Yesterday, we had a banner day in volume for the mortgage REIT sector. The NYSE specialist succeeded brilliantly in stop lossing out all the weak hands and acquiring the shares on the cheap.........He's thrilled to got the shares so cheap......BUT this is how the big money is made in the stock market of today. Patiently wait while the day traders and herd mindlessly dump good companies on the cheap. Then buy them up and ride them much much higher.......Around 50% higher will come the big recommends from the Wall Street crowd after they've already made the big bucks...........A crooked crooked game if there ever was one but there we have it.........I am adding to my position in the MREIT sector.......what the herd has not told u is that with rising long term rates and constant short term rates is that the MREIT sector will become more profitable than ever....................These guys make money on the spreads between short and long term rates, not what the long term rates happen to be.....
Sentiment: Strong Buy
Your dreaming friend, and Im not short but have owned this thing about 15 yrs, I have never ever seen annaly not able to hedge their long positions until now. Rate increases are hardly a new phenomenon in this business, the inability to adequately hedge is something Ive never seen before. This model is broken
You can ONLY hedge UNCERTAINTY. You CANNOT hedge CERTAINTY. If the market determines that rates are going to certain limit, you CANNOT hedge that - or the hedge will cost you a lot. In todays' age of Social Media, market has come to some kind of conclusion what the 10-yr will be for the next 2-3 years. Will a insurance company insure a DYING patient on deathbed.
AGNC did a much better job on hedging long before the interest rates started hiking so their positioning is better than NLY although I have owned both of these stocks. I am out of NLY presently but if you have 5 years, I say hold and collect those dividends.
This company is a slave to the long term USD bond market. Weak hands in this stock are irrelevant. There are monumental forces much larger than investors in this stock. The FED is going to control the direction of MREIT's, not weak hands or strong willed investors.
Why do you keep spreading inaccuracies like the MREIT's will be more profitable when long rates go up? That is upsurd. Their book value will plumment tremendously. Sure, new incremental investments will bring in a higher margin (as long as short end rates stay unchanged) but in no way will that make up for the disastrous losses on their existing portfolio.
At this stage, I think NLY is more than capable of hedging its losses on its long term portfolio. The big move in rates is mostly priced in. BUT let's not forget what happens when assets reprice at a full percentage point higher while liabilities stay same.....Instead of getting a paltry net interest margin of 1%, the spread will quickly move to 1.5-2% which more than makes up for the portion of the portfolio which is UNhedged...... I've been investing in NLY since 95' and I have never seen a time when NLY's profits did not rapidly increase when long term rates rose while short term rates stayed frozen.........REMEMBER it was the FED's QE buying which destroyed the net interest margins of the Mortgage REITs.
Sentiment: Strong Buy
That's part of the game too. The herd is fleeing bond mutual funds on news that frightens them out of the market. Confuse the herd and run them off the cliff. Take the stock market down, take the bond prices down, buy, and then sell them back. It's just a wash, rinse, and repeat cycle of fleecing the public. The reality is that the stock market could end the year at Dow 17,000 and interest rates lower since the Fed isn't going to do much different.
When I am collecting 14% on my stock, I could care less about traders. Traders ride stocks down for the last few pennies and ride stocks like TSLA from $120 to $140. Not a shred of investing going on there. Keep to the fundamentals, don't put all your eggs in one basket, and buy more stocks like NLY on weakness. When the herd finally figures out what is going on, the stock is up 30%. I have done the same thing with Herbalife, Questcor, Nu-skin, and First Solar in the last year and have been handsomely rewarded. While the TRADERS were selling and giving me their stock for nothing, I cashed in 200-400% profits in the next 12 months.........So keep on selling TRADERS!
Sentiment: Strong Buy