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starbucks4ever (97.89)

Printing press remains profitable, especially to the people who own it.

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January 12, 2010 – Comments (6)

The only thing that I can gain from this article is that when Bernanke entered the market for Treasury and Agency junk, he brought with him so many newly-printed dollars that even investments as crappy as T-bonds went up in nominal value, so he can now pat himself on the shoulder and spin stories, telling us how me made money on that trade. To me it looks like if there was any money made, the word "made" should be taken literally. Another fly in the ointment: there is a general rule that you don't boast about a trade until you close it. Has Bernanke tried to sell any of those securities that show such outstanding unrealized gains? A little voice is telling me that there won't be many buyers. Unless, of course, Bernanke steps in to buy them from himself. http://finance.yahoo.com/news/Fed-posts-record-profit-of-apf-231123775.html?x=0 

WASHINGTON (AP) -- The Federal Reserve generated record profits last year, reflecting money made off its extraordinary efforts to rescue the country from the worst economic and financial crisis since the 1930s.

The central bank announced Tuesday it logged a record windfall of $52.1 billion. Of that total, a record of $46.1 billion gets turned over to the Treasury Department....

The bigger profit reported by the Fed came from $46.1 billion in earnings from the securities it held last year.

Such income went up as the Fed's holdings of securities mushroomed.

The Fed launched several securities-buying programs last year to help revive the economy. Its goal is to drive down rates on mortgages and other consumer debt.

Under one program that ended last year, the Fed snapped up $300 billion worth of government debt. Under another program, the Fed is on track to buy $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac, and an additional $175 billion in debt issued by the mortgage giants. Those programs have boosted the value of securities held by the Fed." 

6 Comments – Post Your Own

#1) On January 12, 2010 at 1:40 PM, russiangambit (29.40) wrote:

The FED is the biggest hedge fund of all now. And the beauty is , they don't need to worry about financing, they can "create" it,  the cost of capital is 0 is the leverage has no limit. The central bank  turned into a hedge fund and nobody cares as long as the market is going up. Of course, should the market go down and the  hedge fund go bust, they can always create more money to plug the hole.

 

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#2) On January 12, 2010 at 1:44 PM, starbucks4ever (97.89) wrote:

"Of course, should the market go down and the  hedge fund go bust, they can always create more money to plug the hole"

Which does not mean the market will never go down again. GS/JPM still need to generate volatility, and Bernanke will play along nicely. 

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#3) On January 12, 2010 at 3:07 PM, EV38 (99.19) wrote:

#2 - I think this is a perfect example of being a cynical bull. Not bullish because you like US economic prospects, but bullish because you know they will prop up the markets at the expense of the USD. Don't worry I am in the same boat, leading with gold of course.

This is what bears don't understand. We are equally as "bearish" but are bearish on the right thing. The credibility and morals of the guys in charge.

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#4) On January 12, 2010 at 3:28 PM, outoffocus (23.49) wrote:

I think it takes a bear to truly understand what is going on right now.  If you think we are entering a true bull market, then you have to ignore all the negative economic fundamentals.  They have us so brainwashed that we can't even see that we've already entered stagflation.  Gas has been going up in a straight line for the past year.  (How many people can say they've seen their pay go up in that same time frame?) It took until yesterday for the media to pick up on it and all they could say was that gas went up 15 cents or something like that in the past 2 weeks.  What about the other $1 runup? Gas used to be under $2 a gallon.  Now its dam near $3 a gallon again for crying out loud.  Wake up people.

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#5) On January 12, 2010 at 4:48 PM, leohaas (31.21) wrote:

"Gas used to be under $2 a gallon.  Now its dam near $3 a gallon again for crying out loud.  "

That is still very cheap. At what point will we finally realize that we have to cut our gas usage? The majority of that money goes to countries where they hate our guts, so much that some of these people are willing to kill themselves if they can kill a few of us. Stop sponsoring the terrorists. Buy a more gas-efficient car. Drive less. Get a house closer to your work, or work closer to your house. I cannot wait for $7 gas.

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#6) On January 13, 2010 at 12:02 AM, starbucks4ever (97.89) wrote:

" but bullish because you know they will prop up the markets at the expense of the USD."

I am not sure that they will not crash the market first. The odds are slightly against it, but I wouldn't be surprised if they did.

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