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American Capital Agency Corp. Message Board

  • chicocan2 chicocan2 Dec 7, 2011 3:10 AM Flag

    THE RISK UNDER THE RUG

    http://seekingalpha.com/article/311916-chimera-revisited-dump-hold-or-reinvest

    This could be coming to a reit near you......valuing assets at market, not face value could change the value of agnc and other reits....IMHO

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    • You a definitely on target about the 70's, i have been in reits since they were authorized, and have been well rewarded, but i've seen some strange things, so always looking for the "Murphy's Hole".
      I do not agree on your view of inflation. In the 60s an income of 10k was great retirement for my lifestyle. Today it is closer to 100k or more. I do not care what the gov says, i know better from the past. When i was in college, a gal of gas was .25, now is more than 10 times. A chev with hydramatic was 2k, today well over 20, and closing in on 30k.
      so my point is, if inflation is 13%, and after tax i would need about 16% on my money just to break even. That is about what AGNC is paying. Thank goodness. And, again thank you so much for your time and effort to educate me. I am an old man, and the returns on agencies is truly a blessing. What are the folks doing who are getting 2% or so..?
      I tell many people about these investments, and have yet to meet anyone who has even heard of them.
      Even so must be aware of the great risk involved, and stay alert, and check out all the potential hidden facts...........................
      GLTA, esp the old ones.

    • Its a matched position. The repo loan is secured by the same collateral. They can't get into a "bleeding position". I don't know, I feel you need a primer on leveraged asset financing. You are going back to the mid 70s when all sorts of mortgage reits were around, and that was when the mreits were in their infancy. This is much more refined and the risks are hedged and controlled. The only downside is a lower dividend, not mayham, albeit if you are in the shares based on a certain dividend and the dividend drops that is a different question, but we are trading above book value and the book value is solid.

    • >the gov is out of fiat money to buy

      The definition of fiat money is that the gov is never out of it.

      And at current inflation rates*, they're actually setting themselves up to make money on the interest they'll be repaid later for the cash they're printing into the economy now.

      So at they point they stop, it will be because it worked and the economy is starting to move on its own. And then we'll forget all about where the money came from, because we'll be stuffing it in our pockets.

      * - I know people will cherrypick to pretend that inflation's higher than it is, pointing to the arbitrary non-member prices of commodities at the supermarket, but the real rates are nearly negative, since housing and wages and imports are in fact part of real rates.

    • It's a terrible article, because it doesn't discuss the essence of held for sale or held for investment accounting. It also does not address the valuation of MBS versus RMBS. They are completely different beasts. You have been influenced by a scud article.

      If an MREIT holds an asset as a long term investment, then a market to market does not impact the P&L. If an MREIT holds assets for sale, then yes, market to market accounting is appropriate.

      What he really misses is that agnecy MBS is rising in value generally. CIM is a non-agency RMBS model and apparently, from the article, entered in a series of tricky accounting moves. Non-agency RMBS, can be anything, but one thing it isn't is agency backed and traded everyday.

      MBB, the ETF for MBS, is the best quick proxy for MBS. The values of MBS are rising, as the government continues to buy more and more of it in operation twist. I also have a conspiracy theory that suggests they are trying to control the entire MBS market to get control of the servicers right to modify the loans without refinancing. Okay, off the Mel Gibson movie stuff.

      When you think of AGNC, NLY and most of the others, you only need to know that MBS values are rising, but that creates the more fundamental question of yield. So, really yields are falling and that is something to think about. Value is not a problem, and the book value you see on the balance sheets of the MREITs in agency MBS are solid. So, the book value per share figure is well supported.

 
AGNC
22.30+0.30(+1.34%)Dec 19 4:00 PMEST

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