So Much for That Mortgage REIT Bull Market

Includes: NLY, THMR
by: TraderMark

The carnage is amazing in the mortgage REITs. I was looking for some bull markets about a month ago and asked readers for some ideas [Thank you Readers - Found a Bull Market - 4 Mortgage REITs]. After doing some work in this group which was not an area I've invested in before I jumped into MFA Mortgage Investments (NYSE:MFA).

So that did not work out so well; I am going to place the blame on my readers since I'm already mourning Thornburg Mortgage (TMA). Well these were my 2 positions that were supposed to yin when the rest of my portfolio yanged - and they sure are doing it... but in the wrong direction.

I have a watch list of the 5 major players and all are down between 15-30%. Annaly Capital Management (NYSE:NLY) which is supposed to be the best of breed is down 18%. This is amazing to watch because these companies take government backed bets (paper backed by Fannie and Freddie)... and the crisis of confidence is getting so bad, even that is not deemed safe anymore.

While this clearly is painful, simply due to the panic in the markets and no sense of logic I am going to cut 1000 of 2500 shares in MFA Mortgage, even at a 30% loss. The action makes no sense, but that doesn't mean investors won't flee in utter panic so I want to reduce exposure a bit. Even if it means eating a loss. I am selling these shares for around $6.75 and taking a bit hit. My exposure is now down to 1% of portfolio though. I don't know how to handle the rest frankly - unless the government is going out of business and/or one believes they will allow Fannie and Freddie to go out of business this action makes little sense.

But I have to say I wish I never tried to follow the Kool Aid herd into finding some "financial" picks that would go up with then Kool Aid about housing rebounding in half a year was in effect. These 2 positions really hurt, especially back to back. Thankfully I have a lot of good positions offsetting these two, but it is a lot of capital I need to make up, over $30K lost in these two positions in just over a month. Which means if I never touched these 2, I'd have close to 3% better performance. Blah. Simply a toxic waste pool ... now i know what it feels like to be a
Citigroup (NYSE:C) investor. But I am a bit disgusted I went down this path when I had avoided all this junk since last summer. Even I was infected by the Kool Aid virus...
  • Shares of real estate investment trusts that invest in mortgages plunged Thursday after one of Thornburg Mortgage Inc.'s banks declared the lender in default.
  • Keefe, Bruyette & Woods analyst Bose George downgraded Anworth Mortgage Asset Corp. and MFA Mortgage Investments Inc. because he expects book value to decline and expects the companies to hold onto more cash to handle uncertainties in the market. Shares of Anworth Mortgage Asset Corp. tumbled $1.89, or 21.4 percent, to $6.96. Shares of MFA Mortgage sank $1.38, or 15.9 percent, to $7.31. Bose removed Annaly and Capstead from the firm's "Best Ideas List."
  • Among other real estate investment funds with steep declines, Anthracite Capital Inc. lost more 11 percent to $5.30, CBRE Realty Financial Inc. fell 18.8 percent to $3.23, Deerfield Capital Corp. sank almost 24 percent to $2.19, Capstead Mortgage Corp. plunged 23.5 percent to $12.47, and Annaly Capital Management plummeted almost 15 percent to $16.45.

Disclosure: Long MFA Mortgage Investments, Thornburg Mortgage in fund; no personal position