Many mREITs saw huge BV gains becasue of QE3. The gains in agency holdings will remain as long as their CPR remains low. However, if mortgages rates fall another 50 bbps, it's likely we see a wave of refinancing, regardless of LTV. The asset increases in non-agency stuff were also huge (e.g. TWO and IVR), but those could easily reverse in a "risk-off" environment.
The volatility was expected and many mREITs have a buy-back in place. BV, however, is a moving target so it's difficult to see any buy-backs unless things get too crazy/oversold. (e.g. MTGE at or under $20.)
On top of this, the interest rate spreads are getting squeezed from both ends. Repro costs are rising and mortgage rates are falling. The GSEs may ask for more money for their guarantees, so even if mortgage rates to borrowers remain the same, coupon rates will fall.
That said, I'll buy more MTGE, TWO or IVR if I see prices fall to where they were a little over a year ago. I'll hold what I have and deal with some short-term (medium-term?) pain. IMO: BV should put a floor on the pps. The mgmt teams can do a better job of preserving BV than I could via "timing the market."
As for things like RSO, NRF and BDCs: I suspect it's the usual risk-off effect from the election. Nothing changes and Congress is still deadlocked -- the chances of a Fiscal Cliff deal before January is slim to none. My guess is that a deal will be done after January. The tax increases and budget cuts will happen, and only after that will Congress be able to strike a "deal" to revert some of it.
Now we know why the Fed is thinking of expanding its QE3 asset purchases, as well as bumping up the amount to $80 billion from $40 billion after "operation twist" is over. The market may put more pressure on Spain as well to get its bailout, and the ECB may need to backup its words about unlimited buying.
IMO the FED's QE3 is going to be well over $100billion..this is kind of a "let's get a big stimulus going without going through congress" effort. And as far as Europe goes, you just have to laugh. Greece has only 11 million people...but by the time the rest of Europe gets tired and boots it out of the Euro it will have cost Europe and others like the USA working through the IMF over $200 Billion. Spain will easily cost double that. In the case of Greece the banks and individual bond holders were forced to take a haircut of 75+% on their Greek bond holdings. That leaves the euro governments and IMF as the ones holding the bag on Greek bonds. Our share of the IMF action is 17%. We borrow from china and lend the money to the IMF which lends it to Greece. The USA loss will probably be $5+Billion.......
You sho got dat right! Prices for most things been all over the map with little or no consistency. The market has no clue other than the random movements on the chart. I don't think anyone really knows what to expect from Obama and the house. Will they reach a grand compromise? Will we fall off the so called "fiscal cliff"? I think there will be a compromise: We will get the extension of the Bush tax cuts but only for the first $250K. In return the dems will admit that SS cannot sustain itself as is and raise the retirement age and also the ss witholding tax, slightly. Finally, the GOP will cave in and agree to a tax increase on the most wealthy; probably those earning $1M/yr or more. There will be no tax reform; just more kicking of the can. Defense will be cut, we will pull out of Afgan and Iraq and let the mideast muslims kill each other. Israel will attack Iran with very little help or hindrance from the US. The EU will split, hopefully in a controlled manner. I don't really have a clue either!