Bimini Capital Management, Inc. (BMNM)

[alexander77]

Book value will only keep increasing like the two previous quarters. I am confident.

[swampboots]

BMNM needs strong sponsorship, have to buy until that day!

Hope 2014 newbies dust this stock off after balancing outs of oldies.

[alexander77]

ORC is flying. ORC management=BMNM management. All good signs.

[swampboots]

Just as tasty, as weak holders must unload for cash, and tax offsets.

[alexander77]

Positive fundamental analysis for BMNM and ORC:

"My key takeaways are as follows:
•The Fed has now begun tapering in a very slow manner which might last for an extended period and was left open for adjustments along the way... in either direction. This will eventually give the interest rate environment more stability, and while I do believe the 10 year will go to between 3.25%-3.50% in 2014, I think if it goes much higher the Fed will pull back the tapering.
•The Fed clearly announced once again, that the short-term rates will stay exceedingly low (zero interest rate policy) until at least late 2015. That means to me that as long as there is stability in the longer term rates and ZIRP is in place, both Annaly and American can work well between the spread and begin to make greater profits.
•With mortgage rates rising, prepayments and refinances will slow further in my opinion and that will place less stress on the SOP of each of these companies. Another good sign.
•Mortgage applications will continue to increase as the economy heals and that will mean new mortgages at higher rates, with banks also willing to lend since they can now make more profits.
•I feel that the agency backed mREITs will fare better than the non-agency backed REITs, simply because the amount of new business coming and going will be in that arena."



http://seekingalpha.com/article/1911011-will-the-fed-tapering-help-the-mreits-well-it-depends-part-2?source=feed

[alexander77]

More positive news for mreits:

Peter Schiff: Despite taper, Fed bond-buying isn't going anywhere

"
Editor's Note: The following is a guest column by Peter Schiff, CEO and Chief Global Strategist at Euro Pacific Capital.

There can be little doubt that today's Fed announcement is an epic attempt at rhetorical audacity. The message they hope to convey is that they are tightening monetary policy by loosening it. Based on the early market reactions, the trick has seemed to work.

I believe the Fed was forced into this exercise in rabbit pulling because it understands far better than the cheerleaders on Wall Street that the economy, despite the soaring gains in stocks and real estate, remains dependent on continued stimulus. In my opinion the seemingly positive economic signs of the past few months are simply the statistical signature of the QE itself. There is little evidence to suggest that the trends are self-sustainable. But seemingly strong data had made the arguments in favor of continued QE increasingly untenable. As they could no longer stay the course the Fed had to do something. Ultimately they decided to play it both ways.

As far as the headline grabbing taper decision, the Fed's hands were essentially tied by widely held expectations. Perhaps spurred by a desire to initiate the end of QE before he leaves the chairmanship, Ben Bernanke did surprise some by announcing the taper now instead of allowing Janet Yellen to do so in March. The $10 billion reduction has convinced many that the QE program will soon become a thing of the past. At his press conference Bernanke affirmed that he expects QE to be fully wound down by the end of 2014. Look for those forecasts to change rapidly.

Without QE to support the markets, in my opinion, the economy will likely slow significantly and the stock and real estate markets will most likely turn sharply downward. As a result, I expect the Fed will do its utmost to keep the markets convinced that the QE program is in its final chapters. But these "Open Mouth Operations" likely represent the full inventory of the Fed's policy options. I suspect that when the economic data begins to disappoint, the Fed will quickly reverse course and increase the size of its monthly purchases. In fact, today's Fed statement was careful to avoid any commitments to additional tapering in the future. It merely said that further changes in the amount of purchases will be dependent on the data. This means that QE could go in either direction.

But more important than the taper "surprise" was the unusually dovish language in which the Fed decided to wrap its seemingly bitter pill. Today's statement goes significantly farther than any prior communications in assuring that interest policy, its main monetary tool, will remain far more accommodative, for far longer, than anyone previously predicted. In fact, they have now committed themselves to keep rates at zero until "well after" the unemployment rate has fallen below 6.5%. On this score the Fed is not simply moving the goalposts, they are running away with them. With such amorphous language in place the FOMC appears to be hoping that it will never have to face a day of reckoning in which they will be forced to actually raise rates. On that score they are similar to the legislators on Capitol Hill who want to pretend that America will never have to pay down its debt.

Despite the slight decrease in the pace of asset accumulation, I believe that the Fed's balance sheet will continue to swell at a pace that would have shocked Wall Street even a few years ago. As the amount of bonds on their books surpass the $4 trillion threshold, market watchers need to dispel illusions that the Fed has any intention to actually shrink its balance sheet, or even stop its growth. Already fears of such moves have pushed up yields on 10-year Treasuries (^TNX) to multi-year highs. Any actual tightening could push them significantly higher. But we are still seeing much higher leverage than what would be expected in a healthy economy, and as a result, the gains in stocks, bonds and real estate markets are highly susceptible to rate spikes. If yields move much higher I feel that the Fed will have to intervene to bring them back down. In other words, the Fed will find it much harder to exit QE than it was to enter.

