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.

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A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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