View Full Version : darn

07-15-2002, 07:52 PM
mbs reits got cheap today and picked some up. im hopin some more stocks come into the buy range. id love to see PG sell off a whole bunch more and id be a buyer. us dollar had a bad day. qqq holding up well. intc earnings tomorrow. still think main components of qqq are overpriced but i wont be a hero if it goes against me. noticed that rag barrons had interview with old codger money manager who was panning some consummer non durable stocks due to valuation. market does put a premium on em.

07-15-2002, 10:18 PM
I don't find REITs that attractive right now, what is your basis for getting in? I think commercial real estate is terrible to get into, way too many vacancies and still some overhang projects left from recent good times. I think the rents being charged will progress down over some time because even though the economy is improving, businesses are being very careful about expansion and with all the cheap space out there they can demand very favorable terms in every major market. Only good side I could see in them is that dividend rates are much better than being a bondholder right now so if you wanted a fixed income type investment and were willing to take on some moderate risk, this might not be that bad a sector to be in.

Your other comments I like. Consumer cyclicals are always overpriced IMO. They are steady and survive down periods very well, but their value is always questionable because paying for a big brand name is not very value conscious. Think about it, if you have 40% of the market, you can't do a whole lot to get more of the market (barring monopolistic practices). The pricing of premium names though means you have to get bigger or cut costs. I have never been a big fan of betting on stock to do well through cost cutting. Cost cuts rarely work out half as well as companies envision and even worse they kill productivity as morale sags and people start seeing it as a "cheap" company. However if your stock requires growth and you are a consumer company that really can't grow faster than the economy, how can you justify the price? I think your suggestion on this is right on.

Dollar had a weak day, but tomorrow is sure to be stronger. The impressive late market rally will bring back money, everyone wants to catch a potential market bottom the world over so that will draw some cash. Besides the fall in the dollar was mostly psychological, the whole parity with the Euro issue. The Yen will weaken soon, I think the BOJ is letting some people get set up for a fall when they come in with a big intervention soon.

07-15-2002, 11:02 PM
talkin about mortgage backed security reits. they take advantage of the spreads between short term rates and the rates that mortgage backed securities pay. theyre leveraged typically around 7:1 which is a lot less than typical leverage that banks use. typically these reits dont own real estate. here is a list of some of em in no particular order:

AHR - yielding 12.66%

CMO - yielding 30.4%

FB - yielding 16.02%

IMH - yielding 15.8%

NLY - yielding 15.86%

RAS - yielding 12.01%

a couple of notes about some of em. CMO does own real estate and is thinly traded and owned mostly by insiders. i havent found anything wrong with it. there was a share holder lawsuit of former ceo back in 1998. this is totally behind them now. AHR is considered to have the most secure dividend. FB is owned mostly by its parent company FBR. FBR has been doing investment banking for these mbs reits through secondaries. secondaries arent as bad for these as it might appear as it allows them to raise capital which they can use to generate more income even though the number of shares is diluted. anyway FB did a secondary about a month ago as it went for $33.25.

profitibility for these reits is best maintained thru a steep yield curve. i think govt. 5 year and 10 year hit a brick wall today. didnt go crazy but picked up some as they recovered a lot over the last hour and a half.

my favorite currency is the british pound as it looks to be super strong.

07-16-2002, 12:38 AM
Good analysis, I never really follow the mortgage backed variety for various reasons. Most notably what my college finance professor said in that these only perform well in "sweet-spot" conditions. You don't want rates to go up, yet you don't want rates to go down too far and then get a bunch of payoffs and refis. Sort of like hoping for very little volatility and as you say a nice spread between shorter term rates and the long bonds. Might not be the best market for them over a few years, but the likelihood that the Fed stays put for awhile and the really low PPI numbers make this a potentially good place to stay for the time being especially considering what little upside bonds have compared to their potential downside that lurks once the economy gets its act in gear and fires on all cylinders.

As for currencies, I like the dollar to make a rally for awhile. The pound will have downward pressure because the talk is on now about how sterling is closer to the necessary rate to join the Euro. That is the type of talk that could really hurt its potential as the wide spread to the Euro has been its only hope of staying out. On the other hand I think the Euro is going to get a little weaker here because people are going to inevitably see that despite all this run on the dollar, supposedly by Euro holders in large part, the FTSE and DAX have gone lock-step with the US market. If you aren't getting any better returns at home, why keep pulling your money out? Only reason why Europeans "feel" they are getting money now is because US equities have gone down more purely as a function of exchange rate. So US equities have become really cheap relatively speaking.

Remember that the world has all gotten equity culture and it is growing even more in Europe and Japan. The US has made the switch in great strides, the other parts of the world still value paper and gold under mattresses more so than we do here. As much as people like to think the scandal and bursting of the bubble has changed minds, they are fooling themselves to think that. People that are getting out of the market now aren't saying screw Wall Street so much as they are saying I don't want to lose any more money right now, but I will be back when I feel its safe to invest in stocks again. Valuations would really be in trouble if people were wholesale exiting the market for good, but I don't think there is much of that at all. You have risk-adverse people and foreigners take out their money, just as Elroy points out. Everyone else hasn't really gone too far from the pack. As the rest of the world joins in on the equity frenzy, you have a lot more money chasing a somewhat limited supply of stock. Keep in mind that stock buybacks are all the rage right now and that very few IPOs or mergers made with shares have hit the market. That should mean a lot less supply and eventually more demand. That is why I have tended to ignore all these people with the market is overvalued theory. Maybe it is if this was 1980 or 1990, but its not. There is a lot more money chasing stocks and a pretty static supply for now. Many of the IPOs that did come out in the bubble became worthless, they aren't absorbing the vast new demand for equities that is out there. Once again, remember in the end pricing is all about supply and demand, not fundamentals.

07-16-2002, 06:27 PM
not a recommendation...but i have been following a very volatile stock..rambus...(rmbs) for years....as a joke i bought 400 shares at about 3.40/sh about 2 weeks ago...it closed about 6.30 today...hey hey...anybody else done that well going long the last 2 weeks...lol

07-17-2002, 10:33 AM
I have been long RMBS since about 90. Average price is now about 25. I promised myself I wouldn't buy any more until it hit 30.

Still think they'll win out in the end. All they need is one court win to double the price.

07-17-2002, 09:52 PM
holy hell a fred hager head,,lol,,,actually i am starting to get excited about it again..lol..gl