
The Fed Will Buy Bond ETFs Now - feross
https://www.bloomberg.com/opinion/articles/2020-05-12/the-fed-will-buy-bond-etfs-now
======
yingw787
One can dream, but you can imagine if the Fed really wanted to implement UBI,
it could probably do something like:

\- Give everyone in the U.S. a guaranteed loan for $2,001, 0% interest,
payable at the end of the month

\- Before you "default", enter in a "negotiation" where the Fed can buy back
the security from you for $1, writing off "the losses"

\- Do it all again the next month

Tada! Monetary policy as fiscal policy! If you don't want to write it off
immediately, guarantee 0% interest and have the timeline for the loan be 200
years, then write off the debt as nonpayable after death.

But seriously, I'm not sure if there's a clear line between monetary policy
and fiscal policy anymore.

~~~
MattGaiser
If inflation rises, there needs to be a mechanism to have it paid back. All
the Fed QE at least theoretically goes back into the bank once markets recover
and the assets purchased can be sold to make that so.

Who is going to buy individual loans which are never repaid if inflation
starts to rise?

~~~
lisper
You've got the causality backwards. It's the writing-off that causes inflation
(because now you have all that extra cash out in the economy that never comes
back to the Fed in the form of loan repayment), not the other way around.

~~~
jddj
Only if they continue to buy.

As shown in 2018, the fed has the power to massively deflate the currency
simply by indicating that they might want to unwind or reduce stimulus.

------
granzymes
The comments here confuse me. The Fed is buying bond ETFs so that it can
provide support to the corporate debt market in a way that doesn't 1) require
a ton of careful, time-consuming credit risk analysis and 2) doesn't favor
individual issuers.

The goal is to improve credit conditions and provide financing that otherwise
wouldn't be available to companies during this crisis. This isn't manipulation
of the stock market, it's making sure credit markets don't dry up at the worst
possible time and exacerbate the damage. The funding here is $75 Billion from
the Treasury Department (authorized by Congress) and like other Fed facilities
the money isn't disappearing into the void; the Fed will eventually unwind
these positions or allow them to runoff its balance sheet.

As much as I love Matt Levine, maybe having an article with a higher
information density would reduce the number of low-effort comments. Something
like this article[0] maybe, dang?

[0] [https://www.wsj.com/articles/bond-etfs-climb-as-the-fed-
kick...](https://www.wsj.com/articles/bond-etfs-climb-as-the-fed-kicks-off-
historic-purchase-program-11589296012)

~~~
SilasX
Well, stupid question then: why would this prop up the debt market? They're
just buying tokens redeemable[1] for a basket of bonds. How does that prop up
(the underlying) bond prices? Or their liquidity?

ETF prices are pretty firmly anchored to the underlying bond basket prices,
due to arbitrage, so prices only flow from the bonds to the ETF shares, never
the other way around. Is there a dynamic I'm missing whereby the purchase of
ETFs make the bonds more valuable on the market?

For an analogy, let's say there are coupons you can redeem for a 20-lb turkey
at Trader Joe's (analogous to bond ETFs, which are redeemable for baskets of
the underlying).

Let's say they trade on a secondary market (like those coupon selling sites)
at a stable discount to the market price of the turkeys at TJ's. Let's say I
go out and start buying up the coupons with reckless abandon.

I accept that they would then trade at a smaller discount to TJ turkeys. But
why would that raise the market price of the turkeys themselves? Nothing about
that makes the turkeys themselves more in-demand, does it?

[1] which is how I understand ETFs to work and maintain value parity

~~~
whatok
There's a few faulty assumptions that might apply to more liquid and efficient
markets but do not apply to corporate bonds. Corporate bond liquidity is
minuscule and many create/redeems are done with incomplete baskets vs actual
underlying. One of the reasons why the Fed decided to include ETFs in this
facility is because the ETFs were trading at a steep discount to NAV at some
points earlier this year. For example, SPY's largest discount to NAV this year
was around 80bps. For LQD (the largest and most liquid IG ETF), the largest
discount was close to 5.1%. Discounts to NAV of that size are not academically
arbed away with illiquid underlying assets because there's no liquidity or
price discovery happening in those assets either.

~~~
rndmwlk
I want to preface my statements with this, I'm not trying to get into an
internet argument or attack your positions or anything I'm just trying to
learn some stuff here because I find it all interesting.

