In short: Owns — one of his biggest positions, basis about 0.9x book, and he put most of his liquidity into it instead of T-bills. "It's not about rates, it's about spreads": MBS vs 8–10-year Treasury spread, a large MSR book, prepayments at 4–5%. "The best managed REIT in the industry"; would buy more if it trades off. Owns the common, not the preferreds.
Annaly is a mortgage REIT: it borrows money cheaply and buys mortgage bonds, mostly ones guaranteed by government agencies, then pays most of the income out as a dividend. Whalen says people ask the wrong question when they worry about interest rates. What drives Annaly's profit is the spread — the gap between what its mortgage bonds yield and what 8–10-year Treasuries yield — plus how fast homeowners pay off their loans early (slow prepayments at 4–5% a year are good for it) and the value of its mortgage-servicing rights (the fee stream for collecting payments).
He treats it as a cash substitute: he owns no T-bills and parks most of his spare money in Annaly, bought at about 90 cents per dollar of book value. He thinks it will be one of the survivors as the mortgage business consolidates, calls it the best-managed REIT, and would buy more on a dip. He reminds viewers that REITs are for income, not for price gains.
30:04But Chris, with flattening of rates, will you change your stand on Annaly? — Not right now. No. Because remember, it's not about rates, it's about spreads. What you want to do is look at the treasury yields for 8 to 10 years and look at the yield on mortgage-backed securities, number one. Then you want to look at the other components of their business. Mortgage servicing rights.
In short: "NLY after the dividend raise is also an add." The quarterly dividend went to $0.75 — it had been $0.70 for about six quarters and $0.65 for eight before that — "quite positive… about a 13.4% dividend yield here." A raise, not a cut, is the confirmation that the carry has stabilized.
Annaly is the largest of the agency mortgage REITs — same machine as Dynex, bigger scale. The news is that it raised its quarterly dividend to $0.75, after paying $0.70 for about six quarters and $0.65 for eight quarters before that. That takes the yield to roughly 13.4%.
Why the raise matters more than the yield: these companies cut their dividends when the maths stops working. A raise is management signalling that the spread they earn has stabilised — which is exactly the confirmation you want before buying a rate-sensitive income name. "Annaly after the dividend raise is also an add."
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In short: Desai (keep): ~13% dividend yield; a "high-octane carry play" on agency MBS and residential credit; the recent dividend INCREASE signals management confidence in near-term earnings power. Conservative leverage, hedge ratio and platform diversification make it worth keeping.
In short: High-dividend agency-mREIT add (~13.5%) — one of three real-estate dividend names (with DX, RWT) added into rate-hike fear; positions here will be "much bigger" than the speculative FPH allocation.
Annaly is the largest of the mortgage REITs — same model as Dynex (borrow cheap, own government-backed mortgage bonds, pay a big dividend, here about 13.5%). It's a core, larger position in the high-yield real-estate basket Singh is building as a bet that interest rates have nearly peaked.
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