Description

Today there was panic selling in NLY - I think under any reasonable rangr of outcomes, book value is probably 12-15% off of 4Q19 levels - so $9.66 going down to about $8.21. The stock today traded in the 3's, before settling out at ~$5.30. I think this is the epitome of a firesale by yield investors who are selling everything that's not nailed down so to speak.

The biggest risk is short term liquidity as the contemplated plan to do a national mortgage holiday obviously affects a company that owns 100's of billions of agency MBS on massive leverage. It's very simple - there is 0% chance the government will allow a systemically important financial institution to fail as a result of government action to alleviate consumer pain - allowing this to happen would be akin to throwing your grandmother off the roof to face likely to death to save her from a small house fire - it's just insane. 94% of NLY mortgages are agency paper - this is not '08 - this paper is rock solid and has the government backing - right now we are dealing with a consumer confidence crisis but the financial system is sound thanks in large part to the scars of sins past.

NLY is now down more than it was in '08 whent the business was actually facing real financial risk as mortgages were all failing - that is not the case now or yet - sure if the world ends mortgages are irrelevant, but then so is every stock so you have just hold your nose and buy here.

Catalyst

fear abates eventually and people start going outside again