In a statement released yesterday, the Federal Reserve said,
“To provide support to mortgage lending and housing markets, and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.”
Martin toiday Weiss also says a depression is unavoidable. Many people say many things and then selectively choose a few things to prove their prescience, while opportunistically ignoring the many things that were wrong.
They back the principal of the loan outstanding...The dividend as you refer to it (actually it is a distribution and not a dividend which is much different for tax purposes) can vary based of the company's management of the loans they purchase, libor, leverage, etc.
For those newer to these investments, it is important to make that point clear. If an inverted yield curve would occur AND I AM NOT SAYING IT EVER WILL AGAIN, then it is possible for the funds to make little or no profit in a time frame and pay out little or no distribution.
Note that CMO lowered their distribution this quarter as did AGNC and I believe ANH and MFA may do the same...
Good stock but taking a little rest right now, so be careful what you pay for it.
I agree - your statement is true, however, the likely hood of such an event happening within the next 14 months is practically impossible under the circumstances, what is exactly what the bet on AGNC is all about. The When is the bet? The when is the only Question.
Facts to consider:
Another huge wave of Adjustable Rate Interest rate Hikes is fast approaching the banking system.
Another huge wave of forclosures starts within the next 12 months.
Another huge wave of Band-Rs comes with it.
The Unemployment rate keeps climbing even though the rate of job loss is slowing - but we have not turned the corner on more job losses ahead.
Mid Term elections will not be favorable to interest rate hikes by the fed, especially with bank owned realestate still falling in price as forclosures rise and unemployment with it.
The only things that will force rates higher are if 1. If the fed stops quanitative easing or buying T-Bills, or IF other countries won't buy US Bonds.
or if the CORE inflation rate goes over 4% which seems most unlikely any time before the next election.
The major concern with agnc is that if and when interest rates rise - is that they raise both short and long term rates together or close to together.
The raw truth is that deliveraging is just another word for raising reserve requirements for banks and since that started happening in 2007 by Hank Paulson who single handly removed the implied guarantee on a huge amount of Government agency debt, which many people used as reserve assets with thier AAA ratings, which Paulson destroyed a few words regarding the difference between Implied or implisit. The AAA ratings allowed AIG to sell lots of default insurance on questionable debt under false rating information, the loss of which the American People had to loan AIG to make all the pay offs. Do look for any huge interest rates hikes until all the big banks and AIG are bailed out. These huge workouts are going to take time. AGNC is the perfect place to hide till the smoke clears. One man's opinion