Dynex - where to next?

Thanks for viewing,

Wow, some interesting keywords in their business description;
- LEVERAGED buyer of CMBS products (as you know, leverage works both ways. To juice gains or to ensure out-sized losses),
- ADJUSTABLE-RATE mortgages (I suppose not so bad - unless interest rates increase which to be fair seems unlikely right now),
- office buildings, retail, hospitality, and healthcare (all sectors hit super hard by the current health crisis. Healthcare because everyone is cancelling elective procedures - where all the money is made).

Default rates of CMBS products above 10% in June 2020 but have reduced somewhat in the 2 months following. I'm sure that is good news - unless the reduction was due to "forbearance" - when banks just allow a break in payments of overdue accounts (no chance of a debt default if you don't call in your debts). Around half of the increase from ~2 to over 10% delinquency was from mortgages over 90 days overdue and at least part of the decline was due to banks deciding not to require payments (for some undetermined amount of time).

Its like 2009 again - just replace CDO with CMBS and residential with commercial property. Asset backed securities are great - unless the value of the underlying asset declines significantly - which it has.

I don't know where it will go, up down or sideways All I know is it is in a down-trend and the return in no way reflects the massive risk. It seems tailor made to get flattened by the current environment..

AVOID AVOID AVOID. Or buy, its up to you. Maybe the Fed will bail it out.


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