In the case of such poor liquidity why should we assume the ETF value should
rise to meet the NAV rather than the NAV lower to meet the ETF value? I
understand the bonds are the underlying here, but if the ETF is more liquid
wouldn't its value be closer to gospel?

~~~
whatok
Your thought pattern makes sense but a lot of dislocations in these markets
are once again due to liquidity. I think the easiest way to summarize this is
because of the liquidity transformation ETFs provide, the tail wags the dog
until it doesn't. This gets a bit rambling but I am too lazy to edit right
now.

Liquid hedges are extremely valuable when trading corporate bonds. With almost
every sell-off/rally, you will see more liquid instruments be first movers and
usually overshoot in either direction. If I wanted to buy/sell 100mm MV of
bonds right now, I would have to pay through the nose and there's no dealer on
earth (due to post-GFC regulations) that is warehousing 100mm MV of a single
bond issue so then I'm probably buying 10-20 different bonds and that doesn't
really fit what I'm trying to do. Instead, I can buy/sell 100mm of a bond ETF,
pay close to equity-like bid/ask spreads, and do so without picking up the
phone or having someone decline to trade with me. I'm a little braindead right
now and I know this is a bad example but this makes intuitive sense: if I
really need cash immediately for something, I'll go to the pawn shop first
before going to the bank. The pawn shop will give me immediate liquidity while
the bank might not be open, want me to open an account, fill out some
documents, blah blah.

The same thing happens with SPY, if I want to hedge my up/downside and need to
do it quickly and efficiently, buying/selling single name equities in a lot of
cases is not the best way to proceed. Dislocations vs NAV rarely happen with
SPY or anything with large liquid underlying assets because the create/redeem
process for these is very efficient; I can do it through an API. There have
been advances in the corporate bond market but for the most part bonds are
traded via chat or phone.

So, let's say bonds sell off for whatever reason, everyone immediately reaches
for an ETF rather than selling any bonds. The underlying market takes some
time to react and there's a further cascade of price discovery that usually
happens in order of liquidity. When you have several thousand bonds underlying
an ETF and no efficient way to trade them, price discovery takes a while. ETF
overshoots, bonds try to catch up, oh but wait now this bond looks cheap/rich
vs that other bond, then maybe everyone starts taking their hedges off, and
then the process restarts in a miniature fashion.

This tug of war can take days to shake out but in the meantime, the create and
redeem process still exists so if I feel the ETF is way too rich (simple
unreaslitic example but "wow, ETF dividend yield is 5% but the underlying
bonds yield 10%") I can buy some shares and redeem them for the underlying
bonds and also do the reverse.

The create/redeem process was broken during the recent sell-off because there
was no consensus on where NAV actually was. Sure, the ETF provider publishes a
NAV level but you had several ETFs trading at several percentage point
discounts. In normal cases, I can buy the ETF and redeem it for the underlying
theoretically pocketing the difference. I'm not going to do that if the
underlying price should be much lower or I'm just uncertain as to where it
really should be.

Long story short, ETFs track NAV closer in more efficient markets. In less
efficient markets, ETFs or any liquidity transformation vehicle usually lead
the underlying because it's easier/cheaper to transact in them. From there
it's price discovery on the underlying which happens at varying speeds and the
process goes back and forth.

~~~
rndmwlk
>This gets a bit rambling but I am too lazy to edit right now.

No worries, as I said I'm interested so I appreciate the write up.

>Long story short, ETFs track NAV closer in more efficient markets. In less
efficient markets, ETFs or any liquidity transformation vehicle usually lead
the underlying because it's easier/cheaper to transact in them. From there
it's price discovery on the underlying which happens at varying speeds and the
process goes back and forth.

Totally get this relationship, that's not entirely where my question lies
though.

>One of the reasons why the Fed decided to include ETFs in this facility is
because the ETFs were trading at a steep discount to NAV at some points
earlier this year.

So is the Fed just buying these ETFs in order to shore up this discount
regardless of whatever they believe to be "true" NAV? Why would the Fed
consider it important enough for intervention? Or are they really just at a
point where they're truly raising the tide and this boat is getting more
publicity?

~~~
whatok
There's a few reasons. The Fed's mandate to "promote maximum employment" has
taken the form of ensuring properly functioning capital markets. ETFs not
getting too dislocated from NAV is an important part of that because otherwise
they become a useless hedging instrument. Lack of effective hedges increases
volatility in markets and forces investors to reduce positions. Further
reducing positions during a sell-off causes an even steeper sell-off, etc blah
blah.

Additionally and more importantly, primary market transactions are priced off
secondary market levels. During the sell-off and before the Fed intervened,
corporate bond issuance completely vanished. A large portion of US companies
are debt-financed and would be unable to finance operations or be forced to
pay way higher rates without functioning debt markets. Ensuring both the
primary and secondary market functions properly fulfills (in their theory)
their mandate of promoting maximum employment because without either, a lot
more companies would have gone under or laid off way more people.

