Trader Alert: REITS Trigger FED Warning as American Capital Buys $100 Billion of Mortgages, US Savings Rate Near Record Low, Per Capita Disposable Income Almost Back To December 2006 Level, Citigroup Is Selling Synthetic Securities That Yield 13% To 15% Annually – Based On Credit Derivatives! And Cyprus Crisis Just Lit The Fuse!
March 30th, 2013
REITS trigger FED warning as American Capital buys $100 billion of mortgages
REITs bought more than $100 billion of government-backed mortgage securities in 2012, the most since at least the credit crisis, and will purchase another $60 billion in 2013, JPMorgan Chase & Co. estimated this month. Fed Governor Jeremy Stein pointed to the expansion of mortgage REITs, which have amassed almost $400 billion of the debt, during a speech last month on risky behavior in credit markets influenced by the central bank holding borrowing costs near zero for a fifth year and investors searching for high-yielding assets.
“Agency mortgage REITs deserve attention in particular because they have exploded in size,” said John Gilbert, chief investment officer at General Re-New England Asset Management, a unit of Warren Buffett’s Berkshire Hathaway Inc. (A) that oversees $64 billion. “We’ve been dealing with the unintended consequences of monetary policy for a long time. We have to be on the lookout for the downside.”