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  • CYS Dividend Coverage Is Expected To Improve But Higher Hedges Remain A Concern [View article]
    Forgive my ignorance, but the idea of mREITs has to do with borrowing low and lending high. The yield curve is positive the further out the curve you go. Shortening the curve makes returns lower. To me this would seem to be against the whole notion of mREITs. I suppose we can all draw our own conclusions. I hope these guys are much smarter than me and have info I am not privy to. I sure hope their thoughts are towards a positive outcome, unlike the folks at ARR who are in a race to bankruptcy court in order to start over with new stock and disavow the present shareholders. You mention hedges, I suppose good hedges make for great neighbors, but in this case not so much. Hedging interest rates seems like a good idea on the surface but we agree interest rates are headed south. This should translate to a stronger economy and stronger currency. If you put money in the bank today to be removed at a later date, and get back less than you put in, that seems to fly in the face of the notion of" the time value of money." I suppose if you have to pay taxes and need the negative rates for tax write offs, and can justify giving weaker currency to get returned stronger money then negative interest rates can be justified.
    Feb 15, 2015. 12:36 PM | 1 Like Like |Link to Comment
  • REIT Volatility Is A Big Fat Warning Sign [View article]
    Brad: Risk can be your friend or unchecked it can be your enemy. Volatility is the handmaiden of risk. Not likely to have one without the other. The whole market has become riskier and more volatile. REITs having more leverage than the rest of the market are deemed riskier. I say not so much. Their rewards are much higher also in the form of dividends. I know you like to refer to May and June of 2013 as a watershed for overselling. I was in AGNC at the time. I sold out at $33 and bought back in at $23. Timing is not my thing, but I missed the biggest part of the crash. What did I see? Well about 6 or 8 months prior to that a lot FUNDS started buying up mREITs. Well I know they are not in it for the long haul usually, and they need to collect a few dividends and get out before they have to report their holdings to shareholders. Shareholders don't want to think someone is gambling with their money. The selloff was bound to happen, not to the severity that REITs fell off at that time. In June I decided that REITs looked a lot like Ponzi schemes. What I know about Ponzis is those early in do alright, those late to the game not so much. I started looking at issue dates and dividend rates. I came up with WMC nearly 20% dividend. I loaded up and haven't regretted it yet. In fact I took out a margin account to buy $200,000 more of it. Color me stupid but time will tell. Also Blackrock owns over $3,000,000 of WMC. Pretty high praise in my estimation. I like to think the guys running the WMC show know what they are doing, but I thought likewise of AGNC until it was clear they were as inept as the rest of these clowns. They love to tell about their complex hedges and how they are the smartest guys in the room. What I know about hedges is that transaction costs can eat up any profits quicker than a cat can lick his ass. As you can tell I haven't mentioned interest rates yet. Take this away if nothing else blows your skirt up, we are in deflationary times and everyone is lowering interest rates to the point of negative, even safe and sound folks like the Swiss. I may have this backwards but, in a negative interest rate environment I want my money in something that is guaranteed by the strongest government in the world. Interest and principal are guaranteed by a government that is stronger militarily than the next 10 governments combined, since these currency wars throughout history have led to WAR. If you are still reading this you may want to do a little research into a phenomenon I have noticed recently. A lot of stocks pay their dividends at the end of the year. Right after the ex-date the price drops more than the dividend. Since dividends are taxed differently than gains it would behoove a person to sell before the ex-date and buy back in after the dip. What say you?
    Feb 13, 2015. 05:22 AM | Likes Like |Link to Comment
  • REIT Volatility Is A Big Fat Warning Sign [View article]
    I am having a little bit of cognitive dissonance every country in the world is in a race to lower interest rates even to negative rates. All I read on SA is that rates are headed up and the gloom and doom for all REITs. I am no expert but I have my eyes open and my ears to the ground and a strong case can be made for rates falling further. In the light of QE I can understand why folks feel that way, more money chasing fewer goods causes classic inflation. As near as I can tell that money did not make it into the general population, the financial institutions kept it within the financial community. Barring another Tulipmania, South Seas land deal, or a housing bubble bursting we should be ok holding on to mREITs. The default risk is zero as principal and interest are guaranteed by the government. I don't think there are very many investments like that.
