This is a front page article in today's WSJ. Time to be cautious as this signals future plans to allow rates to rise. The unemployment numbers are giving the Fed a reason to act.
The WSJ can print anything it wants to. However, the Fed is in no danger of, or hurry to end QE. The economy is tepid, the Fed has an unstated "weak dollar policy" in place.Sure, rates will rise at some point, but it will be on the back of a steeper curve. Fed funds will be here or close to here for a long long time. REITs funding will not be moving much. All good for levered spread players. That is, after the dust settles. It may be at lower prices, but that will be great entry points
The fact is that the Fed is pushing on a string and long rates are starting a slow and steady rise. Their balance sheet has exploded and as rates rise they are losing money hand over fist on their holdings. They have artificially inflated housing prices through an unrealistic cost of home ownership due to low rates, brought flippers and "investors" back into the marketplace and completely tapped out the refinancing market. Now we get to deal with the aftermath - again.
And at such time as the Fed did reduce its bond buying, it has indicated that it would still probably keep the overnight Fed Funds rate low for awhile longer. This would have the effect of increasing the MREIT spread which, in turn, would lead to more revenue and probably increased dividends, even while book value and share price probably decreases (to the extent not hedged), at least in the short term, until new SPO's are able to purchase newly priced MBS'.
Your argument is logical however I still think caution is justified regardless. There will be plenty of time to buy when spreads start to rise again. There is no need to weather all the uncertainty between now and then. This stock pretty much always gets back to book value eventually and you usually can't go wrong buying at that price.
It looks to me like AGNC management had a hedging miss step, however, we shall see. I would like to see a the next quarterly report where said miss step has been corrected. After all, we might be seeing a new pattern. Such as when management's old strategies aren't working anymore and they need a new bag of pixy dust to adapt to new conditions. It’s not like this scenario is too farfetched to ignore as being unlikely.
True, it is high but not so high for a President who doesn't understand how to promote business investment. Considering who is in office the economy is doing quite well. It just goes to show how well the US economy can do even under the most adverse of legislative environments.
Eventually the Fed has to define a new norm as what is OK unemployment of they will keep interest rates low forever.
People aren't going to put up with this forever. History has shown time and again that leaching doesn't work and eventually the leaches get shown the door. That will happen in the next recession, or maybe then they will actually be willing to call it a depression.
That said Obama’s tariffs on Chinese solar panels has helped a few of the US solar companies and as a result my other rocket stock is SPWR. In 2012 35% of the solar companies in China went bankrupt. However panel prices are crazy low but SPWR has been able to get around this by offering a complete solution to home owners including installation and financing with leasing as an option. In other words the home owner does not have to own the panels. Basically you agree to have panels installed and Sun Power becomes your new electric company. It seems to be working and it has investors convinced that it’s the new magic sauce. As a result I plan to ride this one up increasing my stop loss percentage as it climbs, similar to what I have done on TSLA which I increased to 15% this morning.
Lower panel prices are creating demand for solar. Of course margins are low along with profits unless you have another way to make money, like financing. FSLR is making money selling to utilities but their margins are now razor thin. That is why I only have 1/4th as much invested in FSLR. There are no other solar companies I would buy. Forget China, that’s a solar rat’s nest right now.
Higher than you think. Many unemployed people have now gone on disability.This means they are not even counted in the workforce. I have evidence that the states are coaxing those on unemployment to go on disability. Its all a sham. The number of people on disability is at an all time high.