CIM doesn't have a high percentage of its float held short, but nevertheless, I find it interesting that its shares short almost doubled from December to January. I think someone at Motley Fool may be shorting CIM. In 2009, I seem to recall them running an article about what a brilliant business model Chimera had and what a great dividend stock CIM was. Now they're running articles about how CIM is "bound to decline" and how it will "crush your portfolio".
I also find it interesting that insiders bought shares last quarter and Barclays Capital initiated CIM at overweight on January 20, setting a target price of $5.00.
So who do you side with, Motley Fool or insiders and Barclays Capital? Do you see anything on the horizon to suggest business conditions will become particularly unfavorable for Chimera?
If you read the article...Fool keeps reminding us of the Negative impacts of rising interest rates and the affect on the spread..something most of us already knew thanks to the intelligent posters who post here.
The question im asking now is...If the Dividend gets Slashed to lets say ...8% are people really going to turn and burn on this one?
I'll Put it like this...Interest rates rise sometime in future..Lets say you can now get 2% on your CD's...LOL isnt a 8% return better?
Plus If you have owned Cim in 2010 your Cost basis is significantly LOWER than what you paid for it if you did not re-Invest your dividend payouts into new positions like I did.
Personally..I think all the nonsense about rising rates is mute until people get back to work, and unemployment goes down.
It is noteworthy that the interest "curve" is now the steepest in history. That is the spread between the two year and 30 year Treasury is the largest it has ever been. The banks benefit big time from this differential in that they borrow short term and lend based on the 10 year. Doesn't CIM receive this same benefit at the present. Ability to borrow at the lower rate and leverage on the spread?
There are two types a company can raise funds. Borrowing from a bank which is a mandatory obligation, and issuing stocks which is speculative. Dividends become more speculative and volatile if the cost madatory obliigation goes up and stock prices plummet due to it becoming less popular and an exodus begins. Psychology plays a big part in the trading of stocks, none at all in the borrowing side of the equation. When you see negativity on these message boards, you will be the first one to bail out.