Is Annaly Really Immune? (NLY, TMA, CIM)

Shares of Annaly Capital Management, Inc. (NYSE: NLY) are being pounded this morning.  The reason for the selling isn’t on its own news.  Competitor Thornburg Mortgage (NYSE: TMA) has fallen some 60% on massive share volume after it disclosed new margin calls that have gone unmet, higher default rates, using default rights of its own, a Fitch downgrade, multiple analyst downgrades, and even the question of bankruptcy.

Annaly even raised $900 million recently.  Annaly has long been thought of as immune because of its high quality mortgages, yet the real estate in the movie Wall Street might have been right by saying "Even the rich are bitching!" Annaly has see n a 19% drop to $15.61 in trading after the first hour of the market open and it has now fallen more than 25% from recent highs seen just over the last two weeks.

Annaly is also involved in ownership and running Chimera Investment (NYSE: CIM), which we have applauded last year as the first pure vulture fund filed to come public.  That was working better than well for a while, but this is now trading as a busted post-IPO company and it has put in new post-IPO lows this morning.  On last look shares were down almost 10% at $14.51, above the $13.99 lows seen this morning.  We had noticed the sharp price correction in this one earlier this week and last with no real news.

We still think many financial mergers are going to almost end up being mandated.  But at this point, the fallout in the mortgage and credit malaise is leaving no one immune.  The beatings continue.

Jon C. Ogg
March 6, 2008