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A double-take is necessary to believe some of the handles in the mREIT sector, undergoing...

A double-take is necessary to believe some of the handles in the mREIT sector, undergoing another savage selloff as the Fed hints at even more QE. The pure-agency REITs - in direct competition with the Fed for paper - are hit hardest. AGNC -3.4%, ARR -8.1%, CMO -4.9%, WMC -7.1%, to name a few.
Comments (53)
  • Doyle3000
    , contributor
    Comments (1366) | Send Message
     
    these are all great buys right now for the following reasons:

     

    Bush Tax cuts or something very similar will be continued or re-started quickly under new compromise for people earning <$250k i.e. 98% of the population.

     

    A significant amount of these stocks are held in IRA's and the dividend tax increase is irrelevant.

     

    The Fed is out of bullets. Fiscal Policy by Congress is going to have to step in because the Monetary Policy is saturated.

     

    If you have a while on our horizon, buy AGNC, WMC & ARR
    14 Nov 2012, 02:36 PM Reply Like
  • dcl3500
    , contributor
    Comments (23) | Send Message
     
    You know it. I am looking all over trying to find the money to put into all three with an eye down the road, and not even that far I should think looking at the drubbing they are taking right now.
    14 Nov 2012, 02:55 PM Reply Like
  • Vertical Spread
    , contributor
    Comments (543) | Send Message
     
    How are they in competition with the FED?

     

    Not sure I get the argument by Doyle3000; that IRA idea is wearing thin. Why are GE and XOM and the whole S&P tanking? I have those in my IRA.
    14 Nov 2012, 02:40 PM Reply Like
  • tampat
    , contributor
    Comments (998) | Send Message
     
    Vertical,

     

    In the most simple of explanations, since the start of QE3 the Fed is now buying the same paper that the mReits buy, hence the competition.
    14 Nov 2012, 02:44 PM Reply Like
  • jrbuettner
    , contributor
    Comments (76) | Send Message
     
    .....buy when there is blood in the streets....
    14 Nov 2012, 02:52 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9953) | Send Message
     
    Yes, but likely quite a bit to go to get there yet.
    14 Nov 2012, 05:16 PM Reply Like
  • richbar
    , contributor
    Comments (792) | Send Message
     
    Yeah, but what if it's all of your blood?
    14 Nov 2012, 07:38 PM Reply Like
  • kingdad
    , contributor
    Comments (987) | Send Message
     
    The sooner Bernanke and Obama are gone the Sooner America's economy will recover.

     

    The dollar's decline continues, Gold looks to rise and the world's economy already in a dither will only sink further into the morass if America can't recover and under today's current scenarios the Leaders of Industry and Investment have voted with their Money and Americans, their 401Ks, IRAs, Roths, Pensions etc. are all paying a massive price for it.
    14 Nov 2012, 02:55 PM Reply Like
  • aretailguy
    , contributor
    Comments (1155) | Send Message
     
    kingdad, the people that got Obama elected really do not care about things like 401Ks or IRA's ect. They just wanted the new model Obama phone, food stamps, disability ect. We have gone from "Ask not what your country can do for you, ask what you can do for your country" to "Gimme!!!!!" The inmates are in charge of the asylum. There is no sense in fighting the inevitiable. They won, we lost. Buy Gold.

     

    http://bit.ly/UyuSSL
    14 Nov 2012, 04:26 PM Reply Like
  • Doyle3000
    , contributor
    Comments (1366) | Send Message
     
    omg drunk uncle - you are going to start already? what kind of American are you? i know we won't be hearing anything good from you once congress cuts a deal and the market becomes bullish again. finish your bourbon and pass out in front of Fox & Friends.
    15 Nov 2012, 09:25 AM Reply Like
  • hermit99
    , contributor
    Comments (278) | Send Message
     
    aretailguy: "They won, we lost." NO, the Average American Won! Obviously, you'd prefer a re-run of GOP policies that tanked the economy. Is your sky falling, chicken-little-sour-gr... Don't presume to talk for anyone except yourself. When you say "we,"
    you mean "I."

     

    "We have gone from ... to 'Gimme!!!!!' Maybe you should try to understand the "gimme" mentality of Big Business subsidies and how many corporations don't pay anything because of loopholes the size of Jupiter!

     

    Continue watching Fox & Limberger for your distorted (mis-)understanding of alternative asylum reality!

