You don't really know with all the distortion from FED POLICY and all the hedging and assumptions on hedging losses and expectations. I doubt if they will really "Mark to Mark" the real losses, they will come up with some hedge contract that shows they didn't loose that much money, hoping things will turn around. VERY HIGH RISK HERE, NOT WORTH THE EXPECTED GAIN IF ANY.
I'm trying really hard to remember that six months in 2013 that "the government reported a huge surplus" and trying to reconcile that with our huge borrowing at that time, now 18 trillion. And I'm a fun of a good laugh also, and that's what I did when you said the income tax on retiree's cd's & money market funds will cause the "government will not need to borrow and can start paying down the debt" (guess because the tax rates will increase).....are you in show business?
As long as you make zero percent over all your OK. The is the FED policy, zero rate or QE, whatever, the most you'll average is 0-2% during this "Distortion Phase". I would just hold cash in a 5 year or 7 year treasury and collect 1.5-1.9% return waiting to invest when long term potential returns are above 10% per annum. Right now if you buy stocks you will average 1.5-2% for the next ten years, when you take into account dividends and capital losses to your equity from overvaluation.
I am going by the numbers, if you want to compare to Greece and draw unsubstantiated conclusions, fine, your free to do that. Greece's high rates are the result of high risk of default.
In our Country, we have managed prosperity by the Federal Government. The cost of saving the banking system and keeping people employed the last 6 years has to end and revenue has to be brought in when the economy can afford it, like right now. Hence, income from interest income is preferable over dividend and capital gains since the tax revenue to the government from interest is almost 3 times higher than dividends and LT capital gains. On top of this, nearly 60% of the people in this country will rely on investment income for retirement to feed their consumption, hence we are moving from a debt/consumption economy to a saving/consumption economy. Higher interest rates will drive consumption. Debt fueled consumption can still occur but it will be at the peril of the lenders and then the "Greek" default risk augurs for higher rates there also. In conclusion, INTEREST RATES WILL RISE ALONG ALL FRONTS, THIS IS THE START OF A 30 YEAR CYCLE OF RISING RATES.
I sold AGNC in the mid $30s and walked. I never really held it that long to make much off the 20% dividend. Most was off the stock price appreciation. Since then I have been investing in VIX volatility. I have been shorting TVIX and buying SVXY each time the market dips. I have been investing 30% of my accounts in this trade and leaving the rest in cash and my accounts value, including the uninvested cash, has gone up 80% in accounts where I could short TVIX and 40% in accounts where I bought SVXY.
I look for opportunities where ever they ly. Next year it will be something else. The investment style of learning how to invest in one thing and sticking with it has never worked for me. It's not profitable enough for my taste. And it is usually the case that once I make money doing something I rarely go back and do it the same way again because there is always something that is better to do at the time.
If the Fed does what I think it will do in 2015 then the people on the right side of the trade won't be owning AGNC. And the Fed doesn't even have to do it to get the price started down because everyone already thinks that they will do it. There are safer ways to make money right now. Owning AGNC now is like leaning over the edge of the Grand Canyon being held back by a narrow string about to break. If you like taking changes then fine. Do that. My guess is most don't even realize the situation they are in. They have this feeling that their money is safe because they don't understand interest rate cycles. The unemployment rate is getting low enough to cause wage inflation and the feds job is to prevent that. Want to assume that the Fed is incompetent? Go for it. But you won't be happy.
All you should be thinking about is when the Fed will start to raise interest rates.
Your better off in TBT or shorting interest sensitive stocks. I started shorting UTE's and M-REIT's a month ago when they were near their 12 mos highs.
I forgot one thing, HA HA HA, HEE, HEE, HEE.....I predicted this would happen in 2013, you should have sold this in the 33-36 and just do short very hedged trades for all of 2014 and 2015, because this is in a descending triangle down for years, at least 5 years maybe even 10 years, a lost decade could happen here because of the distortion caused by the "Zero Rate" and "QE" policies of the FED.
