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  • 18%+ Dividend Western Asset Mortgage Capital Is Benefiting From The Grexit Fear - Buy [View article]
    Not following your numbers vs. their charts. And is NET or gross the appropriate way to reckon up how fixed pay/ variable receive and variable pay/ fixed receive books of swaps interact with each other...
    May 7, 2015. 03:39 PM | 1 Like Like |Link to Comment
  • Western Asset Mortgage: Best-Of-Breed [View article]
    Great company, NIMs are expanding, still a major holding for me, but it's rich at these prices.

    The better trade would be to start gradually moving into MTGE and AGNC, which have opened up substantial discounts to NAV--more than 20% and well on the way to 25% if this keeps up. The price discrepancy can't be justified over the long haul, and don't forget that WMC is taking more risks (credit and leverage) to earn those juicy dividend yields.
    May 7, 2015. 08:16 AM | 3 Likes Like |Link to Comment
  • Fishing In The Oil Patch [View instapost]
    Sorry, my friend. But the good news is, you've got at least one new bidder in the market today.
    May 6, 2015. 11:15 AM | 1 Like Like |Link to Comment
  • American Capital Agency: The Sky Is Not Falling [View article]
    Echoing user27...

    Nice qtr by WMC, but I think AGNC is actually worth a 2nd look at these current prices. They can earn 20% ROE just by buying back their own shares, and they should begin doing so aggressively.

    Buy when mgmt is buying, and sell when they're selling--like all those ridiculous top of the market SPOs AGNC did in 2012-2013.
    May 6, 2015. 09:46 AM | 2 Likes Like |Link to Comment
  • Spreads And Durations And Swaps... Oh, My! Digging Deeper Into Western Asset Mortgage [View article]
    Decent Q, with the fundamentals looking bright for the near term. Still, it's rich compared to the rest of the field...

    With the drubbing that AGNC has gotten lately, and the sheer disgust/ capitulation that's been reflected on SA, I'm thinking about nibbling a little on AGNC. They're close to opening up a 25% discount to NAV. At these prices, the best allocation of capital by mgmt is to begin buying back shares with both fists.
    May 6, 2015. 09:39 AM | Likes Like |Link to Comment
  • Western Asset Mortgage Capital Corporation Announces First Quarter 2015 Results [View article]
    Nicely done--about as well as could be expected in a volatile qtr. And NIM *growing* rather than shrinking as they move deeper into credit!
    May 6, 2015. 09:34 AM | Likes Like |Link to Comment
  • Whither Onshore Drilling Activity Goest, Basic Energy Services Will Follow [View article]
    Agree 100%. I stressed their #'s back in December and came away with the strong impression that they could withstand a 25% hit to revenues for a couple of years without being in any danger of defaulting on their interest expenses. Bought a good sized position in their unsecured notes, which have bounced back nicely. They're going to tread water for a while, but the results looked decent, other than a big bring-forward in their receivables for the Q that had the effect of bolstering the cash flow #'s.

    No opinion on fair value/ current price of the equity.
    May 3, 2015. 01:37 PM | Likes Like |Link to Comment
  • Fishing In The Oil Patch [View instapost]
    Let's just say I've done a couple of those kinds of analyses.

    But the results are only as good as the numbers going in. Disclosed PV-10s of even the front-line operators are hopelessly confected. This E&P space is a cesspool. I much prefer the financial and real estate sectors for that very reason (Go OCN and GNW, BTW!)

    Will check it out in the next couple of weeks. I'm behind on a round of earnings releases I need to process first...
    May 1, 2015. 12:41 PM | Likes Like |Link to Comment
  • Fishing In The Oil Patch [View instapost]
    Thanks much for the tip on ESCRP. Will try to take a look and share any feedback, though I really scratch my head on these E&Ps. It's not clear you can trust the book numbers for recovery values. And looking at the game as chess rather than checkers, even if the prefs look like they're in the money now, there's usually no structural protection to them layering more debt in front of the prefs.

    Hey, sorry, didn't mean to be rooting against you in my call for $5!
    May 1, 2015. 11:00 AM | Likes Like |Link to Comment
  • Fishing In The Oil Patch [View instapost]
    Haha, I got lucky once--probably the smart thing would be to quit while I'm ahead rather than get involved again! Aesop's dog and all that... But at some point the prefs may become cheap enough that it's worth a VERY small bet.

