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laterre

laterre
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  • Is Chimera One Of The Better Plays In The REIT Sector? [View article]
    Great metaphor--but it betrays your misunderstanding of their business model. They've already sold the non-rotten part (the seniors) to other people, and keep the subs for themselves. If there's rot, it eats up their part first...
    Aug 7, 2012. 04:32 PM | 1 Like Like |Link to Comment
  • Chimera Investment Corp: Headed Toward A 0% Dividend Rate [View article]
    It's worth noting that all they've promised you is a .09 divvy for the rest of the year, which potentially includes a "return of capital." This doesn't mean they'll actually earn .09 each quarter. They leave open the poss that you could simply be getting your money back. And they've lowered by 66% their statement of their net income during the restatement period and invoked the dirty words potential "material weakness." If I were a shareholder, I'd consider this a disappointment. Once the shorts cover and the market digests all this, I'd also expect it to sink lower.
    Aug 7, 2012. 10:35 AM | 2 Likes Like |Link to Comment
  • Is Chimera One Of The Better Plays In The REIT Sector? [View article]
    "On the other hand, there are several things that potential investors should consider before establishing a position. One of the negative catalysts potent [sic] shareholders should consider, and as dually [sic] noted by my SA colleague Tim Plaehn, is the fact CIM recently hired a new accounting firm and has delayed the announcement of several previous earnings reports, not to mention they've begun to shave their dividend."

    Other than that Mrs. Lincoln, how was the play?
    Aug 6, 2012. 03:39 PM | 7 Likes Like |Link to Comment
  • American Capital's 40% Discount To Net Asset Value And Dividend Potential [View article]
    TJ,

    Quickly, as I'm traveling...

    To be absolutely clear: I have great respect for the mgmt team at AGNC. They've made good money for shareholders, including myself. I am *not* saying that one should judge AGNC's recent performance based on what happened to a GSE in the middle of a black swan event. In fact, if you re-read my post carefully, I'm saying exactly the opposite about ACAS.

    What I *am* arguing is that it's a logical fallacy to dismiss the current performance of people you don't like (ARR, etc) or to call for mgmt of ACAS to be replaced (which you did) based on what they did in 2007-2008. My point is that IF (notice the "if") one were to adhere to this same standard of judging people based on past performance during an extremely trying time, one would have to be critical of GK as well, whom I know we both admire, or virtually ANYONE running MBS in 2007-2008 who wasn't named Jeffrey Gundlach.

    We can quibble with the legalities of what constitutes a "publicly traded corp" (you'll find some remnants of FNM and FRE on the pink sheets as evidence of my point--not to speak of those who threw good money after bad at the govt's instigation during their preferred capital raises...). We can also quibble about what caused their downfall (you'll say federally mandated lending programs, whereas I'll say--with good empirical evidence--that it was their prop trading and highly leveraged portfolios laden with ABS that initially blew them up). If you'd like a history lesson, we can certainly go back and pull the 10-qs and see what 50 times leverage on a 10% ABS portfolio looked like. But I don't think we're really arguing about what killed the GSEs.

    My bottom line is that 2007-2008 was an exceptionally trying time, and that you can't call out people like Malon Wilkus or the ARR guys for not seeing or knowing things that are evident now in hindsight. I think we'd also agree that you have to judge people on current performance. That all I'm saying--really!
    Aug 6, 2012. 11:08 AM | 1 Like Like |Link to Comment
  • American Capital's 40% Discount To Net Asset Value And Dividend Potential [View article]
    Sorry, TJ--don't mean to bust your chops ;) But Freddie and Fannie were publicly traded corps, and they blew up because of their mortgage portfolios, which were managed even more aggressively than the Bimini's of the world. They lost *plenty* of OPM. If Wilkus or the Bimini dudes can be faulted for getting blindsided, why not Kain--or anyone who was running mbs in 2008-2009? That's all I'm saying. No harm, no foul!

    PS: ugly qtr for AGNC...
    Aug 2, 2012. 04:20 PM | Likes Like |Link to Comment
  • American Capital's 40% Discount To Net Asset Value And Dividend Potential [View article]
    Hey TJ,

    Good pick. I guess I should have your back on calling out mgmt for the 2008-2009 debacle, as ACAS is one of my single biggest losers ever. Still stings. But throughout the whole process, I've gotta say in hindsight that Malon handled things about as well as possible. He's a smart, decent guy. As far as "blame," no one felt more pain from their implosion than he did personally: he defaulted on his loan from ACAS and had his stock sold out from under him at the very bottom.

    It wasn't so much that they were mismanaged as that they were caught in an impossible position. They were forced to mark their portfolio to market (and did so honestly), which blew out their secured loan covenants. Rather than working with them, their lenders were pricks and went for the jugular. They had to liquidate (and consolidate ECAS onto their own books) at the worst poss moment. No one saw this coming, and every BDC--no matter how well managed--suffered to some degree. Several didn't make it and had to be absorbed by others at pennies on the $.

