Few sectors of the economy benefited from the financial crisis as much as mortgage REITs like Annaly Capital Management (NYSE: NLY ) and American Capital Agency (NASDAQ: AGNC ) . When short-term interest rates plunged in response to the crisis, leveraged funds like these made a killing thanks to the increased spread between short- and long-term rates. But this trend has since reversed itself in response to three successive rounds of quantitative easing. In the video below, Motley Fool contributor John Maxfield explains why investors should be particularly concerned about this sector now.
Source: Motley Fool
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Investors should be scared to death of this sector in a rising interest rate environment (it will happen at some point in the future). Risk of permanent loss of capital is high. Stocks with unusually high dividends come with high risk or imminent dividend cuts.