distinguishing between facts and fiction. I've read ad nauseam that NLY makes less money as the yield curve flattens (long term rates go down, while short term rates go up), but I've read here that NLY makes 2/3 of their money with ARMs.
That would seem to me that at the very least they would make as much money when short term rates go up (from ARMs) than they lose from the flattened yield curve.
The div. jumped from 48 cents to 50 cents a share. How can they raise the dividend in the same quarter as when the yield curve has flattened if they aren't making more money? They are required to pay out 90% of their earnings, right?
Finally, even if they made no money between the disparity between short and long term yields and only made money from ARMs, that would make the yield go from 12% (I know it's not that but the math is easier)to 8%?
Now, in comparison to MO which yields around 6% the last time I looked and has considerably higher risks, why would anyone opt for MO over NLY, paticularly in a tax deferred acount? I understand the liability risk for MO. I don't understand them here. Outside of a flattened yield curve, what risks does NLY really have?
Anyone who has followed NLY knows that Mike Farrell has extreme integrity. His main point was that there is still a 190 basis point spread btwn the 1 and 10 year...and reitirated his confidence in NLY's ability to return dividends as high as the low teens in the next year.
Wachovia has their head up their arse as usual. NLY price will move up through ex-date starting tomorrow. Buy & Hold NLY ==> generational wealth