Published Mon, 30 Mar 2020 09:41:29 -0400 on Seeking Alpha
Losses in the 2x Leveraged ETNs, based on mREITs, closed-end funds, business development companies and MLPs among others, have been catastrophic.
Many of the 2x Leveraged ETNs have been accelerated and redeemed as a result of their net indicative (asset) values falling below specified thresholds.
Some of the remaining 2x Leveraged ETNs may present opportunities for those willing to assume the inherent risks.
"Loss Rebalancing Event" provisions in some ETNs could reduce the risk of mandatory redemption at unfavorable prices.
To possibly benefit when the effects of the pandemic recede, and collect very high current yields, the 2x Leveraged ETNs could still be attractive.
My next article will be submitted, as soon as possible, after March 31, 2020, and will include an estimate for the April 2020 dividend for Credit Suisse X-Links Monthly Pay 2x Leveraged Mortgage REIT ETN (REML). It will also include a postmortem for the UBS ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (MORL) and UBS ETRACS Monthly Pay 2x Leveraged Mortgage REIT ETN Series B (MRRL). As I have indicated previously, MORL and later MRRL and REML have been the primary instruments by which I have attempted to utilize my longer-term macroeconomic interest rate outlook that rates would stay lower for longer than many were predicting.
As I explained in What's Next For REML And The mREITs:
...I hedged my MORL/MRRL/REML positions, which were based on my belief that interest rates would remain lower than most thought, because of relatively less robust and thus less inflationary, economic activity. My belief was that the major risk involved with mREITs was that interest rates rose. The way I hedged was to buy instruments that I thought would do well if the economy was significantly stronger than I forecast and thus the equity markets did better, but interest rates rose as a consequence of the very strong economy. In that event, I assumed that the 2x leveraged High-Yield ETNs with... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|ANNALY CAPITAL MANAGEMENT||8.60||0.0||-3.32||1.20||14.00|
|NEW RESIDENTIAL INVESTMENT||14.98||18.0||0.83||2.00||13.28|
|TWO HARBORS INVESTMENT||13.28||0.0||-2.81||1.60||12.02|
|ICAHN ENTERPRISES LP||67.60||16.1||4.20||8.00||11.95|
|ISHARES FTSE NAREIT MORTG PLUS CAPPED INDEX FUND||41.97||0.0||0.00||0.00||0.00|
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