Kee, I don't think that is correct. Check wikipedia. It says they were buying $85 billion per month, combined in Treasuries and MBS in QE3.
William, maybe that means that things are not bargains just yet.
Interestingly, there was a good piece on yahee finance yesterday about psychological biases in investing. One bias (I forgot the name) was when we think something is a bargain just by comparing it against a prior higher price.
mud, you have to remember that most of the family of companies in the ETE empire are partnerships. ETE generally owns the general partner interest (usually about 2%) in each partnership, the incentive distribution units (IDRs) and some limited partnership units. ETE has proposed to acquire WMB in a merger in which the WMB stockholders will get units in a ETE related entity structured as an LLC. WMB itself owns the general partner interest, IDRs and some limited partner units in WPZ. If the transaction is consummated, ETE will effectively become the GP of WPZ, but WPZ will remain a separate entity (for now).
I imagine that's going to hurt when your ARP shares become wall paper. As Maxwell Smart said, "missed it by that much."
Charlie Rose had a guy from KKR on who runs their China businesses. He said the same thing, but he also said that China's transition to a consumer based economy is going to be disruptive and cause increased volatility. Plus he said there is a mountain of debt that is going to be deflationary.
China is not going to save ARP.
And how many were sold with subprime loans to borrowers with FICO scores below 600? How many were sold to oil workers who are going to get laid off?
I suggest that you do some research on a stock called Anthracite Capital, which was an mREIT run by Blackrock to test your theory that the market always comes back.
In your lifetime, the average bear market lasts about 18 months. But there is such a thing as a secular bear market and most investors have not experienced one since the last one was in the 1940's. From the 1980's until now, we have experienced a great bull market in stocks and bonds. But what if that changes and reverts to how markets previously worked.
The answer is somewhere in between. Fed funds is up only slightly so increased borrowing costs are not the issue. Mortgage rates are not going up that much because the 10 yr Treasury rate is actually down because of a slowdown in the economy, so that is not helping spreads. The problem is that NYMT owns more riskier assets, assets that are correlated and priced with high yield securities. High yield spreads are blowing out. Junk bond funds are going out of business and dumping their bonds.
No. The reason is because you need to understand the dynamics of how they were able to get to those levels. The mREITS were able to ride interest rates down which provided big spreads and big book value increases. But eventually spreads tightened and divy cuts came. Book value increases were reversed. I doubt mortgage rates will ever get back to a level to provide those big spreads. But then again no one knows what will happen when we have negative rates.
William, I don't know if you were investing back in 1987. I was. In 87, the market was booming and the economy was going gangbusters, but the market started to stumble and correct in the summer. Then it went on to new highs until October. The crash was not caused by a recession, but one followed shortly thereafter. It did not last long and the market rebounded only to have a small crash again in 89 when a deal to take United Airlines got cancelled (ironically, I think Trump was the acquirer). Then the savings and loan crisis brought the next big recession after oil had fallen to $10 and kicked off hundreds of bank failures in Texas and the Southwest.
Do you see any coincidences?
The market almost always anticipates the change in the economy.
At 2:44, the S&P hit 1886 (the level that I posted about) and bounced. Let's see if they ramp it into the close. I think eventually that level is going to be pierced, but for now, it was tested.
stagg, CNBC is conflicted with Wall Street since their advertising dollars are dependent on people remaining interested in investing. They obviously have not been reporting on the deeper analysis of the slowdown. But just look at the charts of the transportation stocks and tell me that the economy is not slowing.
I was not joking about the computer programs. In fact, there have been a series of articles that details how most of the trading is not even routed through the NYSE in NYC. The NYSE has a building in NJ where they keep all of their servers that processes the trades. The HFT firms have built towers and are using microwaves to front run the trading over fiber. Back in 1987, they said program trading was going to help market liquidity and it ended up causing the crash. Those that forget history are doomed to repeat it.
On NRZ, they may be suffering in part from getting thrown out with all other high yield stocks. However, part of their business plan was to collapse various deals by buying out the loans and resecuritizing them. With spreads blowing out, that type of transaction doesn't achieve as much profit.
On WMC, the market finally got that the forward starting hedging was coming out of the book value each month instead of the earnings.
On NYMT, I have written a few posts on it. Most don't understand how their business works or the risk in the assets that they own. The accounting is difficult. At one time, they owned the riskiest pieces of mortgage instruments. These are the subordinated CMBS and the preferred equity tranches of borrowers (most people don't even know what I just wrote). When the street is chasing credit, these securities increase in value, but when it flips, these securities plunge in value. Guess what is happening now?
People have forgotten, but there was a mREIT named Anthracite that was run by Blackrock that had the same business plan as NYMT. They went bk and liquidated. Even the preferred got totally wiped out. Not saying NYMT is destined for bk, but most people do not understand how these entities work. They think they own a bunch of Fannie Mae govt guaranteed securities with no risk.
No, it's not and your example is probably wrong. The main point is that they are not earning the distribution from a cashflow standpoint and their cashflow is going down in the future because of poor hedging. So if they pay the distribution out of the corpus of the company or borrow it from their credit line then the company is on its way to being worthless.
I think you owe him an apology.