As you know, I have been following Western Asset Mortgage (NYSE:WMC) for some time and downgraded the stock to a huge sell. I then told you it was setting cash on fire and I was out. Not to be touched. The name has been trading with extreme volatility of late as performance has dwindled and tricky accounting has cooked the books to cover massive losses. As such I felt pretty strongly that the company’s dividend was in some jeopardy and sure enough it’s been cut and cut again. Performance was so bad I called it a “train wreck.” I suppose I should be slightly more objective despite the company destroying shareholder value and crushing blue collar investors who chased the dividends. Believe me, I want the company to do well. As you know I have a very specific set of indicators I look for in mREITs. I want them to deliver and to make investors a lot of cash. I want retirees to have secure income from a name like this.

I will be up front and tell you that book values have been pressured in all of the mREITs this reporting season. The good news is that for the sector, things have been on the mend slightly. Net interest rate spreads have been rather favorable for most companies reporting. Most are covering their dividends via their core earnings. Some have more transparent core earnings than others. Some report normalized core earnings. Others have used the metric to hide performance that would not be discovered without close investigation of the financial reports.

Where to begin? Well.………………READ MORE

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