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Mortgage REITs continue to slide - NLY -1%, AGNC -2%, HTS -2.3%, to name 3 - the sector...

Mortgage REITs continue to slide - NLY -1%, AGNC -2%, HTS -2.3%, to name 3 - the sector revaluing itself for what must surely be significant dividend cuts. The Fed's MBS purchases - likely to help book values and dividend maintenance in the short run - are vaporizing net interest margins. Absent a big jump in leverage, returns must fall.
Comments (58)
  • I wrote 2 very significant articles on each of these stocks prior to their free fall. Please take a look at those articles if you are so inclined. The comments that have been made within each article are amazingly wonderful and the wealth of knowledge that can be gleaned is priceless.


    10 Oct 2012, 10:08 AM Reply Like
  • Freefall is right this is a complete disaster! AGNC hasnt seen prices like this since... August.
    10 Oct 2012, 10:20 AM Reply Like
  • Don't hurt yourself patting yourself on the back! <kidding>


    The signs of spread compression were there for a while, but the Fed QE infinity finally woke people up.


    Still, dividends could may well stay stable for several quarter as the mREITs increase leverage.
    10 Oct 2012, 10:45 AM Reply Like
  • I have long hairy arms and can pat my back all over! LOL.....BTW I am not happy aout this!
    10 Oct 2012, 10:50 AM Reply Like
  • Which mREITs do you think will fall the least?
    10 Oct 2012, 11:06 AM Reply Like
  • "VERY SIGNIFICANT".......nobody ever accused you of modesty, eh....


    I'm sure that the plethora of other SA articles warning of the dangers - plus some downgrades and divi reductions had nothing to do with the freefall. It was clearly your articles alone that caused it. ....and you certainly haven't missed the opportunity to continue pushing them like a friggin' street vendor.
    10 Oct 2012, 11:14 AM Reply Like
  • Boog, you are priceless. Gotta love someone who takes every opportunity to toss a rock without putting themselves out there. The facts speak for themselves. You are a loser and I was correct.
    10 Oct 2012, 11:22 AM Reply Like
  • I think AGNC will fall more than NLY.
    10 Oct 2012, 11:23 AM Reply Like
  • RS,
    I read your articles and subsequently sold my AGNC shares at 34.50. (bought at 29) It wasn't that I was able to assess the logic of your arguments so much as it was the respect other commenters had for your judgment. Plus I always suspected that 15 to 20% dividends couldn't last forever.


    It appears to be in freefall today (relative to its usual price stability), I think the larger holders were trying to get out gradually but may be accelerating their exit today.


    A sincere thank you.


    Paul TD.
    10 Oct 2012, 11:48 AM Reply Like
  • Boog,
    you're right.
    This writers are mostly greedy and bias with their own agenda.
    Reits have been here for years & years,
    always with Divi that beats other stocks, rain or shine.


    Long: ARR, NYMT. DCIX.
    10 Oct 2012, 12:00 PM Reply Like
  • Hi Paul. Good job I think you did the right thing.
    10 Oct 2012, 12:16 PM Reply Like
  • what agenda would that be genius?
    10 Oct 2012, 12:17 PM Reply Like
  • Thank you - thank you - thank you!!!
    I had a substantial investment in NLY, AGNC, CMO, CYS and did well the last few years; but did take your advice and bailed out yesterday based upon your evalutaion of the REIT market and the Fed.
    Thanks again.
    10 Oct 2012, 12:51 PM Reply Like
  • My sentiments exacly. I sold on Monday @34.60. I don't usually trade that much but it just seemed the right time to take profits.


    Now I'm wondering what a good re-entry price might be?
    10 Oct 2012, 01:00 PM Reply Like
  • "...taken every opportunity to throw rocks"....


    Had I been doing that, I'd have nearly as many comments as you do. I just got tired of throwing at such an easy, dumb target.
    10 Oct 2012, 01:29 PM Reply Like
  • There is a lot of panic on here over a stock that's down 6% in 3 days, but still up 16% on the year, not including dividends. I think a lot of people dont fully understand how mREITs work, and are searching too hard for an explanation into the decline over the last 3 days. If this post, or RS's articles, were the first you've heard of interest spreads or repo rates or MBS or book value or leverage, maybe you should do a good bit more reading before putting money to work.


