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Annaly Capital Management, Inc. Message Board

  • shorts_are_scum shorts_are_scum Aug 16, 2007 7:28 PM Flag

    What is happening here?

    Ok folks, I'll be the first to admit that I'm very confused by the way this stock is behaving. Can anyone explain why NLY went up like it did today. Some ground rules, though. This is a serious question, so I expect legitimate reponses. No cheerleading, or mindless bashing will be tolerated. Also, let's keep the conversation civil. I know we are all a bit on edge right now, but let's try to act like adults. That having been said, I would appreciate hearing what the board has to say.
    Best of luck to all.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • NLY isn't unique in demonstrating resilience in this market, MFA is doing quite well too if you haven't noticed.

    • I see you did not get a very satisfactory reponse to your question aboubt what moves this stock , this May article from Barrons , makes a good stab at explaining it . As for what moves a stock on any one day, lets not waste our time trying to figure that one out .I like you got sucked into the high dividend back in 2004 , but having gone through the pain cycle I am sticking around for the upswing and have doubled my bet .


      MONDAY, MAY 14, 2007


      MORE
      Annaly's Opportunity
      By JACQUELINE DOHERTY

      THE FEDERAL RESERVE HAS BEEN no friend to Annaly Capital Management in recent years, but that could change if the economy continues to weaken in 2007, spurring the central bank to lower interest rates. Annaly, a Manhattan-based real-estate investment trust, borrows funds at short-term rates and reinvests them in mortgage-backed securities sold by the likes of Fannie Mae (ticker: FNM) and Freddie Mac (FRE). It earns the difference, or spread, between the income generated by its portfolio and its cost of capital, and pays out about 90% of its earnings in the form of dividends.

      Alas, that spread is only 0.58 of a percentage point these days, following the Fed's three-year campaign to tighten credit, which has boosted the short-term federal-funds rate to 5.25% from 1%. With rates on long-dated Treasuries relatively unchanged, the yield curve has flattened or inverted for much of the past year.

      Mortgage yields don't mimic the Treasury market precisely, but the difference is negligible in terms of the damage done: Annaly earned only 44 cents a share last year, down from a record $2.67 in 2002. Its dividend fell to 57 cents a share, compared with a payout of $2.67 in 2002, and its shares dropped to 15 from 21. Annaly recently traded at 15.86.

      Some savvy investors now think the worst is over. "The yield curve will start to steepen in the second half of the year and continue to do so in '08 as the economy begins to slow and the Fed cuts rates," says Arnie Schneider, chief investment officer of Schneider Capital Management, which has owned shares for about a year. "If the federal- funds rate decreases by one percentage point, [the company] could probably earn close to $2."

    • NLY makes more money the steeper the interest rate curve which is steepening a lot since this crises started. It has NO credit risk. So, its dividends will increase dramatically going forward. It will be $20 within a year as before when things went its way.

      • 7 Replies to edwardwilbur
      • I am glad you (edwardwilbur) just posted as you seem to be one of the more intelligent posters on this board. I was long on NLY as I admire Mr. Farrell and they are in the perfect position to benefit from falling short term rates. Credit risk was not an issue. However, I just sold my NLY position today after reading a concerning article article this weekend. On about 3 occasions, the author stated that agency-backed mortgages trade at a premium due to the implied gov't guarantee on these securities. However, thought it is believed that the gov't/treasury will back these, he made it clear that it is not a guarantee. Furthermore, he stated that it was the perception that Fannie and Freddie had probably exceeded their initial mandate to provide mortgages to lower income families and that it would be best for this program to contract in size. The author of the article was Mr. Bernanke (March 2007; you can Google it). This made me very concerned. Now, I am fully aware that if Fannie and Freddie developed liquidity problems, we probably would have way more to worry about than just the price of NLY. But, just the hint of problems with them could have significant market consequences. I am NOT shorting NLY nor buying puts. I would like your intelligent opinion on this.

      • I am glad you (edwardwilbur) just posted as you seem to be one of the more intelligent posters on this board. I was long on NLY as I admire Mr. Farrell and they are in the perfect position to benefit from falling short term rates. Credit risk was not an issue. However, I just sold my NLY position today after reading a concerning article article this weekend. On about 3 occasions, the author stated that agency-backed mortgages trade at a premium due to the implied gov't guarantee on these securities. However, thought it is believed that the gov't/treasury will back these, he made it clear that it is not a guarantee. Furthermore, he stated that it was the perception that Fannie and Freddie had probably exceeded their initial mandate to provide mortgages to lower income families and that it would be best for this program to contract in size. The author of the article was Mr. Bernanke (March 2007; you can Google it). This made me very concerned. Now, I am fully aware that if Fannie and Freddie developed liquidity problems, we probably would have way more to worry about than just the price of NLY. But, just the hint of problems with them could have significant market consequences. I am NOT shorting NLY nor buying puts. I would like your intelligent opinion on this.

