A very knowledgeable NCN member focusing mainly on financials had some interesting comments this AM:
I know I keep talking about this but heres the difference between Thornburg (NYSE:TMA)... and the Annaly (NYSE:NLY), Capstead (NYSE:CMO), Anworth (NYSE:ANH),.. they are 99% that same animal.... use mortgage bonds/loans as collateral to lever themselves up and play the carry trade.
The only difference (and its a HUGE one) is that NLY,CMO,ANH are 100% FNM/FRE AGENCY mbs bonds... while TMA is 100% private sector mbs.
TMA is getting margin called to death on their aaa portfolio b/c their underlying collateral has vaporized and at 18:1 leverage... it don't take much to get your credit lines pulled.
Aan the other hand NLY, CMO, ANH only own Fannie Freddie debt which is super liquid and not seeing price erosion AT ALL. Thus...NLY, CMO, ANH running their 10:1 leverage are no where near margin calls.... but the lemmings selling these names are probably clueless to the difference between the 2 business models .
I think it's probably worth picking up a few sharres near the open for an intraday pop. I bet the smart money comes in within the first 15 min of trading and takes NLY up a point off the lows.
If u do it... just buy in increments as they are dropping... just so you dont get too heavy if some big blocks come in to knockem down further.
Check out Monday mornings open... NLY opend horribly and bounced back over 1.50 when the smart $$ came in.
The only other reason I can see for the assinine selling of these names is that folks that own TMA may also own NLY and are thus getting margin called themselves.
Notablecalls: Love the comments. This comes from a guy who got short Thorn (NYSE:TMA) when things got ugly. Watch NLY, CMO & ANH.
PS: I'm hearing some pretty loud chatter saying one tier-1 house has 7-figure amount of NLY to sell this morn. Should be enough to knock it down early on.
I know I keep talking about this but heres the difference between Thornburg (NYSE:TMA)... and the Annaly (NYSE:NLY), Capstead (NYSE:CMO), Anworth (NYSE:ANH),.. they are 99% that same animal.... use mortgage bonds/loans as collateral to lever themselves up and play the carry trade.
The only difference (and its a HUGE one) is that NLY,CMO,ANH are 100% FNM/FRE AGENCY mbs bonds... while TMA is 100% private sector mbs.
TMA is getting margin called to death on their aaa portfolio b/c their underlying collateral has vaporized and at 18:1 leverage... it don't take much to get your credit lines pulled.
Aan the other hand NLY, CMO, ANH only own Fannie Freddie debt which is super liquid and not seeing price erosion AT ALL. Thus...NLY, CMO, ANH running their 10:1 leverage are no where near margin calls.... but the lemmings selling these names are probably clueless to the difference between the 2 business models .
I think it's probably worth picking up a few sharres near the open for an intraday pop. I bet the smart money comes in within the first 15 min of trading and takes NLY up a point off the lows.
If u do it... just buy in increments as they are dropping... just so you dont get too heavy if some big blocks come in to knockem down further.
Check out Monday mornings open... NLY opend horribly and bounced back over 1.50 when the smart $$ came in.
The only other reason I can see for the assinine selling of these names is that folks that own TMA may also own NLY and are thus getting margin called themselves.
Notablecalls: Love the comments. This comes from a guy who got short Thorn (NYSE:TMA) when things got ugly. Watch NLY, CMO & ANH.
PS: I'm hearing some pretty loud chatter saying one tier-1 house has 7-figure amount of NLY to sell this morn. Should be enough to knock it down early on.
Hope you have the stops in place, because the smart money seems to be shorting and selling hard. Each of these stocks is down 20%+ already, no bottom in sight.
ReplyDeleteGot the eery feeling the market is setting up for a crash, where even the good stuff is sold because that is the only way to raise cash.
NLY was talking with institutions this afternoon... saying that they are 7.5:1 levered up, and have plenty of unpledged collateral that they can use if repo lines get pulled. Furthermore, the stuff they own (agency paper) can be presented at the fed window to borrow from.
ReplyDeleteIf the payrolls number is bad tomorrow, and the fed gives us a surprise cut... this group of Agency mortgage reits will be the single best group to own. Virtually no credit risk, and hugely levered to positively sloping yield curve. Definetly tough to hold these guys today, but they are the best of the financials.
NC,
ReplyDeleteFormer MBS trader and own a mortgage bank. FNMA paper is tight and spreads widening. A little contraction this AM. I say be careful with any long here. Short lease only.
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