We have long pleaded that with a DV01 of almost $1 billion, all of it unhedged, the Federal Reserve is massively exposed to portfolio losses (courtesy of the Fed’s recent transformation into the world’s largest hedge fund) should interest rates commence rising. Well, sure enough after a well over 1% rise in rates in the past few months, and specifically since the advent of QE2, once the market started calling the Fed’s bluff for further monetary easing, the losses incurred by the Fed are sufficiently large to where people should start asking questions. John Lohman quantifies just how substantial the unrealized portfolio damage to the taxpayer balance sheet has become since Ben Bernanke top ticked rates almost to the dot with his launch of QE2.
If, in the spirit of antimatter, Jack Schwager were to compile a book entitled “Market Anti-Wizards”, chapter one would surely feature none other than The Bernank. How else to describe Uncle Ben’s trading prowess as evidenced in the chart below.
To read on go here;
via Top Tick Bernanke: How The Chairman Lost $46 On The Fed’s Holdings Since The Launch Of QE2 | zero hedge