The news came that Global Equity Funds lured a net $25.9 billion, the MSCI All-Country World Index climbed to the highest level since 2008 on Sept. 16. It all had to do a lot with the withdrawal of the bid by Lawrence Summers for his candidature as the next Fed chairman – he was not in favor of monetary stimulus.
MSCI All-Country World Index, a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world, extended gains after the U.S. central bank unexpectedly maintained its $85 billion monthly bond-purchase program two days later.
The most awaited decision came when Chairman Ben S. Bernanke and other Fed policy makers unexpectedly opted to continue the stimulus, as they are not yet satisfied with the national economy and employment.
In consequence to the step from the Fed, global equity funds attracted the largest inflows since at least 2005 in the week ending Sept. 18. According to market observers, it is a good time for investors to invest in stock or equity funds.
“The U.S. Federal Reserve is the Greatest Hedge Fund in History,” Says Warren Buffet
‘Oracle of Omaha,’ Warren Edward Buffett and also an American business magnate, investor, and philanthropist and the most successful investor of the 20th century, has compared the U.S. Federal Reserve to a hedge fund.
He says that the Fed’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion clearly suggests what he believes about it is true.
He was quoted saying that the Fed is the greatest hedge fund in history, as it is generating $80 billion or $90 billion a year probably in revenue for the U.S. government which was not the case a couple of years back. The Fed remitted $88.4 billion to the U.S. Treasury Department last year which has ballooned, as the central bank built its balance sheet during the past five years.
The fourth richest person in the world, Warren Buffet also said that the Fed is under no pressure, none whatsoever to have to deleverage. He also endorsed Bernanke when he said that as the Fed is under no pressure, it can pick its time, and if they have somebody wise there and he thinks Bernanke is wise.
He praised Bernanke for signaling in 2008 that he’d do whatever was needed to stabilize markets and expects that his successor should follow Bernanke’s approach to economic stimulus.
To contact the reporter of this story: Jonathan Millet at email@example.com