Annaly Capital Management, Inc. (NLY)

Not too much increase overall although it makes interest income on Mortgage-Backed Securities. HIGH dividend that seems to continually increase quarter to quarter, near ZERO debt, tons of cashflow.

CRE

NLY has a too high valuation compared to its sales potential. It also distributes an unsustainable dividend.

Well positioned in the Mortgage Industry funding only Goverment guaranteed loans. Pays outstanding Dividends 15+% annually.

How can I not have this as one of my red thumbs when this is one of the most shorted stocks on tickerforum?

Potential zero.

I am cautious about including this, as they may do well. BUT - if there is any sort of haircut put on Freddie and Fannie debt, they're done. Absolutely done.

Instantaneous bankrupt done.

The math is simple - they lever up and buy GSE paper using borrowed funds and their (small) amount of capital.

Nice business, provided nothing happens to that paper.

Instantaneous explosion if something does.

Now here's the issue - Freddie and Fannie's book has 10% of its value (~530 billion between them) in liar loans of various sorts - I/Os, stated income, Option ARMs and Subprime. Why? Because THEY played "hedge fund."

This is why the GSEs WILL blow and why they WILL have to be rescued.

Ok, so what happens if The Fed's new model for that rescue is "tried" on them? You know, the one they talked about today at Jackson Hole? Creditors get a haircut?

Hmmm.... let's see, if the companies go into rundown and the bonds fetch 90 on average, and you're geared 8:1, how much do you lose?

"What is 80% of my money, Alex?"

Oh, and you still have operating expenses to pay, which means you are instantly on the edge of insolvency - if not breathing water.

Yep.

Despite its large percentage dividend, NLY is under enormous selling pressure. I think that more than just being in the financial sector, NLY's management has been disingenuous with its shareholders. Rather than making full bore exposure of its actions and instead based on footnotes in its financial disclosures It appears to have lent $600MM (or 2/3s of its recent capital raise) to its 10% owned affiliate CIM to help keep that company afloat. Moreover, for no apparently good reason, it kept its intent secret regarding its recent acquisition of Merganser Capital while greenlighting its investment bankers to keep a lid on the stock for pricing purposes while all the rest of the financial sector (including some of the worst dogs) was undergoing a significant rally. This is mismanagement, not management and it is likely to cause more damage to share prices than would otherwise have been forthcoming.

Shorting Mortgage Investment.

The credit crises and morgage meltdown in the U.S. isn't going anywhere this summer and is likely to only get worse. If Bear Sterns couldn't survive what hope is their for the rest of the financial sector. Yes, the financial sector seems to be jumping back and key reversals seem to be lifting bullish investors, but this ray of hope will end once investors understand how bad this looming recession is going to be. Even the hopeful and growing few in the financial sector are going to suffer from the troubles of the many.

They are just not a good option in this market and they will continue to slide a little in their price

Annaly seems like a great company. Unfortunately FNMA is not one also, and Annaly sinks or swims on the backs of the GSEs. When FNMA craters, the margin calls will take NLY down too.

Anything cursed with mortgage in their mission statement is doomed to underperform in the current market. I suggest waiting until the upswing in the housing sector begins before investing in Annaly.

What a shakeout!

Its time to make some $$$ on the right side for once. Look at their history and the incredible crop in 2005. I predict this will happen within the next 2 - 3 weeks. I have loaded up on big PUTS$$$$$$$

spec bear

I'm going to call this my lack of creativity pick. A mortgage company that has been going way up.... seems like an easy underperform pick in the current macro enviro. Apparently, they have no subprime, but I think its been amply demonstrated that the subprime is NOT contained and that prime is/will be a risk as well. We'll see.

Mortgage company, lets be serious.

mortgage crises far from over

This stock has nothing to do with subprime. It has everything to do with the shape of the yield curve, and the market has already priced into this stock about a 100 bps cut in the Fed Funds rate. That means you need a full 1% cut in rates until NLY gets back to its historic multiple and yield.