    , contributor
    Comments (646) | Send Message
     
    Ray...IMO, I don't believe there are enough retail investors that have panicked that would move the needle the way it has today and the preceding descents. I strongly believe that the institutional investors with their huge buy/sell power move the needle up/down and the retail investors follow; in panic sell in this case. Now we are left to wonder when will the institutional investors see fit to jump back in causing the ascent. Institutional investors need to look good for their clients and earn them huge returns both income and growth and this sectors is clearly offering both with dividends in the upper double digits and growth in the short and long term while they get a piece of that pie from all ends.
    5 Jul 2013, 01:02 PM Reply Like
  • Tda
    , contributor
    Comments (96) | Send Message
     
    I've avoided mREITs that deal with Fanny, Freddy, and Ginny. I've preferred BDCs, such as PSEC, which, like REITs, must pass through at least 90 percent of their profit to shareholders.
    A May 17th Reuters article says, "BDCs are in a sweet spot now as the economy continues to rebound. They can provide financing to a wide range of companies typically eschewed by mainstream banks. Consider them sub-prime lenders to small- to mid-size companies."
    So yes, technically there is higher risk, but the yields are higher, too, and good BDCs can be purchased at a bargain today.
    5 Jul 2013, 12:10 PM Reply Like
  • siberiavol
    , contributor
    Comments (9) | Send Message
     
    The Merrill Lynch analyst said back in mid June that he thought NLY book value would be around $12.00 if 10 year TBOND went to 3%. Of course the portfolio could have changed since then.

     

    The group seems extremely cheap as most are selling at big discounts to BV. I am still averaging down assuming rates are not going straight to 3.5-4%. My biggest concern is an event risk such as a margin call because of the rapidity of the move. All the analysts I have read think this is highly unlikely but been doing this for a living since the seventies and know markets can overshoot .

     

    For me this has been the hundred year flood. I am not surprised rates have moved up. I just didn't see it happening this fast and the stocks going to such deep discounts to book value so quickly.
    5 Jul 2013, 12:25 PM Reply Like
  • The Long Tail of Finance
    , contributor
    Comments (772) | Send Message
     
    The low for NLY back during 2008 crisis time was $9.94. We're at ~$11.32 now. BTW, credit risk as per Merton model gives it a high yield credit risk with 1yr PDF of 1.373% (BB rating). So...Buy, Sell, or Hold?
    5 Jul 2013, 12:54 PM Reply Like
  • macronaut
    , contributor
    Comments (40) | Send Message
     
    I woke up this morning with that Kenny Rogers song in my head..".know when to hold 'em, know when to fold 'em, know when to walk away...". Might be time for some lateral moves, like into MORL for some high stakes gambling to offset the portfolio book loss in the mReit bloodbath (round 2). MORL showing a 63% yeild and is probably at the bottom, fill yer hats!
    5 Jul 2013, 01:05 PM Reply Like
  • Brian Sanders
    , contributor
    Comments (813) | Send Message
     
    those lows barely lasted. The last sustained low around 11.30s was back in 05-06 period. I wonder if it could drop another 1.35 to 10.00, which we saw back in 2000...a 13 year low would be pretty crazy.
    5 Jul 2013, 01:08 PM Reply Like
  • jpmist
    , contributor
    Comments (329) | Send Message
     
    No, not 63%! Yikes, that's scarey wrong. Last 3 monthly dividends are $1.35. Project that a year, I get 28% yield at today share price. Still not too shabby...
    5 Jul 2013, 03:15 PM Reply Like
  • macronaut
    , contributor
    Comments (40) | Send Message
     
    jpmist;
    Scary is right! But tempting nonetheless. I got that number from the SA quote today for MORL based on their current declared div, but this needs to be confirmed via other sources (which as of yet I have not been able to do). This would be an interesting play at this stage of the mReit "readjustment" given the 2x div yeild....if one can figure out the arcane language of the MORL etf method of calculating share value and dividend.
    5 Jul 2013, 05:41 PM Reply Like
  • rocketman3
    , contributor
    Comments (31) | Send Message
     
