Becoming an ETF

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.

Back to Business

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.

Two More on NationalMemo.com

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

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.