Annaly selling low and buying high? Management discusses

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

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Comments (3)
  • Capt Jack Daniels
    , contributor
    Comments (1466) | Send Message
    The conference call was short & sweet.
    26 Feb 2014, 10:56 PM Reply Like
  • ChuckJ
    , contributor
    Comments (80) | Send Message
    "I appreciate your candor" usually is translated as F-off by the big boys. We'll see what happens to $NLY and others after last year's management actions.
    27 Feb 2014, 07:29 AM Reply Like
  • exmrfvc
    , contributor
    Comments (47) | Send Message
    I have re-read the transcript a 2nd time and the above quotes nip and tuck the exchange between the two. My take on it is that $NLY has delevered more than most and that leaves them with investment oppurtunity when they see one. It doesn't mean they are backing up the truck with the 10 year at sub 3%. Wellington specifically mentions that they watch the 2yr/10yr spread as previous posters have mentioned. See the quotes below for more of the exchange.


    Kenneth Bruce - Bank of America Merrill Lynch
    Right now, I mean you have been running a much more conservative position for a while and that's certainly you think one of the hallmarks of your strategy and that's why I guess I am reacting little bit to just the about-face and trying to understand what might be driving that?


    Wellington Denahan - Chairman and CEO
    I wouldn’t consider it about face, I would just let people know that we will be opportunistic with the buying power that we have.


    Kenneth Bruce - Bank of America Merrill Lynch
    That’s fair. I mean we want you to do that.
    27 Feb 2014, 10:04 AM Reply Like
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