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Careful with those pick buttons



February 08, 2011 – Comments (8) | RELATED TICKERS: FMCC

Just thought I'd share a little stupidity.

This morning, I decided it was time to re-red thumb Freddie Mac (FMCC.OB).  'cept, I didn't pay attention while making the pick and clicked on 'outperform' instead.

Maybe I'll get lucky and Freddie's wacky price climb will continue for another week. 

New rules for CAPS picks:

1) Think twice, click once.
2) Coffee before CAPS.

Fool on!


Disclosure:  No real money riding on Freddie Mac.

8 Comments – Post Your Own

#1) On February 08, 2011 at 7:26 PM, HarryCaraysGhost (77.06) wrote:

I've done this a few times, just got to hope for the best.

No real money riding on Freddie Mac. Why not you never know they might return to 2007 levels (Kidding)

I did'nt even know this was still rateable

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#2) On February 08, 2011 at 7:37 PM, rd80 (96.81) wrote:

Why not you never know they might return to 2007 levels

I used up all my good luck on the GSEs gambling with Freddie's sister in '08 just after the bailout.

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#3) On February 08, 2011 at 7:54 PM, HarryCaraysGhost (77.06) wrote:

Ha, I did the same with both Freddie And Fannie. People on Caps thought I was nuts. But I had my reasons, stopped with a 4 bagger on both.

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#4) On February 08, 2011 at 8:14 PM, devoish (86.31) wrote:

I' ve picked the wrong thumb and had the price move in my favor anyway, and been able to close out the pick in the green.

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#5) On February 08, 2011 at 9:46 PM, Momentum22 (28.94) wrote:

rd80 (98.85) - perhaps your subconcsious mind was speaking to you...I bought a few shares of Fannie Mae in real life. I transferred my stake in AIB over and bought "the dip" last week after they announced the 50% loan limit possibility. 

I am in Fannie Mae at .6811.

Of course it is risky (for all sorts of different reasons) but I think we will see it go higher as more reasonable plans are laid out to keep Fannie and Freddie in place.

The GSEs are not the reason we are in this mess and both Fannie and Freddie's lending platform in multifamily housing is critically needed...and extremely successful.

Don't be surprised to be surprised. Harvest those points and don't feel guilty about it. : ) 

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#6) On February 09, 2011 at 9:53 AM, jrod87 (93.38) wrote:

obama may end freddie and fanni..glad i bought at 0.30$ a share and sold all at avg of 0.88 a share $$$.. now time to cash in on red thumbs

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#7) On February 09, 2011 at 3:51 PM, sailrmac (61.08) wrote:

Regarding your comment on the mortgage REIT article

rd80 -thank you, you make a good point.

A rise in interest rates does hurt existing fixed rate paper even if the spread doesn't decrease.  However, I'm thinking it should not hurt adjustable rate paper anywhere near as much.  AGNC is half adjustable yielding 20%, HTS is all adjustable yielding 14%.

Right now I'm invested in AGNC with a normal size position.  It's tempting to double up by buying a second position in HTS.  I'm thinking HTS is actually pretty low risk but am concerned about what I'm missing.

What am I missing?

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#8) On February 09, 2011 at 8:36 PM, rd80 (96.81) wrote:

@sailrmac -

I don't think you're missing much.  Even with adjustable paper, a rise in long rates would ding the value. 

From HTS factsheet, "Our investments typically have a weighted average term to the next interest rate reset date of between 44 and 61 months"  That helps if longer rates rise, but still leaves a good bit of time before the assets' rates adjust up.

HTS, and (I believe) most of the other mortgage REITs also hedge some of their borrowing rate risk.

IMHO, once short term rates start to rise, all the mortgage REIT business models become much tougher.  Holding adjustable rate paper will help, but won't elimate narrowing spreads.

Shameless self promotion:  I've written a couple of articles on mortgage REITs for the Fool.  Here and here.

I like the mortgage REITs in general and Hatteras in particular, largely because I think it has a little more conservative approach.
However, these companies have had a really good run and I think we're closer to end of it than the beginning.

I'm long HTS in real life and added a little bit last month.

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