mREITs Have Moving Parts

July 29, 2011

I’ve gotten a number of calls and e-mails, comments and inquiries about the amREITs, especially since they hit a major air pocket this morning.  I’ll keep my comments general without mentioning opinions of specific REITs.

I had planned to back away from commenting about these companies while negotiating for a possible position with a firm that deals with them. The stock prices got hammered so hard this morning that some may think there is a serious problem.

I think it might help to explain the function of the reverse repurchase agreement (repo) in an amREIT, since that’s the only thing that has really changed so far. Then I’ll take a shot at predicting what may happen during and after this fabricated crisis over the debt ceiling increase.

Before I get into the specifics on the only moving part (repo) that is currently moving, I should probably point back to a few of the elementary posts from the last two years that explain the mechanics of an Agency mortgage REIT.

You’ll see some links after the break.

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Who Plays AIG in the Sequel?

July 27, 2011

As we watch the water rise toward the top of the government default levees, I am amazed that the market townfolk aren’t panicking, putting their most portable valuables into and on top of their cars and getting out of town.  Maybe they have so much flood insurance that they would actually want the levees to break.

The least likely reason that big market players aren’t heading for the hills is that they think Washington will just increase the debt limit to cover spending they’ve already approved.  After all, that two-sentence, no drama option is only used most of the time, and would have already been used last April or May to avoid the cost and disruption of playing the extension games Treasury had played these last few months.

I do notice how frequently these days I hear the offering levels of CDS (Credit Default Swaps) for US Treasuries.  Read the rest of this entry »

Macroeconomic Lightning Bolt

July 19, 2011

Sometimes the answer is hiding in plain sight, looming so large that you don’t see it.

That’s what happened to me yesterday when a web acquaintance posted an opinion piece by Michael Boskin claiming the Obama Administration was trying to raise income tax rates to 70%.

My first reaction was Michael Boskin?  Can anyone take this guy seriously after the spectacular failure of the policies he championed as George Bush’s chief economist?

That’s when it hit me — for all my interest in the Kondratyev wave, I failed to see why the major competing economic policies of the past century failed, and especially when they failed.

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