An Oldie But A Goodie: Part II

During the financial crisis of 2008 buying Annaly Capital Management below book value was my bread and butter trade. Every time Annaly would drop below book value I would build a position and when it popped above I would either write calls or sell the shares. I was able to pull this trade off numerous times during the crisis and the profits were a big help in getting me through the crisis.

My thesis was simple. There is no reason why a portfolio of agency bonds, which have implicit government backing, should trade below book. In the meantime I was being paid nearly 20% to wait for the shares to pop back above book. I was able to execute this trade over and over during the 08' crisis. Am I not worried about the financial crisis? If we get to the point where agency securities cannot be repo'd than every bank in the World will go down.


ukarlewitz said...

BV is $16.8 now.

Tsachy Mishal said...

Very good chance it pops above book at some point in the not too distant future.