     

    Retail guy? Sounds more like Corporate guy.
    15 Nov 2012, 03:55 PM Reply Like
  • Bettaboy
    , contributor
    Comments (40) | Send Message
     
    "They just wanted the new model Obama phone"

     

    Tracphone pays for the phone (owns Safelinks and other brands) and minutes in the hopes the owner adds more minutes and only uses the Government to verify one's income. The government does not pay for the phone nor the minutes. BTW - my last job in NYC was for a Wall Street firm (I did financial graphics) that sheltered the Uber rich - each account had ten to hundred's of millions in it - all off shore and tax (almost 100%) sheltered.

     

    Some people abuse our systems "safety net" but more so corporations some of which pay no corporate taxes and individuals with vast wealth. The firms would not do "business" with anyone that was not very wealthy - and with no taxes easier to stay and become wealthy. Our lawyer was always having meetings with some Congressperson???
    15 Nov 2012, 05:49 PM Reply Like
  • VeroMike
    , contributor
    Comments (244) | Send Message
     
    Almost $3.00 below book value.
    My IRA has lost about 8% since Obama got re-elected.
    I have mREITS, BDC's and Oil and Gas related stocks.
    The good news was paying about 8% dividends overall.
    Just about lost all capital gains for the year.
    Wish I was not retired, would add to some of these positions.
    14 Nov 2012, 02:58 PM Reply Like
  • Fishman2001
    , contributor
    Comments (2) | Send Message
     
    I agree, retired and holding 60% cash, started scaling into PSEC and AGNC and have gotten burn't. I get paid to wait, but there is sure to be more blood from these holding's. Join Value Forum and you would have known to be out of these names, did I listen yes but not on AGNC and PSEC because I wanted some dividend yield in my portfolio.
    15 Nov 2012, 02:59 AM Reply Like
  • presidentasp
    , contributor
    Comments (53) | Send Message
     
    Mike- I'm not retired but I've lost 24% in my IRA since the O'bama election. Wish I had more money to buy with also but if I did I would have pulled the trigger yesterday and would be losing on that investment, too.

     

    I invested in my diversified portfolio of REIT's (AGNC, NLY, CYS, ARR, TWO) because of the high return and don't really lose until I decide to bail. Not gonna do that. The yield just keeps going up as the price drops and, if dividends aren't cut, I'm still making the same return on the money I invested to begin with. Makes me a little less nervous but it's still not easy to swallow a market panic which causes a stock to tank to below asset value. The market will notice the higher yields and come back in next year.
    14 Nov 2012, 03:22 PM Reply Like
  • VeroMike
    , contributor
    Comments (244) | Send Message
     
    I bought CYS yesterday at $3.00 + below book value when I saw they were going to spend up to $250 million to buy back stock.
    Secondary offering usually knock stocks down, expect this might help find the floor and bolster the price.
    16 Nov 2012, 08:41 AM Reply Like
  • Goalkick9
    , contributor
    Comments (406) | Send Message
     
    VeroMike, no idea what Obama's re-election has to do with the losses in the past week, but my age and portfolio are similar to yours, and I'm not too worried. To me, patient and dividend reinvestment are the keys. If you're reinvesting that 8% dividend, you ARE adding to your positions.
    14 Nov 2012, 03:25 PM Reply Like
  • AlbyVA
    , contributor
    Comments (567) | Send Message
     
    AGNC is $3-$4 below book value, only a sucker would sell. It would be one thing if the company was going bankrupt. But AGNC is (SOLID) and well hedged against rate swings. Prepayments are m00t. Lord I wish I had more cash right now.
    14 Nov 2012, 03:25 PM Reply Like
  • getgl
    , contributor
    Comments (617) | Send Message
     
    I agree that these stocks have become better buys but be careful of being too soon. Let the volatility diminish. They are not going out of business.
    On the idea that this has anything to do with Obama is ridiculous, as the problems in the economy started a long time ago and have been watered by both parties on the path to today.
    14 Nov 2012, 03:29 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9953) | Send Message
     
    get,
    Agreed, even better prices likely available for those who wait.
    14 Nov 2012, 05:26 PM Reply Like
  • AlbyVA
    , contributor
    Comments (567) | Send Message
     
    Who cares about the competition? There are $7 TRILLION in MBS to be had by everybody. The Fed's money printing will take a very, very, very long time before they put a dent into the MBS market.

