My friend (and very successful investor) Pete Rawlings writes:
I’m so disgusted with the SEC. First they eliminate the up-tick rule, then they continue to allow high frequency trading, now they are going after mortgage- REITss. Next up will be MLP losing their tax advantages. I really don’t want to invest my money in the stock market anymore. There isn’t an investment class that is safe from these a-holes.
This is what the Wall Street Journal reported yesterday:
The End of Mortgage REITs? by Ben LevisohnIt’s been a tough summer for mortgage REITs. It’s about to get tougher.
The stocks, which invest in pools of home loans and then borrow to boost returns, rebounded double-digit drops in late July, as investors fretted about their access to short-term funding in the repo market, resulting in the sector’s own little flash crash. And with Fed Chairman Ben Bernanke committing to ultra-low interest rates well into 2013, the future looked bright.
But in the list of risks to REITs, nobody thought to add the SEC (I certainly didn’t). On Aug. 31, the U.S. regulator sought comment on whether mortgage REITs should lose their tax exemption or their ability to use leverage. The plan seems to be to force them to choose one of two options: become a regular corporation—and get taxed like one—but keep the leverage or lose the leverage and keep the tax exemption.
In what seems like a classic case of understatement, Morgan Stanley’s Janaki Rao and Zofia Koscielniak wrote in a note today that a “loss of either…would significantly erode REIT attractiveness.” You think?
In trading today, Annaly Capital Management Inc. plummeted 3.9%, Hatteras Financial Corp. dropped 3.5% and American Capital Agency Corp. fell 2.9%, quite a bit more than the Dow Jones Industrials 1% decline.
The SEC’s stupid request for information is here.
What’s amazing about the SEC’s request is that it came out nof the blue. No one anywhere has suggested that mortgage REITs are Ponzi schemes, are ripping off investors, are stealing from the poor, are causing global warming or, God Forbid, are going to cost Obama (or anyone else) the 2012 election. Moreover the election of a company (like Annaly) to be treated as a real estate investment trust (or REIT) is handled under the Internal Revenue Code and has nothing whatsoever to do with the SEC.
Frankly, I don’t understand what’s bugging the SEC. I called around yesterday. No one seemed to know either. I’ll continue checking. Personally, I own a lot of NLY, AGNC,, ANH and the new MITT.
If the market panics further and these things fall further, my tendency is to be a buyer of these beaten-down stocks.
Heck this is not the Justice Department suing AT&T to stop buying T-Mobile (a suit which makes some sense). This is the SEC asking for comments.
Go to Annaly’s web site. You’ll find two items of interest:
+ Since inception Annaly has paid over $6 billion in dividends to its shareholders, and this chart:
Europe grinds to a halt, reports MoneyGame:
They write:
Eurozone PMI plunged to a two-year low this morning (i.e. yesterday), indicating a worse-than-expected slowdown and triggering declines for the euro on easing expectations.
Manufacturing PMI — regarded as an early indicator of recession — fell to 49.0 in August from 50.4 in July, indicating that while GDP is still expanding manufacturing is stalled.
According to Credit Suisse, inventories are at their highest since December 2008, but the lack of demand for goods means that manufacturers will probably have to cut production to reduce overhead in the months ahead. If we regard this orders-to-inventories statistic as an early indicator for manufacturing PMI and ISM, then we’re likely to see these numbers slip further over the next few months.
And America’s not doing that well either. Today’s jobs/unemployment report sucks. No change.
September in the stockmarket is the worst month.
This year will be no different.
I like my gold and my 6% Australian CDs even more.
Here’s a business we definitely cannot outsource. From yesterday’s unsolicited email:
Brazil is the home of many innovations — including smaller and smaller bikinis, the latest called “dental floss.”
I don’t make this stuff up.
Shout-out to long time reader, Carlos Hernandez. Happy 62nd birthday.
Hndsome Carlos with his super-intelligent grandson, Lincoln. Keep on being cautiously optimistic with your capital preservation investment strategy. Retirement is right around the corner! CASH IS KING. And hopefully KU basketball and the Kansas City Chiefs will bring joy to you and your family this season!
How long will you live? Here is a calculator that estimates your life expectancy. It was developed by Northwestern Mutual Life.
