In sharp contrast to the views at American Capital (AGNC +0.5%), Annaly (NLY +3.2%) CEO Wellington Denehan-Norris - speaking on the earnings call - says it makes more sense to lever up and directly buy mortgage-related assets than repurchasing shares or buying the stock of other mREITs.
Why rely on the management of other companies, says Norris, reminding of the 1998-99 period - another time when mREITs traded well below book value. After the collapse in Russia, it was found one "darling" in the mortgage REIT industry (no longer in business today) owned the debt of that country.
Satisfied with hedges currently in place, Annaly doesn't plan to add any more as it buys more MBS. After taking down leverage to 5:1 over the past year, the company is looking to bring it back towards 7:1.
On the growing commercial side of the business, Annaly is in talks with an originator of commercial mortgages for direct access to its assets.
Noting the recent sluggish economic stats, particularly as they relate to housing, management doesn't feel like the Fed will soon be in any position to tighten policy.
Previous earnings coverage