This ang moh REIT, 10% dividend yield! Beats all Singapore REITS hands down!

[Shiny Things]

wa why 100% sia?

You're an FA expert, aren't you?

Go figure it out. There's a very good reason why WHX is trading with a >100% yield. Show us your fundamental analysis skills; tell us why it's trading with that stratospheric yield, and give us a "buy" or a "sell" on it.

 

[platopus]

Lol, I go and see WHX, from $20 in 2011 drop to $1,72. Die die also cannot touch, MKT cap of 20+ million only. Later they pay you in shares then share price drop again hahahaa

 

[wahkao3]

You're an FA expert, aren't you?

Go figure it out. There's a very good reason why WHX is trading with a >100% yield. Show us your fundamental analysis skills; tell us why it's trading with that stratospheric yield, and give us a "buy" or a "sell" on it.

late liao
tmr i do ba

 

[platopus]

m.seekingalpha.com/article/2784835-why-whiting-usa-trust-is-110-percent-yield-is-too-good-to-be-true

investorplace.com/2014/06/whiting-usa-trust-whx-dividend-yield/#.VK1dF72wrqA

Expect to close shop le, return u ur share price nia

 

[Shiny Things]

Is mortgage backed securities function like CDO?

yes a fund buying CDOs. But I think its less complex than the CDOs before 2007-08.

For me, I like to think of it as buying a fund that holds a basket of CDOs.

What the f*ck? No, wahkao, that's not even remotely right.

I'm gonna step in here before this goes even further off into wrongness.

Mortgage REITs are a uniquely American thing. To understand how they work, though, you have to start right down the bottom of the stack with the American mortgage market.

American mortgages are a bit odd. The vast majority of them are 30-year fixed-rate mortgages, and if you're thinking "wow that's an awesome deal", you're right. The mortgages are issued by banks, insured by Fannie Mae or Freddie Mac, and then packaged up into "mortgage-backed securities", which is just a fancy way of saying "bonds backed by people's mortgages". This mortgage bond market is huge in America - the MBSes offer a somewhat higher yield than regular US government bonds, with minimal credit risk (because they're implicitly backed by the US government through Fannie and Freddie).

(The tradeoff for the higher yield is that you've got a thing called "prepayment risk", which basically means "if interest rates go down, people will refinance their homes, so your mortgage bond matures early and you have to reinvest the cash at the lower prevailing interest rates; if interest rates go up, people won't refinance, so you're stuck in a bond that yields a lower-than-market interest rate". So if you buy mortgage bonds, you're effectively short interest rate volatility, and that option can be priced and hedged like any other option. Prepayment risk is a fascinating quirk of the mortgage-bond market, and I'd love to put in a discussion of it here, but this margin is too narrow to contain it. (Incidentally does anyone else think Fermat was just epically trolling us with that note?))

So that's MBSes. Where mortgage REITs (henceforth mREITs) come into this is that they're a uniquely American spin on the regular REIT structure.

The American rules on REITs are similar to Singapore: you get a tax break as long as you pay out all your net income as dividends (or something like that). But American REITs can hold MBSes as well as actual real estate, and that's what mREITs do.

They leverage up (borrowing money from their banks at low short-term rates) and buy MBSes using anywhere from 2x to about 8x (!!!) leverage. So instead of just getting the 3-ish percent you'd get on a current-coupon mortgage bond, you get that multiplied by 2, or 3, or a lot more than 3. You get the real-estate exposure of a leveraged REIT, without all of that messy business of owning actual buildings.

The tradeoffs, though:
1) Volatility. Owning a many-times-leveraged bond portfolio is a recipe for volatility in your share price.
2) Interest rate sensitivity. mREITs lose money when short-term interest rates go up (because they have to pay higher rates for their leverage funding), when long-term interest rates go down (because their portfolios get prepaid), and when long-term interest rates go up (because they're stuck with mortgages that are at below-market interest rates). Interest rate volatility of any form is bad for mREITs.

