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  • Grab These 4 Cheap Diversified REITs Before Earnings This Week  [View article]
    David, you really should be more careful how you characterize the stocks you recommend. CYS, MFA and ARI are mortgage REITs ("mREITs"), not considered by investment analysts as diversified REITs. As vehicles investing in leveraged mortgage backed securities or commercial loans they have their own very unique characteristics completely different from REITs holding diversified real estate. CYS and MFA are residential mortgage REITs investing in residential mortgage backed securities (RMBS). Regarding ARI from another article on SA regarding ARI: "Apollo Commercial Real Estate Finance, Inc. is a real estate investment trust that primarily originates, invests in, acquires and manages performing commercial first mortgage loans, subordinate financings, commercial mortgage- backed securities and other commercial real estate-related debt investments." Granted, the assets held by mREITs do have a relationship to the real estate market in terms of whether there is a high level of refinances or defaults. But they also involve many more specialized considerations than real estate REITs that actually own real estate and collect rents.
    Feb 9, 2016. 09:23 AM | 7 Likes Like |Link to Comment
  • Prospect Capital: Upcoming NAV Declines And Potential Credit Rating Downgrade  [View article]
    Hard to believe PSEC now trades at only 56% of NAV and 17.61% current yield on price. Well, as I commented in another article yesterday, I'll be rolling down the 7-strike puts to 6-strike. Thinking of shortening position to -1.2 delta since the broad market appears to want to go lower hard. One pesky problem is that the strike price intervals keep getting to be a higher and higher percentage of stock price (now 1/6.7) which is way more than it would be if the stock was at, say, 8 or 9); maybe we'll get a reverse split after the price dives under 5. Another problem is that the March 6 puts look expensive at 0.75, but Feb 6's don't have much time to live. Possibly I'll sell just only the Feb 7-strike puts and add stock with proceeds and keep March 7-strike and add March 6-strikes or 6/5 put spreads. I get the feeling that the market wants to test the 2009 low around 2.5. This begins to look like AMD.
    Feb 8, 2016. 05:56 PM | Likes Like |Link to Comment
  • Prospect Capital Corp.'s Fiscal Q2 2016 NII And NAV Projection (Including Current Price Target)  [View article]
    Holding delta neutral position with 7-strike Feb 19 puts and sold 5 Feb 19 6-strike puts at 0.20 to add 500 shares at 5.8 or better. With a break below 6 will roll over 7-strike puts to later expiration at 6-strike and re-establish delta neutral. How low can this go; looks like a test of 2008 lows at about 2.3 is possible? This general bear market in debt-related equities (BDCs, mREITs, high yield) seems to be anticipating some awful economic events coming up. Love the 16+% yield.
    Feb 7, 2016. 10:04 AM | 5 Likes Like |Link to Comment
  • Stocks And The Monster In The Closet  [View article]
    Let's see now. Legacy ARM rates up 0.5-0.75% (see 6-month and 1-year LIBOR rates for 52 weeks), HELOC rates up 0.25%, credit card rates up 0.25% from already sky high levels of 12-30%, no increase in social security retirement income (but higher Medicare deduction), real median household income actually lower than 2009 but grocery prices and rents way up. Sounds like a lot of consumer stimulus, right? As the market falls, consumer sentiment will deteriorate. Also, the elephant in the room that almost nobody mentions is the record high level of margin debt that is getting smashed. I don't use margin, but I just got a notice from Interactive Brokers that the margin requirement for one of my mREITs, Arlington (AI), is being increased from 66% to 100%. I guess I never realized that brokers could increase required margins above the 50% minimum level. I recall that one of the biggest causes of the 1929 crash is that brokers kept increasing margin requirements from very low levels at the top to very high levels at the bottom (in those days there was no Fed regulation of margins). With or without a recession, I'm expecting a long bear market in stocks.
    Feb 6, 2016. 10:01 AM | 3 Likes Like |Link to Comment
  • Dollar Plunges, Gold And Oil Soar, Stocks Utterly Confused - Bezek's Daily Briefing  [View article]
    The biggest shocker is that the hated mREITs have been rallying for two weeks even as the yield curve has flattened and the broad market has struggled.
    Feb 4, 2016. 09:25 AM | 2 Likes Like |Link to Comment
  • Seeking Alpha's New Look: Making It Easier For You To Be A Better Investor  [View article]
    Hate the ballooning banner. Makes me dizzy.
    Feb 1, 2016. 07:03 PM | 8 Likes Like |Link to Comment
  • Invesco Mortgage: Not Good Enough  [View article]
    All mREITs have been hurt by the significant compression in spreads over the past year or more, and I expect the compression to continue until the effective yield curve is inverted. At some point the costs of short term borrowing plus hedging costs will exceed the income from leveraged ownership of MBS. Now they are additionally adversely affected by the general bear market. In addition to spread compression the mREITs will continue to suffer from high prepayment rates, and, most likely, growing default rates as we move toward the next recession. However, I continue to hold several for their juicy dividends but almost always with full hedging via puts and even short hedging at times. I won't invest in any mREIT that doesn't have a good options market, since I believe the stock prices will continue to decline for quite a while. I recently ditched IVR, since their option market is somewhat less efficient than that for names like NLY, AGNC, CIM, ARR or HTS, and I can get better yields from ARR, HTS, OAKS, WMC, CIM, AI (only AI has qualified dividends for a taxable account), and the same yield for AGNC. In the long term as these stocks get lower and lower into the $5-7/share range, efficient hedging could get more difficult, since available strike price intervals for puts will represent an ever larger fraction of the equity value and overhead calls will have little premium to sell.