As he left the stage from his final press conference, Ben Bernanke should have left a giant bottle of aspirin on the podium for his successor Janet Yellen. She's going to need it."

http://finance.yahoo.com/blogs/breakout/peter-schiff--despite-taper--fed-bond-buying-isn-t-going-anywhere-195423236.html

IN OTHER WORDS: the FED WILL TAKE CARE THAT MREITS ARE A SAFE INVESTMENT WITH HIGH DIVIDEND PROFITS

[swampboots]

Hold the pour until you hear the divvy snore.

[alexander77]

It has less than 11 million shares outstanding. After today's news we can be 100% sure that the book value will be increased by next quarterly financials come out.
This is really great news! I am going to open a bottle of champagne with my wife to celebrate it tonight.

[swampboots]

BMNM just laying there can't understand how it was not sponsored by some value guy.

[alexander77]

Today's FED news means jackpot for BMNM and all mreits.

[alexander77]

ORC keeps climbing: ye$$$$$$$

[alexander77]

ORC up +3% means that management has done well (also monthly divided is up .05dollar/share). Knowing that BMNM management is controlling ORC, this can only mean good news for BMNM as well.

[alexander77]

Dividend of ORC is up .05 dollars/share compared to last month. Remember that bmnm management is in ORC as well and holds shares around 50%. Yes!!

[alexander77]

The company want to reduce their debts first before giving dividends. On the other hand, as you can read in their last quarterly report, they could change plans: there is a possibility to partially reduce NLP's and partially distribute quarterly dividend. IMO if the company successfully can increase book value the next two quarters -which they will IMO- then the company will already start distributing dividends as well.

[swampboots]

Why this stock not believed to perhaps gift the dividends like just a few years ago, and trade consistently at least above book value?

[alexander77]

"After Wednesday's beige book (available here), I am more optimistic this scenario could play out. Over the past three weeks, expectations have grown tapering could start in December or definitely March. This belief has sent yields ever higher, sending Annaly's shares (and presumably book value) ever lower. The beige book changes the calculus. The beige book read "the economy continued to expand at a modest to moderate pace." This phrasing was the same as the October report, and if the Fed was unwilling to taper then. Would it taper now?

However as I dove deeper into the report, I realized the beige book actually downgraded the Fed's assessment of the U.S. economy. The beige book used the word (or a derivation of it) "weak" 29 times, up from 18 times in October. Similarly, "strong" (and its derivations) was used 69 times down from 99 times. The strong to weak spread dropped to 40 from 81. With a more dovish Chairman taking the reins in January, tapering would seem unlikely with the Fed downgrading its assessment of the economy.

Moreover, the Fed said residential construction remained "subdued." Improving the housing market is a critical goal of quantitative easing and the mortgage bond purchases. This language makes me more inclined to believe the Fed does not see the house recovery as self-sustaining just yet. Housing, of course, is an extremely rate-sensitive asset class, and higher mortgage rates could torpedo the recovery. It is even less likely that they taper when they have concerns over housing. With rates already creeping higher, I do not see the Fed tapering purchases and letting rates soar even higher.

This beige book was the Fed's way of telling investors that tapering in December is off the table. Unless there is a noticeable acceleration in economic activity, I would start to doubt that in Janet Yellen's first meeting as chair the Fed tapers its purchases. This would suggest there is now a substantial likelihood of tapering beginning in June of 2014. This revised baseline is excellent news for Annaly and the other mREITs as the Fed's decision to push off tapering will give NLY the time it needs to adjust its portfolio to shore up book value.

I believe the Fed has said rates should rise no further and will not taper for several months. I do not expect the 10 year to consistently trade above 3% over the next four months, which will be great for Annaly. With the upside move in rates over, I do not foresee NLY book value per share dropping below $11.50, which means that shares are a steal here. Then as the Fed begins to taper and rates resume their march higher in the second half of 2014, Annaly will be perfectly positioned to add to its portfolio and increase funds from operation. Below $10, Annaly offers a great margin of safety with a likely increase in the dividend in the back half of 2014. While tax selling could pressure shares through the end of the year, I think Annaly is a buy here thanks to the dovish beige book.

Source: The Beige Book Is Bullish For Annaly"

http://seekingalpha.com/article/1879041-the-beige-book-is-bullish-for-annaly?source=yahoo

[alexander77]

Fed unlikely to redraw markers for rate hike

"SAN FRANCISCO/NEW YORK (Reuters) - Federal Reserve policymakers have cooled to the idea of explicitly raising the bar on future interest rate hikes, a sign the U.S. central bank is angling for a return to more subtle -- and familiar -- ways of explaining how it plans to steer the economy.

The Fed, still struggling to boost the U.S. recovery from the Great Recession, remains intent on assuring investors that easy monetary policy is here for the long haul. Households and businesses, in the Fed's view, need low borrowing costs to get spending and investment back on a self-sustaining path.

That's the reason the central bank took the unprecedented step last December of pledging to keep overnight interest rates near zero until unemployment falls to at least 6.5 percent, unless inflation threatens to rise above 2.5 percent.

