News or Noise? | Federal Reserve Balance Sheet: Ongoing Losses and Their Impact on Investors
News or Noise: News
Almost exactly a year ago we filmed a Stock Talks titled, “Federal Reserve Balance Sheet, Commercial Banking, and My Nightmares”. Click here to watch.
The thumbnail was a photo of me on a couch trying to unsuccesffuly trying to sleep, as I worried about the potentially disasterous state of the Feds balance sheet and bank balance sheets during the rapid rise in interest rates in 2022. That was pre- Silicon Valley Bank implosion, pre-run on a few other poorly positioned regional banks and pre an addition $2 trillion in 2023 deficit our Federal government is running.
I’m Chris Perras, Chief Investment Officer with Oak Harvest Financial Group. And This is our investment team’s mid-week release when we examine a news item, headline, or story making the rounds from publicly available sources and ask, “Is it News or Noise?” for your money. This week we update our prior discussion from a year ago on the Federal Reserves balance sheet, its ongoing operating losses, and it’s unrealized mark to market losses that are likely well over $ 1 trillion and counting after the 2q2023. Investors this is big news for your money and will likely shape many decisions by both the Fed and Treasury in the quarters, years, and decade ahead.
The good news here is that if you want to get up to speed on the topic right now, a research analyst we follow, Avi Gilbert, has an absolute fantistic, detailed writeup he just posted on a research website that many investors use, “Seeking Alpha”. Here’s the link to Avi’s piece.
Investors, take 10-15 minutes and read Avi’s piece. It is the up to date math and status of my Federal Reserve balance sheet and operating losses from a year ago. In fact, the only thing I would change in it is the title. I would gone with, “The Federal has lost $1 trillion in a year and counting, that’s not pocket change in the real banking world”.
Massive Fed balance sheet and operating losses are huge news to investors and their money. News few in the investment community have written with such detail as Avi. While this dynamic is unlikely to cause a market crash right now, as it has been going on for over a year already, it is likely one of the biggest ongoing macro issues that will weigh on investor returns, increase market volailty, and and continue to creep up to the surface of the market until it breaks something in a big, big way.
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