For me though, all things considered, they're not a fit for me.
Yeah, well that's fine but I'm not here to find what is a fit for you, I'm just interested to learn more about AGNC and CIM and what they do, and why the yield is so high. I think I'm correct that the reason is if near term rates rise dramatically and unexpectedly, then they won't be able to sell their 2 year holdings at prices sufficient to pay off their very short term borrowings, and will be essentially squuezed into insolvency. They owe a million bucks now, and the two year loans that they've bought are only worth $970,000 instead of a million bucks, and there you are. So AGNC may continue to pay great dividends as long as rates don't rise, but if they do rise AGNC will not be able to pay nice dividends and everything will go to hell. If someone else has a better understanding of the reason why their yield is 18%, I'm eager to listen.
And i agree they aren't like some business that for whatever reason has huge yields. AGNC and CIM are just some guys with capital who are speculating on interest rates, nothing to do with any business at all really. |