By providing economic guideposts, or thresholds, the Fed hoped to convince investors it was serious about keeping overnight rates low. To the degree investors were convinced, the long-term borrowing costs markets set would stay low as well, since they embody expectations for future overnight rates.

But earlier this year, when Fed Chairman Ben Bernanke hinted the central bank could soon reduce its bond purchases - the other tool it has been using to hold down long-term rates - bond yields, which act as a benchmark for many borrowing rates, spiked, sparking a debate over whether the forward guidance on interest rates needed to be strengthened.

Last month, two highly publicized Fed research papers suggested that lowering the unemployment rate threshold could give the economy additional thrust, fueling a surge of speculation that such a plan was in the offing. Bernanke, after all, had earlier suggested it was a possibility.

But Fed officials appear to be leaning against such a move and have already moved back to the tried-and-true approach of letting a few well-chosen phrases guide market expectations.

Minutes from the Fed's last policy meeting show only two officials backed a lower unemployment threshold -- and one of them has since tamped down the idea. Meanwhile, remarks from Bernanke and Fed Vice Chair Janet Yellen suggest they have abandoned the notion.

Yellen, the nominee to succeed Bernanke as Fed chairman when his term expires January 31 and who has spearheaded the evolution of the Fed's post-recession communications strategy, said policy was likely to stay loose "long after" one of the thresholds has been crossed. "It is also important to note that the thresholds are not triggers," she said last month.

Bernanke similarly noted that rates could stay at rock bottom "well after" the 6.5 percent unemployment threshold was crossed. The jobless rate stood at 7.3 percent in October.

QUALITATIVE MESSAGES

Unlike the last time markets began seriously expecting a reduction to the Fed's bond buying, back in September, investors now appear convinced that interest rates won't start to move up for at least another year and a half.

"I think that the message that 6.5 (percent) is a threshold not a trigger and that rates will remain low even after that level is breached has sunk into market participants, so there is little benefit to changing the threshold," said Tim Duy, an economics professor at the University of Oregon.

Indeed, minutes from the Fed's October 29-30 policy-setting meeting suggest that aside from Charles Evans, president of the Chicago Federal Reserve Bank, and Minneapolis Fed chief Narayana Kocherlakota, there is little enthusiasm for reducing the unemployment threshold.

Even Evans, the original architect of threshold-based policy, has pulled back a bit.

Asked earlier last month if he would support Kocherlakota's idea to promise low rates until unemployment falls to 5.5 percent, a level many economists believe is consistent with a healthy economy, Evans said he would.

He added: "I would guess that that's a very aggressive action and perhaps only a more intermediate step would be called for."

James Bullard, the St. Louis Fed president, who has called for adding a pledge to keep rates low as long inflation lingers below a certain floor, has a "few" like-minded thinkers among his colleagues, the Fed minutes show.

But Bullard acknowledged that it was more likely the Fed would "describe how we will behave after we pass the 6.5 percent threshold" rather than tweak the threshold itself.

That kind of qualitative description "is the way they will go for now," said Eaton Vance portfolio manager Eric Stein. "The unemployment threshold and in particular raising the inflation target are probably too controversial to do right now although they could happen in the future."

Not everyone agrees.

Carl Tannenbaum, a former Fed official who is now chief economist at Northern Trust, "absolutely" believes the Fed will lower the 6.5 percent unemployment threshold, given the necessity to keep long-term borrowing costs tamped down.

"It's a way of keeping long-term rates from going too crazy," he said. "They need to stay easy. ... We've got really low inflation in this country."

Policymakers, however, might have a hard time making the case that fresh thresholds will not simply be updated again and again. It "might cause us to lose credibility for the whole endeavor of having thresholds," Bullard said.

They "are not to be abrogated lightly," he told reporters on Nov 21. "If we move them around then markets would start to wonder whether we'll move them again if data suggested we didn't have the right number that was convenient at that point in time."

http://finance.yahoo.com/news/fed-unlikely-redraw-markers-rate-061645391.html

GREAT NEWS FOR BMNM AND ORC

[alexander77]

Time to buy interest rate risk.
This author is a very well reputated analyst.
http://m.seekingalpha.com/currents/post/1438491

[alexander77]

mREITs Would Love an End to the Fed's Free Money

"The Federal Reserve currently pays banks 0.25% per year on funds banks hold in reserve at the Fed. It also pays on excess reserves -- funds that aren't required to be held at the Fed.

This policy counteracts the effects of quantitative easing. When the Fed buys U.S. Treasuries and MBSes from financial institutions, most sellers just park their cash at the Federal Reserve to collect that lucrative 0.25% annual risk-free return.

And as a result, trillions of excess reserves have piled up

Some are saying the Fed should stop paying banks 0.25% not to lend as a way to boost the economy. Janet Yellen is open to the idea. It's a big debate, but if the Fed ends its free money policies, mREITs could be the biggest winners.

How mREITs win
American Capital Agency (NASDAQ: AGNC ) and Annaly Capital Management (NYSE: NLY ) use repurchase agreements to borrow cheap money. As of the last quarter, American Capital Agency paid 0.41% per year to borrow more than $30 billion in less than 30 day capital from banks via repurchase agreements. Annaly Capital paid 0.35% for nearly $24 billion from similar financing agreements.

