You should have picked some TBT at 46-47, it is up to $49 and has broken out of its trendline on very high volume, very bullish here or very sure rates will rise.
TBT up $2 and has broken out technically to the upside. This will make new highs shortly. A couple weeks ago, I said to load up on this at 42-43. Hope you all did, buy on any selloffs in the 45-46, buy ASAP, that is what the M-REIT's are doing as an hedge, this will go to 60's then 70's, just from the hedgers. RATES are soaring, Yellen's vision of redistribution of wealth is being implemented.
I am not trying to convince anyone, but the low interest rate environment is costing the FEDERAL GOVERNMENT, Trillions, and we all know the Government works for us, taking tax revenues, borrowing for our causes and we end up paying for it in taxes. Buying up all this MBS at inflated prices and holding to bring rates down is costing every tax payer or every citizen in this country. THE FED is diverting wealth from 90% of the people to give banks and large corporation differential advantage to pay off losses from the massive real estate loan defaults. I believe they over did it here and wealth needs to flow back to the 90% through higher rates on savings accounts, money market accounts and all the new young'uns that are forming families and don't have any investments. This is the bread and butter of our great democracy. You want these people to save so that the banking and businesses have capital to expand and grow (not buy back stock and get smaller, through attrition). There are two different types of growth. What we need is a reset, and we start with much higher interest rates, then much lower stock prices, and then the 90% will make some very good investments, in bank accounts, CD's and common stocks at good valuations. You don't want these people paying $40 - 50 for AGNC, it is a lot better investment at $5, with a 25% yield. Trust me, I have been through this dozens of times, my best investments had PE ratio's under 5, yields of 7-15%, and price to book value of .50-.60. Read Yellen's white papers on redistributing wealth......rates are going higher and higher and higher, wealth will be redistributed, redistributed, redistributed, over and over and the cycle continues.
If they raise interest rates 1% on everybody, the income tax revenue of 10 - 44.6% on Interest Income for individuals and corporation is 50%, is much much much higher and will bring a lot of need withholding and estimated tax revenue in quarterly installments. Old 30 year debt is not retired, the FED has been borrowing more longer maturity and reducing short term borrowing, mostly due to demand, no one puts their money in 0 % or .05% yielding stuff. Most is 10 yr to 30 year debt. The multiplier effect is also here also, which will spur the economy. Right now, the stock market bubble puts money into the pockets of 5-10% of the population, but with an interest rate increase bubble, it puts money into the pockets of 90-95% of the people, and then it get multiplied because businesses, partnerships, corporations, LLC's pay tax too, including Estates and Trusts, which earn interest on cash balances in their accounts. Trusts and Estates are taxed at 39.6% after their income goes over $12,150, so THIS IS A GOLDMINE that the government needs to absorb the cost and expenses of issuing 7 Trillion of new debt this past 7 years. The books need to be balance, flows in and flows out need to be settled, the longer it goes on, the higher the overall cost.
I DID. I sold everything in the 33-36 range. I was in CIM, ARR, AGNC, TWO, and dumped everything. I sold my CIM at $4.26 after they announced the penny cut in the dividend 2-3 years ago, and it was down to $2.26. I am a veteran of M-REIT's from the 1970's, I went through the whole cycle, I know when to buy, when to sell, when to short and when to pray for my fellow investors. Right now I am halfway through the short phase and only have the last phase of this process, my prayer messages for all the poor souls that got stuck on board this ill fated ship.
THE FED has to sell off all the MBS junk because of new legislation reigning in the FED and for regime change in less than 1.5 years, when Obama leaves office. MBS, my est. 1.5 trillion will have to be sold or dumped at 10, 15 20 Billion rate/mo. to get out of this junk. This along with rising rates will could push rates up just like 1980-1981, because it is a perfect storm, aligning with Echo-boomers, children of the baby boomers getting careers, forming families and settling down, just like the late 1970's for their parents and early 1980's. I believe history will repeat over next 5 years and 15-20% spike in 10 yr. treasuries, will cause most of the Mortgage REIT's to go under, just like the 1970's, the whole industry went under in one decade, 99.99%, I was there, I remember, I owned m-REIT's on the upside, Atico Mortgage Investors, Associated Mortgage Investors out of Miami, Fla., Continental Mortgage Investors, etc. I had them all 10-13% yields, 50% capital gains on the IPO and then I shorted them all to the ground, $.06/sh. This is where I made my first fortune. Then I moved into IPO's from Mutual Savings Banks and S&L's alongside Peter Lynch. Something below from discussion by Treasury Scholars, how they unwind the MBS on the FED's balance sheet, they can't keep it there, "Extraordinary Measures" is over, the economy is back to NORMAL.
Therefore, a conventional Fed approach to monetary tightening—selling securities from its balance sheet—is the better one, at least provided that the composition of its balance sheet does not force it to sell illiquid and sector-specific securities like MBS. The question then becomes how the Fed can normalize the composition of its balance sheet—that is, fill it completely with Treasury securities—before it needs to tighten monetary policy.
You and a dozen other financial press folks are spouting the same thing. I listen only to the FED. 5 sitting members most recently said the data released indicates everything is on schedule for a Spring increase, 6 months after QE ended, per the FED's statement back in December 2014, Yellen herself made the same comment, everything is on schedule, nothing has detracted from her December 2014 statement, 'THE FIRST RATE HIKE WILL HAPPEN 6 mos. from QE ending, hence, June 2015. THIS IS FROM THE FED, FROM STATEMENTS MADE LAST WEEK. They went so far to say, the data hasn't changed anything, although they are open until the next meeting and will review everything on June 17 week, but as of right now, "EVERYTHING IS ON SCHEDULE FOR FIRST RATE HIKE".........In fact the letters put out by the FDIC to member banks are warning bank managements about an imminent rate increase for Spring 2015. I believe we are real close. What is the difference between June or August, it is only 60 days. Knowing traders they will price in increases for the next two years, who wants to get stuck in a descending triangle, the market will reprice quickly factoring in FED's Fund estimate going out two years.
I bought VISA in 2009 and some more about 10% over the IPO price, it is up six fold, this is my largest holding 50% of portfolio. I would add on any pullbacks to 50 area was my last one. I am waiting for a vertical downward spiral or panic and hope to pick up more VISA.
M-REIT'S WILL UNDERPERFORM FOR TWO YEARS AT LEAST, AS FED NORMALIZES RATES. FED FUND RATE WILL GO TO .75% BY DEC 2015 AND 2.5-3.0% BY DEC. 2016. I DON'T THINK REIT'S WILL DO WELL, EVEN WITH HEDGES. You saw what happened in 2013, well 2 years later the convexity and the liquidity is worse than ever. I am surprised this is still above 20, lots of bagholders and not enough people to sell to, the LIQUIDITY is going to cause VERTICAL DROPS. This investment is not for conservative retiriees for income.
By December. Yellen said everything is on schedule for first rate hike 6 months from end of QE, hence the first rate hike prediction and forecast from FED's website is as follows: Target is .75% by 12/31/2015
6/17/2015 .25% increase from 0% to .25%
9/17/2015 .25% increase from .25% to .50%
12/16/2015 .25% increase from .50% to .75%
I believe banks are already planning for this, they are raising money market accounts to .75-1.25%, avg 1.0%, and two year CD's are going to 2.0%.
The data shows this is coming down soon. Although, anything is possible, if you don't fight the FED and follow their guidance, SEE THEIR WEBSITE, this is what they are forecasting for 2015.
Time to short agency REIT's, Yes, Zacks just put sell rating on AGNC and they have downgraded estimates on earnings again, with negative trend, M-REIT's. City of Chicago was just downgraded to junk status, bankruptcy risk has increased. Illinois is not doing well at all, $6 Billion deficit and gov. is cutting 20% across the board, that may not be enough to continue past a year.
I have to disagree. The Treasury data shows the LT debt ballooned from 12 Trillion to 18 Trillion over last 6 years or there about, they can not afford anymore. Rates need to go back to 5% on the 10 year so that United States Treasury will raking in $2 Trillion from taxes on interest income per year and another $2-3 Trillion in capital gains taxes when the bear market starts and everybody starts selling, when they sell they pay capital gains taxes. The banks and job creation is done, there is nothing else the gov. can do., Low rates pushed forward demand into the last 5 years, not much left with low rates. Now it is time to harvest the 39.6 + 3.8% tax on interest income for high wage earners. This is where the gold is at. Also, a lot of businesses need to liquidate and that capital flow to new expanding businesses that hire people and invest in "yield spread". Look for REIT's to liquidate or close, especially the levered up ones.
This just came out, which is a whopping increase from their previous rate of .45%. You can pull out or upgrade the CD after a year and get .80% or just hold for two years to get 2%.
Synchrony Bank is offering a flat 1.23% on a 1 year CD.
PNC is offering 1.0% on MMA guaranteed for one year, it will be 1% or higher.
I would say banks are very knowledgeable on where rates are headed. MMA will be 1% this year and 2% in 2016.