There are some things that mREITs are not:
1) They are not ABS-CDOs. Mortgage backed securities are not CDOs, and neither are mREITs. (Though that said, there's some vague similarities if the REIT issues debt as well as equity.)
2) mREITs almost never own CDOs. This was a thing back in '06 (a lot of CDOs were issued that were backed by the preferred stock of mREITs, which is just a leverage nightmare), but it's really not a thing any more.

 

[alexchia01]

yes a fund buying CDOs. But I think its less complex than the CDOs before 2007-08.

For me, I like to think of it as buying a fund that holds a basket of CDOs.

and effectively, a fund that holds bonds that are issued by the typical american home owner.

If they default, we can go after their houses

This guy has no idea what he's talking about. What a load of crap.

 

[felixleong]

What if I told you...I'm a clone, but not who you think I am?

total post 6

obviously...

 

[felixleong]

Do you it is a joke but questioning on the team of volunteers moderators intergrity to me it is not a joking matter.

bro relax ~

 

[SpeedingBullet]

So far i think only certain CEFs package CDOs, CLOs and CMOs in their portfolios. One of my PIMCO funds is holding quite a few CMOs.

Hey Shiny, how about this REIT by Blackstone called the Blackstone Mortgage Trust (BXMT)? They don't actually own properties but the loans itself, are those CLOs they are holding or just normal loans like an mREIT?

 

[Geeezz]

shiny so is it safe to say that if i were to guess that int rate would go up this kind of reits would make a soild investment?

 

[linxiaobei]

What the f*ck? No, wahkao, that's not even remotely right.

I'm gonna step in here before this goes even further off into wrongness.

Mortgage REITs are a uniquely American thing. To understand how they work, though, you have to start right down the bottom of the stack with the American mortgage market.

American mortgages are a bit odd. The vast majority of them are 30-year fixed-rate mortgages, and if you're thinking "wow that's an awesome deal", you're right. The mortgages are issued by banks, insured by Fannie Mae or Freddie Mac, and then packaged up into "mortgage-backed securities", which is just a fancy way of saying "bonds backed by people's mortgages". This mortgage bond market is huge in America - the MBSes offer a somewhat higher yield than regular US government bonds, with minimal credit risk (because they're implicitly backed by the US government through Fannie and Freddie).

(The tradeoff for the higher yield is that you've got a thing called "prepayment risk", which basically means "if interest rates go down, people will refinance their homes, so your mortgage bond matures early and you have to reinvest the cash at the lower prevailing interest rates; if interest rates go up, people won't refinance, so you're stuck in a bond that yields a lower-than-market interest rate". So if you buy mortgage bonds, you're effectively short interest rate volatility, and that option can be priced and hedged like any other option. Prepayment risk is a fascinating quirk of the mortgage-bond market, and I'd love to put in a discussion of it here, but this margin is too narrow to contain it. (Incidentally does anyone else think Fermat was just epically trolling us with that note?))

So that's MBSes. Where mortgage REITs (henceforth mREITs) come into this is that they're a uniquely American spin on the regular REIT structure.

The American rules on REITs are similar to Singapore: you get a tax break as long as you pay out all your net income as dividends (or something like that). But American REITs can hold MBSes as well as actual real estate, and that's what mREITs do.

They leverage up (borrowing money from their banks at low short-term rates) and buy MBSes using anywhere from 2x to about 8x (!!!) leverage. So instead of just getting the 3-ish percent you'd get on a current-coupon mortgage bond, you get that multiplied by 2, or 3, or a lot more than 3. You get the real-estate exposure of a leveraged REIT, without all of that messy business of owning actual buildings.