    Let the weak hands shake out, read the conference call at the end of the month, and go from there.
    10 Oct 2012, 01:51 PM Reply Like
  • ... And you've learned to use a keyboard, too! Proofreading / spell check may come in the future?
    10 Oct 2012, 03:08 PM Reply Like
  • RS- Do you have a read on whether IVR will hold in there?
    11 Oct 2012, 08:28 AM Reply Like
  • ok so what changed with regards to AGNC since your last article?
    10 Oct 2012, 10:18 AM Reply Like
  • facts
    10 Oct 2012, 10:27 AM Reply Like
  • RS,


    you have a tough crowd here. in my experience most people have little understanding of mortgages. trying explain the effects of the fed buying agency paper and how that impacts mREITs is a tall order. I give you credit for the effort.
    10 Oct 2012, 04:09 PM Reply Like
  • Agency MReits owns assets the govt is willing to pay up for. Better yet, they own those assets on a highly levered basis. Book values are soaring.


    So it comes down to whether your not you trust your management team. When MBS prices are peaking, spreads are near zero and dividends are near zero but BVPS is 50-100% higher than it is today, do you trust your management team to liquidate at the top? That's the key question today.
    10 Oct 2012, 10:23 AM Reply Like
  • MFA is ex-dividend today. Pays a 21 or 22 cent dividend, if memory serves, and is down only 12 cents when I looked. In my mind, that isn't a bad morning for an mREIT.
    10 Oct 2012, 10:23 AM Reply Like
  • Hmmm Interesting : Very interesting
    10 Oct 2012, 10:30 AM Reply Like
  • One way to look at the mREITs in your portfolio is whether you view them as an allocation to your fixed income or are you looking for capital gains, more of an equity allocation. [Of course, both is better.] I viewed the mREITs as part of my fixed income and am primarily concerned with the yield. Any capital gain is nice, but I am unlikely to sell to capture that gain. A look at historical prices led me to fully expect a decline in yield. However, my judgment (hope?) was that compared to alternatives, even a 5-6% yield was not bad; and, if I held on and did not sell the shares, the capital loss would be only a paper loss, never realized. This is what I did, holding NLY long-term, and it has worked out well. I realize other owners of mREITs (e.g., hedge funds) are going to try to capture the capital gain, so there will be downward pressure on the share price. I will live with it, and continue to take the (reduced) dividend.


    I have a separate, and significant, allocation to cash which is available for opportunistic purchase of equities. I am willing to "time" equity purchases.
    10 Oct 2012, 10:43 AM Reply Like
  • I can add, I have been the advocate of NOT selling into this until interest rates at the fed rise, and that means the prime rate and the rates people pay for their mortgages. THIS has not happened, and what is the reason we buy these REITs for? For dividends. If the dividends and the stock price, equal 10% or more gain, then I hold,
    if the price goes below that threshold, then I sell, but in retirement 5 - 10% if great for your savings.


    I risk 10% on any investment, and when its gain, or dividends totally fall below 10%, I am out, until then, unless the reasons for getting in are changing, I hold. I go by the idea also, would I buy this stock now?" Sure I hate to give up gains, but it is like mountain climbing, sometimes you have to go back to find a better route to the top.


    NOTICE also, that the general market itself is weakening, now isn't a little convenient and coincidental that the REITs AND the market fall together. How much effect are the reasons stated in this article rally hurting the REITs or is it just weak market I spoke of. IF it is the weak market approaching, then I am selling everything!


    NOW< you also have to look at the allocation of your total net worth. IN my case, I did not allocate much to REITs yet, so my actual capital loss will be small. AS I just retired, I was going to add more in to REITs until rates began to rise, and now that the REITs are correcting, it is nasty to see the red on the sheets the last few days, but the dividend cuts still keep the pay window above 10%.


    I will give you an example: My NLY is down, [since I bought it] 6.25%, I have received over 12% in dividends since my purchase date, so I am still ahead about 5.75%, and with being in a risky deal, up over 5% [as I said] ain't bad brother.


    I have checked my other 'deals', [over the years] and REITs are constantly paying me more net than any other investment save for the precious metals. The PM's are the best.


    I am sure one can glean one stock or trade out of their history to beat what I am showing you here easily, but I am saying my "NET WORTH has been enhanced with REITs. Had I had all my money in them, I would be worth more today, than I am now. Had I stayed out of REITs, I would be worth much less. especially had I not exited all investments in 2007 as I did. Yes, I missed the big rise in the 'recovery', but I did not need to "break even" like most investors have needed to do, and still have not done.


    You can skew the numbers all you like. Lets compare % of net worth gain or loss since the year (_______) and see whose method is working.


    If I could choose the date, I would pick the date I quit listening to brokers and gurus and newsletters and began doing my own investing.


    I don't have the knowledge nor power to influence people like these big deal newsmen, letter writers and well known gurus.


    You listen to Elliot Wave, Weiss, Wealth InNstitute, Vector Vest, Vantage point etc, etc, and so on, soon they will have your money and you won't.....


    Monday, NLY was down .8%, (nearly a non event, when looking for dividends) Remember, I said I don't mind riding on a teeter totter, although the ride up is more fun than the ride down, but to enjoy the ups, you need to suffer the downs.


