Tapering is priced in... Playing world of warcraft for fun, RBGs in particular. I play a Holy Priest.
I never said i'd get 0.80 every quarter of 2014. The dividend will vary. It may go up or down. Some years will be better than others.
David. there are people who are willing to give up say.. 1 million dollars in exchange for an income stream. They BOUGHT the income stream and have no intention of ever selling. They will milk it until it runs dry completely.. if ever. It's like buying an oil well that doesn't have to run out of oil and possibly can have an unlimited supply. people like me... who own 19,000 shares don't care about the stock price. We care about long term book value and growth of capital sure... but most importantly - our income stream.
They generated 0.61 of spread income when you back out the TBA roll loss.. and during the quarter had a FULLY HEDGED position.. with higher % of repo swapped than at the very end of Q3. So the duration gap is slightly higher at end of Q3 and that gives more spread income. You are the one who doesn't know what you are talking about or who you are talking to. I started with 72k back in 2008 and you tell me that i can't read a balance sheet??? LOL
KBW just released this estimate after viewing the Q3 report for 2013.
"Tuesday, Oct 29
Two sell-siders offer tepid defense of American Capital
"A good quarter, all things considered," says Nomura's Bill Carcache, maintaining his Hold rating and $22 price target on American Capital Agency (AGNC -8.7%) after Q3 results. Carcache seems copacetic with CIO Kain's defensive stance - a view not shared by all, judging by the earnings call and the direction of the stock today. KBW, meanwhile, maintains its Buy rating, but cuts the price target to $25.50 from $27. The team sees Kain loosening up on his "fully hedged" stance and lifting earnings power "north of the $0.80 dividend."You take what you get when you buy an actively managed mREIT like AGNC, says Nomura. Some quarters are going to be terrific, and others - like Q3 - will have a ton of activity with little to show for it.AGNC continues to be a major drag on the sector (REM -3.7%). Other names: Two Harbors (TWO -2.6%), Hatteras (HTS -2.9%), Anworth (ANH -3.8%), Western Asset (WMC -2.6%), Ellington (EFC -1.9%), (EARN -3%), AG Mortgage Investment (MITT -5.1%), Apollo Residential (AMTG -4.9%)."
XX, personally.. i think Q4 will come in at 0.80, the still have some UTI and the duration gap was a little higher in Q4 than Q3. so probably 0.70 core income.
XX, KBW expects AGNC to lift the earnings power north of the 0.80 dividend. So are you saying they are lying? You know ROE's go up when the spread gets wider, right? I doubt it goes to 0.60, but if it does that is OK. I am OK with a $2.40/yr dividend return. in exchange for less rate risk if gary thinks it's appropriate. Dividends don't just go 1 way.. they will move up and down over the years depending on the volatility of interest rates and many other factors.. including the spreads.
Nope. Not moving. lol. I don't mind the taper. P/B is already stupid low. Not many investments like that which yield so much... Also, most of them go to #$%$ when the economy tanks.. it does every 5 years.. so agency bonds make more sense. AGNC will be able to move into MSRs later this year or early next year and that should protect them better from higher rates in relationship to book values. ROEs will be higher post taper due to larger spreads. So that should benefit our income. Basically , i believe that AGNC will be able to manage through interest rate cycles and pay a strong dividend... total returns will be higher than other investments. Only worry is spread inversion like 05-06, which i'm sure AGNC will figure something out.
$60,800 yearly (0.80 dividend)
$8227.50 federal (quarterly $2056.875 )
$3238.50 state (quarterly $809.625)
$4,111.17 Monthly income
$53,200 yearly (0.70 dividend)
$7087.50 federal (quarterly 1771.875)
$2,801.50 state (Quarterly 700.375)
$3609.25 monthly income
I plan on playing my taxes as the dividends are received.. all depends on the dividend amounts, but I am not with the buy/sell game. Just holding for better or worse... FOREVER. Or until Gary passes. Whichever comes first ;)
well i had a good run.. you know... Still have more money to invest if we dip.. but i won't ever be lightening up. And I guess that makes me retired now. Retired at age 26. Best of luck to the rest of you still in the rat race.
I have 19,000 shares of AGNC, and I won't be selling for a very long time. I am done trading, because I don't want to pay taxes on capital gains. The dividends will be my only source of income, and I may add more shares of AGNC later - post taper. My trading life is over. So i probably won't be posting much. But i'll leave you with this last post. This was a response to an email i wrote to AGNC Investor relations suggesting AGNC/MTGE invest more in IOs etc.
"We agree with the concept of IO's and the benefit they can have per your email below, but execution is unfortunately fairly challenging.