I wanted to add one more thing, when the ten year hits 8%, NLY and AGNC will be trading between $1.00 - $5.00, with a yield of 10-11%. It will be similar to my beloved Bimini Capital Management (BMNM) which nose dived to 10 cents a share, which I loaded up at 11 cents a share and is now trading around 1.50-1.60, there will be amazing opportunities when rates rise, if you have liquid cash money, have an education and really define the cause and effect in the economy.
In order to properly understand our economy you have to define the underlying causes and the actions taken by external forces correctly. Saying 8% won't happen and 4% won't happen based on an incorrect assumption, i.e., higher interest rates will cost the country more and we can never pay back our debt.
Facts are, the low rate environment the last 6 years resulted in record amount of deficits and record amount of borrowing. We started to neutralize these deficits in 2013 when the 10 year treasury spiked up from 1.2% to 2.9% and excessive borrowing was curtailed, as seen from QE ending. Hence, the higher the rates go, the less the gov. will borrow and the more the TAX REVENUE from interest income. The aggregate interest income composite number that I tracked exponentially rose from June to December 2013 and just like I expected and predicted, the GOVERNMENT REPORTED A HUGE SURPLUS. As rates rocket higher, the government will not need to borrow and can actually start paying down the existing debt from the income tax revenue from INTEREST INCOME. Check it out on the form 1040, interest income is taxed at regular rates and the new 3.9% surtax on Net Investment Income for Obamacare is an added bonus. The gov. wasn't stupid, back in 2012 when they put this special tax on, no one paid attention because interest rates were near zero, but one they rise to 4%, 6%, 8%, this will flood the gov. with tax revenue and also help the 55-60% of the voting public who are over 55 years of age and didn't save enough for retirement.
So true!!! You could have sold at $24 in Sept 2013 and you be rolling in dough right now!! (except for the $4.50 in dividends you would have paid out, ooops)
gracieblackbelt.2012 • Mar 6, 2015 12:32 PM Flag
How many jobs were added between the middle of December 2014 and the middle of January 2015?
There were 2.7MM jobs LOST in that time period. Seasonal adjustments are masking continued labor weakness.
The relationship between the interest rates and a investor's demand for levered stock investments of Mortgage REIT's has important implications. In this post, I will use very accurate inferences and off the cuff estimates of interest rate elasticity to provide good estimates of REIT stock demand in a rising interest rate environment. My empirical strategy exploits a discrete jump in interest due to a change in FED Reserve distortion of interest rates from the free market mean rates. This discontinuity creates a large notch in the intertemporal value proposition constraint of prospective investors in Mortgage REIT's allowing me to identify the causal link between interest rates and Mortgage REIT stock demand and thus market stock prices.
What I have found in the causal link is remarkable, but not unexpected. I have identified some new variables that have remained almost completely overlooked by the high paid analyst in todays markets. I have identified a very large "Bunching Demand" link that allows me to predict that there will be a levered multiplier effect of negative proportions to investor demand for risk assets like M-REIT stocks, of a very sharp magnitude, sort of like a air-pocket or gap down effect. I am estimating that a 1% increase in the 10 yr. TREASURY NOTE, from 1.7% to say 2.7% could gap down the market indexes by 25%. A further increase from 2.7% to 3.5% could gap down the market indexes by another 30%, a total of 47.5% absolute negative from market highs that we recently just experience.
I didn't agree. The government will have no recourse but to raise rates high in order to bail out the pension systems, including social security. An 8% yield will add 10 years to social security lifeline. Plus it will bring in much need revenue from taxes, tax revenue from INTEREST is three times higher than tax revenue from dividends and LT capital gains.
Interest Income: Tax Rates: 10% - 39.8%+3.8%
The max rate is now 2014: 39.8+3.9 = 43.7%
Dividend & LT Cap Gains: 0% - 20%
When you factor in the returns that claim these amounts, there is a larger percentage of returns over $250,000 total income hence, the extra 3.9% NII special tax this year. Enormous amount of taxes coming into the government. I am surprised they waited this long.
you must not understand REITs.
Please do us a favor and go away
that is not true at all.
Another lie from short troll.