Annaly Capital Management, Inc. (NLY): 1 Big Risk We Are Facing Right Now

Page 1 of 2

Annaly Capital (NLY)This time of year is oodles of fun for investors, when companies’ annual reports and letters to shareholders shed a bit more light on the inner workings of investment favorites.

The “Risk Factors” section is an especially good read and, while often filled with generalized statements about the economy, future legislation, and such, can sometimes give a real clue as to what these companies themselves consider a threat to their bottom lines.

Such is the case with Annaly Capital Management, Inc. (NYSE:NLY), whose latest 10-K filing I recently perused. One particular risk the company identified caught my eye, as I had been thinking about this issue myself — and it’s a doozy: the winding down of Fannie Mae and Freddie Mac.

Fannie, Freddie wind-down will cause upheaval
As Annaly management notes in its 10-K, the idea to unwind Fannie and Freddie was first floated by the Treasury Department in early 2011, in a white paper regarding housing finance reform. As an entity that invests primarily in mortgage-backed securities backed by these government-sponsored entities, any change in the status of these behemoths would have an impact on Annaly and other pure-agency mREITs, such as American Capital Agency Corp. (NASDAQ:AGNC) and ARMOUR Residential REIT, Inc. (NYSE:ARR) .

Lately, the changes to those GSEs have been accelerated. Just this week, Edward DeMarco, the acting director of the Federal Housing Finance Agency decreed that the two must work together to create a new, joint company that will securitize home loans for a fee. This new entity could end up being either public or private, depending upon which way the political winds blow.

Since the two GSEs currently insure about 90% of all home loans being written, shutting them down, no matter how slowly, will cause issues for mREITs. As Annaly points out, market uncertainty pursuant to this process can easily cause market jitters that could decrease the value of the company’s holdings. Not a good thing, of course, since it is these very securities that Annaly Capital Management, Inc. (NYSE:NLY), American Capital Agency, and Armour use to secure financing with which to invest further.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!