Very short-term repurchase agreements are at the core of American Capital Agency's and Annaly Capital's funding sources.

But because the Fed pays banks 0.25% on excess reserves, banks have no incentive to make loans -- even short-term repurchase agreements -- at a rate less than 0.25%. A real market rate would undoubtedly be lower than 0.25%. Why else would banks pile so much cash in the Federal Reserve?

Real rates are much lower
If the Fed pulled the rug out from under the 0.25% rate it pays banks to keep reserves at the Fed, Annaly Capital and American Capital Agency would score much, much cheaper financing. The one-month U.S. Treasury bill will become the new, short-term risk-free rate. That rate is currently 0.03% per year.

Thus, it's possible that mREITs would see an immediate 0.22% change in their borrowing costs if the Fed stopped paying so darn much for excess reserves. That, of course, would have an immediate impact on the spreads mREITs earn by borrowing cheap and investing at higher rates, juicing profitability.

Will it happen? For now, it seems unlikely. Banks warned they would start paying negative interest on checking and savings accounts if the Fed ended its handout to the banking system. However, if Yellen decides to lower the rate the Fed pays banks not to lend, mREITs would be some of the biggest beneficiaries."


http://www.fool.com/investing/general/2013/11/26/mreits-would-love-an-end-to-the-feds-free-money.aspx

[alexander77]

2014 won't be the end of the world, but the year you got to get in stocks. The bottom has been reached, now it is only up. IMO

[Roy London]

don't believe for a second unemployement is going to get better..they are putting out BS to keep peeps thinking things are getting better..there is a crash coming in 2014 maybe around the second quarter. China is in bad shape right now and in a huge housing bubble..they could go bust...they put the dept ceiling off because of the the holidays...Banks have put restrictions on Business money transfers...chase bank got hit with 30 billion in fines..a collasp of global currency is it the works...The calls on the vix are huge..check it out!!

[alexander77]

That's going to happen very gradually and will start in the coming months. But because the FED does not even have a plan/schedule for it, it won't happen before the middel of January.
In the meantime bps for 10 years is rising, unemployment keeps dropping and housing prices are rising: that's very bullish.

In a year and a half at Max, we will be seeing quarterly dividend like .03$/share again at least.

[Roy London]

when interest rates rise it's going to get ugly in America..they will have to raise them soon....still watching

[alexander77]

Another bullish article, in the know that the 10 year treasury yield increased 4bpps to 2,75%:

"REITs and the (Potential) Impact of Rising Rates

Posted 11.18.13 From Brian Haskin | 0 Comments


REITs and the (Potential) Impact of Rising RatesWe all know that bond prices will fall when interest rates begin to rise, but what we don’t know is what will happen to other income oriented assets such as REITs. History provides us with some insights, but there really is not a clear picture that fits neatly with today’s scenario. What we do know is that rising interest rates can be a good sign, and are typically a result of one of the following:
Strengthening economy
Increasing levels of inflation
Some combination of both of the above

It is generally agreed that increasing levels of inflation would drive real asset prices higher, including real estate prices, which would benefit REITs. A strengthening economy means that property rental prices and occupancy rates should go higher, also a positive for REITs. A combination of the two, with only modest increases in inflation, is generally very health as property prices increase, rental prices increase and occupancy rates increase.

Real Estate Professionals Point to Past Data

According to Cohen & Steers, property valuations have increased in the past four cycles of monetary tightening and periods of rising Treasury yields (see page 5 of their report “What History Tells Us About REITs, Inflation and Rising Rates“). However, as noted in the InvestmentNews article linked below (see Read Full Story link below), just the mention of a potential pull back in the Quantitative Easing program by the Federal Reserve sent REIT prices tumbling. “Tapering concerns helped push REITs down 13.5% from May 22 to June 26,” noted the article’s author, Janet Levaux.

This then brings up one question that looms large, and is really difficult to measure: How much of the current REIT valuations are driven by the incredible hunt for yield that has occurred over the past several years? While all the historical statistics can be examined, there is really very little data that would represent a time period such as the one we are in today: artificially low (near zero) interest rates, slow growth economy, massive government stimulus on a global basis, significant government debts (globally), negative real returns on cash, and very low levels of inflation. Hence, one needs to take a step back from the data and take pieces of what has occurred in the past, then piece those together to develop a plausible scenario, or series of scenarios for what will happen to REITs if and when interest rates rise.

No Clear Answer

Wesley Gray of Empiritrage concludes in his blog post titled “Do REITs blow up if interest rates spike?” on the blog Turnkey Analyst that it just isn’t clear what will happen. The evidence just isn’t clear. He goes into far greater detail in his full report, and shows how the correlation of REITs to the 10-year bond have changed over time, and also analyzes the impact of changes in both nominal rates and real rates on equity REITs and mortgage REITs.

