If SEC implements its suggested plan of taxing the MReits or stopping Mreits from using leverage - then there would be 25% drop in yields. Is it priced in ?
Any implications of Europe's problems.
Not only is there no such SEC plan, as others have pointed out, but all evidence suggests that SEC has been getting an earful in response to its Request for Comment on this.
The comments they have actually received to date are online. I read a random sample of them and, as one might expect, they are uniformly against changing the rules for mREITS. Interesting reading:
Knowing the government, they've probably hired someone with a mental disability wearing coke bottle glasses to review the comment letters. I wouldn't be at all surprised if the majority go to file 13.
Europe has been priced in and it was bogus and that is why you can see a rebound off the lows. There is no change in tax policy or interest iminent. This is mostly a dream produced by short sellers. Tne market is choppy though and you should set stops at a level that is comfortable for you. Hedge funds are buying here now not selling. It really makes sense to buy below 30 and dips . The return will beat the street average.
Your words are like a cool drink on a hot day. I've been preaching the same message for over a year now.
I often feel alone, on this roller coaster market with the faint of heart screaming, "WE'RE GOING TO DIE!!":
1)"20 is coming"
2)"26-28 will be new trading range"
3)"mReits are finished"
4)"SEC will take away mReit's leverage"
5)"Operation Twist" will flatten rate curve causing AGNC to crash"
6)"4&5 will necessitate a reduction in the dividend"
7)"reduction in dividend will drive PPS to 20"..and the loop repeats...
I could go on. The above listed items are all fear and speculation. The interview with the CEO last week was nothing new. Todd discovered nothing that we didn't already know..which is:
1)AGNC's MBS pool is way over balanced to low balance MBS, eliminating refinance threat on the majority of their holdings.
2)Hedges were in place to mitigate prepayment risk, long B4 the notion of Operation Twist crossed the Administration's sensors.
3)SEC review clearly is after financial entities alien to AGNC's charter.
4)OT and SEC review will be finished within months...
So those who don't believe #1-#3, will soon stop shivering, and invest again in the best managed, highest yielding, most resilient and consistent stock in the whole universe of securities...and most important...
My Dec35Puts and my Dec 27/28Call spreads will once again make me filthy rich ;-)
Thanks for your words of sanity...
1. even if the SEC recharacterizes Agency mREITs, the IRS won't, so the mREITs will still be paying 90% dividends to get 0% tax rates, but on only 1.5X leverage instead of 7-10X.
2. the SEC isn't going to recharacterize Agency mREITs. ray's posting of the government-securities exception pretty much nails that possibility closed.
I think we are now playing silly word games, but if you insist: The fact that that AGNC's price drop is mentioned right after the SEC news and it is followed by "It’s not too hard to see why" seems to me to indicate that the writer of the article (NOT THE SEC) thought that AGNC was a target.
As for the rest, you are barking up the wrong tree. Again, I DID NOT SAY, and I am not saying, that the SEC comment request is ominous for AGNC. In fact I said the opposite several times now. What I contradicted was your assertion that the SEC issue is totally irrelevant to AGNC. Even Gary Kain, evidently, does not think so.
I would say this dead horse has been beaten enough.
"American Capital Agency Corp., Hatteras Financial Corp. and Capstead Mortgage Corp are each down about 2% today."
You said that the SEC "targeted"-your word-AGNC. So you think that a mention that it was down by 2% one day amounts to targeting? The article never mentioned AGNC again.
Why didn't you give the rest of Fandetti's quote? "Mr. Fandetti, however, writes that there’s no need to panic: “It is important to remember that the SEC has historically expressed the view that agency whole pool certificates are allowable under the exemption, so we’d be surprised if agency-mortgage-backed securities did not qualify under the final rules.”
You're putting a very weird slant on the article by what you choose to leave out.
There is also word from AGNC itself on the SEC issue. It does not consider it a serious threat, but does not dismiss it wholesale either. In the Credit Suisse report posted by drexion2004 on 9/24, we had this:
"We recently had the opportunity to meet with Gary Kain, President and CIO of AGNC. The four main areas of focus of the meetings were 1) refinance risk, 2) liquidity risk, 3) the SEC comment period, and 4) the current return environment. We came away from the meetings feeling comfortable that AGNC is well positioned ...
SEC: AGNC believes that there will not be wholesale changes to the mortgage REIT business model as a result of the SEC request for comment. In the event that this does occur it will likely be 2-3 years down the road before the changes would take place. The importance of the mortgage REITs to returning private capital to the mortgage market is one of the key reasons that we do not see changes to the REIT
That Credit Suisse job was disparaged as a pump job by Terr and others, but I would assume that Kain's statements were not made up or falsified.
"This is a bald-faced lie. The article never mentions AGNC."
Whoa, Randy. What did you have for breakfast?
My quotation came from this:
Which very much does mention AGNC -- in the paragraph after the one I quoted:
"American Capital Agency Corp., Hatteras Financial Corp. and Capstead Mortgage Corp are each down about 2% today.
It’s not too hard to see why. In a report released yesterday, Citigroup analyst Donald Fandetti wrote that if agency-mortgage REITs were forced to reduce their leverage from eight times debt-to-equity to two-times, their dividends would fall from about 18% to 5%."
So there is a Citi analyst involved too. And if Seeking Alpha took this from WSJ and WSJ took it from Citi, that still cannot be brushed off as comments by unreliable Seeking Alpha.
In any case, much of your rant is off base. I did not take a position up or down on any of this. I just said it creates uncertainty. I continue to be long AGNC calls as I tend to agree with reits_r_s that the price will rise again into ex-div. Later, we'll see.