Disclosures

Capstead Mortgage Corporation

I, Richard Eckert , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
Disclosure Chart

Ratings Distribution as of May 17, 2012 % with Investment Banking Relationships
Rating Number of Companies Percent of Total Rating Number of Companies Percent of Total
Buy 112 73.7% Buy 13 100.0%
Neutral 37 24.3% Neutral 0 0.0%
Sell 3 2.0% Sell 0 0.0%
Total 152 100% Total 13 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
  • Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
  • Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

Additional Risks and Considerations

    • The Federal Reserve Bank—specifically, the Federal Open Market Committee—and its Chairman recognize that accommodative monetary policy is ineffective and inflationary. And may, in fact, have been counterproductive.
    • The Federal Reserve goes too far in its current accommodative stance and deliberately attempts to pancakes the yield curve, pushing down the yield on a 10-yr note to somewhere in the vicinity of 1.50%.
    • Conservative lawmakers gain the upper hand on Capitol Hill and succeed in shutting down Fannie Mae and Freddie Mac sooner than contemplated in this report.
    • Changes in tax treatment of dividends.
    • Too much capital chasing too few good ideas.
    • The presumption of liquidity.
    • Counterparty risk.
    • Policy error—for example, the automatic refinance of all agency mortgages at current interest rates or the elimination of two important exclusions to the Investment Company Act of 1940 upon which mortgage REITs rely heavily.
    • For firms that invest in non-agency, credit-sensitive assets, the risk that credit performance on the underlying loans deteriorates significantly as a result of additional home price declines, sustained high levels of un- and underemployment, increases in the ranks of those un- or underemployed, or the slippage of the U.S. and other developed economies into recession.
    • A geopolitical event precipitating or exacerbating a policy error or recession, especially as the U.S. enters a major election cycle.
    • See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.