We have publicly spoken about our interest in MSRs and why we feel it would be a good REIT asset. It is in concept very similar to IO but is available in size, albeit currently still hard to source but something we are continuing to look into.
Hope that's helpful.
"What is management's view on IO securities in the current rate environment. Would it not be more opportunistic to have IOs represent a sizable portion of the portfolio at agnc? perhaps 10 to 20 percent of the portfolio while prepayments are likely to remain low and even drop off more should rates move higher from here? or is this more of a liquidity issue with adding IOs? would that not help with the NIM rather than running a higher swap/swaption book? or are IOs simply too expensive to justify adding them?
The people who trade this stock are #$%$. MBS are also in a strong recovery uptrend. Year end NAV could eventually be $26-$27 range. yet the stock stays at $21ish... So that's like $6-$7 below future year end NAV if this trend stays intact. HELLLOOOOOO WAKE UP PEOPLE.
Just want to add to that... MBS prices have gone up pretty significantly since the "no taper" announcement in September. They continue to be in an uptrend, with 15 yr outperforming.. yeah.. that's right 15 yr has been a beast... probably due to the lower duration. 3.5 delevers in like 2 to 3.5 yrs depending on CPR. so.. when you think about the rate risk there.. it's not much. You can easily run a 8x leverage there with 60 to 70% repos hedged. And i think AGNC is going that direction. Just take leverage up and down based on the trend of mbs prices. easy game to play. So right now, the trend is up, which mean book values are trending up and you need to realize it's not over for AGNC. They will go the MSR route and reduce swaps further while getting paid to do so with the same duration risks. Stay agency, avoid credit which can blow up and stay in low duration assets and you will do well in a rising rate environment. There is just so much they can do to generate alpha for shareholders.. and I expect that they will increase duration gap further and continue to increase 15 yr paper while reducing 30s.
higher rates can't sustain because higher rates right now mean crash of the housing market and non agency sectors too. The US stock market is at a record high, that won't last either. We always make these new highs over the last 15 years and crash. Like clockwork. make new high - crash. Over and over. QE has been and continues to be a failed economic experiment. Emotion has been controlling rates and that will always be the case. Watch the emotion run wild when the US economy, which is now more levered than it was in 2007 crashes again. I mean, come on? can't you see that? We are more levered now than before. There was no real growth, just a boom - bust cycle of credit. It's soo soo stupid and it continues to this day. Thus the 30 yr bull market in bonds. Rates might go up to 6% in the golden scenario the economy recovers. so what? thats up 200 bp from here at most. It's the same level we were at back when the fed funds was 4%. yeah.. 4%.. so doubt we go above 6% unless inflation is super high and would also mean growth would need to be super high despite higher fed funds. Can't say that will happen for 10+ years, if ever. OK. so you hedge up, reduce leverage if that starts to play out.. keep duration low and stay with 15 yr and ARMs, higher coupon mbs and still make off with 8% yield and stable book values, then you cut some hedges off when rates stabilize at the new level and you increase your dividend. This is just an easy game to play if you are any good. Gary is the best player I know. He is not perfect but he is good.
Just look at the prime paper American home mortgage owned. It doesn't just hit subprime when the economy goes to #$%$. Rising rate theory is a joke. We have been a 30 yr bull market for bonds... doubt that will just end while the world economies are in this much trouble. Growth is basically nothing. And if rates ever started to really shoot up.. you just hedge your AGNC with puts and use the profits from the puts to reinvest. Also, you know management will be moving money around to protect value if that happened.. so u get a double protection level. Hedging during the may/june crash using puts and reinvesting the profits near the lows has kept many investors in the game.
It does not work that way. There will always be some sort of return with AGNC... eventually investors get paid back in full. Management is very active and did very well to protect the NAV during the May/June decline. They respond quickly to changing market conditions. The stock price only matters if you are selling/trading. Right now, it's all about risk management over earnings maximization. That will change as the environment evolves...
Whats interesting is.. I can keep my AGNC shares... and just hold them until I am paid back eventually with the dividends.. then all my shares are just a free bonus.. but you know.. this guy who is short.. he has to cover eventually or he will lose more money than he is short.. a dividend cut just means it takes longer to get "whole" but eventually you do get "whole." And dividends can always go up. Right now AGNC is on the defensive, dividends could go up later as the spread gets wider.. and then what? Shorts going to cry about the dividend boost?
crater, management is greedy? Really? because last i checked their fees were going down because of the buyback. Buying back shares and selling agency mbs to fund it. Thus they are shrinking.