~~~
rndmwlk
>ETFs not getting too dislocated from NAV is an important part of that because
otherwise they become a useless hedging instrument.

Sure, but that's only if we consider NAV to be "true" worth. To your point
with the lack of liquidity in the underlying wouldn't logic dictate that the
underlying needs to "catch up" so to speak?

~~~
whatok
In normal functioning markets, maybe? When stuff like the events of the past
few months happen, markets just stop trading altogether. If there's thin
trading in an already illiquid market, there's no mechanism that forces things
to reprice. What you see as NAV did not reflect executable levels. That's why
you saw bond ETFs trading at such a discount because those were the only
things people were able to sell. In a lot of cases most people decided they'd
rather short 25mm of an ETF at -x% discount and have it retrace to NAV par
than sell 10mm bonds down -1.5x% and then the next 15mm at an even steeper
discount. Crude example, not how bonds are quoted, and you probably would have
to sell those bonds in way more trades than that but hope it serves as an
example.

~~~
rndmwlk
So, due to the liquidity issues the proxy market is essentially being used in
place of the primary market and the Fed, understanding this better than I,
opts to bolster this proxy market precisely because it is being used as a
temporary primary market?

------
bawana
No matter how much qe the fed does , there will be no inflation. The money
goes to banks and financial institutions. They do not spend it on real goods
and services. Rather they implement financial tools to get higher roi. Thus
too many dollars chase too few financial tools resulting in equity inflation
(a rising stock market) The real market of goods and services is unmoved and
as a result wages and prices are stable (stagnant). The fed only helps banks
because they use a system designed in the 1930s. Back then before credit
cards, internet banking, before the repeal of Glass Steagall, banks drove the
economy by lending to people. (See ‘It’s a Wonderful 𝐋𝐢𝐟𝐞’) To move the
economy, the fed has to put money into the hands of people who will spend it.
Each taxpayer should get a fed account with a monthly stipend of fed-coin.
Fed-coin will have a half-life to encourage people to spend it. Once spent its
value will be fixed as it gets converted to regular dollars

~~~
jsdevtom
Printing money is, by definition inflation. Printing money in to the hands of
people who spend it is stealing from savers. Effectively discouraging
responsible financial decisions in favour of lending.

~~~
bawana
there will be no inflation because the money is not being spent. It is being
invested. As for savings, no sane person would put their money into a savings
account. Why lend your money to the bank (if you even have any to spare)?!

~~~
neuromancer2701
I think it is better to say that there will be no broad based national
inflation of the dollar. Cars, homes, stocks will definitely be inflated.

------
sylvain_kerkour
Hi, I know this is not a common point of view but here is what I propose to
stop being angry against those magician apprentices (they make money disappear
from pockets of others to appear in theirs).

Just ignore them. Just ignore this circus.

Build resilient local communities, reconnect with your family, build yourself
a sustainable future.

As another one said: "The game is rigged", so just play another game.

It's not worth being angry against this noise. They know what they are doing.

~~~
tathougies
And after you reconnect with your local community, form your own currency.

~~~
sschueller
It's illegal as soon as you stop paying the tax man.

------
cs702
_US credit markets are not really working as "markets" anymore_, properly
speaking, because a single special buyer, the Fed, is setting both risk-free
rates _and_ credit spreads for all corporate borrowers. Just by _announcing_
it is willing to buy corporate bond ETFs, the Fed has become the very visible
hand of the bond market.

 _The "price" of a corporate bond no longer means what you think it means._ It
is now determined by the Fed's willingness to buy bond ETFs for reasons that
may or may not have anything to do with the creditworthiness of individual
companies.

This is both utterly shocking and completely predictable.

~~~
jacobush
Smells like the Soviet 5 year plan. Except no plan. Is it Agile Planned
Economy?

~~~
BobbyJo
I like that a lot. The 'Agile' economy. Let's check the sprint board in the
morning and... the schedule as slipped again.

------
q92z8oeif
tax payers -> fed govt -> "the fed" -> blackrock inc -> corporate ETFs ->
american corporations which tax structure is in ireland.