    MORL's monthly dividend is $1.105. Multiply that by 12 gives an annual dividend of %13.26. The dividend yield is calculated by the annual dividend ($13.26) divided by the share price ($19.69) multiplied by 100.
    Thus MORT's yield is 67.34 per cent.
    6 Jul 2013, 02:09 AM Reply Like
  • mrmedusa
    , contributor
    Comments (342) | Send Message
     
    If you look at the MORL page on the website http://bit.ly/12LhLGT, you'll see that the dividend is different every month, and follows the pattern of the underlying holdings. July is a big month for mREITs because most of them pay then. Next month's dividend will be a lot smaller because MORL only pays out what they get in. Septembers's will be small also, and The big one will come again in October IF no more dividends are cut.
    6 Jul 2013, 05:47 AM Reply Like
  • Ray Merola
    , contributor
    Comments (3488) | Send Message
     
    Indeed, I was looking at the monthly chart. The 2008 lows were below $10 but they didn't last even a month. They bounced around down there during the teeth of the crisis, but ended up above $11 or so. This looks a little like the REIT crash of the late 1990s. Patience turned out pretty well in that time.
    5 Jul 2013, 01:26 PM Reply Like
  • itscalledcommonsense
    , contributor
    Comments (650) | Send Message
     
    Uh, no it didn't. mREIT investors in the late 90s were crushed and have not got back to even to this day.
    5 Jul 2013, 02:22 PM Reply Like
  • Ray Merola
    , contributor
    Comments (3488) | Send Message
     
    Not sure what investment / data points you have utilized. In 1998, the RE funds were popular. This was one of the largest, and the one to which I referred:

     

    http://bit.ly/127BJad

     

    The fund fell 22.6 percent in 1998. It recovered and continued upwards until 2008. Even the financial crisis did not bring TR below the 1998 low.
    5 Jul 2013, 03:40 PM Reply Like
  • Schindig71
    , contributor
    Comments (2) | Send Message
     
    I love RIETs for the long term. Assuming there are no catastrophic collapses in the long term, not timing the market perfectly will be offset by all the dividends you are reaping. Of course most RIETs have already passed the ex-dividend date, so I say look at what the Fed is doing and buy before the next ex-dividend date. I am personally long on NYMT which is currently paying out at over 15%.
    5 Jul 2013, 02:21 PM Reply Like
  • pagreen1966
    , contributor
    Comments (600) | Send Message
     
    Just bought up $5K of (AGNC).

     

    Can't resist a bargain!
    5 Jul 2013, 02:21 PM Reply Like
  • Javimanic
    , contributor
    Comments (239) | Send Message
     
    pagreen, feelings on MITT and WMC??
    5 Jul 2013, 03:39 PM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    Capitulation in mreits, lets hope, so we can go shopping
    5 Jul 2013, 03:31 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    mREITs have similar sentiment and price action to gold and gold miners as rates surge. Expect 10yr to reach 3% interim.
    5 Jul 2013, 05:08 PM Reply Like
  • anomaly1
    , contributor
    Comments (811) | Send Message
     
    NOBODY know what book value is until it is disclosed.

     

    Anybody using historical lows is UNINFORMED. The portfolio holdings have increased and changed since 2011.

