In a few weeks, WMC may declare its next divi, say at 90 cents again, or perhaps a bit higher having just recorded 94 cents core earnings. Company is also capable of buyback to benefit from its own extremely high yield.
Given how the trading volume has been shrinking, short covering will possibly cause a riot once its starts.
Frankly, disappointed to see posts from the short sellers having withered. Hello.
Reik - WMC is hedging their view of the landscape. When you say they don't hedge as well as others - that may not be completely accurate. You can hedge yourself to death and eliminate all risks as well as all upside.
Their higher core earnings are also a natural hedge.
In some environments their view/hedging strategy will underperform - in others it will do better.
Mbs pricing moves that are highly correlated with treasuries should be adequately hedged. If spread comes in the hedges will outperform.
So to say "watch out" because MBS are down doesn't really cover the actual risk. MBS down with treasuries down more could be okay.
You could go hide in the bushes and hedge 200% but what would be the point?