Shack -- would be interested in your comments on (i) mortgage REITs (Bloomberg has an index, though i am not sure of the ticker; large individual components are NLY, TMA, IMH, RWT); and (ii) homebuilders (again, i'm sure there's an index, and the bigger components are CTX, TOL, LEN, PHM, DHI).
while i again don't like to interject too much FA into this thread, forgotten in the recent run-up in equities is the 150 bps reversal in TNX and the "where are the bodies" discussions of a handful of weeks ago. well, we may have found one today, in the guise of Annally Mortgage (NLY), a stock that i have been tracking for a LONGGGGG time and am fortunate enough to be short, which cut its dividend from over 50 cents to 25 cents and whose book value has quite probably fallen to under $10 from around $13.
i bring this up because as mentioned in a prior post the leveraged mortgage trade is today quite possibly the most crowded trade in the history of mankind, from mortgage REITs to hedge funds to banks to the Chinese re-cycling their dollars into our agency securities. heck, the trade is sooooo crowded that even Bill Fleckenstein and Jim Grant are LONG Annally. anyway, anything that signals that leveraged speculators were hurt in that TNX reversal, and subsequently leads to a withdrawl of some of that free-flowing liquidity at the margin in the mortgage market, could be very bad.
what i found interesting today is that the homebuilders, on no apparant news that i could find, and with the TNX up (rates down) and mortgage rates improving a little at the margin, were down large today. maybe the market telling us that the NLY dividend cut is more important than first glance....
this overall issue could be what is holding back the banks, which of course have been badly lagging the market of late and got pasted pretty good today. i don't think i need to tell you that all of that money that is NOT going into C&I and corporate loans in the last two years is going into buying mortgages, mortgage-backed securities and agencies.
i am a firm believer that what had become basically un-limited, unfettered capital availability for the mortgage trade is what has propped up our economy for the last 2-3 years (yes, yes, i am a card-carrying reader of Doug Noland each and every week <g>). that might be changing at the margin, and, well, we all know what happens to dynamic systems when the second derivative goes to zero.....
thoughts??
Cheers |
