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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (22221)	11/21/2004 8:29:06 PM
From: Wyätt Gwyön	Respond to of 110194

Annaly is a longtime Grant favorite. their CEO has spoken at his conferences. it has been a good one for me. it fell briefly after the most recent dividend payment at the end of October, but has been going gangbusters ever since. strangely, this has coincided with the rapid flattening of the yield curve, which surprised me because i thought Annaly always made their money buy borrowing short and lending long (with lots of leverage!). Grant helps explain this in that article: For the past two years, Farrell says, the company has prepared for a flattening of the yield curve--i.e., for less daylight between short rates and long rates. Such preparations have necessarily penalized the bottom line. But to its credit, management knows what it doesn't know. And among the things it doesn't know is the future. "Remember," says Farrell, "Annaly came of age in the time of an inverted curve"--i.e., 1997-98, when short rates were intermittently higher than long ones. Such trials inculcated in management a due respect for the power and unpredictability of nature. "My experience in this regard," he adds, "is that it is better to be early playing defense, rather than late, even if it means you leave a few dollars on the table, which, despite our success, we have." So maybe this is the theory of Annaly: The management knows it's a mortgage REIT and not the world's hottest hedge fund.