AGNC's First Full Quarter Conference Call Scheduled

For those of you keen to learn about American Capital Agency's first full quarter -- and what a quarter for that to be, eh? -- it's been scheduled for October 29. Investors can follow it live at the AGNC web site.

During the last ACAS conference call -- that is, the conference call of the company managing AGNC -- managers indicated that AGNC was at that time providing the exact performance anticipated, yielding a return on equity north of 25%. I'm intereste to see what the recent market dislocations has wrought, and how interest rate spread changes are expected to impact AGNC's profits. Unless the spreads narrow, AGNC's government-guaranteed underlying investments should put it into a position to continue performing. The question is, how long as AGNC got under its current borrowing arrangements. Currently, AGNC is producing pretty good income for itself and for shareholders.

Since AGNC gets monthly payments of not only interest but principal and prepayments, AGNC is in a position to regularly recycle capital back into its business as the illiquidity problems make it difficult to market securitized home mortgage products. One advantage of easily-timed liquidity is that an illiquidity crisis seems easily avoided. Additionally, AGNC's ability to reinvest at current rates presumably will enable increasingly superior investment entries as the economy worsens, as instrument pricing will deteriorate (and reinvestment opportunities will improve) with confidence losses at a rate faster than the deterioration of instrument performance. In light of the govenment guarantees behind AGNC's underlying investments, this last point is more than a speculative bet.

The fact that the government-backed guarantors of AGNC's investments have recruited from the board of AGNC's manager ACAS to find a new Chairman of the Board of Freddie Mac suggests that AGNC's manager is a fairly good place to find expertise in the field in which AGNC invests. In an era in which knowledge is golden, ACAS may well be a gold mine -- and AGNC a well-positioned prospector.