The tradeoffs, though:
1) Volatility. Owning a many-times-leveraged bond portfolio is a recipe for volatility in your share price.
2) Interest rate sensitivity. mREITs lose money when short-term interest rates go up (because they have to pay higher rates for their leverage funding), when long-term interest rates go down (because their portfolios get prepaid), and when long-term interest rates go up (because they're stuck with mortgages that are at below-market interest rates). Interest rate volatility of any form is bad for mREITs.

There are some things that mREITs are not:
1) They are not ABS-CDOs. Mortgage backed securities are not CDOs, and neither are mREITs. (Though that said, there's some vague similarities if the REIT issues debt as well as equity.)
2) mREITs almost never own CDOs. This was a thing back in '06 (a lot of CDOs were issued that were backed by the preferred stock of mREITs, which is just a leverage nightmare), but it's really not a thing any more.

Thanks shiny! They sounds so similar yet functionally so different! So this MBS is usually for someone who wants predictability for the yield of their investment? It'll be either that yield that they initially signed up for or lower yield? In this world that there's always rising cost, seems that its a very risky investment.

 

[Shion]

Thought someone mentioned before dont be too serious with dividends...

 

[Shiny Things]

shiny so is it safe to say that if i were to guess that int rate would go up this kind of reits would make a soild investment?

No. If rates go up, leveraged mREITs are a nightmare.

If interest rates are headed higher, then mREITs get squeezed from three sides: they pay more interest on their funding costs (because they borrow short-term to buy long-term instruments); they take mark-to-market losses on their mortgage bonds (because interest rates have gone up); and they actually lose money faster as rates move (because prepayments on their mortgage bonds slow down, which makes them longer duration, which means they lose even more money as rates go up: in options lingo, they're short truckloads of interest rate gamma).

So far i think only certain CEFs package CDOs, CLOs and CMOs in their portfolios. One of my PIMCO funds is holding quite a few CMOs.

Yeah, I misspoke a little, in that I think some mREITS can hold CMOs (though most don't). Collateralised mortgage obligations are not like CDOs in that they're not ways of slicing up default risk; they're ways of slicing up the prepayment risk.

Hey Shiny, how about this REIT by Blackstone called the Blackstone Mortgage Trust (BXMT)? They don't actually own properties but the loans itself, are those CLOs they are holding or just normal loans like an mREIT?

Good question, though remember that mREITs own the securitised loans, they don't own the loans directly.

It looks like the BXMT loan origination business holds the loans directly (c.f. page 59 of their 2013 annual report), and their CT Legacy business is a 52% interest in the old CT Partners real estate private equity business (which I think does own the properties directly, though they're leveraged to the eyeballs so you only own a thin slice of equity). The CT Legacy business does have a very small slice of the CT CDO structure that they issued back in 2004 in the boom times, but that's miniscule (<$10mio compared to their market cap of about $1.6 billion).

 

[Shiny Things]

Thanks shiny! They sounds so similar yet functionally so different! So this MBS is usually for someone who wants predictability for the yield of their investment?

Ah, nope - mortgage-backed securities are for people who want a higher yield than you can get from US treasuries, in return for taking on the prepayment risk. So you have a predictable, higher yield; but you have an unpredictable tenor of the bond.

(They're sort of like the interest-rate equivalent of dual-currency deposits. In both cases, you're selling an option to enhance your yield; in the case of DCDs that option is a real physical thing, in the case of mortgage bonds it's an embedded prepayment option.)

 

[sandwicher]

Well guys, just do the right thing. I've reported both the clone and the troll by pressing the "report" button.

Just do your part and the trolls will be gone (temporarily).

 

[felixleong]

What if I told you...I'm a clone, but not who you think I am?

clone reported, please help report too

 

[SpeedingBullet]

Good question, though remember that mREITs own the securitised loans, they don't own the loans directly.

It looks like the BXMT loan origination business holds the loans directly (c.f. page 59 of their 2013 annual report), and their CT Legacy business is a 52% interest in the old CT Partners real estate private equity business (which I think does own the properties directly, though they're leveraged to the eyeballs so you only own a thin slice of equity). The CT Legacy business does have a very small slice of the CT CDO structure that they issued back in 2004 in the boom times, but that's miniscule (<$10mio compared to their market cap of about $1.6 billion).

