Public Service Announcement

November 15, 2012

I thought about calling this “PSA” but I thought that might just appeal to potential customers for Dendreon’s customized vaccine, Provenge.

No, this is about mREITs. 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 »


Blue Light Specials

October 15, 2012

This morning in the mREIT aisle the spinning blue light attracted alert shoppers.  In particular, seveal amREITs completed what looks like an “air pocket” end to a week-long trend of dramatically lower prices.

As always, there are both fundamental and emotional reasons for the price movements, but today’s early plunge looks like a mini-capitulation.

Among the stocks I watch, AGNC traded briefly under $30 a share, and ANH traded to just a penny higher than $6.  Those were the “screaming buys” in my opinion, but NLY flirted with the $15 level, and TWO traded solidly under $11, albeit briefly.

MITT also traded down, but I haven’t got a feel for its price action yet, though I admire the bond-picking talents at Angelo Gordon.

But don’t get too upset that you missed the sale.

I’ll explain after the break. Read the rest of this entry »


Gold, Grains and Gasoline

October 2, 2012

As any veteran of the agonizing series of delays and loopholes built into the attempt to stop naked short selling in the stock market can recall, the “players” who manipulate our markets for profit have a playbook that keeps their games going even when the refs first blow the whistle.  They delay, delay and delay, and all along the path, they weaken the restraints that might keep them from maximizing their profits.

The latest hidden profit game that they are defending is the manipulation of commodities markets.

Read the rest of this entry »


Look Away from the Pressure Point

September 18, 2012

Where will the QE3 spending make the most difference in asset prices?

As soon at the Fed announced its open-ended commitment to buy MBS at the rate of $40 billion a month, the market sold off the dollar, bought stocks and bought investment grade corporates and junk bonds, sold Treasury Long Bonds, bought non-dollar currencies, and bought just enough MBS to keep prices almost flat (up 2 basis points in yield for the day).

Think about that for a minute — the Fed says they’ll buy MBS, and the price of almost everything else moves more than the price of the MBS.

So the thing to think about is what else might happen as the Fed steps in like the Duke brothers to buy the market (and some day, to sell).

Read the rest of this entry »


Hedging Your AmREITs

December 20, 2011

Most of what I’ve written about hedging is what I know — how a bond portfolio manager hedges a book of mortgage-backed securities.

I hope it’s been helpful for my readers to recognize the styles and methods the managers of these companies use, and their relative transparency and quality of disclosure on this front.

Jon Rosenbaum asked in a comment today:

“What is the best way to protect your principle and retain dividends for amreits? What hedging instruments work best?

What about SDS for general market drops? or some other vehicle?”

Before I take a shot, let me remind everyone that there is no perfect hedge.  Back in the 80’s, the First Boston (today Credit Suisse) traders kept a small potted miniature (English) boxwood near their trading desk with the legend  “The Perfect Hedge”…. Read the rest of this entry »