The Smart Money

Recently, Berkshire Hathaway issued fixed rate debt to replace floating rate debt. This likely means Warren Buffet believes there is risk to short term rates.

Annaly, with one of the most astute managements in understanding rates, decided to issue shares. Annaly's management has had pretty good timing in the past with their share issuance (ie they tend to issue shares closer to the top). Annaly makes a lot of money when short rates are at zero, likely meaning that management believe there is risk to short rates . The smart money is betting on higher short rates.

2 comments:

Chaos! said...

I've been thinking NLY is a short here for the same reasons. It's hard to be short a stock that yields 14% (till they cut the dividend!).
You used to follow this one. Any opinion? Any guesstimate of NAV?

Tsachy Mishal said...

I wouldn't bet against a great management. There are probably other mortgage REITs that make better shorts. One of them is probably leaving themselves exposed to higher rates. I dont know enough to figure out which one.