REITs ? Anyone invested in them.

Quote from barnz008 : Getting there. Anyone getting in here or reloading?

I have a multi-decade horizon so I am chewing off little bits as these mREITs start to die. Their dividends may get cut but I doubt they are going to zero. Even at the worst time since NLY went public (2006), they were still paying a dividend of around 3-4% on the year.

I was wondering your thoughts about to when invest into O. You had mentioned it before and it seems solid

My advice would be to stay away from NLY and AGNC and the other agency REITS. With the Fed committed to buying MBS for the foreseeable future the yields on agency MBS will decline. When the yield declines the Net Interest Margin (difference between the rate they earn and the cost of the repo financing to purchase MBS) compresses and therefore you get selloffs in the stocks and the stocks are at risk of having to cut their dividends.

Id go with AMTG which is about ~35% comprised of non-agency mortgages. These will trade less on where yields go and more on where spreads go. As the world improves, the credit spread vs. nonagency will compress and the prices of nonagency MBS will increase. THis will drive higher prices in the stocks and overall improvement in the book value of the more non-agency focused m-REITS.

Quote from weswes : My advice would be to stay away from NLY and AGNC and the other agency REITS. With the Fed committed to buying MBS for the foreseeable future the yields on agency MBS will decline. When the yield declines the Net Interest Margin (difference between the rate they earn and the cost of the repo financing to purchase MBS) compresses and therefore you get selloffs in the stocks and the stocks are at risk of having to cut their dividends. Id go with AMTG which is about ~35% comprised of non-agency mortgages. These will trade less on where yields go and more on where spreads go. As the world improves, the credit spread vs. nonagency will compress and the prices of nonagency MBS will increase. THis will drive higher prices in the stocks and overall improvement in the book value of the more non-agency focused m-REITS.

With AMTG, you're also taking on the risks of non-agency mortgages however. NLY seems like the safer play, although you are correct in that we are in uncharted waters. NLY has traded in a fairly predictable range for a decade (for the most part), but now the fed is committed to its MBS-buying bazooka

When NLY's dividend collapsed in 2006 (by far the lowest since it went public in the 90s), it will still paying out 3-4% per year. I'll take that, knowing that there will be better days on the horizon

Quote from weswes : My advice would be to stay away from NLY and AGNC and the other agency REITS. With the Fed committed to buying MBS for the foreseeable future the yields on agency MBS will decline. When the yield declines the Net Interest Margin (difference between the rate they earn and the cost of the repo financing to purchase MBS) compresses and therefore you get selloffs in the stocks and the stocks are at risk of having to cut their dividends. Id go with AMTG which is about ~35% comprised of non-agency mortgages. These will trade less on where yields go and more on where spreads go. As the world improves, the credit spread vs. nonagency will compress and the prices of nonagency MBS will increase. THis will drive higher prices in the stocks and overall improvement in the book value of the more non-agency focused m-REITS.

Excellent. Thanks for that. I'd thought of such a scenario but am still thinking some larger specs will buy these up in the endless search for yield regardless of Fed. Seems to me that the initial news of "the Fed's doing ___" is absorbed and the market does what it was going to do all along anyway. Not sure if it's all priced in yet, thus the fishing for feedback on these vehicles.

On it.

Quote from rrc06 : I was wondering your thoughts about to when invest into O. You had mentioned it before and it seems solid

Oversold on the daily level and back to some weekly long term trendline support. Still looking for the $35-$36 level and won't take a position until it's found solid support and has given a weekly long signal entry. On the long term picture, I'd like to see a hard and fast move down on high volume to scare the children so it can resume it's uptrend...maybe like $31.

Quote from barnz008 : Oversold on the daily level and back to some weekly long term trendline support. Still looking for the $35-$36 level and won't take a position until it's found solid support and has given a weekly long signal entry. On the long term picture, I'd like to see a hard and fast move down on high volume to scare the children so it can resume it's uptrend...maybe like $31.

Thanks for the advice.