     

    People are worried about bogeymen when it comes to MREITs. Let me know when there is a Nuclear War, Doomsday Asteroid, or Super Volcano Eruption in Yellowstone. That's about when I'll be selling my MREITs payout 90% of their profits to me while holding Government Backed Paper. Watching people cry about nothing makes for a soap opera.
    14 Nov 2012, 03:33 PM Reply Like
  • Spiker6
    , contributor
    Comments (7) | Send Message
     
    Sure hope you are right...
    14 Nov 2012, 05:29 PM Reply Like
  • kingdad
    , contributor
    Comments (987) | Send Message
     
    Alby well put, but with the O back in office the likelihood of a Nuclear Iran just increased a lot. So that is the main one to watch.

     

    Lots of panic and uncertainty out there. Lots of buying opportunities for those with cash on hand. The rest of us will just have to suffer through this crap all over again.
    15 Nov 2012, 10:03 AM Reply Like
  • Moneyman CPA
    , contributor
    Comments (55) | Send Message
     
    Vertical:
    When you own stock or bond in an IRA or a 402-K the dividends and interest that those investments earn are not taxed for income tax purposes. When you withdraw funds from your IRA or from your 401-K you report the amount to your withdrawal as ordinary income and you pay taxes based upon your total income in that year. So it does not matter if the tax rate on dividends stays at 15% or if it goes to 20% or even to 42% your IRA or your 401-K will not pay any taxes on the dividends received until you take the money out.

     

    Now for the rest of you, this sell off is a panic sell off and not warranted by the FED involvement in the mortgage backed securities market nor is it warranted by the recent earnings reports issued by any of the mREITs. Most if not all reported slightly lower spreads and higher CPR but they all still reported nice income returns and most are still paying significantly greater returns than one can get on any other investment at this time. To those of you who sold out their positions in the past 4 weeks, now might be a very good time to try to get back in. The book Values of these company's are above their current market value, some by as much as $3.00 or more. Historically these stocks sell at or above book value, buy at a discount while you can. If any of these company's should decide that they cannot compete with the FED and they decided to go out of business, the liquidation value of their common stock is currently greater than the market value. Shareholders would get more than they would if they were to sell their shares.
    14 Nov 2012, 03:36 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Be that as it may, panic selling wiped out many fixed income and REIT funds in 2007-9. Pick the bottom carefully here.
    14 Nov 2012, 04:50 PM Reply Like
  • worthless111
    , contributor
    Comments (36) | Send Message
     
    Thanks CPA, this is well written and is a summary of what I have been thinking for a while but do not trust myself !
    14 Nov 2012, 09:54 PM Reply Like
  • cbradshaw
    , contributor
    Comment (1) | Send Message
     
    Our own government, once again, hurting the free market.
    14 Nov 2012, 04:54 PM Reply Like
  • BuckeyeNation
    , contributor
    Comments (6) | Send Message
     
    ARR has taken a beating the last two days. Is there still room for it to drop? Debating on when to get in...
    14 Nov 2012, 05:24 PM Reply Like
  • Doyle3000
    , contributor
    Comments (1366) | Send Message
     
    i'd jump in at $6.50 if I had more cash. these are all great prices, even if they go down another 2%
    15 Nov 2012, 09:27 AM Reply Like
  • John P Ward Jr
    , contributor
    Comments (32) | Send Message
     
    I'm not convinced that this is necessarily panic based selling.....I think it is the "market" for each of these stocks (and sectors within the equity income flavor of stocks) expressing an opinion about where the dividend tax rate is likely to land once we get to the other side of these "fiscal cliff" negotiations........the downdraft in the stock prices is increasing yields (assuming distributions stay the same) so that after one applies whatever the new dividend tax rate will be, the after tax yield to investors will be roughly similar to where it is today...........the market may also be trying to find a new level for distributions too as a cliff related recession might push the Fed to intervene further with additional QE and mREIT spreads could tighten a little more..........so, all in, I think this is just a repricing exercise and, once things settle down, it'll be interesting to compare where these stocks (and yields) were on Nov 6th and where they are once these markets bottom........that comparison will tell you where consensus landed on what the dividend tax rate will be even before the legislators do............last comment here, I don't think today was necessarily the bottom as the S&P 500 convincingly breached its 200 day moving average on the downside and joined the Dow and Nasdaq which had done so some days ago......generally, that's a bearish signal and I'd imagine there's going to be some more selling across all the equity markets before a bottom forms........would expect there to be sympathetic selling across the mREITs, BDCs, and MLPs on the way down and consider this a textbook case for dollar cost averaging into these names gently on the way down if you have dry powder.......assuming a belief in the long term fundamentals of these names, attempting to call the bottom may not be worth the risk of missing it (as many do).............disclo... I'm long AGNC, CMO, IVR, TWO, ARCC, and TICC.....
    14 Nov 2012, 05:26 PM Reply Like
  • kingdad
    , contributor
    Comments (987) | Send Message
     