    Feb 11, 2015. 09:50 AM | 1 Like Like |Link to Comment
  • Western Asset Mortgage: Are You Ready For The 20% Dividend Yield? [View article]
    Color me stupid, but I fail to see the need for these complicated hedges. As I see it they are buying mortgages that are backed up by the Federal Government. If the folks buying a house miss a payment the government guarantees principal and interest. Where is the risk? When I try to write covered calls the commissions are way higher than buying or selling the stock. Of course if you are depending on LIBOR what could possibly go wrong? As I understand it these folks borrow short term and loan longer term netting 1% or 2%. Then they leverage that 8 or 9 times to pay that 20% dividend. Who is loaning that 8 or 9 times and at what rate?
    Feb 5, 2015. 07:55 AM | Likes Like |Link to Comment
  • Should You Be Worried About Western Asset Mortgage? [View article]
    First of all Western Asset the parent company of WMC, just received the top award for their funds from Morningstar. That is a pretty big deal so they are in pretty good hands. At least that was my understanding. WMC is able to pay more dividend because they hold their hedges to a minimum. WMC has enough earnings to more than cover the dividend. Blackrock owns over 3million shares, you cannot get a much better recommendation than that. There is a rumor going around that all other things being equal people would rather live in their own homes, and that is WMC's business as I understand it. Lately Cramer and a lot of other "gloom and doomers" are certain the sky is falling. I am a glass half full kind of guy and I think WMC will be somewhere north of $15 by the next ex-date.
    Jan 31, 2015. 01:02 AM | 7 Likes Like |Link to Comment
  • ARMOUR Needs To Quit Defensive Approach [View article]
    Dear Sir
    What you are saying is correct to a point. You assume that ARR management has the shareholder's best interest at heart, this clearly is not the case. From the time I started watching ARR they have paid out more in dividends than they were earning. When you call the company no one knows anything and no one who does know is available. As near as I can figure they are trying to get to bankruptcy court as soon as possible, and start over with new stock, and the older stockholders are left holding the bag. With all due respect, this is what they did with Bimini. Check it out. They are much more dependent on new blood coming into the game than taking care of present stockholders. I know this makes it sound like a Ponzi scheme and should be illegal but the investment bankers charge huge fees on the new stock, investment bankers are above the law and play by different rules than the rest of us. You speak of over doing the hedging. Not if you have a brother in law or friend selling those hedges. Hedging
    is something akin to picking up pennies in front of a steam roller while blindfolded.

    Jan 30, 2015. 12:52 PM | 3 Likes Like |Link to Comment
  • I Hope The Exit Doors Are Wide Enough [View article]
    First of all six countries around the world lowered their interest rates this past week. The trend looks deflationary to me even though some say disinflationary I fail to see any difference. Secondly, the FED can ill afford to raise rates on our debts. Thirdly, the dollar is getting stronger every day compared to ALL other currencies that matter. Fourthly, the government guarantees principal and interest on mortgages bought by the mREITs. I fail to see the risks everyone wants to hedge against, but I am just a simple guy trying to make a buck or two. Fifthly, they have to pay out 90% of earnings. This doesn't negate any financial engineering by REITs, but if earnings cover dividends you should be OK. I try to put my money where my mouth is. Today I borrowed $190,000 on margin to buy more WMC. That is how bullish I am on REITs. For 40 years the most profitable concerns in the NYSE were Fannie and Freddie until the politicians got too greedy and ended them. These hedges, swaptions, derivitives, and other back door tricks are akin to picking up pennies in front of a steam roller while blindfolded.
