Virtuous Ponzi

November 15, 2012

In a recent post, I mentioned the “virtuous Ponzi” effect that comes from selling new stock above book value in a mortgage REIT.

The reason I’m talking about it now, when the entire group is trading below book value, is that there is a contrapositive logical truth available today.  Before you give me grief about trying to popularize Euclidean logic, let me confess that I was blown away seeing a clip from the new Spielberg movie of Lincoln (click on the clip on the lower right). Read the rest of this entry »


Option Anomaly

November 14, 2012

Today a recent retail favorite is getting slammed, probably by short sellers and profit takers, given its tremendous price rise and earnings announcement that surprised to the upside.

That stock, NTI (Northern Tier Energy) was upgraded by several brokerages when their first (partial quarter) dividend of $1.48 was announced a few days ago. One brokerage, Deutsche Bank, lowered its rating, but left the price target at $25.

Read the rest of this entry »


Picking Up Bargains

November 13, 2012

Last night’s question from Dan led to a fairly technical and complicated answer about the current state of the mREIT sector.

Again without giving specific investment advice (since I have no idea what your specific circumstances are), I thought I’d put into words a little technical primer on picking up bargains when the market gods are slamming these stocks.

I’ll try to describe how I pick them, leaving how my emotional and financial state affects my order of choice for another time.  Just be aware that your own ability to sleep at night, or need for cash, can radically change your order of preference among these stocks.  Right now, I’d say the fear factor has driven a lot of small investors to sell, simply because they don’t like the sickening feeling of seeing red pixels on their screen full of stock prices. Read the rest of this entry »


Becoming an ETF

November 12, 2012

Annaly (NLY) took a big step last week toward becoming an ETF all by itself.

Under replacement CEO Wellington Denahan-Norris (formerly Chief Investment Officer and then co-CEO as Mike Farrell fought his cancer), Annaly decided to bid for all the shares of its commercial mortgage REIT, CreXus (CXS).  They already owned a majority share, and already provided a significant piece of Crexus’ financing, so the exposure hasn’t really changed much for the monster (over $140 billion in assets) Agency MBS REIT, Annaly.

It makes economic sense for a mortgage REIT to buy its stock whenever it trades significantly below book value, since that increases the yield for existing shareholders and supports the stock price.  The negative is that it decreases the capital supporting the portfolio.  In this case, the $840 million price tag for the commercial mortgage REIT is less than NLY gets in principal paydown every month from its Agency MBS portfolio. Read the rest of this entry »


Back to Business

November 8, 2012

Soon enough, I’ll be back to making observations about the market, structured finance, economic trends and policies.

I just have to put the “coda” on the election results before I go.  If you would rather believe that America just doesn’t get it, or that Romney wasn’t conservative enough, don’t follow after the break.

Read the rest of this entry »


Two More on NationalMemo.com

November 5, 2012

This one from Friday is about the asymmetric economic returns of political contributions and independent spending in a post-Citizens United world.
This one posted early Monday on the managerial choice we get to make this week.
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Out My Back Window

November 1, 2012

An especially hard gust of wind shook the house just before we lost power on Monday.  I was quite thankful that the half-dozen trees that fell on three sides of my house all fell where they hit only other trees and dirt.  These were all within 100 feet of my house.

Read the rest of this entry »