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laterre

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  • 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 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 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 11:08 AM | 3 Likes Like |Link to Comment
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