CFC

squiffy · #1 04-05-2004, 02:10 PM

CFC was as high as 97 or 98 earlier this year. Dropped down to low of 86 or so today. Any predictions?

adios · #2 04-06-2004, 11:19 AM

Don't know, as stated in another post I did a lot of selling last Friday. I'm going with the "pop" scenario regarding the employment outlook at least for the time being. When the fundamentals change, I try to change my outlook. PE is still low for CFC but I don't think the dust has settled yet. CFC's Mortgage Servicing Rights (MSR) portfolio will certainly increase in value as mortgage rates backup and will provide earnings. CFC accumulated a huge MSR portfolio over the past couple of years. CFCs business model uses what CFC management refers to as a macro hedge. Basically when originations are growing their MSR portfolio is a drag and when originations are shrinking their MSR portfolio provides earnings.

squiffy · #3 04-06-2004, 01:18 PM

CFC certainly seems to recover better than other mortgage-type companies. Lots of REITS still dropping today, I guess on theory that higher employment, inflation, higher interest rates will hurt them in the long run.

Of the homebuilders, which one do you think is the weakest and most likely to start collapsing IF interest rates rise and IF home sales decline?

adios · #4 04-06-2004, 01:43 PM

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CFC certainly seems to recover better than other mortgage-type companies. Lots of REITS still dropping today,

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CFC isn't as interest rate sensitive due to the fact that yield percentages aren't a big deal since CFC retains most of it's earnings.

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I guess on theory that higher employment, inflation, higher interest rates will hurt them in the long run.

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Not necessarily with equity REITs IMO. A stronger economy should benefit a lot of equity REITs in terms of higher asset values IMO, strong consummer spending, more commerical office space utilized (WSJ had an article about this today), higher hotel/motel occupancy rates, and maybe at some point higher apartment occupancy rates. I think equity REITs are getting clobbered due to the fact that yields on bonds are moving up. In order to maintain the yield spread between bonds and equity REITs, equity REITs have to come down in value some. Perhaps the spread will widen as well. Just my take.