After investors saw this preview of what higher rates can do I think the number of uninformed investors has declined significantly. The only investors not feeling any sense of caution are the simpletons as can be seen by the mindlessness of more recent post. Cautious investors don't cause rapid run ups. This is what would be termed as a lower high in a down trend I believe. I still think that the short side has lower risk long term. But I won't short. I'm still waiting for rates to peak as I believe that a buy at that time is the most conservative strategy.
Right now I sense that being on either side of the trade would be best characterized as reckless. Shorts were doing good but BB has made that strategy less certain in the near term. But longs do not have it easy either because the eventual tapering is like a storm cloud on the horizon. When you expect rain you look for shelter. There are always those who will stand out in the rain but we all know what we call them. This analogy fits well. It is that it takes a little more intelligence to know if you are standing in the rain when investing and from what I see here on yahoo that many don't seem to have it. Or maybe its just that a higher percentage of people of low IQ post. As I cannot believe that the bulk of investors are this lame.
I believe that it is possible to make money on mREITs with very low risk when investing during the right part of the interest rate cycle. I know because I did. However this is not the right part of the cycle. There are other investments that are more appropriate for this period of the monetary policy. Bonds or bond like investments should be avoided now. I can guarantee that everyone who fights this trend with significant amounts of money involved will never do it again after this cycle. But I don't think that it is necessary to learn the hard way. But for some maybe it is because they do not have the analytic thinking skills to predict future outcomes.
I have been long AGNC for awhile now and am still trying to determine whether I buck and ride out the impending storm we have ahead or sell it all for a small loss and walk away for now.
For anyone riding out the storm I have this question. Have any of you considered downside protection in the form of short term puts?
It won't go very much higher. In case you don't remember as far back as yesterday, this is still being pumped up by QE, which will eventually end. Enjoy the good day while it lasts. Performance of Agency RMBS today says that AGNC is still burdened by an upward interest rate trend.
with the fed doing a back track, look for the good ole batesat to come into play. will make high end options not so depressing now. Man, bought the 29's and 30 day before big Ben put the kabosh on things. Oh well, perhaps they will turn around.
It will continue only as long as Ben keeps his mouth shut. That, I feel, is quite unlikely given that he's going to testify in front of two congressional committees next week. I'm thinking there's a 90% chance he'll send the mREIT market into another tailspin with one of his well conceived comments regarding the death of QE.
One thing you can be fairly sure of is that AGNC will experience violent moves in both the up and down directions over the next few months, and end up pretty much where we are now. Enjoy the ride.