I've already made nice returns here, but I'm not watching the daily gyrations. But I am watching the banking industry, and from everything I hear (from some folks inside the industry), our government is going to keep the spreads between long and short term rates artificially wide for quite a while yet - giving banks the chance to cash in on a 5% net interest margin without any risk - simply so they have some time to rebuild an equity cushion before 2012-2013. Reason? That's when all the REALLY crappy commercial real estate loans booked in 2006-2007-2008 hit the critical five year mark - with resets, balloons, or terminations. At that point, the banks will have another unavoidable set of write-downs, and they need to be super-liquid to withstand it. Right now, banks are delaying dealing with their problem loans unlike any time in history - they have too many of them, so it is easier to kick the can down the road a bit, since you are earning 5% risk free for every foot further you kick the can.

The mortgage REITS, with solid assets underlying the investments, SHOULD have no problems if our government lives up to the guarantee (if not, we're back in armageddon so bigger problems are at issue). So these guys are living life large thanks to regulated banks being in such bad shape - and I have a feeling that this artificially wide spread will stay with us longer than anyone thinks plausible. So when these REITs start trading anywhere close to their net book value, grab them, and stop the short-term whining about today's price versus yesterdays price.

Management here also earned some credibility - selling shares to DB just BEFORE an earnings announcement. I took a flyer, bought before the announcement, and held my breath. (Actually, more of a calculated risk, as I figured no management team would sell those shares, then have a crappy earnings announcement, and open themselves up to endless lawsuits). Earnings announcement was great, slight depression as DB unloaded their shares onto the market (but still made themselves a nice trading profit), and then the shares climbed steadily as the market caught on (and climbed too high - 15 up days in a row!). But management earned credibility with me - they left some money on the table. So I knew the 15 up days would not last - collect the dividend, and hope it falls back more towards BV again after the frenzy wears off.

What am I missing? Appreciate any thoughful comments or opposing points of view. (If you just want to call me a dumbass, don't waste my time. More importantly, don't waste yours. Go do something better with your life)