~~~
dmillar
The first link here is more aptly Japan and China. And, to make this really
circular, Ireland also is one of the largest holders of US debt.

~~~
bcrosby95
Note that most government debt is owned by taxpayers in one form or another
though. China and Japan are very large foreign owners though.

~~~
dmillar
Japan is actually the largest, fwiw. These Fed programs are being financed by
debt spending, not tax increases. So even if some of this debt is held by US
tax payers, it's not at their expense. They're getting paid interest.

~~~
dtwest
Debt spending tends to turn into tax increases if you actually plan on paying
the money back

~~~
thephyber
Not necessarily. If the economy grows faster than recent history, a constant
tax rate brings in more revenue.

Also worth looking at the last time the USA completely paid off its government
debt.

> On January 8, 1835, president Andrew Jackson paid off the entire national
> debt, the only time in U.S. history that has been accomplished. [1]

[1]
[https://en.wikipedia.org/wiki/History_of_the_United_States_p...](https://en.wikipedia.org/wiki/History_of_the_United_States_public_debt)

~~~
dtwest
Yes, well actually if the economy grows at all, a constant tax rate brings in
more revenue, while we tend to spend more too. But I agree it is theoretically
possible.

In Andrew Jackson's case they also raised taxes:

[https://en.wikipedia.org/wiki/Tariff_of_Abominations](https://en.wikipedia.org/wiki/Tariff_of_Abominations)

------
whatok
Few things:

\- No one knows how much or what exactly they're buying but they're limited by
the size of the overall facility and are primarily going to stick to
investment grade with a carve out for fallen angel and HY ETFs. Blackrock
needs to provide the Fed with a list of ETFs they may buy and disclosure on
that is uncertain.

\- They are not required to publish their holdings but will provide an
aggregate number alongside the rest of the H.4.1 numbers published on
Thursday.

\- The main and other part of this secondary market facility is secondary
market corporate bonds. There is a certification process that issuers need to
complete in order for the Fed to buy their bonds. Given the backlash on PPP,
issuers are reluctant to register and especially reluctant given that
secondary markets are more or less functioning.

\- Most of the impact of this and other facilities announced has been seen in
the announcement; not through actual purchases. This is true for the Fed and
has been true for the BoJ and ECB.

\- With the announce impact/implicit backstop, a (current) cap on ETF
purchases, and a reluctance for issuers to certify, if markets function
properly, you may not see very many purchases by the Fed under this facility
at all.

------
omerbensaadon
Nobody sees any issues with the Fed being saddled with private sector debt?
The same Fed that decides how much money is printed? The same money that is
the world reserve currency (functionally, the new gold)?

What the fuck is happening?

~~~
thephyber
> is happening

What is different this time?

The Fed has participated in just about every financial bailout since it was
founded in the 1910s. Even before the USA moved from gold-backed-bucks to fiat
currency, there were rumors that there wasn't enough gold to back all of those
promises.

> Nobody sees any issues

I'm sure lots of people are concerned, but that isn't the question. The
question is what can be done and I think at this point everyone s paralyzed
with indecision.

~~~
omerbensaadon
The difference is the riskiness of the things they are willing to buy...

------
dznodes
This could be the reason stocks have been going up ..despite double-digit
unemployment. Decoupling from reality?

~~~
toomuchtodo
[https://www.reddit.com/r/wallstreetbets/comments/ghcfn5/dddd...](https://www.reddit.com/r/wallstreetbets/comments/ghcfn5/dddd_the_20102020_liquidityfueled_asset_bubble/)
(ignore the subreddit, it's actually an excellent analysis about how liquidity
operations are inflating asset values)

~~~
stx
I wonder what the US going into a deflationary spiral would mean for real
estate like rental houses? When economists say deflationary spiral do they
mean prices of assets (like houses) would fall?

~~~
mindslight
When economic priests invoke the deflationary spiral, they mean some ambiguous
boogeyman that you're supposed to be scared of so they can keep printing money
and handing it to the politically connected, as they're doing here. Deflation
is the _natural state of things_ , as we are continually figuring out how to
be more efficient. We've had extreme deflation in the technology industry
going on _several decades_ , and the results have been fantastic. It is only a
bad thing for the slavedrivers that want to keep everyone working full time
doing fake jobs.

~~~
toomuchtodo
Underrated comment. Need a tech accelerator that is the inverse of the Fed,
optimizing for minimum employment instead of maximum employment (one of the
Fed's two mandates).

