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American Capital Agency Corp. Message Board

  • iguanaman_99 iguanaman_99 Sep 2, 2013 12:22 AM Flag

    Seeking Alpha, Lance Broffman Article


    The recent dividend cuts by mREITs were primarily due to caution or if you prefer fear, on the part of their management. They are conserving cash in order to reduce leverage and possibly use more cash for hedging activities such as buying swaptions. The worst fear for an agency mREIT is that it will not be able to roll-over its repo debt. If my forecast that short-term rates will remain low for much longer, the agency mREITs might gather up their courage and begin to increase their dividends as their spreads and income increase.

    Sentiment: Strong Buy

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    • WRONG!

      Must conserve cash in event a market break causing margin calls requires immediate settlement or forced sales of securities exacerbating losses. SA writers have completely lost perspective thinking Mreits have become a value play.... they are not even a value trap..... they are a black hole.

    • In my opinion the market is pricing the stock as if short term rates are not going to stay lower for much longer and I don't think the stock price will recover if rates stay lower for a longer time than the market has anticipated. The market will wait until what it is expecting to happen actually happens. The only difference will be is that it will take longer. But no sensible investor will pay more for a stock knowing that this situation is looming over the horizon until it is resolved. Only some of the inexperienced retail investors will think this way because they don’t know any better. Of course this won't stop them from handing out advice on things they know little about. That is why they appropriately earn the name fool. And my advice is not to follow a fool when he is walking toward a cliff.

      I think most people know this but the problem with investing that it is often so complicated to predict likely future outcomes that many retail investors don't understand what they are doing as well as they should. That's OK if you acknowledge this to yourself and act accordingly but it is the fool who acts as if he knows things that he does not know. It is somewhat like trying to cross a crowded freeway with a blindfold on with the expectation of not getting hit. Certainly anyone who would try to do this is a fool. But this is obvious to anyone, even someone with an IQ of 70. Therein lies the problem. Which is not understanding when one doesn't know enough to be in an investment. And from many of the post I read here I can see that many are in this catagory. They think they understand but they really don't. Or they are emotionally invested and ignore the facts that contradict their investment thesis. It is a losing scenario either way.

      The only good thing to be said for these people is that if they did not exist the volatility of the market would be so large that it would be crazy to invest. So in a way maybe we should be thankful for them.

    • WSJ says that the 10Y is headed above 3% this year. Read the article on the front page of Yahoo Finance. Lance doesn't know what he's talking about!

    • Mreits or any reit for that matter doesn't have a lot of discretion regarding dividends since they must pay out 90% of their earnings each year in dividends. So if they are holding back now they'll have to make up for it in a few months.

      Sentiment: Hold

    • Hows that aldw and arr working out for ya man?

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