DFR

well that sucked! coming so close to last week's drubbing in TSRA, this really sucks. Seems so obvious in hindsight too -- as in why wouldn't their non-agency RMBS run into liquidity issues in terms of the repo funding?

I hope we are at that point like NLY was at when that stock was around $11 in early 2006 -- they were supposed to be smart investors with a low risk strategy and all of a sudden the stock went from $20 to $11 and the dividend cut crushed too. Since then the dividend has gone up and the stock with it. NLY was suffering from the shape of the yield curve during the Fed's interest rate hikes. They bit the bullet and adjusted the portfolio and from then on the dividend has slowly come back.

Right now everyone loves NLY and no one likes DFR yet right now it sure seems to me there is finally less risk in owning DFR then NLY because DFR has removed their non-agency mortgages so their liquidity risk has all been eliminated (at least relative to NLY). NLY still faces rate risk but DFR hedges their risk away with interest rate swaps. DFR has a management company that offers growth potential as well as a diversified revenue stream -- NLY used to have one too but I don't know how large it is/was as a percent of the total.

For DFR, the management fees should be a larger than expected percent of the total. Their assets under management are holding firm because of the nature of their CDOs (term funded). While the REIT portfolio has declined in size and earnings potential. Pro forma during 2006, the two sides of DFR were about the same -- since then I suspect the DCM part has held up better than the REIT portfolio believe it or not.

since my cost basis is significantly higher than the current price I plan on recognizing those losses in the near future -- probably double up on the stock and sell half in 31 days.