American Capital Agency Corp. Message Board

Some quotes from Kain:

"mortgage price performance was surprisingly weaker in the first quarter ... as fears of an early Fed exit led to extension risk becoming the main focus of mortgage investors."

"Unfortunately and this is important, given the small move in treasury and swap rates, hedges ... could not offset the weakness in mortgage valuations. ... as we have stressed in the past, our hedges ... are designed to protect us against mortgage price changes that result from large interest rate moves..."

"Importantly, these conditions appear to be reversing in Q2 and recent Fed statements have been considerably more balanced."

"... interest rates have come back down and mortgage valuations have strengthened. As such, as of month end [April], our book value had recovered a portion of the Q1 declines..."

"Looking ahead, we see little reason to believe this prepayment or dollar roll trends will change over the near-term and we’re also seeing repo rates beginning to drop as well, which should further benefit our aggregate cost of funds. It was the combination of these positive factors along with the more attractive MBS valuations that led to our decision to raise additional equity in February."

I listened to the call and, if I understood it correctly, I think Gary Kain went to great lengths to explain that what Scott Kennedy claims is NOT what happened.

Specifically, Kennedy seems to be saying that MBS prices fell (thus lowering BV) because rates rose.

But Kain says that rates moved very little, and that MBS prices fell not because of that, but because of Fed's talk of early exit from QE, which led to "extension risk" (i.e., the expectation that mortgage durations will grow as interest rates rise in the future, even though they haven't risen yet). And he said specifically that this hurt AGNC's results because its hedges are intended to work when MBS prices change as a result of rate changes, but in this case only MBS prices changed, NOT the rates -- so the hedges did not help.

At least that's what I understood. Overall, though, Kain was optimistic, and seemed to be saying that this was a freak event (my term) which hurt temporarily but is already correcting (as of the end of April) while it created some investment opportunities which they have exploited. All in all, YBF seems to have the right idea backing up his truck.

"...read it... Do if for a few weeks. You will be amazed."

Which weeks did you find amazing? I was curious and read Obama's schedule for the past couple of months and I was impressed with how full it is (more than 30 events a week, averaging more than 6 a day, for all the weeks I saw). And remember, this is only the "public" schedule. It does not include items like reading reports, calling members of congress or other heads of state, talking to his chief of staff and other advisors, or preparing for speeches he will be making.

Presidents, like all chief executives, have to juggle a lot of balls, including those that have to do with governing and those that have to do with PR. And a lot of the "events" on the schedule require preparation, or study afterwards. You really think the guy sits around and plays Free Cell most of the time?

Still curious which were the slow weeks you saw.

Apple's advantage has been that everything it makes is super-intuitive. You don't have to read any manuals or rule books (they say) -- you just go at it with your intuition and it just works.

Everything, except its stock symbol -- which, very un-intuitively, is AAPL, not APPL. Who knows how many Apple zealots have tried to buy Apple shares and failed because of this simple reason.