More Buying

I added to my IOC and CMO holdings today, and put in the instructions to transfer another chunk of cash into the trading account.  Think of it as ‘averaging in.’

I’m still holding about a year and a half of living expenses in cash, and will keep bringing that cash into the trading account as things get cheaper, subject to a hard limit of keeping a year of cash out of the market.

My apologies to anyone following my lead, because it always seems to be a painful process with a little more downside after I buy (e.g. ELN, NLY and ANH the other day).   If only I could buy three days after I actually buy, but the existential time-shifting issues get me too confused when I try to figure out how to do it.

hh

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2 Responses to More Buying

  1. Tom D says:

    Howard,

    Morgan Stanley Research’s Interest Rate Strategy, published Friday May 28, includes a longish and rather bullish section on “agencies” going forward. Their main listed reasons are the FED being on hold for longer than anticipated, steady bank demand coupled with reduced loan demand, and negative positioning in MBS amongst money managers. Protection form rising delinencies in specific loan balance and seasonaed pools and in 15 years. Treasury foreclosure mitigation will have little effect on GSE MBS valuations. Also mentioned are FED purchases and high delinquencies reducing convexity hedging needs compared to pre-crisis periods with the 4.5% coupon “on the cusp of refinanceability”. Also they feel a revaluation of mortgages versus corporates is about to occur. And, of course, new supply remains tepid.

    There’s more, but this is the gist of it. No mention of mREITs, but overall recomendations for long MBS and short the long Treasury bond. They see 4-6% CPI as “baked into” US sovereign debt overload “mitigation” reality over the next 2-5 years, but that this isn’t marked into long Treasurys at this time.

    I’ve been out of mREIT equities for about a month but bought some more CMO PrB on the drop to 9.5%. I need to look again and read up on some of them again.

    Cheers!

    Tom

    • hhill51 says:

      Except for the IOC dog-of-the-week winner, my additions of capital and deployment into the amREITs has been for those exact reasons….. I’m sure the fixed income world met this research piece with a yawn because it’s so obvious.

      On the other hand, it may be that equity analysts and portfolio managers are starting to get the joke, and I’ll be regretting not holding my last tranches of NLY, ANH, CIM and CMO (already flipped for a quick profit). After all, in spite of the dream scenario (low repo rates as far as the eye can see, explicit government backing, and limited refi opportunities for most borrowers), the equities in this group got nowhere near their Price to Book ratios from the last low short rate environments. Today, a few are still at a discount, and “normal” would have been 1.3x to 1.6x.

      hh

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