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Fed’s $211B Crisis: Hidden Risks in the Federal Reserve’s Portfolio | The Tom Dupree Show”

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The Federal Reserve’s Financial Predicament: A Deep Dive with Tom Dupree

Financial Hour Episode with Tom Dupree and Mike Johnson

Episode Overview

In this revealing episode, Tom Dupree and Mike Johnson discuss the Federal Reserve’s concerning financial situation and its implications for the broader economy. They analyze the Fed’s current predicament, particularly focusing on its significant losses and negative carry issues.

Key Topics Discussed

Federal Reserve’s Current Challenges

  • The Fed is experiencing a negative carry situation, paying about 5% on deposits while earning only around 2.2% on investments
  • Current cumulative losses stand at approximately $211 billion
  • September quarterly financial report shows a negative $67 billion deferred asset increase over nine months

    • The Fed’s Asset Portfolio

    • Holds approximately $2.4 trillion in mortgage-backed securities
    • Owns about $4.7 trillion in treasuries
    • Nearly $1 trillion of mortgage-backed securities are at 2% interest rates
    • Current market rates for long-term mortgage backs are around 5.5-5.6%

      • Historical Context

      • Major purchasing activity began during the 2008 financial crisis
      • By 2010, the Fed had purchased about $1.25 trillion in mortgage backs
      • In 2020, during COVID, they purchased approximately $700 billion in agency securities within two months

        • Investment Strategy Discussion

        • Tom and Mike emphasize the importance of having both bonds and dividend-paying stocks in investment portfolios
        • Discussion of how companies that consistently raise dividends can help combat inflation
        • Analysis of fixed income versus growth investments in the current market environment

          • Expert Commentary

          “This is a problem and now everybody knows about it… The incoming administration has got to get their handle on it.” – Tom Dupree

          Practical Implications

          • Potential impact on mortgage rates and the housing market
          • Effects on government operations and bond markets
          • Implications for individual investors and portfolio management

            • Contact Information

            To learn more about managing your portfolio in these challenging times:

            • Call: 859-233-0400
            • Website: dupreefinancial.com
            • Schedule appointments directly through the website homepage

              • Next Steps

              For more detailed information about how these market conditions might affect your investments, schedule a consultation with Dupree Financial Group to discuss your personal financial situation.

              This episode of The Tom Dupree Show was brought to you by Dupree Financial Group, where we make your money work for you.

              The post Fed’s $211B Crisis: Hidden Risks in the Federal Reserve’s Portfolio | The Tom Dupree Show” appeared first on Dupree Financial.

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