    If you're going to call for mgmt changes--or constantly bring up the Bimini fiasco as a reason for selling ARR now--how about being consistent and acknowledging that Gary Kain (whom Malon hired, BTW) was running Freddie Mac's book (with +/- 15% ABS at ridiculous leverage) when they blew up? Why the double standard?
    Aug 2, 2012. 11:08 AM | 3 Likes Like |Link to Comment
  • Western Asset Mortgage Capital - The Story Before The Call [View article]
    Happy to be wrong on the low side! The dates they're using 5/15-6/30= 1/2 quarter, rather than 1/3. Unlikely they were fully deployed right away, though. They may be overpaying a bit for the stub to match up with normalized earnings.
    Jul 30, 2012. 09:53 AM | 1 Like Like |Link to Comment
  • Chimera Investment Corp: Headed Toward A 0% Dividend Rate [View article]
    Good points--agree 100%. Interesting also that, for all the people who bash FIDAC, they did a heck of a job running FMY. Bleed in NAV there (resulting in the big premium) only started after FIDAC left.
    Jul 26, 2012. 02:34 PM | Likes Like |Link to Comment
  • Chimera Investment Corp: Headed Toward A 0% Dividend Rate [View article]
    Hey, I don't know anything more about it today than I did yesterday other than that it's .20 cheaper. Seems really overdone to me. Bottom line--it's worth at least a buck and change, bullet-proof, even if they never pay another dividend, which is extremely unlikely. At these prices I'm inclined to pick up some calls as lottery tickets.
    Jul 26, 2012. 02:02 PM | Likes Like |Link to Comment
  • Chimera Investment Corp: Headed Toward A 0% Dividend Rate [View article]
    Methinks this sell-off is really overdone. There is *no way* this company goes to zero or is delisted. Assuming they've made no major changes, the agency portfolio alone is worth a buck! Much below $2 for the whole thing and you're applying a huge discount to their subs. Unless there's something we're not seeing, there's nothing new in this SA post to justify the drop.
    Jul 26, 2012. 01:52 PM | 1 Like Like |Link to Comment
  • Chimera Investment Corp: Headed Toward A 0% Dividend Rate [View article]
    Good stocks are easy to understand. It's the bad ones where there's imperfect information and, thus, arbitrage opportunities. After having following this company for several years, there is only one thing I'm relatively confident of: their intrinsic value is either considerably more or considerably less than the current stock price...
    Jul 26, 2012. 12:47 PM | 2 Likes Like |Link to Comment
  • Chimera Investment Corp: Headed Toward A 0% Dividend Rate [View article]
    Not to pile on, as I've been calling this thing a dog for several years now, but still I try to follow it, as there's some money to be made here one way or another.

    A few quibbles with your analysis--first, they are in a good position in one sense that the junky non-agency subs aren't leveraged. (The other--less charitable--interpreta... is that they have no borrowings against these subs because no one would accept them as repo collateral....) All their repo borrowings are against the agency side of the portfolio (which accounts for about .80-1.00 of their equity, by my dated calcs). They own the rest of the non-agency subs free and clear and can in principle wait things out. The problem, though, is that they won't begin receiving any principal repays against these until the AAA front ends of the bonds are paid off, and this doesn't seem likely any time soon (more on this below). By owning the locked out subs, they're entitled only to the IO overflows left over after the frontends are paid the fixed 6-6.5% they're due. So CIM's cash flow is variable and depends on how the underlying credit is performing. If non-performing loans get too high and the foreclosure backlogs aren't flushed out, or servicers stop advancing the interest, the cash overflow to them dwindles. I'd assume that's what's been happening.

    In the absence of filings, the only way to really track their financial health at this point is through the performance of their re-remic deals. They issued a series of bonds in 2008-2010 which are floating around out there in various FI portfolios. Most of them were Credit Suisse deals re-branded in the CSMC 2009 or 2010 RR series. Because they were never registered with the SEC it's hard to find out the details of how much subordination they required, but one of the most widely owned and easily tracked is the JP Morgan 2009-7 deal CIM did. For example, there's a $2.5 million 12-A-1 AA bond from this series in the portfolio of the closed end fund FMY that FIDAC used to manage. Based on the way Brookfield and other third-party owners of AAA pieces of the JPM deal are currently marking the seniors, there seems to be no major issues with the seniors getting paid (other than, tracking them from quarter to quarter, they seem to be paying down really slowly), but that really doesn't tell anything about how far the losses may have eroded the subs.

    The canary in the coal mine would be if any of the AAA or AA seniors they've sold off started showing distress. I've been watching for signs of this and haven't seen it yet. Public owners of the seniors frontends are still marking them at par or above, which is a good sign. But if these were to show any losses, it would mean that cash flow to the subs had ceased entirely, and CIM's unrated non-agency portfolio would be fried.
    Jul 26, 2012. 07:16 AM | 10 Likes Like |Link to Comment
  • 14.60% American Capital Agency Yield Captivates Investors [View article]
    Just wait... 3s are flying off the shelf, and the street is already talking about FNMA 2.5 TBAs, which ought to push 30yr mortgage rates sub 3%. And we haven't even reached the fiscal cliff... Problem is that once real vol and panic set in, mreits will trade in opposite directions to their NAV, just like last summer. That's the time to buy!
    Jul 24, 2012. 02:12 PM | Likes Like |Link to Comment
  • 14.60% American Capital Agency Yield Captivates Investors [View article]
    Todd gets the deal...this keeps up and we're headed to 9-12% yields on the agency mreits--probably on the higher end for well run mreits such as AGNC and the lower end (relatively quickly) for the also-rans.

    What does it say about AGNC that "growth" is now predicated on selling more shares to new investors at a large premium to intrinsic value? Or that it now takes 8.5 turns of leverage to generate spread income in the low teens? Or that every new $ that comes in the door is reinvested at tighter spreads that are dilutive to NIM. Ah, but who cares that the hot dog business is ailing when there's so much money to be made selling hot dog franchises!
    Jul 24, 2012. 07:52 AM | 1 Like Like |Link to Comment
  • CommonWealth REIT: New Bond Not Attractive [View article]
    It's exchange traded debt, so it has a regular ticker like a stock: CWHN
    Jul 20, 2012. 10:59 AM | 1 Like Like |Link to Comment
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