Quote from rrc06 : With AMTG, you're also taking on the risks of non-agency mortgages however. NLY seems like the safer play, although you are correct in that we are in uncharted waters. NLY has traded in a fairly predictable range for a decade (for the most part), but now the fed is committed to its MBS-buying bazooka When NLY's dividend collapsed in 2006 (by far the lowest since it went public in the 90s), it will still paying out 3-4% per year. I'll take that, knowing that there will be better days on the horizon

yes you take on the non-agency risk that isnt backed by Fannie / Freddie like the agency is but agency has rallied so much already and the yields are so low that if rates keep going lower (as they did yesterday) the reits will continue to experience NIM compression and only way to sustain their dividends will be to increase their leverage.

I personally have the view that the housing market is recovering, the economy will continue to recover and spreads will continue to compress, therefore i think non-agency is the better place to be. plus it doesnt have nearly the prepayment risk that agency has.

Quote from weswes : I personally have the view that the housing market is recovering, the economy will continue to recover and spreads will continue to compress, therefore i think non-agency is the better place to be. plus it doesnt have nearly the prepayment risk that agency has.

On the flip side lets say housing is still in trouble and this is just a parting of the storm clouds and the economy continues to stumble, do you still think the spreads will remain and maybe widen? I guess my question is; how much of either scenario is already baked in at this point? Not to mention the fear of the div tax slam coming next year (ie fiscal cliff dive).

I'm running out of popcorn watching some of these REIT instruments thrash back and forth. O is almost to my initial target but still has yet to pick a direction that I'm comfortable with.

Quote from barnz008 : I'm running out of popcorn watching some of these REIT instruments thrash back and forth. O is almost to my initial target but still has yet to pick a direction that I'm comfortable with.

A ton of MLPs got slaughtered last week as well, and appeared to be good buys on thurs/fri. APU at 38, MMP at 39, and EPD at 48 were all pretty good deals (for now, it seems). APU was yielding over 8% at that price.

I decided to initiate a small position in O at 37.45. I'll add more if it goes well below that

Quote from rrc06 : A ton of MLPs got slaughtered last week as well, and appeared to be good buys on thurs/fri. APU at 38, MMP at 39, and EPD at 48 were all pretty good deals (for now, it seems). APU was yielding over 8% at that price. I decided to initiate a small position in O at 37.45. I'll add more if it goes well below that

That's the thing, given the history of these instruments it's not even a slaughter - it's just what they do.

Yeah, I'm not touching any of those pigs. Looks like one more blow off top rally before tiiimmbeerr....

Quote from barnz008 : That's the thing, given the history of these instruments it's not even a slaughter - it's just what they do. Yeah, I'm not touching any of those pigs. Looks like one more blow off top rally before tiiimmbeerr....

I have a multi decade horizon. Mlps on the whole have been a great asset class to own the several years IMO. I'm adding on huge dips like we saw recently

Quote from barnz008 : Oversold on the daily level and back to some weekly long term trendline support. Still looking for the $35-$36 level and won't take a position until it's found solid support and has given a weekly long signal entry. On the long term picture, I'd like to see a hard and fast move down on high volume to scare the children so it can resume it's uptrend...maybe like $31.

I seemed to be doing OK so far buying in at low 37 range. It popped through 40 today. Hoping I can add more in the mid 30s at some point.

Quote from rrc06 : I seemed to be doing OK so far buying in at low 37 range. It popped through 40 today. Hoping I can add more in the mid 30s at some point.

Nice. It's definitely the strongest performer of the small group I follow. I haven't been paying attn lately, so I missed it.

Staying 90% cash and doing short-medium term trades till the end of the year. I figure when the world ends in three weeks it will be easier for the aliens to manage my account if it's all cash.

Quote from barnz008 : Nice. It's definitely the strongest performer of the small group I follow. I haven't been paying attn lately, so I missed it. Staying 90% cash and doing short-medium term trades till the end of the year. I figure when the world ends in three weeks it will be easier for the aliens to manage my account if it's all cash.

Pulling up to its highest level since early September. Should I be kicking myself for not biting off more on the dip in mid november? I have a feeling the recent news on the ACRT acquisition may be creating bullish headwinds for the shares.