ACR - Investors Hate Caution

• NLY and NRZ rallied and reached the neutral ranges. If shares dipped without a decline in fundamentals, they could be appealing again.
• The emphasis in analysis of mortgage REITs should rely on book value more than the shape of the yield curve.
• Investors cannot reasonably forecast the future changes in interest rates and in management's changes to the portfolio to predict performance several months in the future.
• It is entirely possible to predict where values stand today. A wise analyst can make predictions about book value today because they already know how MBS and hedge valuations moved.
• Preferred shares give us some nice opportunities to camp out. We really need to emphasize valuation though. Plenty of investors are getting very optimistic.

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