Just to be clear about it, when I recently purchased some more NLY shares when the price dipped into the low $17’s, those were what I think of as trading shares, and they did what I hoped they would do.
I felt that the offering of convertible preferred shares, being $500 million plus a “green shoe” of $75 million exercisable later, would result in support by the major houses, in the form of trading support and positive analyst commentary.
That is exactly what happened, and with the stock up over a buck while the rest of the group sits like a slug, I sold those shares.I let you know where my trading money got re-deployed the day I did it. I’m up on the ANH, and down on one Canroy and basically flat on the other. These are all trading shares, and they could be gone in a heartbeat if a quick profit emerges.
I also laid out my reasoning for continued high dividends from the group. That core holding, in my income accounts, is still there.
I am watching carefully, but I won’t be exiting the sector any time soon with those core holdings, unless the entire MBS world hits another Wile E. Coyote moment, looking down to see nothing but a distant canyon bottom.
We are at a point where the MBS are trading at a negative spread to LIBOR (proxy for repo financing cost) once you adjust for the borrowers’ prepayment options, so the sector is not “set it and forget it” as Ron Popeil might say.
I’ll try to post an emergency alert if I sense the MBS support evaporating. For now, it’s a better place to be for most institutional investors than the world of credit risk or sovereign risk. It’s all in the pricing of relative value.