    Jan 22, 2015. 09:22 PM | 2 Likes Like |Link to Comment
  • Annaly: I Am Seeing More Reasons Not To Own This Stock Right Now [View article]
    Some of these mREITs like ARR are cutting dividends and are mismanaged so badly one can only surmise that they are in a hurry to get to bankruptcy court and start over with new stock issued. The guys running ARR have already done this with another mREIT called Bimini Capital. They bankrupted the company and started over with ARR. On the surface this sounds outrageous and illegal but the investment bankers make all kinds of fees in these deals and are not to eager to give that up. Personally I think some folks ought to be behind bars, but be not fooled these folks do not have the stockholders interests at heart. There are many other ways they cook the books and screw the shareholders. These folks are dealing in mortgages backed by Fannie and Freddie there is no need for complicated swaptions and other various and sundry hedges. It reeks of brother in law deals and kickbacks. This should be enough to say caveat emptor.
    Jan 8, 2015. 06:57 PM | 1 Like Like |Link to Comment
  • Annaly: I Am Seeing More Reasons Not To Own This Stock Right Now [View article]
    You folks seem to forget the main reasons for buying MREITs. They are required to pay out 90% of earnings, leaving little room to cook the books. They invest in federally insured mortgages. It is my understanding that principal and interest are covered by our great uncle Sam. On the surface I do not understand the need for high priced hedges, swaptions, or whatever complicated terms they use to justify their bloated salaries. Many folks say that MREITs are just like bond funds. After the summer of 2013 I decided they were more like Ponzi schemes. What I know about Ponzis is that those early in do quite well those later not so well. I started looking for the newest MREIT, and came up with WMC and have done quite well since. If only I could not get cold feet and sell into the dips, I would have done much better. Can you say whipsawed. I also write covered calls against WMC and have done well if I stay away from the strike price as far as possible. It is my intention to ride this horse as far as possible or a fresher horse comes along. The 19% dividend is better than I deserve, and I thank them for it, as I cannot figure how much of that dividend is earnings or return of capital. The guy at the grocery store or repair shop does not care.
    Jan 4, 2015. 11:39 AM | 1 Like Like |Link to Comment
  • The Real Reason Why Stocks Are Down [View article]
    All of these folks who play the oil futures markets are getting margin calls this week. These futures contracts are worth less than nothing and other stocks must be sold at whatever prices to cover the margin calls. The airlines are huge in these markets as they have huge demands on supplies. I suspect that as their cash on hand dries up from margin calls we will see prices of flights fall to help cash flow.
    Of course the global warming crowd should be happier as demand falls. My own take on this is a little more common sense than scientific. All of this oil comes from underground, and oil is a great lubricant. In the light of continental drifting there may be a reason that oil is underground. We have no idea what kind of harm we are doing to the earth's crust.
    Dec 14, 2014. 07:48 PM | 1 Like Like |Link to Comment
  • Western Asset Mortgage: Yeah I'm Dumbfounded Here [View article]
    My thoughts on WMC. I have a degree in finance , I am able to read balance sheets and income statements. I have no idea of the quality of the WMC loan portfolio. There may be a lot of bad loans or nonperforming assets there, but BIG BROTHER stands behind their portfolio and all income streams. I keep reading about all of these hedges and roll overs and whatever else you want to call them. To my way of thinking these are unnecessary. It seems like these strategies are like brother in law finance. Not really cost effective as shown last summer when prices fell and the hedges were not effective. When you have BIG BROTHER backing you why play games.
    I had 30,000 shares of WMC until the market dipped below 16,000 and triggered a sell, needless to say I got whipsawed, and am looking to get back in before the next end of year dividend. Money saved spends just as well as money won, money lost not so well. A good nights sleep is priceless.
