An interesting exchange took place between BofA analyst Ken Bruce and Annaly (NLY) chief Wellington Denahan on today's earnings call (transcript) in which Bruce politely wonders if management - having sold low last year - isn't setting itself up to buy high this year. "I guess I am a little shocked," says Bruce. "It just feels like the market is being seduced back into thinking everything is maybe not as strong as we thought it was just a couple of months back."
To review: Annaly showed particular caution late in 2013, taking down leverage (5:1 at year's end vs. 6.5:1 a year earlier) and boosting hedges, and now - with bond prices having marched higher in the year's opening weeks - management is talking about being aggressive again, but not planning on increasing hedges as assets are added.
"[That] we're going to the load the boat - that's absolutely not what I'm trying to get across," responds Denahan. "Opportunistic" is the key word, she says, expecting to take advantage of the volatility associated with the Fed exit from the MBS market. "I wouldn’t consider it an about-face, I would just let people know that we will be opportunistic with the buying power that we have."
Bruce: "I appreciate your comments, your candor."
Denahan: "I appreciate your candor as well."
Earlier coverage of Annaly earnings