Referring to the Treasury Yield Curve, granted spreads have narrowed since January but not by a drastic amount. The 30-year went from 2.98 to 2.82 (.16) and the 10-year from 1.97 to 1.66 (.31). Since October, ARR has declined one dollar or negative 13%. That is the real fly in the ointment. Prices will remain unpredictable and choppy until an agreement is reached in Gaza Strip and the Fiscal Cliff stalemate resolved. If necessary, ARR management will increase leverage to compensate for spread compression.
None of the political stuff matters one bit. Maybe will add more panics but people will fly right back in as long as the yields remain where they are. Even with compression, if we can get 10% returns, that still kills the market.
All this nonsense is already priced in. This stock is trading well-below book value (granted, those numbers don;t mean quite so much in mREITs).
ARR won't be taking ANY loss, even with QE3 and QE4 and QE5. They are insulated to some degree against the Fed buyback, and even then, it won't crush DIVs unless the short term rates and the long term rates flip. No one sees that coming, especially any time soon.
There is a limit to the amount of leverage that the repo lenders will allow an mREIT to use. ARR was already at the higher end (I think it was over 8) compared to its competitors (who were mostly in the 6 range).