We are clearly in unchartered territory when it comes to looking at today’s economy, and thus have to be careful about drawing conclusions from past data. It is true that an improving economy should be good for real estate, and will likely lead to higher interest rates. The balancing of these two is tricky however, especially when current real estate valuations have been pushed higher not because the economy has been improving dramatically, but because of inexpensive financing and the dire need for income on part of so many investors."

http://dailyalts.com/news/reits-impact-rising-rates/


Posted by Brian Haskin

Brian Haskin is the Founder, Publisher and Editor of DailyAlts and also serves as the CEO of Alternative Strategy Partners. Brian has more than twenty years of experience in the asset management industry, having worked globally for leading firms such as Barclays Global Investors (now BlackRock), Deutsche Bank, Wilshire Associates and Analytic Investors. Brian brings his passion and acumen for alternative investments, product development and business strategy to the implementation and ongoing development of the DailyAlts.com platform and its content.

--> IMO real estate valuations will only increase further because nobody is going to sell his house for a lower price than he currently bought, especially knowing that unemployment numbers keep dropping.
$$$$$$$

[alexander77]

Why subdued employment costs are good for mortgage REITs

"The Employment Cost Index is a quarterly index that measures the cost of labor to business

The Employment Cost Index (or ECI) is prepared quarterly by the Bureau of Labor Statistics. It’s the counterpart to the Consumer Price Index (or CPI). One way of thinking about ECI is that it’s the wage side of the wage-price spiral, while CPI is the price side. The Employment Cost Index is used as an input into government salaries and is often cited by the Federal Reserve when setting policy.

The ECI breaks out the cost of private- and public-sector workers, including changes in compensation and benefits. The results are further broken down into occupational groups. The biggest use of the ECI is to identify wage-push inflation. Wages growth has been generally subdued since the Great Recession began and benefits, specifically health insurance, has increased.

Highlights of the report

Employment costs increased 0.4% in the quarter ending September 30, flat from the 0.4% increase in the fourth quarter of 2012. Wages and salaries (which account for 70% of the index) increased 0.3%, while benefit costs increased 0.7%, an increase from the 0.4% jump in the third quarter of 2012.

Over the past 12 months, compensation costs for civilian workers increased 1.9%. Wages increased while benefit costs increased 1.6%. For private industry workers, compensation increased 1.7%, while benefits increased 2.2%. For government workers, compensation costs increased 1.7%, while benefit costs increased 2.9%.

In terms of industries, wages and salaries in finance were up 0.5%, as was construction. The laggards were in retail and hospitality, which were up 0.1%. Geographically, the South and West increased 2%, while the Midwest and Northeast increased 1.7%.

It will be interesting to see the effects of the Affordable Care Act on employment costs. We’ll find that out in the March 2014 report.

Impact on mortgage REITs

Historically, the Fed closely watched the Employment Cost Index, and surprises in the index could move the bond market. These days, the Fed isn’t all that concerned about inflation raging out of control. Indeed, it would like to see it higher. There’s nothing in this report to indicate that employee compensation costs are going to trigger a wage-price spiral. Given the slack in the labor market and the high unemployment rate, it’s almost impossible for wages to rise meaningfully nationally.

The takeaway for Mortgage REITs like Annaly (NLY), American Capital (AGNC), Capstead Mortgage (CMO), Chimera (CIM), and Two Harbors (TWO) is that interest rates will remain low and the Fed will probably continue asset purchases (quantitative easing). This means that mortgage yields will be low, leverage will be required to generate a return on equity, borrowing costs will remain low, and prepayment risk will remain a threat. Prepayment risk stems from the fact that a borrower can refinance their mortgage without penalty. So if interest rates drop, the mortgage investor will find their highest-yielding mortgages paid off early and they will be forced to re-invest the money in lower yielding mortgages.

More From Market Realist"

http://finance.yahoo.com/news/why-subdued-employment-costs-good-174558355.html

[alexander77]

Why subdued employment costs are good for mortgage REITs

"The Employment Cost Index is a quarterly index that measures the cost of labor to business

The Employment Cost Index (or ECI) is prepared quarterly by the Bureau of Labor Statistics. It’s the counterpart to the Consumer Price Index (or CPI). One way of thinking about ECI is that it’s the wage side of the wage-price spiral, while CPI is the price side. The Employment Cost Index is used as an input into government salaries and is often cited by the Federal Reserve when setting policy.

The ECI breaks out the cost of private- and public-sector workers, including changes in compensation and benefits. The results are further broken down into occupational groups. The biggest use of the ECI is to identify wage-push inflation. Wages growth has been generally subdued since the Great Recession began and benefits, specifically health insurance, has increased.

Highlights of the report

Employment costs increased 0.4% in the quarter ending September 30, flat from the 0.4% increase in the fourth quarter of 2012. Wages and salaries (which account for 70% of the index) increased 0.3%, while benefit costs increased 0.7%, an increase from the 0.4% jump in the third quarter of 2012.

Over the past 12 months, compensation costs for civilian workers increased 1.9%. Wages increased while benefit costs increased 1.6%. For private industry workers, compensation increased 1.7%, while benefits increased 2.2%. For government workers, compensation costs increased 1.7%, while benefit costs increased 2.9%.

