Amidst a letter making you want to decamp to the bomb shelter, Kyle Bass renews his bullish call...

Amidst a letter making you want to decamp to the bomb shelter, Kyle Bass renews his bullish call on housing, specifically non-agency MBS. The refinancing boom has not spread to Alt-A and Subprime loans, and rates remain high while credit trends sharply improve - a sweet situation for owners of the paper. Mortgage REITs with non-agency exposure include: NCT, IVR, MFA, EFC, CIM, DX.

Comments (9)
  • Tack
    , contributor
    Comments (16279) | Send Message
    Good points.


    The oft-mentioned fears of refi's are overblown because most mortgagees cannot qualify for the new loans, either lacking equity, added cash credit scores, or all the above. The only genuine risk for these REITs is spread compression from their borrowing side, not their lending side, and that doesn't appear to be an immediate threat.


    Given that prices in the space have taken a beating recently, they would seem to represent better than fair value.
    18 Nov 2012, 11:28 AM Reply Like
  • ArtfulDodger
    , contributor
    Comments (2587) | Send Message
    Yo Tack:


    How have you been? Well, I hope.


    I fear one more problem with the mREITs and others, and that is the SEC changing their distribution-taxation structure. After looking them over earlier this year, I don't think we ever received a finite answer as to what they were going to do, if anything.


    From my end I believe that it's a possible scenario (very negative too), because this administration leans toward the government doing most everything, the private sector as little as possible.


    Todd Johnson was on top of this earlier, but I can't get an answer from him on any recent news.


    Have you heard anything about that?
    18 Nov 2012, 12:49 PM Reply Like
  • Tack
    , contributor
    Comments (16279) | Send Message


    Not a peep.
    18 Nov 2012, 12:52 PM Reply Like
  • REIT Analyst
    , contributor
    Comments (500) | Send Message
    Kyle Bass's comments are relevant for non agencies. Not much to do with agencies (not directly at least), but your comment is I think specific to agency MBS.
    Considering only housing related effects, what's good for non agencies (strong home pice appreciation, better credit mostly discount bonds) is moderately bad for agencies (faster prepays on mostly premium bonds).
    18 Nov 2012, 07:14 PM Reply Like
  • Trade In Mexico
    , contributor
    Comments (1014) | Send Message
    Kyle Bass gets it! Stay heavy in cash, austerity and a recession is coming to America in 2013:

    18 Nov 2012, 01:53 PM Reply Like
  • Patrick Harden
    , contributor
    Comments (463) | Send Message
    EFC is a publicly-traded partnership, not a REIT. Additional options include MTGE, MITT, RWT, and PMT.
    18 Nov 2012, 03:46 PM Reply Like
  • REIT Analyst
    , contributor
    Comments (500) | Send Message
    And how differently would you analyze EFC from a hybrid mREIT?
    18 Nov 2012, 07:15 PM Reply Like
  • divinecomedy
    , contributor
    Comments (465) | Send Message
    Good letter, and I am short the Yen. From my point of view it's one of the only game in town with a favorable asymmetric outcome. Sure you can lose more in the short run, but I too think Japan has about run its course. Within a year, this trade should be a home run.
    18 Nov 2012, 09:34 PM Reply Like
  • karlis44
    , contributor
    Comments (63) | Send Message
    K ULLIS , MD
    19 Nov 2012, 12:35 AM Reply Like
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