There are only 13 quick questions. Yet, they can predict how long will live. The best news is that since they sell life insurance, they have a serious interest in telling you that you’ll live forever. According to this test, I’ll live to 101. And pigs will fly.
Click here for the test.
Profound (?) thoughts for the weekend.
+ I asked God for a bike, but I know God doesn’t work that way. So I stole a bike and asked for forgiveness.
+ Do not argue with an idiot. He will drag you down to his level and beat you with experience.
+ Light travels faster than sound. This is why some people appear bright until you hear them speak.
+ If I agreed with you, we’d both be wrong.
+ Dolphins are so smart that within a few weeks of captivity, they can train people to stand on the very edge of the pool and throw them fish.
+ Why do Americans choose from just two people to run for president and 50 for Miss America ?
+ You do not need a parachute to skydive. You only need a parachute to skydive twice.
+ The voices in my head may not be real, but they have some good ideas!
+ Always borrow money from a pessimist. He won’t expect it back.
+ You’re never too old to learn something stupid.
+ Change is inevitable, except from a vending machine.
The Tennis continues. The US Open is on ESPN2 and the Tennis Channel.
Harry Newton who wonders why it so hard to buy. I can’t find anyone selling screwless Decora faceplates, despite calling the manufacturer Leviton. Manhattan Mercedes promises to fix our lemon station E500 wagon and work a deal on a new car, but then fails to call. Our economy would be a lot better if everyone learned to be be nice to their customers. Simple things, like returning their phone calls. Dah!
Oh and I took the test. 93. Cool.
Re difficulty in buying things: I have a list of 21such “barriers to the sale” in my book, Roadmap to Revenue: How to Sell the Way Your Customers Want to Buy. It all comes from company-centered thinking/acting versus customer-centered thinking/acting.
There is a way to change a company from one state to the other (yep, it's in the book) – but it starts at the top. If the person at the top doesn't fundamentally care about customers (and employees – it goes hand in hand), then nothing will change. If the person at the top does care, but doesn't realize how simple (not easy, but simple) the solution is, his/her company will continue to make it too difficult for their customers to buy.
Harry, I hope you have a glorious 3-day weekend and bike a lot.
kz
Harry,
I bought those light switches made by Leviton, with the hidden screws, a couple of months ago. I bought mine at Home Depot and have seen them on the shelves at Lowes as well. They cost a lot more than a regular switch but they come with the extra plate to cover the inner plate that has the screws on it. Although I bought mine at their “brick & mortar” store, I believe the Home Depot sells them online as well.
Your flying pig picture brought back memories of one of your old magazines and the trade shows. Remember the Mazda Miata you gave away? Oh, those were the good ol' days.
Harry, I also have some money in AGNC. Correct me if I'm wrong, but the SEC doesn't have the authority to take away their REIT status or ability to use leverage do they? This looks to me like something that will blow over and be forgotten soon. In the mean time, this may be a great buying opportunity.
Harry, no one calls back because the Customer Service people are at the bottom of the 'food chain' in Corporate America. If and when we learn that the only two people the public meets is the SALESMAN when they buy (or talked into buying) and the CUSTOMER SERVICE when there is a problem. IF Corporate America would learn that if you SERVICE the CUSTOMER then the CUSTOMER becomes your BEST Salesman. “Stupier” is at work here.
Stupider?
I was going to labast you for speeding our linguistic decline, but I now see that stupider is indeed a valid word found in the dictionary.
I guess I'm stupider than you.
So Harry, just curious, did you stick with your “down 5% and out” rule and you're now out of NLY?
Vincent
ps you'll find the screwless (which is what we all wish Wall Street was) faceplates on amazon.
I'm still in NLY. My rule is 8% and out. I'm less than !% down on what I bought it and it's only down 7% from its peak this year.
Anytime there is a 14% dividend in a 2-3% climate its just a matter of time before before you get murdered.As hungry as I am for a 14% return i'm not willing to be prepared for a 40% or greater loss of principal…Your stops will be worthless when it gaps down on one bright sunny morning and bingo Gotcha again…Its pretty hard to fool mother nature! I used to think I could but I am slowly waking up ….