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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (146946)	1/29/2002 5:50:37 PM
From: reaper	Read Replies (1) \| Respond to of 436258

DAK As the resident real estate expert here, have you ever looked at the residential mortgage REITS -- Apex (AXM), Annally (NLY), Capstead (CMO), Redwood (RWT) and Thornburg (TMA)? Near as I can tell these are just 10:1 levered hedge funds that borrow short (repos) and lend long (mortgages, agency bonds). Annally, for example, has $6.4 billion of mortgage backed securities (fair value) backed up by a mere $682mm in capital. They of course are "growing" like a weed right now as the yield curve is steep and borrowing short and lending long produces great "profits". But don't these go down if the yield curve flattens, and don't they go to zero if there is any material break-up in the real estate market? Plus, they generally trade at 1.5-1.6x book. Since I can by definition buy into a hedge fund at 1.0x book, why should I pay a 50-60% premium for their book? Cheers