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It's a jittery mortgage REIT sector as last night's election assures the Fed will continue to...

It's a jittery mortgage REIT sector as last night's election assures the Fed will continue to strangle the leveraged operators' net interest margins. Annaly (NLY -2.8%) - the purest of the pure-play agency REITs - still reeling from Monday's poor earnings, leads to the downside. AGNC -2%, TWO -2.3%, HTS -2.1%.
Comments (27)
  • Snooze and lose -- my mREITs are off those lows, so a missed a opportunity.


    Since Bernanke doesn't have to worry about being fired, I'd think REITs would be okay -- except maybe for possible higher tax threat on dividends.
    7 Nov 2012, 10:07 AM Reply Like
  • I guess you lost me. It's my understanding that the "dividends" from AGNC are already taxed at the regular income rate, not at the dividend rate.
    7 Nov 2012, 10:17 AM Reply Like
  • I misspoke. Please unread my comment about dividends.
    7 Nov 2012, 10:39 AM Reply Like
  • Chowzer you are mostly right. Here is how REIT dividends are taxed to individuals.
    For tax purposes, dividends are allocated to ordinary income, capital gains, and return of capital. As REITs do not pay taxes at the corporate level, investors are taxed at their individual tax rate for the ordinary income portion of the dividend. The portion of the dividend taxed as capital gains arises if the REIT sells assets. Return of capital, or net distributions in excess of the REIT's earnings and profits, are not taxed as ordinary income, but instead applied to reduce the shareholder's cost basis in the stock. When the shares are eventually sold, the difference between the share price and reduced tax basis is taxed as a capital gain."
    7 Nov 2012, 10:48 AM Reply Like
  • Thanks for the info, Claude.
    7 Nov 2012, 04:30 PM Reply Like
  • not most of mine...they are in a Roth...
    13 Nov 2012, 11:08 AM Reply Like
  • News of Obama's re-election has sent the markets reeling!
    BDCs, mReits and so much more are down down down.
    7 Nov 2012, 10:19 AM Reply Like
  • Kingdad; Before Market opened, Dow Futures were up +/- $50. News from Europe caused the sell off. We can blame Obama for many things but-IMO- not for today's sell off :) bzl14
    7 Nov 2012, 01:45 PM Reply Like
  • Bzl you are just plain wrong, It was the late Asian & early EU markets that were propping up the Futures. When the Real American traders showed up the mkts went to hell in a handbag fast. But nice try on spinning the Obama effect.
    7 Nov 2012, 03:59 PM Reply Like
  • Hmmm, you sure it's Obama and not fear that all the Grover-owned legislators are fixing to drive the bus off the fiscal cliff?
    7 Nov 2012, 05:19 PM Reply Like
  • Dow is up 60% since Obama took office. Obama bailed out Wall Street, the big banks, and saved the world economy from a 'for certain' liquidity trap and depression.


    Maybe a selloff is healthy!
    7 Nov 2012, 06:36 PM Reply Like
  • bzl14 is right. Markets in Europe were firming up....until the European Commission worsened their forecast for the EU and Eurozone recession. The Obama effect only made things look worse.
    Look here for instance:
    "NEW YORK (Reuters) - The Dow industrials lost more then 300 points in a sell-off on Wednesday that drove all major U.S. stock indexes down over 2 percent in the wake of the presidential election as investors' focus shifted to the looming "fiscal cliff" debate and Europe's economic troubles."
    "The market's losses were broad, with pessimism exacerbated by overseas concerns after the European Commission said the region would barely grow next year, dashing hopes for improvement in the short term."
    7 Nov 2012, 10:51 PM Reply Like
  • It looks like I will head back to Gold.
    7 Nov 2012, 10:22 AM Reply Like
  • Kain should start buying back stock as the price is now about 5% below book value.
    7 Nov 2012, 11:05 AM Reply Like
  • Comment by Chris Hodge:


    Armour Residential REIT (NYSE: ARR) is not the kind of company I'd normally invest in. I pretty much swore off mortgage-backed securities when I realized that banks were just selling them and had no commitment to making them into proper investments. However, the 72% profit margin, the PEG ratio of .61 and the dividend yield of 15.3% do a lot to sway me. Added to these tasty features is the fact that Armour was started by Marc Bell, who has his hand in a lot of successful businesses. With fat profit margins and a major shareholder with serious chops, this might be worth looking into further.
    7 Nov 2012, 11:17 AM Reply Like
  • I bought low on today's news -- added to my already heavy holdings of ARR. Pretty happy.
    7 Nov 2012, 07:48 PM Reply Like
  • Why did ARR hit a new 52 week low today?
    14 Nov 2012, 11:38 AM Reply Like
  • Obama's re-election and Bernanke's extended term!
    14 Nov 2012, 12:52 PM Reply Like
  • Sure is funny that before the election, the experts were saying that once it was decided who the next president was going to be, the market would take off. Also the fear that Romney would fire Bernanke also was hurting the market back then.


    Now we have certainty and we know Bernanke won't get fired and the market collapses. Hard to figure this stuff out.
    15 Nov 2012, 08:59 AM Reply Like
  • Thanks, Claude, for the clarification on the tax situation.
    7 Nov 2012, 12:17 PM Reply Like
  • isn't AGNC divs treated as ordinary income to begin with?
    so div tax breaks expiring does not impact how agnc divs are taxed?
    7 Nov 2012, 01:56 PM Reply Like
  • "Armour Residential REIT (NYSE: ARR) is not the kind of company I'd normally invest in. I pretty much swore off mortgage-backed securities when I realized that banks were just selling them and had no commitment to making them into proper investments."


    This seems illogical to me.
    - ARR is a pure agency MBS play.
    - Agency MBS are guaranteed (directly or indirectly) by the US Govt
    - Borrowers with crappy credit typically have a hard time prepaying their loans
    - Lower prepayments (technically, less directional prepayments) are a good thing for agency REITs


    Hence, if it is true that banks make crappy loans and get rid of them through securitization, then buying agency MBS backed by this loan is actually an opportunity.


    If this was about non-agency MBS, the statement would make sense. But here, I am really struggling to understand.
    7 Nov 2012, 02:15 PM Reply Like
  • Cros67,
    I thought ARR invested in Agency Fixed and Agency ARM. Since the Agency ARM is not on the governments buying list right now, ARR doesn't have as many problems with prepayments as the Agency Fixed Only mREITs like NLY and AGNC.


    7 Nov 2012, 02:35 PM Reply Like
  • John,


    My point on prepay speed/directionality is also valid for ARMs as for FRMs, although it's true that ARMs are only exposed to the negative effect of prepay speeds increases through periodic or life caps, so not as much as FRMs.
    But last time I read through ARR's quarterly, it seemed to me in any case that their ARMs holdings were not that significant vs fixed-rates, nothing like HTS.
    7 Nov 2012, 02:41 PM Reply Like
  • AGNC is now way below book value by nearly $2/share. Paying $5/yr dividend or $4/yr dividend, there is no way I'm passing up on this once in a lifetime opportunity. Oh, and lets not for get the $500/million buyback.


    It just doesn't get better than this.
    7 Nov 2012, 04:14 PM Reply Like
  • Live life like Jimmy Buffett, but invest like Warren Buffett.
    "Buy when there is blood in the street".
    7 Nov 2012, 06:40 PM Reply Like
  • Mr. Market was quoting some good prices on AGNC today. w00t.
    7 Nov 2012, 08:07 PM Reply Like
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