    Good piece John, well thought out and put together.
    Still holding all of my Reits and BDCs the economy can't recover without them. Unfortunately many are of the conviction that Obama really doesn't want things to get better esp. in a hurry. You can't demagogue prosperity or race bait successful minorities.
    15 Nov 2012, 10:07 AM Reply Like
  • John P Ward Jr
    , contributor
    Comments (32) | Send Message
     
    Thx kingdad...........I try to stay apolitical in my investing but cannot disagree with your observations re the re-elected administration; very difficult to understand how the ACA implementation and raising taxes (whether it is tax rates or by eliminating deductions) will generate significant GDP growth in excess of 4% consistently............. it is economic growth the country needs to pay-down $16 trillion of national debt and reduce the $1trillion annual gov't budget shortfal; my view is that the debt overhang and deficit spending is impeding growth significantly because of the uncertainty it has created (uncertaintly = less capital investment and less hiring)......perhaps the Obama crew just needs to prove to themselves that tax revenue will only fill a very small portion of the hole that needs closing.....back to investing: because I agree with your slow growth/recovery observation, I (like you) am invested in yield instruments as I think generating gains from growth stocks, in a very slow growth environment, will be extremely difficult for the next 10 years.............I think public policy will negatively impact these yields over time but, given that many of these instruments (MLPs, BDCs, REITS, etc) are starting with double digit and low teens yields, even the negativity fm public policy (tax environment and fed interventions) will not likely take the annualized returns lower than 7-8% (because if it does, we've got way bigger problems than how our stock portfolios are doing) and I've always thought a high single digit return over a long period was pretty good .............lastly, I like these yield instruments because the underlying securities in their portfolios tend to ride senior in the capital structure of the companies in which they're invested.........so, in many cases, they're riding in a mezzanine or senior term debt position and first on liquidation above the equity or preferred stock..........in a slow growth environment where most companies will trudge and bump along doing just OK, that's a good place to be particularly if you believe picking winner among growth stocks will be very difficult.........good luck with your investing, these are very very interesting times............
    15 Nov 2012, 11:34 AM Reply Like
  • kingdad
    , contributor
    Comments (987) | Send Message
     
    TY John for your kind comments. please consider looking at some of the Preferred stocks of the better mReits as they are paying in the high 7 and middle 8% ranges. With their preferrential treatment they can be a safe haven when these types of events happen and looking forward at further squeezing by Bernanke even more so since their returns are guaranteed and paid 1st. (long NLYPRC and NRFPRB)

     

    the 16th seems to be signing that a floor has been reached (at least for now) and these nice yielders are beginning to recover from that week's worth of abuse. Have a Happy Thanksgiving too!
    16 Nov 2012, 12:33 PM Reply Like
  • laterre
    , contributor
    Comments (405) | Send Message
     
    There are some terrific bargains to be had--approaching 20% discounts to NAV, but wait for the vol to settle. The whole market is unwinding, and I think the mreits go still lower before forming a bottom. With all the uncertainty and the headwinds it only makes sense they should trade with some discount to book. Those 25% premiums and 36 handle on AGNC back in the summer were nuts. Parenthetically, as a sociological observation, can't help but notice that the tone around here sure is diff than the "rah-rah," "safe as cash" crowd who were talking a big game three or four months ago.
    14 Nov 2012, 05:28 PM Reply Like
  • Dividends#1
    , contributor
    Comments (2707) | Send Message
     
    laterre,

     

    I am still rah, rah, did you read what Kain had to say, he did say there was concern, but also he was confident AGNC was positioned well and would still have a good return. Not, his exact words, but you get the drift.

     

    He also stated, people might not understand/know the dividend of AGNC in taxable accounts are currently taxed as ordinary income (not qualified), so any increase in dividend tax for AGNC in taxable accounts will not make a big difference. Maybe, you or the CPA could expand on the details of this.

