mREIT Preferreds - Stay Woke, Make Bills 3/3/17 Edition

Includes: AI
by: Rubicon Associates


The universe trades at $24.26, down $0.10 and yielding 8.13% (sold off, but new name added). The "optimal list" is at 8.10% (3 bps tighter than the universe).

Cost of stability this week impacted by the addition of AI and the massive cost in its complex.

Risk premium was 564 bps, 20 bps tighter than last week.

Okay, if you are anything like me (which means getting carded for anything other than the AARP discount stopped a while ago), you are saying to yourself "WTH (yep, family friendly) does stay woke, make bills mean"? Well, you will notice this week I did not add the "no fluff" guarantee, because, well, this is semi fluffy. I have added "stay woke, make bills" in honor of the Snap (SNAP) IPO. My daughter (college student) sent me a text with a picture of a snapchat she received discussing the Snap IPO (as much as anything can be discussed in a snapchat). It said simply "stay woke, make bills."

I scratched my head and assumed there must have been a typo or it was new investment lingo that I haven't heard. Breaking out my Ovaltine decoder ring and making use of the code which cracked Enigma (okay, I simply called my daughter) I determined this was code for "stay alert and focused and you can make money." Now we all know, so stay woke.

Having dispensed with the SNAP-fueled fluff, the mortgage REIT preferred universe:

Note that Arlington Asset's (AI) two senior unsecured issues have been added by request, broadening the universe out a little further.

There have been no changes in the optimal list except choosing the AIC as the representative issue from Arlington.

There wasn't much of a change in the optimal list from a price/yield perspective.


Week over week, the cost of stability is a little higher as equities underperformed preferred. Arlington is also skewing the numbers with its whopping 10%+ give up to go from equities to senior unsecured.


The risk premium (stripped yield less Treasury yield) is 564 bps this week, again, influenced by AI, but primarily due to Treasuries widening out more than the preferreds.


Equities underperformed preferreds by over 100 bps last week (ouch).

High/low graphically:

Equity data (note the underperformance of the newly added AI in the short term):

Surprisingly, a chart:

This week, I have included the swaps rates again as they will help influence the underlying performance of the equities. I am going to also add Treasuries. Honestly, I am considering doing a market update sheet weekly, which would have the swaps plus more stuff that I follow closely (rates, VIX, sector performance...). Not committing to it, as I don't want to fall short on time and leave folks hanging (partially why I have not attempted a marketplace offering with mREIT and shipping preferred, market data...).

Yes, I varied from the no frills, no fluff style, but honestly, I had to share the new lingo that seems to accompany disappearing pictures.

Stay woke, make bills!

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