I see, that's where it all gets muddy, and then there're those that are called non-agency mREITs or something? An even "blacker box" type of REIT .

Yeah I was a little confused over BXMT's structure, because it's the first time I see them holding the actual loans (altho when I see "origination" I'm guessing they'd sorta keep their own stuff).

Their CT Legacy biz isn't doing too bad actually, but I don't know how it will be affected by a rise in i/r.

Best bet, buy BX itself (which is also a highly confusing business)

 

[Seed92]

high return high risk , though there are some although rarely , Low Risk High Return

 

[felixleong]

This message is hidden because wahkao3 is on your ignore list.

sibei song

 

[wahkao3]

What the f*ck? No, wahkao, that's not even remotely right.

I'm gonna step in here before this goes even further off into wrongness.

Mortgage REITs are a uniquely American thing. To understand how they work, though, you have to start right down the bottom of the stack with the American mortgage market.

American mortgages are a bit odd. The vast majority of them are 30-year fixed-rate mortgages, and if you're thinking "wow that's an awesome deal", you're right. The mortgages are issued by banks, insured by Fannie Mae or Freddie Mac, and then packaged up into "mortgage-backed securities", which is just a fancy way of saying "bonds backed by people's mortgages". This mortgage bond market is huge in America - the MBSes offer a somewhat higher yield than regular US government bonds, with minimal credit risk (because they're implicitly backed by the US government through Fannie and Freddie).

(The tradeoff for the higher yield is that you've got a thing called "prepayment risk", which basically means "if interest rates go down, people will refinance their homes, so your mortgage bond matures early and you have to reinvest the cash at the lower prevailing interest rates; if interest rates go up, people won't refinance, so you're stuck in a bond that yields a lower-than-market interest rate". So if you buy mortgage bonds, you're effectively short interest rate volatility, and that option can be priced and hedged like any other option. Prepayment risk is a fascinating quirk of the mortgage-bond market, and I'd love to put in a discussion of it here, but this margin is too narrow to contain it. (Incidentally does anyone else think Fermat was just epically trolling us with that note?))

So that's MBSes. Where mortgage REITs (henceforth mREITs) come into this is that they're a uniquely American spin on the regular REIT structure.

The American rules on REITs are similar to Singapore: you get a tax break as long as you pay out all your net income as dividends (or something like that). But American REITs can hold MBSes as well as actual real estate, and that's what mREITs do.

They leverage up (borrowing money from their banks at low short-term rates) and buy MBSes using anywhere from 2x to about 8x (!!!) leverage. So instead of just getting the 3-ish percent you'd get on a current-coupon mortgage bond, you get that multiplied by 2, or 3, or a lot more than 3. You get the real-estate exposure of a leveraged REIT, without all of that messy business of owning actual buildings.

The tradeoffs, though:
1) Volatility. Owning a many-times-leveraged bond portfolio is a recipe for volatility in your share price.
2) Interest rate sensitivity. mREITs lose money when short-term interest rates go up (because they have to pay higher rates for their leverage funding), when long-term interest rates go down (because their portfolios get prepaid), and when long-term interest rates go up (because they're stuck with mortgages that are at below-market interest rates). Interest rate volatility of any form is bad for mREITs.

There are some things that mREITs are not:
1) They are not ABS-CDOs. Mortgage backed securities are not CDOs, and neither are mREITs. (Though that said, there's some vague similarities if the REIT issues debt as well as equity.)
2) mREITs almost never own CDOs. This was a thing back in '06 (a lot of CDOs were issued that were backed by the preferred stock of mREITs, which is just a leverage nightmare), but it's really not a thing any more.

thanks for sharing
otherwise I also duno what kind of asset they are.