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Chimera Investment Corporation Message Board

darswan27 11 posts  |  Last Activity: Jan 22, 2015 3:29 PM Member since: Feb 7, 2010
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  • darswan27 by darswan27 Jan 22, 2015 3:29 PM Flag

    let's do the CPR math. I am going to use averages for the sake of illustration, in real life CPR's are built from the pool level up. Having said that the averages can provide valuable insight into any portfolio. So the annualized CPR was 8.7% times the portfolio balance of $15,421.9 billion equals( rounded) to $1,342 billion in payoffs over the next 12 months. The weighted average purchase price is 105.5% (5.5% over par) times $1,342 billion equals $73.81 million divided by 12 equals a projected $6.15 million premium write off per month. In addition, the $1,342 billion run down in portfolio means gross income is reduced by $1.342 billion times weighted average net coupon of 3.47& or $46.57 million (gross) or $3.88 million per month. . So the total effect of the CPR is about $10.0 million per month or less than 2%of total gross income. .Very manageable. So after expensing repo interest and monthly hedge cost (based on past experience) should lead to the strong possibility of returning to a 15 cents quarterly dividend in the coming quarters. See you next month.

  • Reply to

    monthly update

    by kevinlats Jan 21, 2015 8:32 PM
    darswan27 darswan27 Jan 22, 2015 10:04 AM Flag

    Agree. The stock is probably trading at least a $1 below year end book value. The managers see a free gift at these levels.

  • Reply to

    monthly update

    by kevinlats Jan 21, 2015 8:32 PM
    darswan27 darswan27 Jan 22, 2015 9:09 AM Flag

    Excellent update. they have expanded the portfolio and if you do the math with around a 1.40 spread they can easily support a return to a 15 cent quarterly dividend. CPR rates behaved better than expected and with the Daragi QE program boosting interest rates (our 10 yr treasury at 1.94% vs 1.70% last week) refinance pressures may begin to ebb. I'm adding to my position starting today. GLTA

  • darswan27 by darswan27 Jan 21, 2015 5:20 PM Flag

    Wow at 8.7% for the portfolio much lower than one would expect. The last time rates were this low the CPR was 13% to 16%. the 15 year portfolio is showing it's true colors and will help protect Book Value. GL.

  • Reply to

    Potential buyers ?

    by one_of_those_very_good_guys Jan 20, 2015 4:33 PM
    darswan27 darswan27 Jan 21, 2015 4:19 PM Flag

    Don't worry Barclays is doing the thinking for you. Most likely already had a buyer when they approached SIMG, Now it's just a matter of price so the SIMG Board doesn't get sued for selling too cheaply. Gotta love the nactivist investors they undoubtedly were behind putting SIMG in play. $8 to $9 a share not impossible because no debt and an easy all cash deal for $700 million or less. Should be cashing our checks soon!!

  • Reply to

    What if margins are good and SPF hits

    by ladyvacation Jan 15, 2015 7:41 PM
    darswan27 darswan27 Jan 21, 2015 2:46 PM Flag

    SPF duh!!

  • Reply to

    CPR's

    by darswan27 Jan 21, 2015 10:33 AM
    darswan27 darswan27 Jan 21, 2015 2:44 PM Flag

    HA!! ARR can surely use some resussitation. Standby for monthly update and we will break down the CPR

  • Reply to

    What if margins are good and SPF hits

    by ladyvacation Jan 15, 2015 7:41 PM
    darswan27 darswan27 Jan 21, 2015 12:13 PM Flag

    The market in my opinion is currently not pricing in lower commodity costs for lumber or copper. My bet is margins will improve as the year progresses. I think you will be proved wrong at $8 in the next 12 months. With low interest rates, the FHA reducing insurance premiums so sellers can more easily sell and move up to a SPF home the future is bright and much more likely a $9 handle than $8.00. It's hard to believe Mr. Market is leaving so much money on the table for SPR and I would expect more stock upgrades in the months ahead.

  • Reply to

    CPR's

    by darswan27 Jan 21, 2015 10:33 AM
    darswan27 darswan27 Jan 21, 2015 12:07 PM Flag

    Yes, one of the reasons ARR went from a 30 year portfolio to a 15 year portfolio was to reduce interest rate risk and protect book value. Hedges limit interest rate risk by paying off in a rising or falling interest rate environment depending on what future interest rate move you are trying to limit from an adverse financial impact. Please note ARR amortization of premiums is expensed monthly as it occurs, no yield smoothing techniques are used. This is admirable transparency but can cause larger monthly write offs as CPR's increase. Once again, my theory/guess is that history will repeat itself and ARR is better protected from premium write downsthen the market is pricing in. ARR is currently a buy in my book at these levels. Let's watch those CPR's later today.

  • Reply to

    CPR's

    by darswan27 Jan 21, 2015 10:33 AM
    darswan27 darswan27 Jan 21, 2015 11:32 AM Flag

    Constant Prepayment rate. CPR's are historically lower on 15 year paper than 30 year paper.

  • darswan27 by darswan27 Jan 21, 2015 10:33 AM Flag

    Everyone knows this is all about CPR's and how much of the portfolio will be refinanced away with accompaning write downs of the purchase premiums. The dirty little secret is 15 year paper is not as likely to be refinanced as 30 year paper because the shorter term gives the mortgagor less bang for the buck than 30 year refinances. BV is much more likely to go up than down due to the year end 10 year treasury being at 2.17%. Watch the CPR in the company update today which will be the tell.

CIM
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