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Western Asset Mortgage Capital Corporation Message Board

  • jackhiller@ymail.com jackhiller Aug 7, 2013 8:20 PM Flag

    This MB plagued with psuedo economists

    Our fed Gov is now at a $17 T deficit that is rising, for lack of tax income to match the increasing social welfare costs. Does any one seriously believe the fed would not act to keep treasury borrowing cost from becoming too high to service? The currency is fiat, and the fed has a computer to print enough to buy all of the treasuries debt, but prefers a lower rate so that hyper inflation does not scare the bond rates and the public.

    But it does not actually matter much whether the fed foolishly tapers QE this Fall, or not. If it keeps QE going, because the economy is poor, most new jobs are for temps, and many full time are now being converted to lower paying temps w/o benefits, they it can buy enough treasury notes and mortgages to keep rate from going to high to kill housing and make Gov debt servicing "too" expensive.

    But let's say the Fed experiments with a taper, to see what might happen. All of the worlds major economies are at best flat or receding, so there is no inflationary pressure from lack of available goods and services. The bond buyers have had a concern that the Fed's QE monetization, its printing new money from thin air, will eventually lead to money inflation, even while bank lending is lean. So, if the Fed backs away from continuing QE monetization, with economies poor, the bond buyers will be motivated to buy bonds and mortgages as providing real interest and capital gains potential.

    With the world's economy poor, and inflation less of a threat than deflation, regardless of tapering or not, rates have likely peaked.

    WMC did not say they cancelled their hedges against rate pops, but instead shifted to a less costly form, because they expect less turbulence in rates, and rate reductions later this year as the markets accept that our economy and the other majors are flat or receding.

    MTGE had a decent earnings report, given the turbulent markets. WMC actually increased core income for dividends, and the BV loss was only an unrealized GAAP.

    Sentiment: Buy

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