My friend, Professor Anthony Sanders, finance professor at George Mason University, pointed out to us yesterday that the Fed just reported that it has $66 billion of mark to market losses on its balance sheet. Horror of horrors!
Well woop de doo. The Fed doesn’t mark to market for a reason. It never sells anything. It will never be forced to sell anything.
The Fed does not need capital to operate. It can, and does, conjure money in and out of existence at will. And eventually, as its bond holdings mature, it always gets paid. Or at least so far, it has always gotten paid. So, marking to market, is a nice philosophical exercise, but in practical terms, it’s meaningless. It has no impact on the market. It never will have an impact on the market. It should play no role in your thinking about investing or trading.
But boy are there plenty of reasons to pay attention to the Fed’s balance sheet, which is what I do a large part of my work time. I do it so that you don’t have to, and mostly because I have come to believe over 55 years of following markets that, while it might not be the only thing that matters, it sure as hell beats whatever comes second.
First, let’s look at this mark to market business. Here’s what is critical for you to know.
The post Here’s How To Make Money Off the Fed’s “Losses” (Part 1) appeared first on Lee Adler’s Sure Money.
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