I like MITT. They have had less declines in book value then most of these mreits. They seem to know what they are doing. If you are going to do a swap for some mitt by selling mtge.. wait for a 1:1 parity or better and then swap for some.. MITT's last reported book value was lower then MTGEs. I like WMC better then MTGE and MITT though. The management knows how to hedge book to a better degree in a rising rate environment, just listen to some of their CCs. Whats neat about WMC is that they now pay a 0.90 dividend vs MTGE's 0.80 and they trade for $1.00 less then MTGE.
Yep, MTGE was $1.20 over WMC and I took that opportunity to sell the shares in blocks and swap over to WMC.. I wiped out 0.20 a share of MTGE doing so.. so i only got a net spread of $1.00 between the two. I like the hedging strategies at WMC, they clearly are working better then the AGNC management strategies. however, My risks to MTGE are still there and I feel that a larger non agency position is going to drive positive results at MTGE. I know the stock is definitely over reacting to the sell off, there is no way book is below $22. I can't believe MTGE is still doing worse than agnc!!! But you know how it is. MTGE will do better then AGNC in a rising rate environment, and if the housing market continues to recover then MTGE will have an even greater recovery in book value. It's all about liquidity and MTGE has 1/5 the liquidity of AGNC. The other issue is those damn TBAs. Buying lower coupon paper has been a losing game, the better paper is the higher coupon 4.0 and 4.5.
Here is the problem, if mortgages go to 5 to 6% range, what happens to housing? I think it will run into some serious problems if rates go to that high. I see a deflationary risk coming. inflation is 1.5% with QE3.. so what do you think it will be without QE3? probably close to 0 or at least under 1%... Now if anything at all gets worse from there.. thats a deflationary environment. Look whats happening to gold prices, stock prices, bond prices.. everything is going down.. usually in deflationary environments interest rates go lower - not higher. So there is a disconnect here. but Gold is the key.. because gold is selling off, that *COULD* be a sign of deflation fears at the very least.