In terms of industries, wages and salaries in finance were up 0.5%, as was construction. The laggards were in retail and hospitality, which were up 0.1%. Geographically, the South and West increased 2%, while the Midwest and Northeast increased 1.7%.

It will be interesting to see the effects of the Affordable Care Act on employment costs. We’ll find that out in the March 2014 report.

Impact on mortgage REITs

Historically, the Fed closely watched the Employment Cost Index, and surprises in the index could move the bond market. These days, the Fed isn’t all that concerned about inflation raging out of control. Indeed, it would like to see it higher. There’s nothing in this report to indicate that employee compensation costs are going to trigger a wage-price spiral. Given the slack in the labor market and the high unemployment rate, it’s almost impossible for wages to rise meaningfully nationally.

The takeaway for Mortgage REITs like Annaly (NLY), American Capital (AGNC), Capstead Mortgage (CMO), Chimera (CIM), and Two Harbors (TWO) is that interest rates will remain low and the Fed will probably continue asset purchases (quantitative easing). This means that mortgage yields will be low, leverage will be required to generate a return on equity, borrowing costs will remain low, and prepayment risk will remain a threat. Prepayment risk stems from the fact that a borrower can refinance their mortgage without penalty. So if interest rates drop, the mortgage investor will find their highest-yielding mortgages paid off early and they will be forced to re-invest the money in lower yielding mortgages.

More From Market Realist"

http://finance.yahoo.com/news/why-subdued-employment-costs-good-174558355.html

[alexander77]

Why subdued employment costs are good for mortgage REITs

"The Employment Cost Index is a quarterly index that measures the cost of labor to business

The Employment Cost Index (or ECI) is prepared quarterly by the Bureau of Labor Statistics. It’s the counterpart to the Consumer Price Index (or CPI). One way of thinking about ECI is that it’s the wage side of the wage-price spiral, while CPI is the price side. The Employment Cost Index is used as an input into government salaries and is often cited by the Federal Reserve when setting policy.

The ECI breaks out the cost of private- and public-sector workers, including changes in compensation and benefits. The results are further broken down into occupational groups. The biggest use of the ECI is to identify wage-push inflation. Wages growth has been generally subdued since the Great Recession began and benefits, specifically health insurance, has increased.

Highlights of the report

Employment costs increased 0.4% in the quarter ending September 30, flat from the 0.4% increase in the fourth quarter of 2012. Wages and salaries (which account for 70% of the index) increased 0.3%, while benefit costs increased 0.7%, an increase from the 0.4% jump in the third quarter of 2012.

Over the past 12 months, compensation costs for civilian workers increased 1.9%. Wages increased while benefit costs increased 1.6%. For private industry workers, compensation increased 1.7%, while benefits increased 2.2%. For government workers, compensation costs increased 1.7%, while benefit costs increased 2.9%.

In terms of industries, wages and salaries in finance were up 0.5%, as was construction. The laggards were in retail and hospitality, which were up 0.1%. Geographically, the South and West increased 2%, while the Midwest and Northeast increased 1.7%.

It will be interesting to see the effects of the Affordable Care Act on employment costs. We’ll find that out in the March 2014 report.

Impact on mortgage REITs

Historically, the Fed closely watched the Employment Cost Index, and surprises in the index could move the bond market. These days, the Fed isn’t all that concerned about inflation raging out of control. Indeed, it would like to see it higher. There’s nothing in this report to indicate that employee compensation costs are going to trigger a wage-price spiral. Given the slack in the labor market and the high unemployment rate, it’s almost impossible for wages to rise meaningfully nationally.

The takeaway for Mortgage REITs like Annaly (NLY), American Capital (AGNC), Capstead Mortgage (CMO), Chimera (CIM), and Two Harbors (TWO) is that interest rates will remain low and the Fed will probably continue asset purchases (quantitative easing). This means that mortgage yields will be low, leverage will be required to generate a return on equity, borrowing costs will remain low, and prepayment risk will remain a threat. Prepayment risk stems from the fact that a borrower can refinance their mortgage without penalty. So if interest rates drop, the mortgage investor will find their highest-yielding mortgages paid off early and they will be forced to re-invest the money in lower yielding mortgages.

More From Market Realist"

http://finance.yahoo.com/news/why-subdued-employment-costs-good-174558355.html

[alexander77]

Goldman Sachs is very bullish for the US economy in 2014 and beyond! Another great sign for mreits like BMNM and ORC.
http://www.businessinsider.com/goldman-sachs-2014-sp-500-outlook-2013-11

[alexander77]

"Forget that strong October jobs report. It wasn't strong enough to convince Ben Bernanke to slow the Federal Reserve's stimulus program.


The latest data show the economy added an average of 200,000 jobs each of the last three months -- marking a sudden breakout for the labor market after months of weaker reports.

Immediately after the October report was released, Fed watchers started speculating that it may just be the good news the Fed has been waiting for: Would the Fed start winding down its stimulus program at its next meeting in December?

Now, it doesn't sound like it.

In a speech Tuesday evening, Bernanke characterized that data as "somewhat disappointing."