     

    REITS have this risk.
    5 Jul 2013, 05:12 PM Reply Like
  • xxavatarxx
    , contributor
    Comments (2606) | Send Message
     
    Concur with anomaly1.
    It's hard to compare the historic lows unless you can compare a time when a single entity was buying up 90% of the MBS market and driving the MBS prices to unrealistic highs.
    5 Jul 2013, 06:24 PM Reply Like
  • Robert Duval
    , contributor
    Comments (4398) | Send Message
     
    I have seen enough panic here. I buy panic. Long nly @ 11.40. Also on another note, long Line via short puts @ 22 avg. sheer panic.
    5 Jul 2013, 05:56 PM Reply Like
  • jmacjohn
    , contributor
    Comments (37) | Send Message
     
    AGNC up 2+ yesterday, and already down .40 this morning. One "sale" that took it down shortly after open of about 3/4 million shares. Pure and simple manipulation! Yesterday probably an opportunity to cover shorts. Now they want it down to a level where they can cover some more. Anyone know, or can find out, who the big money boys are that are doing this? Hedge funds?
    12 Jul 2013, 10:09 AM Reply Like
  • speculative
    , contributor
    Comments (646) | Send Message
     
    JMAC, whoever did, is helping to keep AGNC at a great accumulation price. Having been at nearly $37, the discount is $14.75; 67% discounted rate with 19% dividend. I was hoping to get in under $21 but I am tapped out having picked up a great deal more of my others in the sector and reducing my cost significantly; hence increasing my dividend payout. I can't say when but AGNC will revisit $28 in the near future and if it takes longer, who cares. They pay an awesome dividend for your patience.
    12 Jul 2013, 11:15 AM Reply Like
  • Javimanic
    , contributor
    Comments (239) | Send Message
     
    LET ME START; hi, my name is Jav and I own too many Mreit stocks- at least my family, friends and strangers tell me so...me I dont think I have a problem.................. I do feel this thread/news item is a great place to post non-technical thoughts as well as tech talk regarding mreits in general. Profit taking is almost a necessity considering that if you don't sell after 9% gain...the rest surely will..and the herd takes it back down some. I did not sell...not trusting enough of my day trader skillset to be buying and selling every time something moves around %3 or more. But a whole lot of cash sure gets stripped out like copper wires in a abandoned house when people day trade these.
    12 Jul 2013, 11:28 AM Reply Like
  • speculative
    , contributor
    Comments (646) | Send Message
     
    Dude, just set it and forget it.
    12 Jul 2013, 01:24 PM Reply Like
  • Javimanic
    , contributor
    Comments (239) | Send Message
     
    RONCO method...I agree as long as none of my picks file anything with the word "chapter" in it in the next 10/15 years.
    12 Jul 2013, 01:57 PM Reply Like
  • speculative
    , contributor
    Comments (646) | Send Message
     
    I believe we'll be fine. Now I'm thinking about rotisserie chicken.

     

    Enjoy your weekend and we'll do it all over again on Monday.
    12 Jul 2013, 04:01 PM Reply Like
  • wiseone123
    , contributor
    Comments (191) | Send Message
     
    Dear PinkRabbit,

     

    You state that "management owns stock as well and will do all that they can to keep good dividends flowing". Please note that all senior management personnel are now longer employees of NLY, having recently resigned to become Managers and/ or Members of Annaly Management LLC, where they are compensated in the amount of 1.05% of Stockholders' Equity. Know any Fortune 500 companies where management compensation is exclusively tied to S.E.? In reviewing NLY's SEC filings since 2009, S.E. has increased substantially in part due to Unrealized Gains in Available For Sale Securities (increases in BVs in both 2012 and 2011) and through a $5.4 BILLION new stock issuance in 2011. Increasing S.E. though any means possible appears to be their prime directive as increasing dividends reduce S.E. Going forward, it will be interesting to see how this plays out.
    13 Jul 2013, 12:02 PM Reply Like
  • Pinkrabbit
    , contributor
    Comments (190) | Send Message
     
    Thank you for the compensation info. I did not know that. Still and all they are also equity holders themselves. At least I hope they. However you cannot increase S.E. unless there are buyers and buyers want solid dividends.

     

    As long as new stock issues are used to increase book value rather than pay dividends, I'm a happy camper.
    14 Jul 2013, 10:29 AM Reply Like
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