      • I am glad you (edwardwilbur) just posted as you seem to be one of the more intelligent posters on this board. I was long on NLY as I admire Mr. Farrell and they are in the perfect position to benefit from falling short term rates. Credit risk was not an issue. However, I just sold my NLY position today after reading a concerning article article this weekend. On about 3 occasions, the author stated that agency-backed mortgages trade at a premium due to the implied gov't guarantee on these securities. However, thought it is believed that the gov't/treasury will back these, he made it clear that it is not a guarantee. Furthermore, he stated that it was the perception that Fannie and Freddie had probably exceeded their initial mandate to provide mortgages to lower income families and that it would be best for this program to contract in size. The author of the article was Mr. Bernanke (March 2007; you can Google it). This made me very concerned. Now, I am fully aware that if Fannie and Freddie developed liquidity problems, we probably would have way more to worry about than just the price of NLY. But, just the hint of problems with them could have significant market consequences. I am NOT shorting NLY nor buying puts. I would like your intelligent opinion on this.

      • I am glad you (edwardwilbur) just posted as you seem to be one of the more intelligent posters on this board. I was long on NLY as I admire Mr. Farrell and they are in the perfect position to benefit from falling short term rates. Credit risk was not an issue. However, I just sold my NLY position today after reading a concerning article article this weekend. On about 3 occasions, the author stated that agency-backed mortgages trade at a premium due to the implied gov't guarantee on these securities. However, thought it is believed that the gov't/treasury will back these, he made it clear that it is not a guarantee. Furthermore, he stated that it was the perception that Fannie and Freddie had probably exceeded their initial mandate to provide mortgages to lower income families and that it would be best for this program to contract in size. The author of the article was Mr. Bernanke (March 2007; you can Google it). This made me very concerned. Now, I am fully aware that if Fannie and Freddie developed liquidity problems, we probably would have way more to worry about than just the price of NLY. But, just the hint of problems with them could have significant market consequences. I am NOT shorting NLY nor buying puts. I would like your intelligent opinion on this.

      • I am glad you (edwardwilbur) just posted as you seem to be one of the more intelligent posters on this board. I was long on NLY as I admire Mr. Farrell and they are in the perfect position to benefit from falling short term rates. Credit risk was not an issue. However, I just sold my NLY position today after reading a concerning article article this weekend. On about 3 occasions, the author stated that agency-backed mortgages trade at a premium due to the implied gov't guarantee on these securities. However, thought it is believed that the gov't/treasury will back these, he made it clear that it is not a guarantee. Furthermore, he stated that it was the perception that Fannie and Freddie had probably exceeded their initial mandate to provide mortgages to lower income families and that it would be best for this program to contract in size. The author of the article was Mr. Bernanke (March 2007; you can Google it). This made me very concerned. Now, I am fully aware that if Fannie and Freddie developed liquidity problems, we probably would have way more to worry about than just the price of NLY. But, just the hint of problems with them could have significant market consequences. I am NOT shorting NLY nor buying puts. I would like your intelligent opinion on this.

    • Let me give a example to show you why NLY is different than TMA (and others).

      Both TMA and NLY have about a 10% equity to assets ratio.

      TMA's non agency AAA jumbo loans have received a haircut (decline in value for collateral purposes) of about 10% in recent weeks. This means they have to cough up 10% of the value of the mortgages in cash for collateral on their short term loans used to fund the business . Well, they only have 10% equity to assets-they are looking at getting wiped out since 10% - 10% = 0%.

      NLY has not been totally immune. The stable government backed agency market has seen its haircuts go up 1% in recent weeks. But 1% is not 10% and NLY has plenty of liquidity left-9% in this case.

      In fact, NLY may even like the haircut if it means lower rates. The got it today.

      Sorry if this is long.

      • 4 Replies to toddleemcc
      • Toddleemcc,
        What's your take on ANH.?
        http://finance.yahoo.com/q?d=t&s=ANH

        My understanding is they have book of $6.50 ex Belvedere.
        Nothing but agency stuff after that.

        Seems a better buy than NLY ?

      • Liquidity = The ability of an asset to be converted into cash quickly and without any price discount.

        http://www.investorwords.com/2837/liquidity.html

        Equity = (inter alia) total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value.

        http://www.investorwords.com/1726/equity.html

        Dear Mr. Ph.D in Economics, how the HELL did you get to be so fricking IGNORANT? PLEASE don't say "liquidity" when you really want to say "equity"! LIQUIDITY has EVERYTHING to do with SOLVENCY it has precious little to do with EQUITY. A company can be BANKRUPT (debts far exceed assets leaving negative equity) yet remain quite SOLVENT. You sir, are intellectually BANKRUPT!

      • he's a charlatan who claims to have a Ph.D in Economics yet does not know the difference between LIQUIDITY and EQUITY. He says that TMA has the same Debt to Equity Ratio as NLY but this is simply NOT TRUE. TMA as TWICE as much leverage as NLY does. This makes NLY a whole lot less risky, I don't really want to point this out but it's the simple TRUTH.

