Author Topic: Can the leveraged mortgage reits survive?  (Read 3308 times)

aaengel

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Can the leveraged mortgage reits survive?
« on: April 23, 2014, 11:08:38 AM »
I was wondering what people thought of the leveraged mortgage reits and whether or not they can survive the interest rate hike eventually?

brewer12345

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Re: Can the leveraged mortgage reits survive?
« Reply #1 on: April 23, 2014, 12:47:39 PM »
They have in the past, not that it was always pretty for the shareholders.

soccerluvof4

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Re: Can the leveraged mortgage reits survive?
« Reply #2 on: April 23, 2014, 12:51:03 PM »
^+1 and they most likely will move up so slow it , companies will have time to adjust. Been hearing about a rate hike for how many years now?

arebelspy

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Re: Can the leveraged mortgage reits survive?
« Reply #3 on: April 23, 2014, 01:05:52 PM »
I wouldn't bet on them.
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diesel15

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Re: Can the leveraged mortgage reits survive?
« Reply #4 on: May 12, 2014, 02:19:02 PM »
Feelings tend to be strong on both sides of this argument.  If you understand how these mREIT's make money I do think that you can make money from them.  Short term rates have been extremely low for an extended period of time and will likely remain this way for some time.  How long?  Anybody's guess.  I don't believe that short-term rate increases are coming in 2014 so these are about as "safe" as they can be at the moment.  I believe that in the short term there is considerable upside to these stocks.  However, since they are subject to interest rate volatility on top of leverage they can be quite risky.  I personally am betting on them very heavily right now and am ecstatic with my returns so far in 2014.  Long-term I do also believe that they have a place in my portfolio although the allocation I currently have is not sustainable. 

soccerluvof4

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Re: Can the leveraged mortgage reits survive?
« Reply #5 on: May 13, 2014, 04:23:25 AM »
I am in them heavy as well....Very overweight as with the energy sector and they have performed well. Both in stocks and in my Vanguard funds (index)  Bottom line when there not you rotate out of them if you don't feel comfortable with them. Interest rates aren't going anywhere fast in my view at least till after the next election.

wtjbatman

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Re: Can the leveraged mortgage reits survive?
« Reply #6 on: May 13, 2014, 07:14:25 PM »
I've got some money in them that's giving off some crazy high yields (MORL). I'm DRIPing and so far so good. But it's a small position really, and nothing I would lose sleep over if it imploded. Not yet anyway, but it might become that one day if I keep reinvesting the dividends ;)

Mr Mark

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Re: Can the leveraged mortgage reits survive?
« Reply #7 on: May 13, 2014, 08:06:32 PM »
Ahh, the siren call of market timing....

Look, if REITs are in your AA, the gain will mean you can rebalance elsewhere. Heck, violate your AA by a point or so and switch to slightly underweight against that mean AA wrt REITs. Its your AA, and I'm a great beliver in a (max, max, max) 5% play money area where you can invest in literally tulips if you really really want. I feel free to critise this choice, however.







rmendpara

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Re: Can the leveraged mortgage reits survive?
« Reply #8 on: May 13, 2014, 08:31:55 PM »
I was wondering what people thought of the leveraged mortgage reits and whether or not they can survive the interest rate hike eventually?

Depends on the specific REIT since they have different strategies. General strategy is to borrow short term and invest in long term, so they make money on the spread between short term rates and longer term rates.

When rates rise, they get squeezed because their borrowing costs increase, but their earnings increase less quickly (less prepayments).

When rates fall, they tend to make money because borrowing costs fall, but this is offset because some mortgages will be paid off (and refinanced at lower rates).

Then there's the form of leverage they use to enhance returns... Which also varies a lot depending on which way they are positioned to benefit.

As long as the REIT doesn't explode, it will continuously make money and reward shareholders. However, earnings will be very volatile. If you can stand the volatility in both payouts and share price, it's generally a good long term holding.

Personally, I hold NLY, TWO, O, and ARCP. I understand the mREIT risks, and can take the volatility.
« Last Edit: May 13, 2014, 08:34:07 PM by rmendpara »