TGA is not going Bk. No one can buy up half the shares at prices under $4. if you look at the latest NAREIT chart of the institutional holders, you see that the net change in holdings as of 12/31/15 shows: more shares bought than sold. With $126M cash worth over a buck/sh, no institution will sell for under a buck. TGA pps is linked to Brent which must rise as marginal frackers steadily go Bk when their current wells go dry. No buyer of those Bk producers will drill new wells because their economics require $60 oil to break even.
Sentiment: Strong Buy
Its good you posted the reference to the Lance Bronfman article. My 11/24 post o also referred to it as follows: "wmakaplan • Nov 24, 2015 2:39 PM ...Lance Bronfman yesterday published his most recent Seeking Alpha article estimating MORL's next div (its going to be low with only the 2 monthly div components in action). He discusses the market's irrationality in discounting MORL's net asset value since ETNs have no assets of their own, just the guideline of their index components NAVs which already reflect the basis of their combined discounts (or premiums) to their respective NAVs. " We are fighting an irratiojal market and the steady downtrend has been a disaster to his strategy since the steadily falling reinvested dividends are not compensating for that decline as Bronfman has had to admit.
Lance Bronfman yesterday published his most recent Seeking Alpha article estimating MORL's next div (its going to be low with only the 2 monthly div components in action). He discusses the market's irrationality in discounting MORL's net asset value since ETNs have no assets of their own, just the guideline of their index components NAVs which already reflect the basis of their combined discounts (or premiums) to their respective NAVs.
Thanks for the astute reply. which turned me immediately to your other posts. I fell like a prospector who has found the mother lode. What is your opinion on the Lance Bronfman strategy (from SA) for buying MORL? TIA
From SA: MBA Mortgage ApplicationsComposite Index: +6.2% vs. -1.3% last week.Purchase Index: +12% vs. +0.1.Refinance Index: +2% vs. -2%.30 year mortgage rate at 4.18% vs. 4.12%.
Meanwhile the TBA mortgage yields fell 2 ticks in line with the 10-yr bonds 2 bp drop. Meanwhile the Fed talks short term rate rise while market does the opposite. . Mort up .$0.24. Ezplain this puzzlement, please.
I disagree. TGA avg 3m volume is extremely low.(172K). Still reacting to the paper losses in the Q3 report, the stock fell under 2 (1.99) with volume of 500K ( about 0.7% of the 782MM float. ) In other words, 99.3% of the shares were not traded because most holders are not worried given TGA's financial strength and belief the price of oil will rise to the 60 range in 12-14 months.
Yes, but the lower the price, the faster crude production will slow as drillers stop drilling and wells stop pumping when expenses exceed revenue.
A rational analysis based on the eventual turnaround in oil prices.
Clorrection: the street says the chance of FOB rate rise is 85% and Gross (ex-Pimco boss) says 100% and its based on employment figures, not actual inflation which is very low. I agree with you the raise is not warranted until inflation is above 2%. RE markets need mreits. Fed will not destroy them. JMO
Half the index is just 25% of its value, ~ 2% each with minimal influence. The top 11 led by NLY & AGNC are the major movers and they will recover when this cycle ends. Bronfman's 4-year buy and hold plan uses divvy reinvesting and compounding to overcome the fall in pps. The doomsday group must have working crystal balls to know the current cycle doesn't end.
FWIW here is a KEY paragraph From Lance Bronfman’s latest article on MORL, "November dividend will bring yield to 26.5 percent":
There are two issues that most influence the prices of the mREITs and thus MORL. The major issue was previously thought to be the future level of interest rates. A major related issue is now the discount to net asset value that many mREITs are trading at. ****It should be noted that MORL itself never can trade at a significant discount or premium to indicative or net asset value since it can be created and redeemed at indicative value in large blocks.**** The mREITs cannot be redeemed at net asset value. Thus, like many closed-end funds, the mREITs can trade at prices that are significant discounts (or at times premiums) to their net asset values.
There is a minimum 3-month gap in mreit earning reports (currently down) and the 0.1% increase may not be enough to counter the fear toward mreits and MORL caused by the rate rise talk. It will take at least 2 quarters of mreit earning improvements for MPRL to turn around. Mreit results are complicated by the effects of hedging , swaptions, prepays, portfolio adjustments, NAV, etc., none of which can be accurately predicted by the managements, let alone the investors who hope the high yields will offset the high risks.
Good call on 13. Since MORL hit its TTM low of 12.75 on 8/24, it could go even lower when its index reits drop more. That is the likely ST rate rise scenario. But LT rates should also rise and if the market lets the banks boost them enough then the increased spread will boost mreit earnings and current MORL buyers can make a bundle.
FWIW from the smart investor back in September:
Look at the longer-term economic picture. The right question to ask is: What kind of economic environment do we expect over the intermediate term – in the next two to three years? It seems most probable that we will see an environment of modest but steady growth in the U.S. and other developed markets as investors are finding the U.S. and its more established counterparts to be the safest bets in an increasingly volatile global market. Most recently, we've seen strong data on U.S. consumer confidence and business investment.
At the same time, a pullback in China's economic growth could have continued repercussions around the world, especially in emerging markets. In such an environment, interest rate increases are likely to be gradual and well-moderated, with the Fed poised to put the brakes on increases if economic growth flattens out or turns negative.
Under this scenario, enhanced-yield assets should still play an important role over the intermediate term. Investors would be well advised to resist the urge to dump such assets in response to the initial rate hike, as yields on high-dividend stocks, REITs, master limited partnerships and other similar assets are likely to remain attractive relative to high-quality fixed income issues. In addition, given that the risk of economic instability is still greater outside the U.S. than within, a continued allocation to U.S.-based assets – including those with enhanced yields – seems advisable.
The latest signs of volatility in the world stock markets just serve to underscore the importance of avoiding short-term thinking. After U.S. and global equities fell sharply in late August, investors were naturally tempted to shift to more conservative asset allocations, but the almost immediate rebound in the stock market rewarded those who patiently chose to ride out the volatility.