    My whole point is, the dratted market is now approaching spooked. So all have to exit. Well, I guess I will decide today or tomorrow, then go to the race at Charlotte for the wxend now that I am retired.


    Luck to all
    Capt. Brian
    The Lost Navigator


    Thing of it is, the real net profit to the investor.
    10 Oct 2012, 01:00 PM Reply Like
  • Captain Brian - Thanks for your comments. I am still earning but am around your age. I look at my profits from divies and trading REITS like NLY, DX, NYMT. O.K. there has been some rough seas in the past few days, I am down on DX on paper but have collected two nice dividend checks. As to NLY, I have seen these dips before seeing this stock go down to around $15.75 last year. I am looking at this as a buying opportunity. Maybe the market is headed toward a 20% correction, but I would rather hold, collect the dividend and take the risk. One thing is certain, if you have your money in a money market account you are going broke albeit slowly.
    10 Oct 2012, 05:15 PM Reply Like
  • Well Put Capt. this is likely little more than the big boys pressuring these stocks down so they can buy in cheaply and thus bolster their bottom-line ROR going into the 4QTR/EOY accounting period. Their way to do a little late in the game figure mending to try and justify their management fees from the chumps.
    10 Oct 2012, 05:46 PM Reply Like
  • LHP- Your ideas are good until the reason the stock price is falling and eventually the dividends is because the company isn't making the profits as before. First comes a falling stock price and a capital reduction that may just be a paper loss, never realized. Then comes the dividend reduction. Now a loss of income that you depend on. You are stuck. ouch. Hope it doesn't come to that.
    11 Oct 2012, 08:40 AM Reply Like
  • I own shares of hts, agnc, and mtge...should I sell today or not?
    10 Oct 2012, 11:08 AM Reply Like
  • AGNC looks bad.
    10 Oct 2012, 11:23 AM Reply Like
  • stay calm!..... this fall in prices is not as dramatic as the press release would suggest... i think the poster above that says if you treat these as part of a fixed income portion of your portfollio you will sleep better is correct...also rising book values can be a good thing...if managed correctly
    10 Oct 2012, 11:20 AM Reply Like
  • managed correctly? This is like pin the tale on the donkey now that the Fed is buying MBS's.
    10 Oct 2012, 11:24 AM Reply Like
  • Some analysts prefer non-agency REITs.
    10 Oct 2012, 11:35 AM Reply Like
  • Book value should be well above $30 in the quarter, and the dividend is likely safe for another few quarters. Book value provides a good floor to the stock, and the yield should support a slight, call it 1.1x price to book. $33 is about where I think the stock should be, but it might be weak into the quarterly report.


    Either way, I've been in the name for years, so my cost basis is must lower than this. Even with a reduction in the dividend to $1/quarter, the yield is still 13.3% on the book value. I'll keep reinvesting dividends until management leaves.
    10 Oct 2012, 11:40 AM Reply Like
  • everything is a matter of entry price If you bgtin th last month,,,ooooch.! I have a significant position with average price for agnc @ 30 and ARR @7.00. I ouldser adding to the income items at prices closer to my average.


    This is not a disar b on should buy only on dips.
    10 Oct 2012, 11:42 AM Reply Like
  • How much further do you think it will drop? I am looking for entry point?
    10 Oct 2012, 11:52 AM Reply Like
  • antiqueron,
    why ask someone who has so much bias ?
    He might tell you to stay away from all these Reits.
    Make up your own mind, never ask someone you don't know.


    10 Oct 2012, 12:03 PM Reply Like
  • bias? why? you are simply ignoring the facts. too bad really.
    10 Oct 2012, 12:18 PM Reply Like
  • Overnight AGNC takes a dive because some big Broker downgrades (i.e. gives a signal to short the stock). Come on guys, this is how Wall Street plays the money game.
    10 Oct 2012, 12:35 PM Reply Like
  • It does not take someone special to see that the dividend on agnc will likely go down as that has been the trend. The drop is really just a market correction that was predictable. People are running in fear because agnc was slightly over priced and over bought. It would not surprise me if we see another Aug 6-Aug 9 trend where people ran, and then loaded up because it was oversold.
    10 Oct 2012, 12:47 PM Reply Like
  • Calm the Heck Down folks.
    This is the Sept Correction that didn't happen occurring now.
    Late Tues afternoon around 3:45pm there was unleashed an automated program(s) gthat not only drove down the DSow but Reits and other sectors as well as this was the start of the sell-off.


    DON'T PANIC! and Be Patient! We will all recover and Make our Dividends as well. Those of you with Cash reserves, ENJOY the buying Opportunities!