~~~
mindslight
Every accelerator, VC firm, corporation, division, manager, line worker, and
homemaker is _already_ optimizing for minimum employment. Human ingenuity at
work - seeing patterns for where improvements can be made to ultimately
achieve more. Even a guy laying on a couch watching football is trying to
figure out how he can get another beer without having to get up.

Then the Federal Reserve comes along, declares all of our progress
problematic, and manipulates the currency we transact in to make our progress
invisible to each other.

------
blackrock
Ahh.. the hypocrisy of the American government.

They continually accuse other countries of manipulating their currency, of
creating fake stock markets, of all kinds of financial shenanigans.

And then, when crisis hits America, 3 times in the past 20 years! What does
America do? The exact same thing that they accuse other countries of doing.

You should realize that by doing this, that America will never return to a
normalized system, where homes are affordably priced for the average American.

What ever happened to the invisible hand of the free market? It was all just a
lie. Welcome to the Ponzi scheme, called the American financial system.

~~~
maxk42
The Federal Reserve is not a part of the government. It's a private entity.

~~~
apta
Which is so ironic to leave the economy of a country up to the whims of a
private entity, where the people running it indulge in parasitic and immoral
practices (interest/usury) to always profit off of the backs of people.

------
jb775
My instinct tells me we are headed towards massive inflation, and if your
investments aren't parked in the right place (or if you don't really have
investments), you're in for a rude awakening. I don't see how it's in anyone's
best interest (besides the bankers collecting fees) for the Federal Reserve to
get in bed with ETF management companies.

~~~
naveen99
It’s the Heisenberg uncertainty principle of modern monetary theory:
Increasing tax lowers inflation. inflation via government spending is a
negative tax.

------
jsdevtom
This will just inflate the everything bubble further than it has ever gone
before. Terrible news.

------
nickysielicki
I am so angry, and we are so fucked.

~~~
toomuchtodo
I've been told by a professional it's unhealthy to tell someone else how to
feel, so let me instead offer a suggestion: take a deep breath and think
differently about the situation, and seek out opportunities to still profit
from manipulations sanctioned by the economic system.

For example, those of us who knew this was coming bought certain ETFs to front
run the Fed and BlackRock, knowing they were going to begin purchasing them.
Continue to seek out such opportunities in the future. The game is "rigged",
so play along.

"When you can't change the direction of the wind, adjust your sails."

~~~
lisper
> those of us who knew this was coming

How does one join that club?

~~~
toomuchtodo
Consume relevant data from reliable sources. The Fed was very clear they
intended to provide "unlimited support" to "maintain liquidity" when they made
their March statements.

> When asked if the Fed would run out of ammunition to support the economy,
> Powell said no.

> “When it comes to this lending, we're not going to run out of ammunition.
> That doesn't happen," he said.

TLDR "Okay, so you're going to buy everything you can without any
discrimination about price to hack around fiscal policy failure, good to
know."

[https://www.federalreserve.gov/newsevents/pressreleases/mone...](https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm)
(Federal Reserve announces extensive new measures to support the economy)

[https://www.usnews.com/news/us/articles/2020-03-26/fed-
chair...](https://www.usnews.com/news/us/articles/2020-03-26/fed-chair-powell-
says-will-provide-nearly-unlimited-lending) (Fed Chair Powell Says Will
Provide Nearly Unlimited Lending)

~~~
stx
The issue is that those "in the know" will just rig it in some other way as
soon as the peasants start to try to mimic them. Its a cat and mouse game and
we are not all that sophisticated to play it.

I do expect that at some point this pumping of economies (by increasing money
supply) will fail miserably. I am not really that confident of how to position
myself to profit or at least not loose my wealth when it happens.

My position is in mostly in real estate that I purchased during the last
housing bust period. Hopefully that turns out.

~~~
chrisco255
Yeah so assets that are outside of the system altogether are a good hedge.
This is why gold & Bitcoin are good hedges against the Great Monetary
Experiment of 2020. Own the physical gold and hold your own keys.

------
pczy
As far as I'm aware, the arbitrage mechanism works both ways. Continuing your
analogy, authorized participants are able to trade the underlying turkeys for
new tokens, or redeem the tokens for turkeys. When the price of a token is
bidded up, its price becomes attractive relative to the turkeys. Authorized
participants buy the underlying turkeys, create new tokens and then sell those
tokens to take a risk free profit. This continues as long as there is a price
mismatch, and ensures that ETF prices are in sync with the underlying assets.