    Nov 12, 2014. 04:00 AM | 1 Like Like |Link to Comment
  • Raise Of Dividend To 18.5% Makes Western Asset Mortgage Look Attractive [View article]
    Last summer when the mREITs took such a decline, I believed the rhetoric and thought they were hedged against such things. Well they had feet of clay and I was being asked to pay for the hedges and the losses. I was not a happy camper. So I took a good look at what had transpired and for all intent and purposes these mREITs looked just like a Ponzi scheme. The first ones in do very well and the last ones in not so well. I started looking at IPO's of mREITs and happened on WMC so I bought in and have been rewarded well since. Now the question is 'when to sell.' I would feel much better if there were new money coming into the game as with secondary offerings. SA is letting me know it is time to go now by slowing down to a crawl.
    Sep 29, 2014. 07:16 AM | Likes Like |Link to Comment
  • Book Review: The Big Con [View article]
    I read your article looking for evidence of the greatest scam of all time, the collapse of 2008. Sadly not much there, but you did bring up remembrances of my misspent youth around grifters in the 1970's. I never was in on a big con but was around a lot of little ones. I remember the 1st time I saw "The Sting" with my wife I was laughing so hard at the opening scene and my wife asked what was so funny and I told her they had switched the envelopes and the gangster had an envelope with newspaper in it. A minute later the truth came out and she wanted to know how I knew it. Early on I realized if grifters and cheats worked as hard at a real job as they do at cheating their personal lives would be much better off. Over the years I have supplemented my income playing poker and have caught many cheats over the years. Then came casinos and cheating became institutionalized by the house. I have not caught many folks cheating in Vegas but if you gamble in a Mississippi casino you almost certainly have been cheated. I tried to report this to the Miss. gaming commission and they could not be bothered even with proof. Caveat Emptor.
    When history is written and the evidence comes out Cheney and the Geitners of this world will be connected with the biggest fraud in history, 2008 was not a banking collapse but a real transfer of wealth. Follow the money if you want the Truth.
    Jun 29, 2014. 10:53 AM | 2 Likes Like |Link to Comment
  • Investors Continue To Flock To Armour [View article]
    OK here is the deal on this article, the author claims to not have any position on ARR. This piece of fluff on ARR is in bad faith and lies about the future of ARR. First of all call the investor relations folks at ARR and ask about income and hedging activity. I would be very surprised if they answered the phone even. As far as I can gather ARR is in a race to bankruptcy so the managers can start over with new stock and the Hell with the old stockholders, just like they did with Bimini Capital. I suspect the brokerage firms are in on this also and will gain in the issuance of new stock. Of the mREITs this one is by far the worst run by any metric you want to chose. You would be hard pressed to find any insiders investing in ARR because this shit is for selling not buying. I have not figured out how these hacks stay out of jail but I would gladly testify against them in a heartbeat which I am certain that these managers have none for their shareholders. Let me finish by saying please forgive me for not being more harsh on them but my writing skills forbid.
    Jun 23, 2014. 03:59 PM | 5 Likes Like |Link to Comment
  • American Capital Agency Corp.'s. Dividend Sustainability Analysis (Post Q1 2014 Earnings) - Part 2 [View article]
    Hi Scott, like your articles and analysis, why not write something on AGNC and other mREITs and all of their hedging activity. It seems to me that hedges are for exactly what happened last year to the REITs. What good are these hedges if not to cover your backside when the market goes adversely? Is there anything hincky going on with so many hedges and derivatives allowing your stock to get clobbered? I have reduced my mREIT holdings significantly last year and would like to get back in but the hair on the back of my neck is saying no. What say you? I miss those dividends but not the price and BV depreciations.

    If the Government gets out of the mortgage business altogether ala Fannie and Freddie, how will this affect mREITS? Many folks say that mREITs are akin to bond funds and act accordingly, but the mREIT managers think a lot more highly of their skills by paying themselves exorbitant salaries even when they lose money. When I make bad decisions I lose money directly, why is there no accountability for these guys?
    Jun 2, 2014. 06:41 PM | 1 Like Like |Link to Comment