Most of the debt issued was before 2009, $12 Trillion, at rates above 5%. It is only the last $5 trillion over the past 5 years that is of concern, but further analysis shows the treasury issued very little short term debt less than 5 years. Most of it was 10 years to 30 years, which is 3%-4%.
Your proposition that "FED lowered rates to save on interest they pay" has no merit at all and the Department of Treasury website provides all the data to totally refute you proposition. THE LOWER RATES environment is costing the treasury an enormous amount of tax revenue and is contributing to the record amount of debt. The FED has effectively lower interest rates on $100's of trillions of dollars of interest earning assets in this country in which the government taxes at full value not at a reduced 0%, 10% or 20% maximum tax rate. The tax on interest income is 10%, 20% ......38.9% plus the extra 3.8% NIM add on for high income earners. Hence, they are loosing 20 - 42% tax on $5 trillion in interest income versus, almost 20-43% tax on 100 million in interest income from record low rates. They can't afford to loose $1-2 Trillion in tax revenue from low interest rates. The most they would have to pay in additional interest is on the $5 Trillion they borrowed over the past 5 years, which has an effective yield of 3.5% and is only expected to go up about 1.0% to 4.5%. Do the math, $5 trillion X .01 = $50 billion dollars. They net cash flow to the treasury is $2 Trillion - 50 billion = $1.950 Trillion Dollars. This money is needed to pay Soc Security and Medicare. Zero Percent policy is costing the government about $1.95 Trillion per year in lost revenue. They do get an offset from taxes on capital gains, but the long term rate is 0%, 10% or 20%, but not many people have booked profits, but when the bear market starts they will reap another $1 trillion minimum, they need this money desperately.
No, no, no, buy on any dips. I did at 44 and 46, you still make money, this will be over $100 by year end and $200 by Dec 2016, rates are normalizing. QE is a failure. TBT is the only low risk with high potential to gain for 24 months straight. Look to the future, forget about the past, the QE disaster is over, the Global Markets are telling you that, bond paper is being dumped and distributed everywhere, Buffet and all the Billionaires are shorting all types of debt and Congress is in with them. Rates will rise, Yellen tipped off Congress when she testified and now she has tipped off the public. RATES WILL RISE, AND KEEP RISING, UP AND DOWN BUT TRIANGLE WILL BE ASCENDING FOR YEARS.
Lets talk about something serious, that affects Mortgage REIT's. When the FED announces their first increase they are expected to give direction on how they unwind all the risky MBS they bought. With the deficit talks and budget expansion on the table after June, in order to prevent shutdown of government, the government boys are facing very serious decisions as the Federal debt soars from Baby Boomer retirements, Social Security, Medicare and not ACA subsidies, along with 35-40 states budgets in the red with pension cost swelling faster than revenues, the liquidation of MBS is inevitable. I believe this will be another nail in the coffin for Agency REIT's. The risk of loss is so enormous, not just from higher rates on FED fund rate, but the liquidity for MBS, this is going to be worse than 2009, I just feel it, a gut feeling, the moral fiber of this Great Hypocrisy is very close to going into the gutter.
According to my mathematical calculations we are at the bottom of interest rate cycle ready to rise to new ascending triangle highs. Not straight up like a rocket or the past 3 weeks, although I did very well, I bought TBT, ultra short 10 yr. treasury in the 39-42 range average $40.75 and it hit $49 and change yesterday, this makes up for a lot of weeks I kept my money at PNC MMA at 1% and TCF bank at 1%. I got out of risk assets over a year ago, TOO RISKY. Principal loss too great, whether or not it materializes, the risk is there. A month ago, buying TBT seemed like a no brainer, my calculations indicated it couldn't fall much further and if it did it was way undervalued. The low or zero interest rate policy is a failure and objective analysis shows that, all it did was encourage more debt by those who already had too much debt. and speculation in risk assets. Rates can only go up in ascending triangles from here, there will be 4-5 steps up and 2-3 steps down and the interest rate spiral will have an ascending positive slope. I believe this is the start of a 30 year rising interest rate cycle that will correct the abuse and mismanagement by the FED of all the easy high risk debt issued over the past 15 years. This is my economic vision for the next 30 years on interest rates. Anyone long in bonds or buy and hold will be slaughtered slowly, and all those who loaded up on cheap debt, the weakest will be weeded out through insolvency and debt restructuring. Liquidation companies should boom for the next 7 years at least. Foreced mergers, mergers of equals, like Verizon and AOL will become common and will be called strategic debt restructuring mergers. The oil industry will have 50-75% of the companies will perish or merge to survive. Retail the same thing. Anything with debt should be avoided in risk assets. Stocks who have no debt should be considered for investment if valuations make sense right now.