------
Endlessly
Anyone have a graph of the capital injections (or capital equivalent valuation
at the time of actions) that the US and other countries have taken since 2020
started?

~~~
ajsharp
The Fed balance sheet is probably the most direct way to look at the aggregate
liquidity injections:
[https://www.federalreserve.gov/monetarypolicy/bst_recenttren...](https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm)

------
andrewla
Now that the "audit the Fed" members of Congress have been effectively
neutered by "crying wolf" too often, the Fed is content to just wander around
eating villagers, knowing that nobody has any interest in enforcing the Fed's
charter or imposing any restraints on their behavior.

------
programmertote
As someone who have a very basic understanding of economy and the Fed's role
in managing it, does this mean the federal government is owning more and more
share of private companies (at least their debt portion)? Does that mean, the
US, which is supposed to be a very capitalistic nation, is now trending toward
the economy operated by quasi-government-owned companies?

Is it imaginable that eventually, the US government owns the majority stake in
these quasi-government-backed companies, moving the US economy further away
from market-based capitalism?

~~~
MattGaiser
> does this mean the federal government is owning more and more share of
> private companies (at least their debt portion)?

Of their debt portion, yes.

> is now trending toward the economy operated by quasi-government-owned
> companies?

No, as debt is not usually ownership (there are structures that allow it to
become that). Companies just increasingly owe the government money, but that
would happen under any traditional bailout scheme anyway.

> Is it imaginable that eventually, the US government owns the majority stake
> in these quasi-government-backed companies, moving the US economy further
> away from market-based capitalism?

Majority? That is a long long ways away. Top shareholder? It is true in Japan,
so it is plausible. The Fed is not buying stocks at the moment.

[https://asia.nikkei.com/Business/Markets/Bank-of-Japan-to-
be...](https://asia.nikkei.com/Business/Markets/Bank-of-Japan-to-be-top-
shareholder-of-Japan-stocks)

The more concerning issue is that ETFs change management fees. Why is the Fed
supporting management fees instead of buying the debt directly?

~~~
programmertote
Thanks for answering my questions!

I can't agree more with your last sentence. Why Blackrock? I really want to
read their reasoning of using Blackrock as a broker other than it being the
biggest fund manager. The Fed is big enough and why can't it buy the bonds
directly. Maybe their weak excuse is that they can execute it via Blackrock
ETFs quickly. But still...then why not spread it evenly over other
institutions like Vanguard, Fidelity, etc.?

~~~
kube-system
FWIW, the US Government also tapped Blackrock to help with the 2008 crisis.
This article talks a little bit about that choice then:

[https://www.vanityfair.com/news/2010/04/fink-201004](https://www.vanityfair.com/news/2010/04/fink-201004)

------
neonate
[https://archive.md/Uwedm](https://archive.md/Uwedm)

------
dsalzman
For those who like to listen and not read. Here's an automated podcast of this
newsletter.

[https://anchor.fm/talking-money-stuff](https://anchor.fm/talking-money-stuff)

------
zelly
This is not news. It was priced in when the S&P500 rose from 2300 to 2900. Now
the market is starting to (already has?) priced in the Fed straight up buying
equities.

~~~
astrea
I'm not exactly a financial expert, but I feel like any stock market news is
accompanied by a fleet of "This was already priced in" comments.

~~~
zelly
Legitimate shocks are not. For example, when Apple announces bad earnings or
as a more extreme example, 9/11.

------
dznodes
So will smart investors now just follow the FED and invest in whomever they
are propping up? If so they will pick the winners and the losers in every
market.

~~~
odonnellryan
No, because it's possible some assets are now overvalued because of this news.
This news is possibly positive for the market in general, but if you go buy
corporate bond ETFs right now it doesn't mean you'll make money, and it
definitely does not mean you'll make money compared to buying a total market
ETF or something similar.

------
dznodes
Too Big To Survive = too big to fail

------
dilandau
Ignoring the awful attempt at conversational writing, this is bad news for
Americans in the long term.

Short term we add liquidity, allow hedge funds to delever, and prop up a
market everyone wants to crash. Longer term the taxpayers (individuals and
American businesses) are going to be eating the cost.

This bailout makes 2008 a blip on the radar. It's going to take decades to
play out.

~~~
lainga
Well, I'm sorry if you don't like Matt Levine's style, but he's been at his
attempts for many years now and it's what distinguishes him from the rest of
the regular columns. I think to the point where if anyone else at Bloomberg
tried it, they'd be accused of a game stab at Money Stuff. So maybe he's doing
you a service...

