Mind on Money

Another Benchmark Record

A cyber-bud just posted the fact that the five-year Treasury Note has traded at 0.75% yield, another record low.

Think about it.  The world capital markets are willing to give the US money for five years, and get their dollars back with a whopping 0.75% interest per year.

The real money is shouting at us that our deficits are not the issue.  Are you listening?

On another front, speculators and hedgers got a new toy today, or, more precisely, gave the unwashed masses access to one of their leveraged toys.  My inbox this morning had a short blurb from Jody Shenn at Bloomberg about a house price index opening up for public trading on the CBOE (the options market). Continue Reading Another Benchmark Record…

Cooperationist Conspiracy

Most conspiracies start in secret.  Sometimes the secret is so well-kept that even the conspirators don’t know until they get charged by The Man.

I’m here to do my bit to start a conspiracy right out in the open.  Call it reality-based planning for the post-rapacious economy.  As many readers know, George Ure was a survivalist before it was popular, and he stayed on the cutting edge of that world when he shifted to “prepper” a few years back.

He and I even wrote about 300 pages of a (rough draft) book that let us continue our multi-decade argument over what’s happening and what can be done about it.

In today’s column (linked above), if you scroll down to the section titled Coping:  A Fifth Order House, you’ll see a different George than the one I’ve talked to these past dozen years (plus).  I even called to ask what had happened to real George after reading it. Continue Reading Cooperationist Conspiracy…

This is Big Deal

I’m old enough to remember when we had “Fed Watchers” as a very expensive job function on Wall Street.  Their track record was probably as bad or worse than the average meteorologist on the local news, and they only had eight meetings a year to predict.

I was already amazed, as a bond guy, when the Fed started telling us how long they thought they would hold short rates at zero (until at least second half of 2013).  Comments here and here.

Today comes the news that the Fed will share its musings on the future path of their Fed Funds rate as part of their release of meeting minutes.  Gadzooks!  Think how far this is from the days when they told us exactly nothing, and people got paid millions of dollars to guess what the current policy might be.  Fuggedaboutit if you wanted to know what they were thinking about the future.

Never thought I’d see this day.

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Disappointed in ANH

For a couple of years I have taken a lower return from Anworth than my other mREITs simply because they are so conservative.  If you listen to the hard money folks or watch the perennial game of chicken the politicians we elected in 2010 play with our national credit rating, it’s a non-trivial risk that we could wake up one day and find the 10-year Treasury note trading at 5% rather than 2%.

Just ask the Europeans how that feels.  If that were to happen, then the fully hedged amREITs will survive, but the ones playing the duration gap too aggressively may not.

Still, the announcement from ANH that they are converting to “externally managed” is not in my best interest as a retail shareholder.  These arrangements are typically set up so an affiliated company owned by the management provides asset management for a fee. Continue Reading Disappointed in ANH…

Clarification

One friend and reader remarked that my recent post (Good Intentions) seemed to imply that I was going to publish the weekly e-mails from my time managing a subprime bond and equity hedge fund.

Au contraire.

Those e-mails will remain my virtual diary of the runup and meltdown.

Still, they do make interesting reading, especially during the time in mid to late 2007 when Washington and the media establishment decided that “subprime” was as likely to boost ratings as Lindsey Lohan’s latest DUI.

After the break, I’ll post a couple of weekly missives (appropriately scrubbed of portfolio performance, specific trades, or other proprietary information).  They dated to late summer, 2007, and showed that the political and financial world was definitely, positively going mad and looking to find scapegoats.

Now that I think about it, not much has changed these past four plus years, has it? Continue Reading Clarification…

Mad as Hell

Joe Nocera had one of those excellent moments last week — what I call an “I’m as mad as hell, and I’m not going to take this anymore” moments.

While not as universally applicable as the disgust and anger the 1976 cult classic movie portrayed, Nocera was pointing out how outright propaganda machines masquerading as tax-exempt and subsidized think tanks can create an alternate reality out of whole cloth, and how our main stream media and Congress adopt and spread that propaganda.  In this case, his target was one of the more dishonest Resident Scholars at the American Enterprise Institute, and his widely repeated lies. Continue Reading Mad as Hell…

Good Intentions

When I joined the ranks of Wall Street’s investment bankers, I was what they called a “rocket scientist.”  I never worked on spacecraft, but I did hire real rocket scientists along the way, along with software engineers, an Air Force test pilot, finance professors, and more than a few freshly-minted MBA’s.

I called what I was doing “financial engineering” when my friends outside the business asked for stock tips. Even though I paid attention to the stock market before I worked on Wall Street and after, I actually had no time for stocks when I worked there, so I never had any tips for my friends.

But back to Financial Engineering.  As far as I know, I was the first person to refer to my vocation by that phrase, though since that time I’ve seen universities award degrees in it.

During those early years of my career, I was lucky enough to love what I did, to get paid well (though not nearly as well as the more effective political operators around me), and to perform a service that I could see was helping a huge swath of my fellow Americans.

So why did structured mortgage finance turn into a “force of evil” that nearly drove the world economy into a second great depression? Continue Reading Good Intentions…

Merrill Ross Commentary

Good summary of the current state of affairs from Ms. Ross at Wunderlich this morning.

“So far, AGNC, TWO and MFA were able to maintain dividends, while CYS, IVR, HTS, and CMO cut. We think the difference in performance can be attributed to asset selection, but there is no doubt the flatter curve will put pressure on spreads. Continue Reading Merrill Ross Commentary…

mREIT Year-End Review

One of my cyber-buddies (screen name maxx) has taken the time to really get to know the mortgage REIT sector. His views are, IMO, better than just about any of the analysts out there, because he risks his own money on them. And what is more interesting to me, he looks at these stocks as both income and trading vehicles. Without further ado, here is maxx telling us how his year in mREITs worked out, and how he looks at some of the names we all know and love (or hate, on occasion). Continue Reading mREIT Year-End Review…