Does anyone here actually own ACG? If so, let me ask you: Why? Didn't ACG seriously cut its dividend? And here's the kicker: ACG's stock price is now up about .25 since it CUT its dividend, even though the raison detre for owning it in the first place is its dividend income! Hmmm...now why WOULD YOU want to own an investment for income purposes only when it's income disbursements have eroded while at the same time the stock price has risen to the point where the yield level is lower than it was prior to the cut? It should be a screaming SELL, and should be tanking for the very same reason that IMH has been getting dumped. Strange eh? IMH cuts its dividend and the stock gets hammered day after day. ACG cuts its dividend an equivelant % to IMH and the stock ends up rising over what it was prior to the cut!
My guess is that none of you own ACG, and that is why its stock price performs irrationally well given the dividend cut. In fact, perhaps some of you are actually short ACG, which would really explain the strong performance. I'd bet that perhaps one or two really big money people own and control the float at this point since most other people probably sold them their shares back when a dividend cut was anticipated. So now that they own the float, they can move the stock up without having to deal with any other shareholders who may wish to sell it to them on a price rise.
You see the sham of the stock market. If the specialists or MM's own most or all of the supply of shares, they don't have anyone else to screw. Once outsiders get involved, they plan, with the help of the companies' insiders no doubt, to screw them. I believe they spend long hours figuring out how best to screw us.
ACG vs. IMH: Same scenario (divi cuts), with diametrically opposite results to stock prices = specialist/market maker scam on outside investors. Funny too how sky high oil prices and A.G. pumping up interest rates hasn't had an adverse affect on ACG's stock price; indeed, it has actually risen. I guess ACG is immune to such things while other stocks are not...
Yeah, if you figure it takes somewhere between 60 and 90 days to close a loan on average, and annualize the 3.5% you net during that time, it's not hard to see how profitable this can become. The less time you take to turn them over, the better the annualized return. At 90 days, 14%, at 60 days, 21%, at less than 60 days...
I short on ex-dividend day and cover within thirty days each quarter, so I'm not responsible for the dividend. And, yes, a short against the box starts the LTCG holding period over again, but since 90% of my assets are in my IRA everything that comes out of it is ordinary income anyway, so irrelevant.
Nevertheless, I have done the same thing with my small additional BTO position in my taxable account. My view there is that sooner or later the inefficiency of selloffs right after ex-day will settle down, at which point I move on to another strategy and start a potential LTCG hold at that point. However, if my view of the fund changed to the negative at some point(for example, God forbid, adios Jim Schmidt), I'd never let tax considerations keep me from selling. Better a short-term taxable profit than a long-term loss!
103.5? Now that's interesting.
I am confident that we'll eventually find enough material to make an intelligent decision here. The stocks should give us the time; and, if they don't, we're not interested for the technical reasons given in earlier msgs. That is, a material change in the "sponsorship" of these securities would also be a material upgrade in their investment quality.
Can you please explain this hedging strategy a little more? I thought that when you short a stock you're responsible for the dividend.
If you buy a Put you collect the dividend but have the cost of the Put offsetting the dividend.
Also, if you're holding the stock for less than one year don't you have to restart your one year holding period from the date you close out the short.
I'm lost trying to understand how you gain and reduce your basis with this action.
Might be hard to determine how external investors perceive the asset quality, as they buy the MBS bond packages backed by pools of mortgages, which based on loss characteristics makes them AAA securities. This is, of course, not the case for the underlying mortgages individually. When an MREIT doesn't securitize, instead engaging in the kind of whole loan sales that IMH, SAX and others have done more of this year than their normal business plan, you do get a view of what the market thinks of the loans. Price setter/segment leader Argent/Ameriquest has been willing to pay 103.5% of the loan amount for newly originated non-prime loans this year. I leave it to you to conclude what that implies about the asset quality. BTW, the "normal" times level is about 102%.
I explained this on VF the other day. By putting on a quarterly short against the box(a perfect hedge) I have steadily lowered my basis while collecting the divvies. Selling puts me either in (a) cash which yields nothing; or, (b) looking for new places to deploy that may be the next shoe to drop even as I waste time doing due diligence. I know you think the trees are full of good places to buy, but I am more in the Phage school: I'm not buying until I fully understand, and I fully understand the mortgage REIT business, which specifically for lender REITs is a solid business going nowhere.
In case you're missing my point, when IMH was $19, my basis was a little over $11. While not perfect, my hedging strategy has continually lowered my basis while keeping me in a security I am comfortable with both fundamentally and technically.