I have one question for the unnamed Wunderlich Securities analyst(s). Do you think that short term interest rates will rise faster than longer term interest rates in the next one or two years? Their answer has to be no. Otherwise, they wouldn’t have said what they said in the article below.
“The research firm expects “market trends could support higher debt to equity ratios going forward because collateral is relatively dear in the marketplace.” While not every Index member is a dividend payer, the Index does sport a yield of 10%.
Wunderlich notes wider spreads and adequate liquidity will support returns on equity of over 17% on average this year and could provide support with the potential for multiple expansion.”
Interest rates will rise from these artificially low rates manufactured from Federal Reserve digital money creation. I have posted about this here: http://bit.ly/RatesRise . Interest rate spreads will tighten when the Federal Reserve’s quantitative easing (QE2) ends in June. If the Fed stop printing money for a year like they did for most of 2010, then the recession will continue. Short term interest rates will rise faster than long term rates. This is the precursor to an inverted yield curve. The inverted yield curve has preceded almost every recession since the end of World War II.
If the Federal Reserve starts printing money again (QE3) before the onset of another recession, then perhaps the interest rate spreads won’t tighten as quickly. But the Fed will be sowing the seeds of a bigger calamity later. American Capital Agency Corp. (AGNC) and the other mortgage REITs are going to have to slash dividends and their stock prices will take huge losses because their asset values will erode.
Ask yourself this question: Did Wunderlich Securities warn their clients that a financial crisis was eminent in 2007? I can’t find any warnings using the search terms “Wunderlich Securities” + “financial crisis”. I do know that Peter Schiff, EuroPacific Captial, is an advocate of the Austrian school of economics. He is on the list of those who warned of the financial crisis: http://marketplayground.com/2010/11/20/twelve-who-forecast-the-financial-crisis/ No one from Wunderlich saw the crisis coming. Why should you trust them now on mortgage REIT dividend stability?
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Wunderlich Sees Stability In Mortgage REIT Dividends (NLY, AGNC, NRF, CIM, CLNY)
by Jason Smith | May 2nd | Filed in: Stock Sector News
The Mortgage Investment Stocks Index is up 0.1% after Wunderlich Securities said metrics reported by the firms in this group that have reported first-quarter earnings speak to the stability of dividends currently in place. Wunderlich notes fewer than half the mortgage REITs under coverage have delivered first-quarter results, but company reports and current market trends indicate stable payouts for investors.
The research firm expects “market trends could support higher debt to equity ratios going forward because collateral is relatively dear in the marketplace.” While not every Index member is a dividend payer, the Index does sport a yield of 10%.
Wunderlich notes wider spreads and adequate liquidity will support returns on equity of over 17% on average this year and could provide support with the potential for multiple expansion.
Shares of Annaly Capital Management (NLY), the largest Index member by market value are fractionally lower today. Annaly has a yield of 13.9%, based on past distributions. With a yield of 19.2%, based on past distributions, American Capital Agency (AGNC) is modestly higher while Northstar Realty Finance (NRF) with a yield of 7.9%, based on past distributions, is soaring 3%. Chimera Investment (CIM) and Colony Financial (CLNY) are both lower by half a percent. Those stocks yield 13.8% and 6.9%, based on past distributions, respectively.
Investors can track dozens of high-yielding indexes at tickerspy.com.
Link to original article: http://www.tickerspy.com/newswire/?p=4402
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