The Fed stands by its stimulus program, he said, repeating comments that Vice Chair Janet Yellen delivered to the Senate Banking Committee last week.

"The FOMC remains committed to maintaining highly accommodative policies for as long as they are needed," Bernanke said in prepared remarks.

The Fed is currently engaged in its third bond-buying spree in the last five years, purchasing $85 billion in Treasuries and mortgage-backed securities each month. It's a controversial policy with unknown risks, but the aim is to stimulate the economy by keeping long-term interest rates low.

The central bank is looking for substantial improvement in the job market before it starts gradually reducing that bond-buying program.

Bernanke repeated Tuesday that the bond purchases are "not on a preset course, and the committee's decisions about their pace will remain contingent on the committee's economic outlook."

Related: Smooth sailing for Yellen in front of Senate

Yellen is currently under consideration to succeed Bernanke as Fed Chair, when his second term ends in January. Like Bernanke, she has recently spoken out in favor of continued stimulus.

"I consider it imperative that we do what we can to promote a very strong recovery," she told lawmakers last week.

View this article on CNNMoney"

http://finance.yahoo.com/news/bernanke-recent-jobs-reports-disappointing-001000295.html

[alexander77]

Article why people should start to invest in mreits:
Investing in mREITs in a time of rising rates

October 28, 2013 by Darren McCammon

"The second quarter of 2013 was tumultuous for mortgage real estate investment trust (mREIT) securities. The Federal Reserve’s taper announcement created a storm which caught most unsuspecting and under-hedged.


The market sold mREITs off as rates rose, and in many cases correctly anticipated significant book value declines. However, a few (Arlington Asset (AI), Ellington Financial (EFC), New Residential Investment (NRZ), and Capstead Mortgage (CMO)) had already battened down their hatches and thus suffered only minor damage.

Others were late to prepare for the danger, but eventually followed suit, reducing their leverage and increased their hedges. The storm was survived and most in the mREIT industry are now more cautious and better prepared to weather future challenges. In contrast, third quarter earnings are likely to show clear sailing for the mREIT’s with a favorable wind at their backs.

Q3 has been an interesting quarter for the world, but should have been relatively benign for mREITs. Mortgage Backed Security (MBS) values were stable during the quarter, drifting down slightly in anticipation of a September taper, then back up at the end of the quarter when that taper didn’t happen.

While most mREIT’s have significantly lowered risk by reducing leverage and increasing hedging, it turns out, at least in Q3, it wasn’t needed. Reinforcing this benign outlook for Q3, EFC and CYS Investments (CYS) reported Q3 book values which were essentially flat with Q2.

Unfortunately, ARR and AGNC also reported. While they only had small book value losses, the rest of their quarterly announcements were disappointing, shaking the sector yet again. Basically, their timing was bad, in an effort to further reduce leverage and risk, they sold assets during some of the lowest prices of the quarter.

Going forward, I expect the rest of the mREIT’s to have relatively benign earnings reports, including flat book values, resulting in a gradual calming influence on the sector. Annaly mortgages (NLY) outlook, likely to come out next week, will be key. A solid outlook from NLY, and the reduced risk profiles of the mREITs, should help to settle fears of continued MBS and book value losses throughout the sector.

We may also see a small and gradual increase in interest rate spreads. mREITs make their money by borrowing at short term repo rates and using those funds to buy MBS paying longer term, predominantely higher, mortgage rates.

This is commonly referred to as the spread. However, increased rates were not immediately apparent in Q2 spreads despite a roughly 1% increase in mortgage rates. What may not have been taken into consideration is the suddenness of the change.

Rates affect book value immediately, but there can be a delay before the portfolio of assets an mREIT holds rolls over into higher spreads. Also many mREITs increased hedging at the end of the second quarter, the cost of which further reduced the spread.

For Q3 earnings announcements, we could see some of these increased spreads start to come through. This should have a further calming influence on mREIT investors and reinforce that higher interest rates, aren’t all bad news. Indeed an environment of gradually increasing mortgage rates, largely hedged book values, and continuing low short term repo rates, can be beneficial.

Looking into the future, Janet Yellen has been nominated as the new Fed chief. While anything can happen, it is widely believed she will be confirmed. Furthermore, Mrs. Yellen is a known dove. Indeed she has been a noted proponent of keeping interest rates low until unemployment improves significantly.

In my opinion, it is unlikely her first act running the Fed would be to raise interest rates, particularly with another possible debt crisis and partial government shutdown looming. It is therefore unlikely, I believe, that we will see the beginning of taper until at least March, maybe longer if the economy doesn’t keep improving.

I have no way of knowing this for sure, but assuming a slow taper of $10 billion in reduced bond purchases a month starting in March, you are probably looking out until the beginning of 2015 before the Fed is done. That means the Fed continues to add to its bond holdings through all of 2014 and most likely doesn’t start actually increasing the Fed funds rate until 2015.

That is a good environment for mREITs, Business Development Companies (BDC) and any other company which benefits from borrowing short and lending long. This is a case where poor economic growth and a dysfunctional government is a good thing for mREITs.