    The Big Brokerage Houses will be trying to buy up as much of the Reit sector as possible since their YTD returns have been Crapola. With a large forced and Low price purchases of Reits and a couple of other sectors they will pump up their weak returns and appear to be better than they were during the whole year and thus worth their inflated management costs.
    10 Oct 2012, 12:55 PM Reply Like
  • do you understand that there is a substantial difference between REITs and mREITS?
    10 Oct 2012, 04:11 PM Reply Like
  • Daro REITs is the overall Sector and mReits are the ones many of us here at SA Prefer. Can you tell the difference between a sector and a sub-sector? I can and do. If you look closely at the overall market too you'll see that it also is down.


    Daro I personally am holding onto my mReits and BDCs in the face of what appears to be some market manipulation in those two areas during the overall market downturn. Do what you will with your money.
    10 Oct 2012, 05:50 PM Reply Like
  • I agree that "calm" is always called for BUT you have declining MBS prices this week combined with declining spreads (a very unusual combo). This produces a tendency to panic. I know because I am feeling queasy.
    10 Oct 2012, 01:08 PM Reply Like
  • How will this impact NLY-A preferred stock ?
    10 Oct 2012, 01:59 PM Reply Like
  • NLYPRC is up 8 cents ps today.
    10 Oct 2012, 05:51 PM Reply Like
  • People buy and sell for different reasons. I look for yield and hopefully a gain in share price, but yield is the driver for me. I sold ANGC and bought IVR and added to my ARR.
    As far as predictions as to the up or down side of the price you can find as many pros as cons on every stock. This only proves that a stopped clock is right twice a day.
    Please dump all your shares because I will continue to buy into this sell off at some point and reap even larger yields.
    10 Oct 2012, 02:00 PM Reply Like
  • Samangelo- I did the exact same trade. Of course we are probably not the only ones but certainly some of the bright ones.
    4 Nov 2012, 02:20 PM Reply Like
  • RS -- what are your thoughts on the hybrid mReits? I sold my entire AGNC position in August (a bit too early) because I wasn't comfortable with the Q2 information. I still own MTGE, TWO and WMC.
    10 Oct 2012, 02:10 PM Reply Like
  • A five year chart will show that AGNC had Midsummer and Early October extreme downspikes with immediate recovery in 2011 and it looks like that Aug/Oct thing is happening again, right on schedule. There was even a similar spike (October 10!) in 2008. Color me optimistic, but I think this is panicking "weak" holders, and that they'll be replaced, nearly dollar for dollar by strong holders, snapping up more "on sale", in a couple of days. I think that $34.50 is a good expectation. But what do I know?
    10 Oct 2012, 02:18 PM Reply Like
  • Spot One.
    The intra-day lows were all but abandoned by the close of the market as unknown buyers quickly moved in to snap up those depressed shares. Could it be the same folks that triggered that automated selloff late Tuesday PM? Hmmmmm?
    10 Oct 2012, 05:53 PM Reply Like
  • Looking at the 5 year performance of AGNC it is obvious that the management of this REIT knows how to successfully operate in all economic circumstances. Even if the dividend was lowered down to 10% (which is unlikely to happen) the stock still would provide a great return. As a result I purchased more AGNC today.
    10 Oct 2012, 02:34 PM Reply Like
  • Regarded Solutions: You are much too modest!
    10 Oct 2012, 03:00 PM Reply Like
  • OK--I think we've beaten the mREIT horse to death, let's find the new kid on the block. Who has some insight to the next opportunity?
    10 Oct 2012, 10:51 PM Reply Like
  • AMTG is a strong company. RS was correct, everyone following his advice is worth more today. Tomorrow I'm not so sure. I think AMTG is the baby in the bath water. I think the behavior within the Bolinger bands is telling us AMTG is going to bounce up strong. It will trade higher because of increasing BV and well protected dividends. Fundamentals in line with some basic technical indicators is a good investment in my book. AGNC was a bit ahead of itself and will settle in much closer to BV.
    10 Oct 2012, 11:22 PM Reply Like
  • My mREITS, AGNC and NLY are sliding up. ARR is staying pretty level. Looks like it's not a disaster after all.
    11 Oct 2012, 10:13 AM Reply Like
  • UNGAWAH Yup ;)
    create a little selling pressure by writing doom and gloom articles for a couple weeks before your move, wait until market conditions look bearish, trigger your automated selling program late in the day and continue it through the next day's early session, move in and buy up the panic sellers shares at a much lower cost and then pad your bottom-line by looking like smart investors to your clients with a low buy-in on a high yielding stock which will pump up your previously weak yearly numbers just in time for the Annual EOY reports.
    11 Oct 2012, 10:41 AM Reply Like
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