     

    I am surprised you and the CPA above did not mention this. Maybe, you guys did not want others to know yet? Eventually, most will figure this out.

     

    I am going to increase my AGNC position soon. I will hold the majority of my AGNC in a ROTH account. I can sell a little of PM and buy AGNC. I am going to consider it, not sure, but I will definetely HOLD my AGNC.
    14 Nov 2012, 11:37 PM Reply Like
  • Dividends#1
    , contributor
    Comments (2707) | Send Message
     
    laterre,

     

    I will NOT sell PM. I will have to wait till 2013 (to fund my Roth accounts) to buy AGNC.

     

    I do not want to own it in a brokerage account at this time, unless, I can get it really cheap. I put in an order to buy at $26.10, good till cancel, if it does not fill, no sweat.
    15 Nov 2012, 09:40 AM Reply Like
  • laterre
    , contributor
    Comments (405) | Send Message
     
    Hey dividends#1

     

    I didn't have you personally in mind in the "rah, rah," crowd, if it's any consolation.

     

    Anyone selling mreits because they don't understand the tax rules shouldn't be running their own money, let alone buying mreits. Dividends from mreits are and always have been fully taxable. That's the reason why reits exist, and they have to pay out 90% of taxable earnings.

     

    Hey, it's great that Gary Kain is out there telling people to stay the course. He's a smart guy, and you can learn a lot from him. That being said, I stare at the same mbs quotes he stares at every day, as do most of the institutional investors in mreits, and so I don't think his revelation that the wheels weren't in fact coming off the bond market came as any surprise, much as it might have reassured some folks on seeking alpha. But also, what else is he supposed to say? Even if they were against the wall, would he (or any CEO) come out and say anything other than hold? Watch what they do, not what they say. He's got a big chunk of change in MTGE.

     

    Good for you in holding your AGNC. It's a lot more desirable now at a discount than it was 6 months ago at a premium. I've been nibbling here and there as well, picking up some WMC and MTGE at ridiculous prices, though the sell-off in mortgage related CEFs is what's really piquing my interest...
    15 Nov 2012, 04:45 PM Reply Like
  • ANDREW BIONDO
    , contributor
    Comments (8) | Send Message
     
    My opinion for past experience is this trand is based because
    panic and are selling ,,,,,,,All these that are selling to day in January
    2013 will double in value......Buy . BUY ! Buy !
    Andrew Biondo
    14 Nov 2012, 06:49 PM Reply Like
  • CaptRichie
    , contributor
    Comments (20) | Send Message
     
    Sooner or later the sellers are going to realize that their tax rate is going to be whatever the politicians agree on and that it won't matter where their money is invested. The tax will be the tax. At that point they'll wake up and realize that they've given up some really great yielders and will start pouring right back into the positions they sold off in panic.
    14 Nov 2012, 07:25 PM Reply Like
  • richbar
    , contributor
    Comments (792) | Send Message
     
    I've been selling calls against my AGNC positions and unwinding and writing lower strike calls as it's been falling. Still a lot of losses, but it cushions the blow somewhat.
    14 Nov 2012, 07:42 PM Reply Like
  • William Packer
    , contributor
    Comments (362) | Send Message
     
    Takeaways from Gary’s presentation: (AGNC's today)

     

    QE3 turning out as we described in Q1, but a very manageable environment if you have the right positions. You can design a portfolio that will continue to perform well despite the challenges of QE3.

     

    Menendez-Boxer Bill – as written, only 3% of our portfolio is exposed in any way, shape or form to that Bill – little effect if enacted. Only affects loans originated before June 2009 ---we have little, if any exposure there.

     

    On Ed Demarco – has done a great job (in coordination with Obama’s HUD and Treasury departments). FHA, on its own without Demarco, came up with the same June 2009 date Ed Demarco recommended. Idiosyncratic policy risk is at an all time low.

     

    No change in MREIT space regarding dividends

     

    We try to be as agnostic around interest rates as we can be – we use our expertise to position to a range of possible scenarios.

     

    Repo market –we’ve seen no changes seen on the repo side. Our repo agreements have no ties to market cap or stock price – realistically, no changes in terms, nor have we any concerns.

