Paul:
This time, I am one of the unfortunate ones who was wrong on CMO. A few years back, I was right, even though it was a very wild ride to get there, as at one time I was in the hole back then. This no doubt has been just about the worst environment possible for CMO, but the whole way mgmt. has handled this debacle is IMO very poor. Plain and simple, they made a bad bet, using shareholder equity as currency. In reading past reports, I recall there being mention of the company usually faring better in a declining interest rate environment (although not getting squeezed to this extent by a flat yield curve). To quote from the '97 annual, "....provide our stockholders with superior rates of return in a variety of interest rate environments." Why the big bet on IOs, then?
Now to do some research on how they are positioned at this moment, although a quick (and obvious) read would be that any further flattening of the yield curve would not be good. |
