Good post pacman, It's all very confusing. IMO the market has pre-empted the FED increasing interest rates before the Fed increases...I believe the worst is already in the spread. If you bought AGNC when it came public in 2008 you would have collected over $30.00 in Divs and still owned your shares, point is these REITS are a long term income stream and should be sold only when they are at there yearly highs. Also all the money AGNC has spent on hedges has been wasted, Fear of the FED tighting has them spending huge amounts on swaps and swaptations...The best income stock is NEE-C which is FPL preferred that pays 5 7/8 but must be called in by June of 2044 for $25.00, It's a can't lose deal.
Good luck with that. I thought the same thing at 30 and 25. Everyone thinks they are at the bottom and then BANG, BOOM, the bottom falls out. I'm not responsible for it, it just happens that way.
I read your comments on one of the mREITs recently. I appreciated the comments you made. Oh, maybe it was on the downgrade news. Very informative. I have to say, it sometimes seems like up is down and down is up. That would explain why analysts can say things are looking so bad when they may not be. I am no expert and so try to learn from others.
If the 10 year goes up and the basis is that spreads are tightening as they should in a normal market... the basis will offset the interest rate risk in almost all cases. however, if that metric is not working correctly like we saw in 2013 during a market dislocation.... you can experience book value declines in a rising rate environment due to basis risk. However, as I just showed you... basis works for AGNC in a rising long end interest rate environment. now... if rates fall on bonds... ok.. you get a widening out of the basis which means... although your benefiting on the MBS product, you are actually getting hurt by the basis which means very little to no book value gains... perhaps even a decline to book value if treasuries and swaps significantly outperform mbs.. which often happens because of the change in prepayment expectations. So there are ways around having a flat book value. One is to actively manage the portfolio.. more hedges, less hedges, hedges along different parts of the yield curve... etc. actively managing your hedges correctly in relation to mbs is crucial. I hope you appreciate the time I took to explain this to you... because i'm sure it will be hidden under a wall of useless posts by klumpy and crew.
Contact me on Seeking Alpha, under my author name... "William Packer" if any of you have questions on how to trade AGNC, AGNC options, Treasury futures, etc. even if you want to bounce ideas off someone.
The housing market getting stronger has no direct impact on agnc assets since they are already guaranteed by fannie+freddie etc.
For this Reit???? The 10 yr goes down,so does AGNC...The 10 yr goes up....AGNC goes down....Housing Market Is getting Stronger....But AGNC keeps going down....What Gives???....Anybody???..Thanks.
David White does not know what he is talking about. He doesn't even understand how interest rate securities like treasuries and agencies really trade.
Letting us know that the stock will plummet further at month end. Double the reported loss on BV.
Never any good news for years. Keep it comin.
I beg to disagree. I was preaching before it even was $36, I believe at $26 before it got to $36, that if this goes higher you get out. Check it out, I went over the history of M-REIT's, there are only good for 5 years after IPO or at bottom of easing cycle. I said you should only trade and get ready for the enormous losses from buying 2-3%, 30 year fixed mortgages and leveraging 10 to 1 to buy even more had to be the dumbest investment ever. Only someone looking at the current yield and nothing else would even touch this or someone trading. This was not suitable for an intermediate or long term investment. TBT is smoking.
A very large stock price crash, bringing the share price to .25 - .30 of book value would do it. You would see buyings come in. That would price in some of the negatives of FED FUND rate going to 4%. If inflation picks up like it appears, and goes over 4-5% a year, the FED FUND RATE will have to go to 6-8% or higher to reverse this pent up inflation pressure. Rents are rising double digits everywhere, labor is rising double digits, it is really smoking. Unemployment is making new lows. Turnover is skyrocketing both hourly and salaried jobs. The economy is smoking. I am surprised the FED didn't raise in June, this just puts more pressure or probability of bigger and faster increases in the future. Smokin.......really smoking now, everywhere you look.
As long as the stock price does not go down too much more from where it is currently - I am ok holding this and reinvesting dividends for the long term.
The short answer is, everyone is terrified of mREITs, and have been for almost three years. I don't know what it will take for that fear to subside.
Sentiment: Strong Buy
My take, look at the regional small bank stocks. There balance sheets are loaded with 68-90% adjustable rate mortgages. Only the dumb M-REIT's were loading up on fixed rate 30 yr at record low interest rates.
Two ways to play this with cash. But TBT, short the treasuries. Look at the chart Yellen put out yesterday, it shows FED FUND rates will be 1-1.5% by year end 2015, 2.0-3.0% by year end 2016 and 3.0% - 4.0% by Jan 2017. In about 2.5 years, rates will be back to 4.0%, 1/2% variance.
The levered Agency Mortgage REIT's will be single digits, like Annally, except the will be low singles, like $1 - 2.
Inflation is moving up real nice, 0.4% in May, more than double the FED target. I checked the indicators, inflation is actually taking off. Wage inflation (expecially the lower wages) are going up 10-20%, with Walmart, McDonalds, Home Depot, Costco leading the pack. Also, rent paid, is skyrocketing. 1 br apartments renting for $800, rents rising to $1,100, over 30% increases in the big cities. The smaller towns about half that, 15-18%, occupancy is over 97%. Inflation may soar and the FED may be forced to Jack Rates back up to try and get ahead of the curve, right now they are two years behind. Or maybe they wanted this all along.....HYPER INFLATION, DOUBLE DIGITS. The FED FUND rate should equal the inflation rate. Hence if we go to 7-8% inflation in 2016, that 2.5-3.0% FED estimate may be way off for the FED FUND rate by a factor or 2.