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American Capital Agency Corp. Message Board

  • nickspinner Oct 12, 2012 4:11 PM Flag

    When will the mREIT bloodletting stop?

    Catastrophic two weeks for the mREITs. Somebody call the Red Cross and get the transfusions flowing.

    Yikes to the nth power....

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    • Well as mob mentality can take a stock up, it can take a stock down. Here's my take.... AGNC is going to take hit in the core income as a result of spread. AGNC portfolio is mostly low rate MBS but will experience some additional cpr and refi. The portfolio turnover will be replaced with some lower spread MBS. However when I run the numbers, the hit to core earnings should only be 5-10 cents off June 30 - 90 cents. They have some UTI and they have appreciated assets.

      From an historical standpoint, the AGNC's appreciated assets are very inflated right now. Why would you want to keep these assets on the balance sheet when in 2015 (or sooner), the rates will be higher and a dark cloud of inflation always looming? Rates now are at historical lows and these appreciated assets will never be at this appreciated levels again. They can be sold for a realized gain and taxable income. I just think this is a good business decision.

      Bottom line for me. I retain my token position in AGNC (it has been my beloved and always will own some shares) but watch next earnings very closely. I will look for example, AGNC hitting the hedges showing a GAAP EPS of 1.25 selling enough appreciated assets to hit comprehensive income of another 1.50. The divy is safe.

      Say also that NLY does the same then confidence in the Agency Sector will gain spilling over into the non-agency and what about non-agency? Spreads are wider and the economy steadily improving. They could very well steal all Mriet thunder by increasing leverage and put up some good numbers. MTGE & WMC may be way undervalued by the time earnings are released.

      So.... I don't think all is lost for the mreit industry. Management is well aware of market conditions and just may surprise investors.

    • I believe it was Johnny Quest who said "what goes up, must come down"

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