    However, I also believe that if the outsized discounts to NAV persist there might be some takeovers and/or liquidations so investors realize values closer to the NAVs. For that reason I'm reluctant to write covered calls against too high a portion of positions.

    In the case of the quarterly payers I tend to sell the stocks and buy calls to replace the position to hold between dividends, but I don't do that with AI since it's held in a taxable account and want to maintain qualified dividend status.
    Jan 31, 2016. 08:32 PM | Likes Like |Link to Comment
  • High-Dividend Stock Yields Over 13%, Had Record Earnings, Goes Ex-Dividend This Week  [View article]
    I'd go with GMLP since it has options and the position can be well protected with married puts and yield can be enhanced with covered calls.
    Jan 31, 2016. 07:42 PM | 1 Like Like |Link to Comment
  • The Mentality Of An Average Investor, Part III  [View article]
    For trend followers stocks tend to be giffen goods: they become more attractive the more they rise in price and the less attractive the more they fall in price. Trend following can be a good approach, but the problem boils down to defining the trend. For many investors the slopes of the various moving averages define the trends in various time frames. For example, currently the slopes of the 50-day and 200-day moving averages of the indices are downward defining a relatively new intermediate, and possibly, long term downtrend. Very short term averages may be rising now due to the latest multi-day rally. For others the point-and-figure charting method defines the trend for an individual stock. Currently only 33% of S&P 500 stocks are in a bullish trend as defined by the P&F method. For some, the objective is to buy and hold forever, passing stocks on to heirs. It all depends on your objective and your time frame.
    Jan 30, 2016. 07:07 PM | 1 Like Like |Link to Comment
  • Annaly Capital Management And FHFA Ruling  [View article]
    I assume the pain for mREITs due to declining earnings due to shrinking short/long spreads will continue for a long time until the inversion of the yield curve is finished, at which point the mREITs will be losing money on every asset. They'll be like the hedged oil companies, able to make money one time only on the hedges but not on continuing asset positions, and the stock prices will be sub $1. They'll be forced to sell assets to reduce losses. So I'll just keep holding them with delta neutral (or delta negative) put hedges and watch them sink for another couple years. I'm thinking of reducing holdings in mREITs and shifting those funds to more BDCs. Yields are almost comparable to mREITs for some (PSEC and FSC, for sure), and they'll actually be making increasing earnings as the 1-year LIBOR rate continues to rise above the 1% floor in their adjustable rate loans. Of course, the issue for BDCs will be rising loan defaults into the recession even as loan rates rise, so I guess there's no perfect solution.
    Jan 30, 2016. 04:59 PM | Likes Like |Link to Comment
  • The Yield Curve Says No Recession  [View article]
    Good article. I note that the 2-yr/10-year Tresury yield curve has flattened considerably since 2011-2013 and the trend has continued downward recently. I also note that there has been significant upward movement in short term LIBOR rates (overnight through 1-year). The 1-year LIBOR rate is now 1.15%, virtually at its 52-week high. Perhaps it's significant that the spread between short term paper and the 10-year Treasury has narrowed considerably.