     

    Stock buybacks – we use real-time looks at book value to buyback stock. It’s a way to build book value.
    14 Nov 2012, 07:56 PM Reply Like
  • 67g8i32
    , contributor
    Comments (216) | Send Message
     
    Gary Kain has been insider buying MTGE for himself. Don't know if the 50 million shares buy back progrm started yet or not. All I want to say is: hold on to your MTGE shares. Don't panic.
    14 Nov 2012, 08:02 PM Reply Like
  • Moneyman CPA
    , contributor
    Comments (55) | Send Message
     
    John P Ward:
    The tax rate on dividends has no effect on mREITs as their dividends are now and have always been taxed at ordinary income tax rates not at the 15% Dividend Tax Rate. If you hold these mREITs in an IRA or in a 401-K then tax rates have absolutely no effect on the dividends since IRA's and 401-K's are both tax exempt entities.
    15 Nov 2012, 01:04 AM Reply Like
  • John P Ward Jr
    , contributor
    Comments (32) | Send Message
     
    Yup, thx Moneyman...........couple things: i) am aware that the tax deferred wrapper on an IRA or 401k type account makes tax changes a non-event for the returns within the account though one's ordinary income tax rate upon withdrawal may have an impact as/if/when it changes, ii) part of my analysis re dividend taxes is an alternative use test: relative risk/reward of a regular dividend payer taxed at dividend rate vs. pass-through taxed at ordinary income rate vs. growth stock whose gains are taxed at cap gains rate........I get that the REIT is a pass-through entity and the share owner get's ordinary income tax treatment (though let's recognize that those ordinary rates are quite likely to increase as well, consistent with my comments above), my comments (perhaps poorly articulated and maybe I should proof read my posts a little better....to wit: "new dividend tax rate" should've said "new dividend/ordinary income tax rate") were focused on the market trying to sort out the difference between where dividend taxes may land relative to capital gains..........today they're treated much the same for typical non-pass through equity income stocks that pay dividends..........if capital gains tax rates end up lower, I think that, and the fact that ordinary income tax rates are likely to rise, encourages some capital flows out of all the income generating stocks (pass throughs taxed at ordinary income rates and regular dividend payers soon to be taxed at ordinary rates) into growth stocks in an asset rebalancing toward a risk-on, but perhaps more tax efficient allocation..........pe... in a slow growth environment, I think it'll be hard to pick growth stock winners in the coming years but clearly tax policy and fed interventions may provide an incentive for alot of capital to flow that way........so I see the current price action as both a drive for liquidity as the pre-cursor to an asset allocation rebalancing once tax policy is more clear and a re-pricing of these stocks to a level where their risk/reward may be at an indifference point for an investor trying to decide whether to put the incremental dollar in a growth stock with cap gains treatment or in a yield/income vehicle with ordinary income tax (new dividend rate) treatment........iii) underlying my comments is a belief, which you may or may not share, that the bull/bear push and pull of share demand/supply in all these stocks will effectively sort out new risk/reward levels based on the public policy changes that'll effect relative returns and asset allocation..........lotta thinking going on out there right now and investors are shuffling things around trying to find new levels.........will be interesting to see how it sorts out and I certainly don't have all the answers..........good luck with your investing..........
    15 Nov 2012, 12:06 PM Reply Like
  • gferrel1969
    , contributor
    Comments (10) | Send Message
     
    What about rumor of possible principle write downs? Does this not affect the book value of these stocks?
    15 Nov 2012, 01:50 AM Reply Like
  • gferrel1969
    , contributor
    Comments (10) | Send Message
     
    What about the news about principle reduction possibilities? What effect would that have on these stocks? Would that not change book value? So stated book value could not be used to gage value?
    15 Nov 2012, 01:50 AM Reply Like
  • PLAZMO44
    , contributor
    Comments (21) | Send Message
     
    Like most of you I have built up high dividend portfoilos of my wife's and my IRAs. Current yield to cost is 8.49%. We have PSEC, DNP, AGNC, MSB, NRF, STAG, ARCP, ADC & GAB. All have taken a bath since peaking on 10/19. The IRAs have droped 9% as of today. I too would buy more but can't unless I sell something and I don't have to much in growth ETF's. I do have about 25% of the IRAs in VCLT. That may go when this thing turns around. About a month ago I sold three rRIETs when the mortgage scare broke but kept AGNC because it is so well positioned. A lot of this dosen't make sense like DNP that is all into utilities and MSB that basiclly just collects money for shipments of iron ore pellets from MN. PSEC is also very well positioned and is well below NAV at this point. Get a hold of your congressmen and put some heat on them to get this mess fixed before everything tanks.
    15 Nov 2012, 03:00 AM Reply Like
  • Ragean12
    , contributor
    Comment (1) | Send Message
     
