Here is my response to a comment "troubled investor" made...
One of the biggest mistakes I see being made is not selling a bad position when it looks like it could be worse just so you won't take a paper loss. Holding on in the hopes it turns around.
But wait a minute. Isn't that what I did with Enerplus? Glad you asked because there is a difference. With Enerplus I felt it was a losing position but in company that was still good, just undervalued. American Capital was a losing position and I feel its not able to turn around without more substantial loses. I am willing to take on some small short term paper loses if I feel the share price will bounce back. With AGNC I don't see that.
Additionally there is another risk I didn't mention in the video. When interest rates rise the net interest spread will disappear very quickly. This will speed up the dividend cuts and probably share price drop. Eventually though the new mortgages coming in to AGNC will carry a higher yield but that will take time.
Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.
One of the biggest mistakes I see being made is not selling a bad position when it looks like it could be worse just so you won't take a paper loss. Holding on in the hopes it turns around.
But wait a minute. Isn't that what I did with Enerplus? Glad you asked because there is a difference. With Enerplus I felt it was a losing position but in company that was still good, just undervalued. American Capital was a losing position and I feel its not able to turn around without more substantial loses. I am willing to take on some small short term paper loses if I feel the share price will bounce back. With AGNC I don't see that.
Additionally there is another risk I didn't mention in the video. When interest rates rise the net interest spread will disappear very quickly. This will speed up the dividend cuts and probably share price drop. Eventually though the new mortgages coming in to AGNC will carry a higher yield but that will take time.
Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
Thanks for your quick response, it is appreciated.
ReplyDeleteThere was an article published on this subject at SA recently. For anyone who wants to take a look: http://seekingalpha.com/article/1122501-build-an-intelligent-reit-portfolio-without-mortgage-reit-risk
Read that article this morning and its a good one. I'm a huge fan of Brad Thomas. I'm looking at OHI because of his research.
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