Beginning of the year buying was very anemic, this might be due to the fact that the FOURTH QUARTER financials will be out. 2013 is going to be a very very very bad year. The second quarter was bad. The third quarter was really bad. The fourth quarter is going to be another bad one. REIT's have to pay out 90% of taxable income to remain an REIT. But what happens if they have to take writedowns on their off balance sheet stuff in the fourth quarter, and taxable income drops or disappears. If interest rates keep moving higher like today and when the spring comes the pent up buying, the new jobs and the payroll inflation is picking up (I am seeing many places coming back with 5-10% pay raises, even the minimum wage is rising double digits), folks when you see wage inflation in some of the thinest margin industries, THAT IS A VERY SCREAMINGLY LOUD INDICATOR. I am shocked at the McDonald operators who are giving 10% raises to long time employees and their managers and support staff. Same with the retailers, like Costco, Home Depot, Lowes, wages are rising. One employee who was earning $15,000 for 4 years straight, just got a raise to $22,000, that is 46% for 4 years equivalent of 12% a year, no promotion doing the same exact job in retail. Now she wants to know if she qualifies for a condo loan. Inflation is here, prices on almost everything including postage is rising high single digits and low double digits.
I like to invest where there is an imbalance between risk and reward. In interest rate sensive stocks, there is much more risk and very little reward potential. I don't like to take risks, I use mathematical probability distributions to invest, which almost ensures no capital losses. I will be here as long as the fundamentals are very negative in relation to the stock price. Hence, look at the massive losses, the trend down in positive earnings, and the massive risk exposure of the 8 to 1 leverage. I get excited about the dynamics, the probability distributions, etc. If this rallies much above $20, EXCELLENT SHORT, for the short term, medium and long term. Inflation is starting to accelerate, with the spring thaw in home sales, interest rates will move in only one direction, UP.
I haven't been this excited since 2007, I had the same feeling for the real estate industry and the banks, I was short every single bank, like Indymac, WAMU, Nat. City, all of them, 50+, most went under. I mean it was a freakin shorters gold mine. I think agency mortgage REIT's will be the same as the subprime lenders and the old mortgage REIT's of the 1970's, every single one of those went under. This is a GOLDEN OPPORTUNITY for those with the analytical skills and the knowledge ot understand 30 year mortgages or in biblical terms 30 yr. death pledges.