The following is in response to Gary Halbert’s commentary, What Really Happened in Benghazi on Sept. 11, which appeared on October 31:
Dear Editor,
I am a retired US Foreign Service Officer. I worked closely with a number of security officers at our embassies overseas. You can inform Mr. Halbert that embassy and consulate security decisions are made by State Department security professionals with 10, 15 or 20 years of experience. They are not made by politicians for political reasons. Making the tragedy in Benghazi a political football does a disservice to the thousands of Americans who serve our country overseas.
I watched the House committee “investigating” the Benghazi tragedy chaired by Congressman Issa (R-CA) in horror and sadness. Those members of congress displayed a complete lack of knowledge of how the State Department works and a complete disregard for understanding what happened. It was no more than a show for them, a chance to sound outraged. Mr. Halbert is following in their footsteps.
Evan Press
LPL Financial Advisor
Hornstein Investment Group
Woodland Hills, CA
The following is in response to David Schawel’s article, Will Bonds Be ‘Burnt to a Crisp?’, which appeared on October 16:
Dear Editor,
You owe it to yourselves and to your readers to point out the good in mortgage-backed REITs as part of balanced reporting. Sure, they come with risks. The same is true of virtually every investment. But it is a mistake to pick on AGNC.
Consider its past performance and positioning going forward. AGNC went public in 2008 at $20/share, has paid nearly that much in dividends since then, cut its payout from $1.40 to $1.25/quarter without incident (who is going to complain about a 15% yield in this environment?), and is trading at $32. That was the close before they released impressive 3Q earnings on October 29. Its price will further improve when Sandy passes and trading resumes.
This is not your average mortgage-backed REIT. Longer term, consider the quality of AGNC’s management, the strategic positioning of their portfolio and hedges, and whether better alternatives exist in the fixed-income markets.
I have spent years tracking the mortgage-backed REIT sector, including discussions with other knowledgeable investors, reading 10ks and 10qs, comparisons with other mortgage-backed REITs, reviews of AGNC’s investor presentations, evaluation of alternatives, and an assessment of potential outcomes under various scenarios. This mindset doesn’t just apply to my mortgage-backed REIT holdings; I run diversified income portfolios where positions are vetted on multiple levels.
AGNC holds paper with lower CPRs than other mortgage-backed REITs, which means they collect fat premiums for longer and are better suited to handle negative convexity. In essence, they have call protection. Most mortgage-backed REITs will experience higher prepayments and sadly collect par on paper that cost them $1.06 when interest rates fall and borrowers refinance. AGNC is getting different results because they have focused on pools issued under HARP (not HARP 2.0) where borrowers are unlikely to get a better deal, pools with low loan-to-value where refinancing costs are higher than potential interest savings, and pools with high LTV where underwater borrowers can’t qualify for refinancing.
A serious income investor will be pressed to find better alternative and would benefit from an appropriate allocation to a quality mortgage-backed REIT as part of a diversified strategy.
The fixed income markets will be characterized by demand in excess of supply for the near and intermediate term. Currency wars continue and savers are suffering casualties. They say, “Don’t’ fight the Fed,” and yet the Fed isn’t the only big ZIRP player. The ECB’s proposed OMT program is likewise driving down sovereign yields.
Where is an income investor to go? They should go where they can get an acceptable return with a reasonable level of risk. That includes an AGNC position.
I’m sure some mortgage-backed REITs will stumble under QE infinity, but it is hazardous to paint them all with the same brush. Separate the wheat from the chaff and be rewarded.
Anonymous