I belive mREITs are likely to be looking at a calming and profitable Q3 with an improving outlook over the next 3-6 months and hedged book values. In this situation investors should gradually realize that existing discounts to those book values are largely unwarranted.

The discounts should shrink over time producing capital gains. Fear has created an opportunity; mREITs represent not only high dividends but their current discounts provide a margin of error. As such they should be over-weighted in income focused portfolios.

DISCLAIMER: The investments discussed are held in client accounts as of September 30, 2013. These investments may or may not be currently held in client accounts. REITs may be affected by economic conditions including credit and interest rate risks, as well as risks associated with small- and mid-cap investments. Past performance is no guarantee of future results."

http://investing.covestor.com/2013/10/invest-mreits

[alexander77]

A lot of buying today.ORC ended green today as well.

[Roy London]

SS IS VERY SMALL

[alexander77]

Very difficult to get shares at these prices for a company which is reporting net profit and a book value whoch has increased from $.10 to $.29/share

[Roy London]

BMNM back on watch. earnings out not too shabby!!!! Chart not too shabby..bollies look like the want to open up!

[genlou]

"Net income of $0.2 million attributed to Bimini Capital, or $0.02 per common share, inclusive of $2.8 million of other income
Book value per share of $0.12".

[genlou]

"Orchid Island Capital (ORC) Declares $0.135 Monthly Dividend; 11.6% Yield."

BMNM receives a nice dividend from ORC.Hopefully,BMNM will be profitable this quarter.Hope to purchase shares at .19.

[Roy London]

she's comin

[DENN]

NEWS; ORC PAYS FIRST DIVIDEND .135 cents for March. http://finance.yahoo.com/news/orchid-island-capital-inc-announces-215808679.html

[DENN]

NEWS... ORC has a portfolio of $357 million now.. bmnm should get some big dividens from orc with the 980,000 shares bmnm owns... here link on orc porfolio... http://finance.yahoo.com/news/orchid-island-capital-inc-announces-222344760.html

[rlwinvestor]

"Management Fee. The management fee will be payable monthly in arrears in an amount equal to 1/12th of (a) 1.50% of the first $250,000,000 of Orchid’s equity (as defined below), (b) 1.25% of Orchid’s equity that is greater than $250,000,000 and less than or equal to $500,000,000, and (c) 1.00% of Orchid’s equity that is greater than $500,000,000.

“Equity” equals Orchid’s month-end stockholders’ equity, adjusted to exclude the effect of any unrealized gains or losses included in either retained earnings or other comprehensive income (loss), as computed in accordance with GAAP."
-----------------

Seems they get 12% of ORC's equity per year in fees. ORC had about $15M in equity in Sept 2012, but they just added 35M in cash from the IPO. Not sure exactly what the new equity number is now, but they could be looking at $2-$5M in annual fees from ORC.

[DENN]

from todays filing [[[[Upon completion of the Offering, Orchid entered into a Management Agreement (the “Management Agreement”) with Bimini Advisors, LLC (the “Manager”). The Manager is a wholly-owned subsidiary of the Company, and it is registered as an investment advisor with the Securities and Exchange Commission. Pursuant to the Management Agreement, the Manager will receive fees for managing the day-to-day operations of Orchid, including the selection, purchase and sale of assets in Orchid’s investment portfolio.]]]]

[DENN]

this news just released today. bmnm will get fees also for managing orc.. you add up the dividends from the stock they own of orc 981,655 and the fees plus what they will make on the portfolio of bmnm and there should be some good dividends down the road for bmnm shareholders.. http://ih.advfn.com/p.php?pid=nmona&article=56397264

[rlwinvestor]

Looks like consolidation for awhile before next pop.

[J.T. The DD King]

Wow! Someone just spent almost $50,000 on a single buy! Whats that tell you?

[Roy London]

.59 next

[Roy London]

check 1 2 3

[J.T. The DD King]

Aw,.. You are so welcome. Fwiw this is a real company with real revenues, now tied on to a NYSE ticker. In addition REIT's are on the way back, now that Real Estate is finally coming back. IMMB has gone up because of promotions, this has gone up because the shares are worth a hellava lot more than what they are trading for since the filing was made yesterday.

[shanak10]

Thanks J.T. Actually I am only getting to know you and it is a total pleasure. Thanks for your words.

[Flex]

Spot ON~ BMNM well worth the shot and indicators concur with you here J.T.

Flex

[J.T. The DD King]

Hey hey! Glad to see Ya'll saw me on this! I live for sleepers like IMMB and BMNM. I haven't read through the filing yet but what I read at first glance excites me. I'll roll my sleeves up and dig in this weekend but right now seeing the MMs that are working this security tells me there is only one direction for BMNM. Up!

Shanak, you should know my teachings by now Never marry a ticker down here and if you've got good profit, take it! I think you were one of the lucky that got in IMMB at .06ish? If so I would slowly take profit at the Ask. $1 is possible but dropping is also possible. I understand IMMB is spending a ton on promotion but there are inherent dangers. As a rule, I believe this game is designed as a default for traders to lose if they wait out a grand slam when they have a triple or home run on the table. Take profits often!