The Beat(ing) Goes On

Some traders that I respect have exited the amREIT group, and I know they’re sleeping better as a result.  The expected widening of spreads from the Fed ending quantitative easing seems to have been offset by Fannie and Freddie accelerating paydowns through loan buyouts, and by the fact that their regulator has permitted them to resume buying for portfolio.

In short, there are cross-currents and rip tides, and only the strongest and smartest swimmers should be in the water.

Having said that, even a strong job creation number this Friday is unlikely to move the Fed to tighten short rates any time soon.

The stimulus money that states and cities used to keep their people hired is running out.  Pink slips are being handed out at school districts, firehouses, and state office buildings all across the country.

We compromised when we tried to stimulate our economy, and we got a half portion of Keynesian stimulus (about $300 to $400 billion, spread over two years) and a half portion of supply-side stimulus (similar amounts of tax breaks, which got stashed away rather than used to hire new workers).  Neither was enough to spur a true multiplier effect.

Contrast that with China, where they went the Keynesian route, but four times as big relative to the economy, and crammed into less than one year.  That sparked a return to healthy economic growth.

The amREITs continue to drift southward, with Capstead taking the brunt of the hit today, down over 2%, and getting into a pretty tasty price under $12 a share.  That’s not as tasty as the $8 handle the stock had when Board member and famous (some say infamous) CMO trader Howie Rubin loaded up.

Still, it’s tempting.

Annaly is also getting toward the price where I’d buy some swing trading shares.  I think I’ll wait on each to see whether quarter-end adjustments give way to a more drastic price decline as Q2 starts.

So I’ll do nothing.  I am enjoying the passage of time and decline in time value on that IOC strangle.  I’ve made a couple bucks a share while the stock oscillates around the center of the range that defines my maximum profit.

What I don’t understand about the widespread nervousness over the delinquent loan buyout issue is that cleaning out the pipeline is, by definition, a classic one-time event.  So if one-time events are ignored in manufacturers or retailers that manage to have different “one time events” year after year after year, why is this one worth pounding the stocks down so much more than the size of the hit to equity might be?



One Response to The Beat(ing) Goes On

  1. Kevin says:

    Thanks for updating us on what you see in the amREIT’s. I held HTS through the dividend and holding a large amount of ANH.

    Thanks again,


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: