Annaly Capital Management, Inc. (NLY)
Q2 2011 Earnings Call
August 2, 2011 9:00 AM ET
Michael Farrell – Chairman, President and CEO
Kathryn Fagan – CFO and Treasurer
Wellington Denahan-Norris – Vice Chairman, CFO and Chief Investment Officer
Michael Taiano – Sandler O’Neill
Bose George – Keefe, Bruyette & Woods
Jason Weaver – Sterne, Agee & Leach
Douglas Harter – Credit Suisse
Michael Widner – Stifel Nicolaus
Stephen Laws – Deutsche Bank
James Ballan – Lazard Capital Markets
Joel Houck – Wells Fargo Securities
Daniel Furtado – Jefferies & Company
Kenneth Bruce of Bank of America Merrill Lynch
Steven DeLaney – JMP Securities
Previous Statements by NLY
» Annaly Capital Management Q2 2009 Earnings Call Transcript
» Annaly Capital Management, Inc. Q4 2008 Earnings Call Transcript
» Annaly Capital Management, Inc. Q2 2008 Earnings Call Transcript
» Annaly Capital Management, Inc. Q1 2008 Earnings Call Transcript
This earnings call may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements, which are based on various assumptions, some of which are beyond our control, may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors including, but not limited to, changes in interest rates, changes in the yield curve, changes in prepayment rates, the availability of mortgage-backed securities for purchase, the availability of financing and if available the terms of financing, changes in the market value of our assets, changes in business conditions and the general economy, changes in governmental regulations affecting our business, our ability to maintain our classification as a REIT for federal income tax purposes, risks associated with the broker-dealer business of our subsidiary, risks associated with the investment advisory business of our subsidiaries, including the removal by clients of assets they manage, their regulatory requirements, and competition in the investment advisory business
For a discussion of the risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our most recent Annual Report on Form 10-K and all subsequent Quarterly Reports on Form 10-Q. We do not undertake and specifically disclaim any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
I will now turn the call over to Mr. Michael Farrell, Chairman, Chief Executive Officer and President. Please proceed, sir.
Thank you, Roger. Good morning and welcome to analyst call for the second quarter of 2011. I’m Mike Farrell and with me today are Wellington Denahan-Norris, our Chief Operating Officer and Chief Investment Officer; Kathryn Fagan, our Chief Financial Officer and Nick Singh, our General Counsel and other members of management.
As customary, I’ll begin the call with some prepared remarks and then we will follow up with a question and answer period. The text of my comments could be found in our website www.annaly.com as well as the video companion to today’s remarks.
The title of this missive is “The Face that Launched a Thousand Ships, or In This Case, Bankers” The title of this note is taken from the 16th century play “Doctor Faustus” by Christopher Marlowe. It is the iconic story about a man who trades his soul in exchange for power and knowledge. Faust uses this phrase when expressing his desire for the most beautiful woman in history, Helen of Troy.
The legendary Helen, considered a Greek treasure, was so beautiful that wars were fought over her. Homer’s Iliad describes the theft of Helen by the Trojan prince, Paris, from the Greek province ruled by her husband, Menelaus. Menelaus and the Greeks tried to get her back during the decade-long Trojan War, one of the greatest organized sieges in history that finally ended with the infamous ruse of the Trojan Horse.
The rest is history: Cassandra warned the Trojans not to keep the gift brought by the Greeks, but she was ignored and the soldiers hidden in the belly of the giant wooden horse came out at night, opened up the city gates to let in the soldiers who ransacked the city and massacred the sleeping population.
These stories are rich with metaphorical possibilities as it relates to the present-day situation in sovereign credits. I am going to use all of them today.
Let’s presume that the treasure of Greece is not Helen but its national assets, and the euro is the Trojan Horse. The promise of the beauty of cheap money and the consumption benefits that emerged from it drew Greece into a siege that may end with the release of its treasure – islands, buildings, national companies, its economic way of life – or risk a long, costly siege from neighboring nations, creditors and rating agencies.
The euro took about 10 years to create this position for Greece; the Trojan War took about 10 years. The only question today is which re-structuring will the diplomats accept. As I write this, economic conditions in Greece are worsening, interest rates are pricing into default. Companies are not shipping goods to Greece destinations. Hospitals are not receiving supplies from big pharma and the requisite strikes are occurring as the bill for the last 10 years of cheap money is now being delivered.