amREIT Thoughts

In a break with recent tradition, I’m writing about amREITs when they’re having a good day.

To update, yesterday I took advantage of the swoon in HTS price after the secondary to buy a few “trading” shares.  After giving effect to the $1.10 dividend they decided to give the new shares, I figured a net cost with a $27 handle would result in lunch money some time over the next couple of months.

Buying into HTS again also led me to think about what these guys are doing, and I have to say it reminds me of the first five or six years of Annaly. [Correction alert!  I’m referring to AGNC playing for trading profits, but really did buy HTS when it hit post-secondary air pocket.  My bad!]

Back then, Annaly sold its winners and held its losers, and kept paying as much dividend as they could rationalize, even in some quarters when they had losses.  They also came back to the issuing well as often as they could.

I watched in wonder as the unrealized losses Annaly carried forward each quarter got diluted and diluted, while the trading profits on the winners justified paying out hefty dividends even in quarters the company lost book value.  The Hatteras crew seems to be doing something similar.

For that reason, it won’t surprise me to see HTS pay a nice dividend again next quarter, and to sell more stock the next time the price is knocking on the $30 door I pointed to a couple of months ago.

Another new position, this one very illiquid, was a conversion of some of my legacy CMO shares into CMO preferred B shares.  Capstead is sucking wind due to prepayments that are decimating their higher yielding portfolio positions as fast or faster than the old swaps roll off.  It’s not pretty, watching them run as fast as they can to try to stand still.  I’ll just step up a level in the capital structure, but caution anyone following me in that the stock price bounces by fifty cents a share when it sees a shadow, and that it has almost no volume (maybe that’s saying the same thing).

I’m sticking with ANH, probably right through their next conference call, though I’m seeing some other amREIT fans lighten up now that the stock is a dime over $7 a share.

At over $18, NLY is in my swing-trading sell zone, just as it was in my swing-trading buy zone when it wobbled down to $17 a share.  Four times a year with that, and maybe a lucky timing dividend or two, and that stock can pay out close to 25% or more if you’re willing to take some risk, and willing to sacrifice the time to watch it.

On the macro level, I’m still licking my wounds on the speculations, and once again selling covered calls on a position in FAZ.  I chose the near $13’s, and only did it on about two thirds of the position.  As I observed with a very bearish friend, if I can make close to 10% eight or ten times a year, that makes up for “leaving money on the table” if the crash he so fervently believes actually happens.  Predicting crashes, even correctly, seems to be something of a fool’s errand, because the cost of being “early” seems to more than make up for the win that one time you get both the direction and the timing.

I’m watching for a re-entry point for the TBT (long-dated Treasury bear ETF)  shares called away last weekend.  The TMV shares were bought without writing puts, so they keep me aware of what’s happening there.  2.50% yield on the 10-year Note will be my signal to put that position on again, unless the end of the world shows up to make me wish I owned more QID, SDS, SRS, FAZ and SKF.

Some day maybe I’ll stop playing for playings’ sake, and clip coupons.  (Yeah, right!)



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