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To: KaiserSosze who wrote (109180)	7/18/2012 10:04:17 AM
From: Elroy	Read Replies (2) \| Respond to of 118717

Unfortunately I'm out all day today, so won't be able to watch the action. May put in a stink-ball low bid to buy back! I'm curious what you'd consider a stink bid for AGNC? It's so overpriced now it's hard to understand what keeps it up. Think about this. I last bought AGNC in early March after their secondary back then, and I got it for about $29.40. The Q4 2011 book value was ~$27.80, so I got it at 1.06x last reported book value. But when they reported March Q, which was about 20 days after the secondary, book value had become $29. So I actually last bought AGNC at about 1.01x actual book value in March this year. Today, AGNC is $34.20, and that's 1.17x today's estimated book value. So I bought AGNC in March at 1.01x book value, and today it's at 1.17x book value. The weird thing is, the business (mREIT interest spread) is worse today than it was in March. The back end of the curve is declining, so all these mREITs are a bit less profitable than they were in March. So......why in the world should AGNC command a HIGHER valuation today than it did in March? The only thing that could have justified AGNC's massive premium to book value (relative to the other mREITs) is their ability to actively manage the portfolio and thereby increase book value through their trading. In Q2 book value was up a measley 1% when interest rates fell pretty strongly. So........they aren't delivering super trading ability, so why do they get a premium way higher than everyone else? Methinks investors were expecting a bigger jump in book value in the quarter, and as it sinks in that AGNC has not delivered, investors will wonder why AGNC at a 14% yield (nothing special) deserves a premium valuation to the other guys. It has become a market darling, and I don't know what the positive sentiment will fade, but anyone buying AGNC at these levels risks earning those wonderful $1.25 dividends but having them offset by share price declines. 1.1x book value seems expensive, but a fair price for AGNC since they are one of the best mREITs. That means it should cost $32.20, or 2 bucks below where it is today. So a good stink bid would be about $29.50 if you ask me.