written by reader I Want Your Take Of The High Yielding NLY

By robtcohen, October 24, 2011

My fear is of dollar collapse or (an hopefully temporary) currency crisis in which NLY goes from teen price to a single digit price. Is ”the U.S. dollar risk” also your opinion?

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Travis Johnson, Stock Gumshoe
October 24, 2011 10:06 am

That’s not my personal fear — the risk for Annaly, as for all the mortgage REITs, is that the yield curve flattens … as it has been showing some signs of (admittedly with limited success) with the fed trying to push down mortgage rates and 10-year bond rates. The secondary risk is regulatory and/or systemic change in the mortgage market (ie, if lots of refinancings get done quickly and easily because of govt. decree), worries about the currency collapsing are way down the list for me when it comes to mortgage REITs. Not to say that it wouldn’t be a problem if it happened, but they have much more specific and industry-specific risks that I worry about more than I worry about the collapse of the dollar as an impact on NLY specifically.

I don’t currently own NLY or any of the competitors or any “regular” banks, which depend on the same yield curve for their basic income, and I’m not particularly tempted to invest in any of them today, but if I did own a mortgage REIT it would probably be NLY because of their large size and experience at managing through swinging interest rate environments.

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Cool Soupy
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Cool Soupy
October 24, 2011 6:53 pm

Oh Great Sage you are right on – first we bailout the banks and today we are going to bailout Fannie/Freddie mortgage holders with lower cost mortgages. Mike Farrell Chairman at NLY must have foresawn this as he has reduced his leverage and cut the dividend ahead of this announcement. Of course this is just more pressure on our fragile banking system.

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