    I also note that the 1-year Treasury is not the most common index used to adjust mortgage ARMs or commercial loans. The 6-month and 1-year LIBOR rate is used to adjust most mortgage ARMs and the 1-year LIBOR is used to adjust commercial loans. Of significance is the fact that most commercial adjustable rate loans have a LIBOR index floor of 1%, which floor has now been breached upward, causing a rise in commercial loan costs. In addition many millions of US homeowners are stuck in legacy ARMs that they can't refinance and are in their adjustment periods, so the rates and payments on those are adjusting upward. In addition rates on all HELOCs typically follow the prime rate, so those also have gone up 0.25% due to the Fed hike. The foregoing trends will further dampen economic growth. And, we all know the blowout that's happened with the spread between commercial loans rates, especially for lower rated risks, and Treasuries, also not an encouraging sign.

    "...we should be obsessed with finding ways to get the economy back on its long-term growth path (Hint: smaller government, reduced regulatory burdens, lower and flatter marginal income tax rates, and much lower corporate tax rates)." I couldn't agree more with the first part of the sentence, but must disagree with part of the parenthetical part. Smaller government will decrease GNP directly in accordance with spending reductions, plus the negative multiplier effect. Lower marginal rates, particularly in the lowest and middle income tiers would be extremely helpful given the absence of any real growth in household incomes. I doubt that less regulation would significantly affect the economy, but what regulations would you change to do that? Agree that lower marginal corporate tax rates would help, if other loopholes are closed and reform is generally not revenue reducing; the share of corporate taxes versus GNP are at an all time low already.
    Jan 30, 2016. 02:02 PM | 1 Like Like |Link to Comment
  • Apple Has Serious Problems  [View article]
    The fate of all gadget makers whose products don't require razor blades or K cups. If the authors predictions are correct, I suspect Apple is going to eventually lose its cachet with consumers. Apple needs to find a stable source of recurring revenue.
    Jan 27, 2016. 08:18 PM | Likes Like |Link to Comment
  • Is This A Bear Market?  [View article]
    I define a major bear trend in a price as a condition in which the slope of the 200-day moving average is negative. I define an intermediate bear trend in a price as a condition in which the slope of the 50-day moving average is negative. I define a short term bear trend in a price as a condition in which the slope of the 15-day moving average is negative. Intermediate trends can confirm or question the major trend. Similarly, the short term trend can confirm or question the major trend. Other conditions can be informative such as the status of a point-and-figure chart.

    For market averages, such as NYSE or SPY, there are additional indicators that are useful such as the level of the McClellan oscillator, the level and slope of the summation index, and the level and direction of the VIX. Also, certain momentum indicators such as the level and direction of rsi and stochastics can provide clues at to the likelihood of a possible reversal in the trend. In the last few days the rsi and McClellan oscillator suggested a very high likelihood of a pause or reversal in the short term down trend in NYSE (all other averages tend to go up or down in concert with the NYSE), which pause did occur. A continuation of the reversed short term trend, or a series of alternating short term uptrends and downtrends, can cause a reversal of the intermediate trend, which is currently highly likely based on the very low level of the weekly rsi, the level of the summation index (watch for a change in the slope of the summation index; it usually moves by a minimum of 300 points during a short term move), VIX and other intermediate term indicators. I see the possibility of a reversal in the major trend from down to up in the very near future as fairly low at present, but not insignificant. From a more fundamental view, I would watch carefully the behavior of oil and HYG to signal a relaxation in stress in the credit market which recently comprise the fundamental problem in finance.
    Jan 24, 2016. 03:39 PM | 4 Likes Like |Link to Comment
  • Legacy Reserves Shocker - Best Upstream MLP Eliminates Distributions, Creating Opportunity  [View article]
    I'm mystifyed why BBEP preferred would be trading at 4.69 and LGCYO at 2.39. I thought everybody agreed that the risk of BBEP going BK was much greater than that for LGCY.
    Jan 24, 2016. 09:37 AM | Likes Like |Link to Comment
  • Confessions Of A Retired Energy MLP Investor  [View article]
    NGL, probably safe 20.97% distribution, but hedge. GMLP, 17.63%, hedge.
    Jan 24, 2016. 08:58 AM | Likes Like |Link to Comment