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American Capital Agency Corp. Message Board

  • sauteedfoodrandy sauteedfoodrandy Apr 26, 2011 11:43 AM Flag

    AGNC in a nutshell

    I'm trying to figure out how certain things would affect agnc.

    What happens to agnc if the fed keeps printing money and there's massive inflation in the coming years, even hyerinflation

    What happens if the fed stops printing money and the inflation rate drops?


    Whats the worst thing that could happen in terms of AGNC's business model?

    I'm just trying to figure out what AGNC is all about.

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    • It's all about demographics.

      Because of WWII, Japan's baby boom generation was a generation ahead of the U.S. Hence, their boom in the 1960's - 1980's, and their decline since then.

      The same thing is happening to the U.S. We are becoming an aging population and hence in decline. Expect to see low interest rates and a weak economy for the next 20 years.

      And don't worry about China. They buried themselves with the 1 child policy. By the 2050's, India will be the world superpower.

    • yourbestfriendintheworld yourbestfriendintheworld Apr 26, 2011 2:33 PM Flag

      The QE's haven't produced significant inflation. They've been pretty good at modulating it to keep things steady. Which is how they know that if they just stop QE deflation will set in.

      Also, the Feds are not printing money. They're selling bonds to the Fed. Huge difference as regards future money supply. Bonds get repaid. If the economy ever gets moving again, that will be a moderating influence. Provided the anti-tax morons don't mess it up.

      (Search back for discussions of the semantics of CPI; I'm sure they'll be repeated, but they're there if anyone's interested.)

    • Randy,

      Maybe I'm reading the post too literally, but here goes:

      How many rate and spread scenarios have you calculated out to approx. April, 2016? Using the replies to your posting, you could enter all the data for rates, spreads, and future price per share for four different scenarios in about 40 minutes. Take another 15 minutes and enter the data for zero gain over 20 quarters. Be pessimistic and just crush the pps and the dividend yield over every quarter.

      I think you will find that AGNC, IVR and other quality paper-holders are still ahead of most other investment categories.

    • Worse thing: Freddie and Fannie shut down .... chances within three years = zero

      Rates decline: this would reduce the spread [since the cost of capital can't decline] hurting MREIT's. Chances: This is happening right now, but minor so far. I don't think many people see this as a problem.

      Hyper-inflation: not going to happen. this ends the U.S. economy as we know it. We would default on the national debt; the world economy would collapse ... this will be prevented somehow.

      Most likely: rates and spreads stay pretty much where they are. Economy not strong enough for anything else.