Tumbling Mortgage Rates Light Up mREITs, but for How Long?

The upcoming FOMC meeting could throw a wet blanket on this party.

Jan 28, 2014 at 7:31AM

So far, 2014 hasn't been too bad for the beaten-down mortgage REIT sector. Both 30- and 15-year mortgage rateshave been moving downward each week in January, and mREITs have responded. Annaly Capital Management (NYSE:NLY) is up more than 6% this year so far, as is American Capital Agency Corp. (NASDAQ:AGNC), by nearly 8%. CYS Investments (NYSE:CYS) has gained more than 7% as well.

Unfortunately, change is in the air, and it doesn't bode well for the mREIT sector. A lousy manufacturing sector report out of China and somewhat disappointing existing home sales data may have been responsible for a sweet rally late last week, but investors will likely be looking homeward this week, as taper worries once again come to the fore.

Will they or won't they?
The biggest event this week is the Federal Open Market Committee meeting, which begins Tuesday. The question of whether the Fed will continue with its current tapering of its quantitative easing program will, no doubt, be at the top of the agenda.

Despite the evidence that the falling unemployment rate is at least partly due to the discontinuation of emergency jobless benefits and an historically low labor force participation rate, many analysts think the Fed will vote to ramp up its tapering of QE3. Most feel that another $10 billion reduction in bond purchases is on tap for next month, which will bring the Fed's total monthly acquisitions to $65 billion, down from $85 billion in December.

Granted, $65 billion is still a sizable economic cash injection, but as the past months have shown, it is fear of the unknown that causes the most damage. Much of the losses mREITs incurred last year were due to the trepidation markets felt about exactly when the Fed would initiate the taper, which, of course, did not begin until recently.

President Obama may be adding to the general unease. The Wall Street Journal reports that Obama is planning to reveal an especially assertive agenda in Tuesday's State of the Union address, laying out his plan to push administration causes such as job training and other economic issues over the protests of Congress, if need be. He is also expected to announce a non-binding promise by big employers to not discriminate against the long-term unemployed.

The suffering may have already begun. Annaly, American Capital Agency, and CYS have all sunk into the red -- less than 24 hours before the FOMC meeting begins.

As the economy is dragged, ready or not, into recovery mode, expect to see more volatility in the mREIT sector -- with this week in particular shaping up to be especially edgy.

Looking for some sweet dividends?
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend-paying brethren. The reasons for this are too numerous to list here, but you can rest assured it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Fool contributor Amanda Alix has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information