Harsh Words

July 30, 2010

This week was a flood of information, and my portfolio suffered.

Nearly all the mREITs declared earnings and held their conference calls, and all the analysts did their immediate reaction reports.  In those reports there was one downgrade (CMO buy to hold at DB ), and ominous phrases like “management risked its reputation” and “slow value erosion continues”  from Merrill Ross at Wunderlich.

The market almost immediately took more than a dividend out of the prices of the stocks.

One thing happened that might help explain the violence of the takedown that may not have been noticed by the analysts.  That was the move by a very seasoned, but small, mREIT to raise additional capital.

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Unusual Uncertainty

July 28, 2010

A defining phrase, to be sure.  Almost as good as “irrational exuberance.” Also just as likely to result in effective policy action by the Fed.

In response to Egor’s question (no relation to Eeyore, except perhaps in a shared opinion of the other animals in the woods), I was thinking again about the virtual hiring freeze we’ve seen since the financial crisis took hold.

Nearly everyone says that private businesses aren’t hiring because of uncertainty.

That’s true, but the commentators then contort the facts to support a political explanation of what drives that uncertainty.  The real reason is much simpler, and much more powerful than marginal tax rates, or even the cost of health insurance. Read the rest of this entry »


Support For Gloom and Doom

July 27, 2010

When you take a position that spreads gloom and doom is that different than being a gloom and doomer? Perhaps, though the difference may be just how long you’ve been on that team. Another defining factor may be the zeal you have for your stated position.

Bright as they are, it would be fair to call Roubini and Rosenberg gloom and doomers. I’m beginning to feel I may be leaving the land of the “objective” and going over to the dark side with them. Admittedly I’ve been on ECRIs case for a while. I intend to stay there. But its not just me with ECRI.

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mREIT Q2 2010 Preview

July 27, 2010

A friend forwarded one of the bulge bracket dealer reviews of the quarter just completed.  It was fairly upbeat, with a couple of earnings estimates increased (NLY and IVR).

Perhaps most interesting to me was the big divergence from other analysts’ estimates of quarter-end book values.

In my conversation with the institutional fund manager friend, we both thought the recent Annaly capital raise was dilutive to book value, and this analyst agrees.  In fact, he estimates their Q2 end-of-quarter book value at $18.87, a definite good news / bad news situation.

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ECRI Needs to Make a Call

July 25, 2010

Two weeks ago ECRI stated they don’t rely just on WLI to make a recession call. No quarrel there. Their position: The Long Leading Indicator, USLLI has not shown enough downward movement yet to make a call. I have previously reported, that to the contrary, LLI has recently trended downward longer than it did when it signaled the 2001 recession.

Last week ECRI stated that LLI had not shown as much downward movement as it had in the only previous double dip recession in 1982. Fair enough, but there is no significance in LLI anticipating a double dip recession or one more typically spaced.

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Pet Peeves

July 25, 2010

It’s the weekend.  I’m relaxing.  Doing some reading and bouncing around the TV channels for mindless entertainment.

One of the movies I turned on and immediately off was a post-apocalyptic “whatever” that took less than two seconds to see what it was.

How could I know in that short a time?

Easy — the universal nonsense symbol of post-civilization end-of-times — the 55 gallon drums with flames from “scrap” planks of wood being burned.

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Awesome Buy-Write

July 23, 2010

Have you ever written an option on an ordinary stock with implied volatility north of 200% ?  I just did.

I mentioned Arena Pharmaceuticals the other day when (most of) it was about to be called away.  Sometimes when I feel that a company may be on to something huge that will give me seller’s remorse (the bull market version of buyer’s remorse), I’ll use some of the premium to buy a little extra stock.

Today that stock was ARNA.

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