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Annaly Capital Management, Inc. Message Board

  • stephenfischer448 stephenfischer448 Jan 12, 2010 10:52 AM Flag

    100% chance Interest rates will go up

    No I'm not kidding.
    The only real question is when.
    There are some signs that a recovery may be underway, however, with unemployment at 10+% and a new conservative outlook by consumers it is doubtful that the Fed will make any major adjustments in the near future.

    Now consider what will happen as soon as the first real indicator of a stronger recovery becomes apparent. The market is known for overreaction to news, both good and bad.

    I am still optimistic about NLY, however it will be prudent to stay very alert. It will take just one report of a strong recovery to devastate this sock.

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    • Good Post.

      I think the Fed will not have to buy the paper as they have already set up the Banks to do it.

    • he knows.

    • Interesting recent speech by Fed governor Dudley touched on a number of themes relevant for this thread.

      First, link:

      Interesting points:
      "New York Federal Reserve Bank President William Dudley said short-term interest rates may remain low for at least six months and possibly for as long as two years.

      “Short-term rates are going to stay low for a considerable period of time to come,” Dudley said yesterday, according to the transcript of an interview with PBS Television’s Nightly Business Report.

      The policy of keeping borrowing costs low could remain in place “at least six months,” Dudley said. “It could be a year from now, two years from now. It’s going to depend on how the economy develops.” "
      "Dudley said that some reviews of plans by the Fed to end its purchases of mortgage-backed securities suggest “this is going to have a relatively small effect on the level of mortgage rates, something on the order of 0.5 to 0.25 percent.”

      The Fed is buying $1.25 trillion of mortgage-backed securities issued by housing-finance companies Fannie Mae, Freddie Mac and federal agency Ginnie Mae. The central bank began the program in January 2009 and plans to end it at the end of March.

      ‘Big Consequence’

      “If mortgage rates were to back up a lot and if that had a big consequence for the economy then we very well could rethink the issue about whether we wanted to buy more mortgages,” Dudley said."

      So -- rates can stay low for a long time, and the impact on mortgages is not expected to be large. If it turns out to be large, more Fed action can then be taken.

      All in all, pretty positive for Annaly.

    • Thanks for all your input. I'm curious as to why investors would prefer long rates when they are expecting inflation? It seems like investors would stay short with the idea of getting a higher yield by waiting.

    • Given NLY's ability to make money, I'm much more concerned about investor reaction (at this point in the cycle) than any other factor. I don't like the feeling of having the share price drop below my average.

    • Absolutely. Well put, cereal. Being long is the biggest reason for considering the negatives.

    • If the market led a December decision to raise rates by six months, the market would be reacting in June or July, especially if it became obvious that the Fed was holding off raising rates because of the election in November.

    • How can you lose money if divy is reduced ?
      Unless you're a day trader ( buy, sell and never hold ) of course you lose money with nly. But if you hold the stock how can you lose money in a 3-5 years span ?
      Holding this since 2002 ( and adding ) my position is more then paid by divys.
      Please check the charts at nly's web page to see if I'm right or wrong.

    • I have to admit that my book value increase is a guess, based on past three quarters of increasing book. I've done a much more detailed analysis for dividends, because I believe dividend reinvestment is key to long term wealth. I am happy to pay 1.06 or 1.01 times book value right now with record dividends.

      We shall see what happens in a few weeks.

      I do think the market has discounted a fall in book value as the Fed pulls out of the MBS market at end of March. But the recent Fed minutes suggest that if this move significantly impacts mortgage rates and the economy, the Fed will continue to support the MBS market.

      Net, great price to reinvest dividends and a crappy economy for several years will maintain high dividends.

    • JCP, well done, but i don't see evidence that Agency MBS has appreciated from Q3. What's your reasoning?

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