        Listen up Todd, you're a PATHETIC IDIOT, if you don't know anything THAT'S FINE, I don't have a problem with the mentally handicapped but PLEASE don't come around and start posting TOTAL NONSENSE and expect people who KNOW BETTER to stand silently by and accept your NONSENSE as the gospel truth.

      • Wrong, TMA has a MUCH HIGHER Debt to Equity Ratio than NLY. NLY has an 11.2 to 1 Debt to quity Ration it's closer to 8% equity than 10% equity, we're not talking about a 2% difference it's a 20% difference. TMA has a slightly less than 5% equity, it's TWICE as highly leveraged as NLY. If you don't believe me go check the numbers yourself instead of sounding like a complete idiot quoting completely INACCURATE numbers as is they were the gospel truth.

        TMA....20.117 debt to equity

        http://finance.yahoo.com/q/ks?s=TMA

        NLY....11.242 debt to equity

        http://finance.yahoo.com/q/ks?s=NLY

        Your statement "Both TMA and NLY have about 10% equity to assets" is COMPLETELY WRONG DIMWIT! Yes they both have SO MUCH DEBT that their TOTAL ASSETS is roughly equal to their TOTAL DEBT! LOL!

    • NLY does only agency mortgages and thus is a play largely on interest rates-not credit or liquidity.

      There are no credit issues involved as all agency mortgages are insured.

      While liquidity MAY seem like an issue, agency mortgages are backed by the government and Fannie and Freddie (FRE and FNM) help maintain huge markets in these very liquid securities. Fannie and Freddie are a huge part of the history of the financial system and NLY is just a very small part of its history. To state that NLY is like other mortgage ccompanies is to ignore the huge agency market and the 40 years of history of Fannie and Freddie.

      Even in this tumult, yields on agencies have not gapped up all that much. It is a fairly stable market.

      Thus, if no credit risk and no real liquidity risk--what is the risk? Interest rates. NLY makes money if the yield curve is steep. It just got steeper today with a cut in rates.

      I hope explained what makes the stock tick.

      Look, you may not like the stock-returns can only be so high when investing in this lower risk asset class. It is not something that is going to 20 in the next few months. It is an income stock. The point here is that you should like it better now than you did 2 weeks ago--why? Rates are lower. They got lower this morning.

      Note that all other lenders who are in trouble are outside the government sponsored market. Sub-prime and jumbo don't exist with agency paper. I have been pleading with some investors on this board to understand this simple difference!

    • I have been holding this stock for 2 years. I bought on the advice of a broker, not cramer who definitely is wrong more than he's correct. I.e: touting TRUMP his buddy way before they plummeted. Basically my broker said Annaly is not tied to mortgages or interest rates in the same ways as other companies that they dealt more with commercial paper. Never really understood that short of what has been factual for past 2 years, Fact: interest rise = annaly goes down and interst rates get cut = annaly goes up. So if there is a cut or cuts coming annaly WILL go up. And did you notice mr. Mthfr who kept bashing the stock all the way down changed his tune in the last posting and WHERE IS HE NOW????????

      • 2 Replies to pipermarte
      • Gosh with blithering idiots like you jabbering on about how well this POS is doing you'd think that this POS has actually gone up from when I started posting on this board....LMFAO! Sorry dufus, not even CLOSE! For sure it's nowhere near bottoming yet moron, we'll see in the days, weeks and months ahead just how fricking ignorant you are. One day does not a trend make.

      • Let's stay focused, ok. Yes, we both (like a lot of people) got into this stock without truly understanding what moves it up or down. I have decided to try and hold on, and learn as much as I can. And, with any luck I might just get out of this without bleeding too much.
        We should also try to learn as much as we can from this, and keep the personal stuff to a minimum. As much as it pains me to say this, I have found MF to be very knowledgable on the subject and would welcome any input he might care to contribute.
        So, let's get back on topic. Anybody have any ideas about what happened to NLY today?
        Thanks all.

    • I'm guessing this is relatively close to your first individual stock purchase, and also that you saw cramer say "buy" and took a flyer on a thousand shares, and are flying by the seat of your pants, day to day.

      Correct?

      • 1 Reply to blueupticks
      • Negative, sir. I actually purchased this stock around four years ago. I was pulled in by the high dividend they were paying at that time. Guess I got greedy, and stayed too long at the party. Now, I'm having to sit it out, and wait for it to come back enough where I can get out without having too much pain. By your standards, I suppose you could say I'm still a bit of a novice. But from the looks of things, the "professionals" don't seem to understand this stock any better than I do.
        Now let's try and stay on topic, shall we? If I am destined to lose a lot of money on NLY, I'd at least like to get an education in the process.
        Best of luck.
        By the way, I have read one of Mr Cramer's books. I found it interesting, but I certainly would never blindly follow anyone's advice. That's why I fired my Broker.

 
NLY
11.34+0.16(+1.43%)Dec 26 4:01 PMEST

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