    Yes, absolutely, if they declare a divvy these things are off to the races. I just don't see how they can afford to do so right now. Selling hedges to raise cash isn't an encouraging sign. But it does tend to confirm the hunch we talked about before: KeyBank wants out of this deal, bad. Maybe there's enough speculative hot money floating around out there that they can place some senior secured convertibles to take the uncooperative lenders out.
    May 1, 2015. 09:26 AM | Likes Like |Link to Comment
  • Fishing In The Oil Patch [View instapost]
    Hope I'm wrong, but none of these announcements bodes well for the lower echelons of the capital structure.... When they start talking about "stake-holders," watch your wallets.

    If you were an institutional investor eye-balling a PP investment in MILL, what kind of "Credit-enhancing capital" infusion would get you excited?

    a) some kind of senior secured convertible notes with a big kicker that would raise enough cash to get either KeyBank or the Apollo loansharks out of the picture? This would actually be a good move, assuming they could find someone who'd be willing to accept a lower interest rate in exchange for all the potential upside. The downside of this kind of deal for the preferreds is that anyone willing to get involved here can pretty much call the shots, and if the amount of the notes ends up being bigger than the current term debt outstanding (and given these guys' prodigious cash burn) the recovery on the prefs gets pushed farther down or even totally out of the money.

    b) "if the answer isn't yes, then it's probably no": I take this to mean no divvy declaration on the prefs. You see this in the price action on the prefs. Now would be the right time to tender some kind of exchange offer (say, a non-cash offer at .40 on the $) to convert these prefs into new equity. Do this in conjunction with the reverse split needed to get back into compliance. This could be voluntary to see if they can get any takers, or as part of an actual/ threatened pre-pack Ch. 11.

    c) on the Wells notice. Big surprise: looks like they overstated the value of their acquisitions. Didn't we already know this when they wrote all these back down? Is there a potential legal remedy here by the current regime against past management?

    In sum, this is still a big cluster-bump, but at $4 or 5 on the prefs, if they get there, I might take another punt...
    Apr 30, 2015. 03:37 PM | Likes Like |Link to Comment
  • Genworth +6.1% as "stability returns" [View news story]
    It's a classic case of one problem business unit (long term care) with really scary optics (but potentially interesting long-term upside if they can ever get the pricing right) completely overshadowing all the value in other units hiding in plain sight. They'll settle on the right capital transaction in the next 6 mos to a year (whether selling off a non-core unit, going private or whatever), and this will take off.

    Not sure book value is a realistic target, though. Don't their healthier peers in MI also sell at a pretty decent discount to book?

    I bought a nice bucket of their debt when it was way down and just hope that however they re-jigger the capital structure will lead to a credit upgrade.
    Apr 29, 2015. 03:46 PM | Likes Like |Link to Comment
  • Genworth +6.1% as "stability returns" [View news story]
    Nice Qtr. Looks like the worst is behind them. Free up some cash with a strategic sale of the lifestyle unit, secure some more LTCR rate increases, and they're in bizness...
    Apr 29, 2015. 08:25 AM | Likes Like |Link to Comment
  • Lumber Liquidators Overshot To The Downside [View article]
    Hope you're all right. You all are way more confident in the tort system in the US than me.

    Problem is that unlike defective pants or child-labor made shoes, formaldehyde is a toxin, potentially carcinogenic and with lots of other known health hazards. IF--and this is big IF--they can be shown to have had knowledge that they were cutting corners and selling a potentially dangerous product, this becomes more than a nuisance settlement.

    A more conservative analogy than LULU or Nike is A. H. Robins or Manville. I don't think it'll unfold this way, but you're kidding yourself if you don't allow that this worst case scenario is at least within the realm of possibility. Things are never quite as good as we'd like to hope, nor as bad as we fear.
    Apr 15, 2015. 10:53 AM | Likes Like |Link to Comment
  • Lumber Liquidators Overshot To The Downside [View article]
    I don't doubt but that you're right on the facts. Indeed, I hope you are proven correct. This has been as nasty a smear job as I can recall.

    But the best/worst thing about civil tort liability in the US is that the facts are largely irrelevant to whether one can assemble a class or win a judgment. Now that there's blood in the water, every would-be plaintiff whose kid got a brain tumor or whose wife's asthma became debilitating will be out in droves. And all it takes is one smoking gun/ incautiously worded email (all of which will be subpoenaed) between LL's buyers and the suppliers and they're chum.
    Apr 13, 2015. 05:53 PM | Likes Like |Link to Comment