Take #4, yes i know... Just when I thought I was done~!
Long AGNC, Short NLY
Long MITT, short IVR
Long MTGE, Short JMI
Long WMC, short CYS
Long TWO, Short ARR
So what do you think?
I am thinking about launching this on Monday.
AGNC always beats NLY over the longer term in both NAV protection and growth as well as the dividend prospects.
MITT vs IVR - MITT has a solid management team and they are nicely hedged up following Q2. MITT's hedge book is perhaps the best in the space. So MITT has been on the right side of the trade in Q3 yet the market has punished MITT unfairly... I think that reverses and MITT begins to outperform. MITT in my opinion has a much stronger management team than IVR.
MTGE and JMI are a lot alike except that the leverage is much higher at JMI and MTGE knows how to hedge correctly. and... JMI is headed to 0 thanks to the failed management there. Easy pair.
LONG WMC vs CYS... WMC outperforms CYS in absolute yield terms as well NAV protection. CYS is too short duration with new added longer duration paper that is quickly dropping in value. Failed hedging strategy at CYS.
TWO is one of the best mreits out there.. using ARR to hedge it... also because i think ARR goes to 0 over time anyways. ARR failed to get book value up from 2008 to September 2012 which was a period where interest rates continually fell.... $10 to $6ish book in September 2012... Think that says it all...
All the power to you on these make believe future trades. Personally I think you either believe in the steepening yield curve story or you don't. You either believe that mortgage reits are going to be profitable for the foreseeable future or you don't. If you do believe I see no reason to short any mreits at this time. Ya wanta short something? I'd short MSFT and leave the mreits alone. But that is me.
Some of the mreits are going to under perform and i would short those vs the ones that i believe will outperform. But I have decided am going to hold off on this strategy for a little while and keep it as something in my playbook for later on.