TWO - The Horrific Two Harbors Experience Isn't Unique

Summary

• Two Harbors stock has been crushed, just like the entire mREIT sector.
• It is not a broken business model; it is a model that does not work when yields are in constant flux and an inverted curve, with spreads crushing book value.
• We thought things would stabilize as we moved into fall, but that was predicated on a belief the Fed would slow hikes, and inflation has not budged.
• Simply feeling the negative effects of widening mortgage-based securities spreads as well as rising interest rate volatility.
• Dividend cuts likely will be needed until things do stabilize, and now rates movement looks like it will stall as the Fed has signaled a willingness to be data-dependent on hikes.

For further details see: