Investing Caffeine

Bernanke Portfolio Takes Painful Hit

August 18, 2009 at 4:00 am Leave a comment

As a former tenured economics professor at Princeton University, I would believe Ben Bernanke would understand and appreciate the power of diversification, but apparently not. The bulk of his $1.2 million to $2.5 million (only a broad range was disclosed) was invested in a large-cap stock fund and a fixed-rate annuity from TIAA-CREF. Some would say his portfolio could use a higher dosage of small-cap, mid-cap, international and alternative asset classes, including real estate. With arguably the highest ranking finance job in the universe, wouldn’t you expect him to have a smoking hot portfolio? The data paints a different picture.

According to publicly disclosed data, Bernanke’s assets were down -29% (about -$600,000) in 2008, better than the S&P 500, but not comparable since his portfolio also included fixed income securities like Canadian treasury bonds and an annuity fund. For whatever reason, the global money czar couldn’t or wouldn’t use his knowledge to outmaneuver the markets. Why didn’t he use the Yen carry trade to buy crude oil up to $140 per barrel, then short emerging markets during 2008 before going long technology stocks beginning on March 9, 2009?

Certainly, Bernanke does not want to create a conflict of interest, whether real or implied. I’m sure Bernanke is not day trading options and shorting levered Exchange Traded Funds (ETFs) on E-Trade, because the headaches it would create for him would undoubtedly outweigh any short-term financial benefits earned from his investment ideas. Even if Bernanke felt he could exploit profit opportunities, the real bucks will come from speaking events and consulting prospects after he leaves his position of Federal Reserve Chairman. If Bernanke does a better job with his portfolio, perhaps he can retire at a younger age…

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Wade W. Slome CFA, CFP®

Plan. Invest. Prosper.

Entry filed under: Profiles. Tags: Ben Bernanke, Bernanke, diversification, etf, personal portfolio, portfolio, Princeton, TIAA CREF.