    Perhaps someone can explain this as I'm trying to get a handle on it. ARR is down 7.5% today and there is no single event that appears to have triggered it. The market as a whole was down 1.5% and the Fed notes of their last meeting were released, that can't be sufficient reason for the drop. I have found that there are drastic swings in share price without explanation over the past 6 months. QE3 should have been a precipitating event, though after its announcement it moved only minimally. I find little or no news items with any info. Am I missing something, or is there a major problem with asymmetric information and only insiders know what's going on?
    15 Nov 2012, 03:42 AM Reply Like
  • laterre
    , contributor
    Comments (405) | Send Message
     
    Interesting question about asymmetric information. Yes, that's right, virtually anyone with a modicum of savvy in the financial world who spends 3 hours with a spreadsheet, BBG, and a couple of old 10-Qs can monitor in real time what's going on in most mreits within a comfortable margin of error. They all have their niches and strategies, so even the changes they make between quarters are pretty predictable. You are playing poker against people who can see your hand.

     

    The difficulty is that most retail investors can't do this, or more specifically, don't know how to do this. So they get spooked. They read a lurid story somewhere, see red, and panic sell. This triggers stop losses, which triggers more panic, and so forth. I think that's a big part of what's gone on. That's the unnatural and irrational part of the process, the "animal spirits," if you will.

     

    That being said, everything in the market is in the process of re-pricing, particularly risk assets which have been way overbid, and I think premiums to book and mbs prices more generally had gotten complacent. It was obvious that those investor expectations about yields and premia to book weren't sustainable given the current shape of the yield curve. So the re-rack we've seen is actually a really messy (and scary) but entirely *rational* transition to a different price point that makes more sense in the face of the headwinds and uncertainty moving forward.
    15 Nov 2012, 04:56 PM Reply Like
  • macronaut
    , contributor
    Comments (39) | Send Message
     
    laterre;
    I think that you have summed up the problem very succinctly. It amazes me how so many investors fail to put in the effort to fully understand the business model of the stocks they buy, and this is particularly evident in the mReit space. A lot of investors make the decision to buy based on the enticing 12% or 14% dividend yield, but have no idea how that yield is actually generated and the risks/reward equation involved in that process. So the herd mentality kicks in as soon as some negative pronouncement is made by an analyst (who most likely also has little understanding mReits) and everyone hits the sell button. In my opinion, for what it's worth, this selloff is a total overreaction based on a misunderstanding of how mReits function in the real world of actively managing their MBS portfolios. Yes there will be a reduction of the dividend yield for most of the mReits going forward, but the likely scenario for spreads is still going to allow for reasonably high yeild in an otherwise very low-yield universe of investment options. So the caveat for anyone interested in buying shares of mReits for high yield is to learn as much as possible about the business before you invest...that may lessen some of the crazy volatility in the future.
    15 Nov 2012, 11:05 PM Reply Like
  • maeisenstein
    , contributor
    Comments (6) | Send Message
     
    I am retired and invest for income. The sudden drop in the market is disconcerting, but as my very wise wife says you haven't lost anything until you have to sell. The dividends still look very good compared to any other investments. The loss in value is my children's problem, I am only interested in the dividends.
    15 Nov 2012, 03:43 AM Reply Like
  • Alpha_Vega
    , contributor
    Comments (15) | Send Message
     
    I'm new to these stocks, I bought AGNC about three weeks ago, bad timing. Can anyone tell me what drives the mREITs, I am looking at the 30 year mortgage rates but I do not see the rational for the drop, other then fear factor. the margin spread is smaller but still looks good, specifically with American Capital running the company.
    15 Nov 2012, 03:48 AM Reply Like
  • kingdad
    , contributor
    Comments (987) | Send Message
     
    I'm sure your MReits are looking slightly better today along with the other high yielders BDCs etc. Hopefully the bloodbath is over for now as the mReit dividend season begins anew. With no major announcements of cutbacks in dividends this should shore up prices and allow floors to be established so we can again move forward.
    16 Nov 2012, 12:41 PM Reply Like
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