I think people are starting to park their money on CIM while the storm passes... With 10% below book value, no losses on investment securities and 16% dividend, I think people are confident they wont loose their pincipal betting on CIM. And while they way for better times, other stocks are falling.
I have all my money on CIM.
IMHO, CIM was punished when "Seeking Alpha" ran its diatribe on how CIM's portfolio was not agency backed and had declined in "quality." Now the worm has turned.
I don't see the Boehner/Kantor/Bachman led U.S. Congress supportng morem funding for Fannie Mae. How could they ever justify such a move?
I think tomorrow will be ugly for CIM. But I bet it is a LOT WORSE for NLY, AGNC and the other so-called agency backed REIT's.
Guess we will know in 24 hours. I raised this issue on both NLY and AGNC message boards and nobody even cared to even comment.
this brings an interesting point.
A lot of CIM's bagholders say they don't mind the drop in stock price because they will "recover" their losses with the dividends.
The problem with that is, that unless they dump CIM and declare the losses, they will be taxed when the get the dividends.. so in reality, not only they will have to recover their paper losses, they will have to recover the taxes on the dividends are well..
unless they are holding CIM in the IRA account, of course
My understanding is that REITs already have a tax disadvantage compared to most dividend paying stocks since REIT dividends are taxed at higher than the long term capital gains tax rate. I believe that REIT dividends are taxed as ordinary income in most cases?
Is the suggestion that REIT income will be taxed at a higher rate than ordinary income in some misguided effort to raise revenue? Seems pretty far fetched to me but then I wouldn't have thought any group, no matter how blinded by idealism, would be stupid enough to put our nations economic reputation at risk by flirting with default while the rest of the worlds economy is so discombobulated.
Fortunately all my CIM holdings are in IRAs, mostly Roth. This means I could care less what the tax rate is on dividends. Unless congress drastically changes the tax laws dividends inside a Roth IRA won't be taxed until I spend them on something at which point I'll likely pay sales tax. Regular IRA capital gains will only be taxed when I withdraw them after I retire. Then they will be taxed as ordinary income and, presumably, I'll be in a much lower tax bracket by then.
Of course the government could go nuts and try to confiscate all my savings by screwing around with the tax code. I think my new guideline for predicting what congress will do where the economy is concerned is to imagine the most stupid, self serving short sighted approach conceivable and count on them trying to do that. If only I were as good at imagining stupid, self serving responses as they seem to be.
I did not buy CIM at more than $3.50, please stop this talk about how bad CIM have been falling from $19...
I would never buy CIM for more than $3.50. It was not a buy at $19, not a buy at $4, BUT A BUY at $3.50 and a huge buy at $3.08
With Republicans decinding 80% of what happening in the US. No way they will allow tax increases on REITS.
And CIM is not risky! I liked this:
80% of capital invested with no bank loans or repos, bought at huge discounts for cash, "It is performing better then what we expected".
20% agency, leveraged 5 times.
all in all 50% agency, 50% non agency when using todays market prices.
The bet in non agency will pay of huge when housing turns around. It's quality paper, best of the best non agency. They did not have any imparment charges on this paper the last quarter... They had a loss on headging swaps.
What if the new 12 member “Super Congress” decides by Oct 1 that REIT’s altogether are an unnecessary tax breaks for the rich.
They need to come up with $1 Trillion in cut by that date for the new fiscal year.
I would say REITs as a whole could be on the chopping block.
Keep in mind, CIM is largely non agency paper.
It’s a very risky chance to take.