Transcript says they earned $0.45/share Did you know last quarter they made $4.61/share Buy all you can You won't see this sale again
Sentiment: Strong Buy
They didn't lose money, but anyone holding it lost future income. The earnings need to be better than that. Why they aren't is a total mystery at this point. Management is clinging to the wrong hedge instruments.
That is what I suspect. But to assume they will stop doing that before one seems them actually stop isn't wise in my opinion. It would be taking an unnecessary risk with no justification other than to hope that they do that. The fact is we have no idea what they will do. So far they keep screwing up every quarter. Why should we assume that will change in the future? Only the long term buy and hold dummies aren't questioning their track record.
How do they continue to pay the current dividend rate if they only have $0.45 in earnings unless they use money from paid off loans in which case the bookvalue would go down.
A person who imagines that they are smarter than the market overall is either arrogant or foolish. The market overall is rarely wrong. You would be wise to assume that it is not wrong now.
AGNC has been playing the Fed, and it bit them. Kain has years of experience in the bond markets, while Bernanke has none. As a result, Fed actions have been quite unpredictable and contrary to good monetary policy. In the earnings release, Kain said that AGNC would be returning to its core activities instead of trying to game Fed moves. That might help, but the Fed has painted themselves into a corner by manipulating long-dated bond prices for too long, and this may have some nasty consequences regardless of what AGNC does.
Everyone was fooled by the Fed. But as soon as Yellen was chosen everyone knew that low rates had another few more years. There is no reason to hedge against rising rates today. But that situation won't persist forever. He jumped the gun but I can't say that most would not have jumped the gun if put in similar circumstances. One must hope his hedges were short term. What if they weren't? Ooops.
Monetary policy is fine. If you look at the history of the yield curve, it's as steep and curvy now as it's been in decades (the inverted curves of the mid-'00s are flabbergasting; long rates should have been sky-high).
Kain for some reason has been trying to guess when the Fed would stop cultivating that vavavoom in the interest-rate boudoir, and guessing wrong every time, with a hedge that is guaranteed to Godzilla his Tokyo when he's wrong. If he's finally abandoning that strategy, then that's a very good thing (I'd have done it 6 months ago when the first cracks appeared; I wish I'd known he was being a stubborn #$%$ about it, I'd have hedged against him; instead he's stuck me almost as bad as himself...)
So I'm sticking with this, until it turns out he lied, then I'm sending in the Marines.