NEW YORK (TheStreet) -- Let me make it perfectly clear from the start. I don't know where the employment numbers are going to end up tomorrow or a month from tomorrow. Yet I know from my contacts on the Street that there are lots of under-employed people.For those of you who have the latest phobia -- fear of tapering -- about what the Fed may do regarding their massive bond-buying program and QE-4ever, let me put your mind at ease. As one of the nation's most honored commander-and-chiefs stated, "We have nothing to fear but fear itself." The good news is that taper-phobia has been somewhat responsible for putting some darn good publicly-traded companies in the "taper toilet" for the past few weeks. One sub-sector that has been brutalized is the mortgage REITs, and frankly my dear, it's nothing short of ironic. For example take the biggest and one of the best-managed, Annaly Capital Management AnnalyCapital ( NLY) which has been around for 17 years. That means they have experience navigating through treacherous financial waters. AnnalyCapital also owns securities backed by the Federal Reserve. The company invests in mortgage pass-through certificates, collateralized mortgage obligations, agency callable debentures and other securities representing interests in or obligations backed by pools of mortgage loans. It also invests in agency debentures issued by Federal Home Loan Bank, Freddie Mac, and Fannie Mae. It also offers diversified real estate, asset management, and some other money-making financial services. If you're even the slightest bit interested in investing in this sub-sector, visit Annaly.com. Speaking of a great deal, whenever you're incented by the Federal Reserve and the government's "terrific trio" of sponsored enterprises (Federal Home Loan Bank, Freddie Mac, and Fannie Mae) you're downside risk is mitigated. That's why mortgage REITs invest mostly in government-guaranteed debt obligations. AnnalyCapital does get involved in originating and acquiring commercial mortgage debt including commercial mortgage loans, commercial mortgage-backed securities, B-notes, mezzanine loans, preferred equity and other commercial real estate-related debt investments. This is the more risky "stuff."
That's precisely where good management comes into play. They have to measure and weigh every one of these commercial deals and see if the risk is worth the reward. They judge the property types to make sure they suit the current economic climate both nationally and regionally.
This number included $58.3 billion in total mortgage exposure, of which $39.2 billion was invested in agency RMBS (residential mortgage-backed securities), $8.8 billion in non-agency RMBS, $1.3 billion in CMBS, and $8.8 billion in ABS. This fits with its "core investment strategy" which is to be focused on agency RMBS.
There's plenty to like about the mortgage REITs right now. The best and brightest will survive and thrive. If you're still suffering from "taper-phobia" just consider the Fed's objectives and determination when it comes to decreasing unemployment and keeping the economy from deflating.
We may have already seen the bottom for mortgage REITs and if not it's probably is quite near. Buy low and then buy more if the shares go even lower. Also, spread your risk around by buying more than one company, and by all means do your own careful due diligence in choosing the ones where you invest. At the time of publication the author is long NLY and WMC. Follow @m8a2r1 This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.