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Looking for a sector in the green today? Nearly all of the largest mREITs (over $1B market cap)...

Looking for a sector in the green today? Nearly all of the largest mREITs (over $1B market cap) are up. The yield curve isn't super-steep and government mortgage refinance efforts may pose prepayment risk to holders of MBS, but the date of a potential Fed rate hike keeps getting pushed off - the carry trade lives.
Comments (21)
  • Regarded Solutions
    , contributor
    Comments (16692) | Send Message
     
    http://seekingalpha.co...

     

    Well I certainly believe so!
    6 Jul 2012, 02:52 PM Reply Like
  • MexCom
    , contributor
    Comments (3052) | Send Message
     
    Rumor has it that the Fed is going to kick in QE3 and it will include buying the GSE securities. Portfolio values are about to increase sharply. Buying panic to start soon.
    6 Jul 2012, 04:23 PM Reply Like
  • Regarded Solutions
    , contributor
    Comments (16692) | Send Message
     
    Is that a rumor???? I thought we have all just been waiting for it.
    6 Jul 2012, 04:28 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2610) | Send Message
     
    What are the bets now? 0% interest rates until 2015, 2016?
    6 Jul 2012, 05:11 PM Reply Like
  • Regarded Solutions
    , contributor
    Comments (16692) | Send Message
     
    Rumor has it: 2050!!!!
    6 Jul 2012, 05:43 PM Reply Like
  • Jack Rice
    , contributor
    Comments (871) | Send Message
     
    2050!!! lol And I remember the headlines before the bubble burst: Dow to hit 36,000!

     

    Seriously, though, one line I've seen -- that we're Japan, so zero effective interest for the foreseeable future -- isn't so easily shrugged off.
    6 Jul 2012, 08:02 PM Reply Like
  • gcmagone
    , contributor
    Comments (915) | Send Message
     
    These and some business development companies like PSEC are about the only place to be in our current economy. Those seeking yield will be hard put to find better.
    6 Jul 2012, 06:57 PM Reply Like
  • edeone
    , contributor
    Comments (2) | Send Message
     
    What about the secondary issue?
    7 Jul 2012, 09:22 AM Reply Like
  • Jack Rice
    , contributor
    Comments (871) | Send Message
     
    Do you have a particular secondary in mind?
    7 Jul 2012, 04:41 PM Reply Like
  • edeone
    , contributor
    Comments (2) | Send Message
     
    I thought CMO was going to do a secondary issue shortly after they paid their last dividend.
    9 Jul 2012, 09:11 AM Reply Like
  • Jhalgren
    , contributor
    Comments (112) | Send Message
     
    As a journalist instead of marketeer, I'm curious to know what is meant by "secondary issue" as it relates to MBSs?
    7 Jul 2012, 05:23 PM Reply Like
  • Jack Rice
    , contributor
    Comments (871) | Send Message
     
    Secondary issues have no direct relationship to MBSs. Secondary issues are the issuance of stock shares to add to already outstanding shares. Because mREITs, like all REITs, must distribute 90% of their earnings, they depend on share issues to finance the purchase of new MBSs to replenish and grow their asset portfolios. Normally, secondary issues act negatively on stock price, because of their dilutive effect on equity. But since mREITs use almost all money raised by the secondary to increase assets, the effect on equity is usually seen as accretive rather than dilutive. And thus the share price down-tick, following an mREIT secondary issue, tends to be short-lived and is regarded by investors as a buying opportunity.
    7 Jul 2012, 05:57 PM Reply Like
  • Jhalgren
    , contributor
    Comments (112) | Send Message
     
    Thanks for the refreshing explanation. Excellent clarity!
    8 Jul 2012, 12:16 PM Reply Like
  • Pessimistic Optimist
    , contributor
    Comments (179) | Send Message
     
    So let me correlate what I can comprehend on this stage. First, mortgage interest stays down and we merry holders of REITs continue to capture the dividends. Second, the Gov't decides to start purchasing MBSs and in that process the growth of said REITs increases. Third, but maybe not lastly, secondarys are put into play and i get the chance to purchase more right before they continue to go higher as many more will likely start an entry point .

     

    I would like to throw a wrench into my own sweet as honey dividend drenched gears. Possibly at years end the taxes on dividends as we know them will increase to over 40%????? From the 15% which goes out the window to this gut wrenching ( no pun) hideous amount?/ Can somebody with more savvy shed a little light on this? How far off am I? Please tell me I am wrong.

     

    long AGNC, ARR, TWO, HTS and NLY
    7 Jul 2012, 06:41 PM Reply Like
  • Jack Rice
    , contributor
    Comments (871) | Send Message
     
    mREIT distributions do not receive the 15% dividend tax preference but are taxed as ordinary income. If the highest tax bracket becomes 40%, then that's how the mREIT distributions will be taxed for those in that bracket.
    7 Jul 2012, 08:59 PM Reply Like
  • Pessimistic Optimist
    , contributor
    Comments (179) | Send Message
     
    OK JR
    Thanks for info. I didn't mention I have these set up in a traditional IRA... for some reason I remember hearing or reading that an IRA is taxed at 15%.. I have read so much on REITs over this last month, it really wouldn't surprise me if i got confused somewhere along the way. Thanks for the reply
    8 Jul 2012, 02:04 AM Reply Like
  • Jack Rice
    , contributor
    Comments (871) | Send Message
     
    Hey, PO, the rules change almost every year, so I let an accountant do the taxes. It's money well-spent.
    8 Jul 2012, 12:35 PM Reply Like
  • SaltyDog62
    , contributor
    Comments (738) | Send Message
     
    Dividend taxes to go up to 40%??? Oh well, my only taxable income is my Military pension. No tax on my VA disability, thank goodness...
    9 Jul 2012, 06:36 AM Reply Like
  • Jack Rice
    , contributor
    Comments (871) | Send Message
     
    Actually, 43.4%R with the new healthcare component. But this is a moot issue with mREITs, since their distributions have always been taxed as ordinary income.

     

    There's a good article about this here: http://seekingalpha.co...
    9 Jul 2012, 01:16 PM Reply Like
  • Pessimistic Optimist
    , contributor
    Comments (179) | Send Message
     
    Thanks for advice JR
    I do let the accountant take care of business. My thought was to get ahead of this, then make the decision on whether I wanted to loose that much on the endeavor. I think you just cleared something up that I must have read. It was the healthcare component.. and you cleared that other end up also.. ordinary tax rates..
    thanks again
    9 Jul 2012, 01:31 PM Reply Like
  • gettingbeta
    , contributor
    Comments (53) | Send Message
     
    AGNC calls up 450% sept 2012 thanks remuarry md
    10 Jul 2012, 02:52 AM Reply Like
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