So: my investments remain in very bad shape, inflation skyrockets, meaning my current net worth as well as future earnings are far lower. What does this help someone in personal terms?
Federal Reserve pledges asset purchases with no limit to support markets
41–50 of 368 posts
Re: Federal Reserve pledges asset purchases with no limit to support markets
#42Earlier quoted context omitted.
Why can’t they survive by issuing corporate bonds? And as far as I know this Fed policy isn’t to buy failing stock it’s to inject cash overall through treasury bonds, since the Fed isn’t allowed to buy stock.
Because: 1. Nobody would buy them. 2. Small biz doesn't have access to corporate paper markets, even in the best of times.
How does the current Fed strategy help small business right now? If anything, it seems like this strategy will leave larger companies in a position to soak up those small businesses' market share when this is all over.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#43Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…
> Keep in mind they're only able to buy US treasuries and mortgage backed securities. It's those MBS that were the real problem. Total panic on Wall Street with those, because everyone is so heavily tied into them and with all these unemployed people, foreclosures are going go through the roof. Now that they can offload them to the Fed instead of trying to sell them for pennies on the dollar, it's all champagne and c…
There's already a 2 month freeze on foreclosures. If they give checks to Americans, it'll go to mortgages most likely.
This is absolutely bonkers territory. 10,000 years from now, I wouldn't be surprised if archeologists find money between the rock layers.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#44I'm afraid this is another wealth grab similar to 2008 but x10 bigger. What was an international health emergency turned into another large scale robbery of the common folks.
Could you elaborate on how its a wealth grab?
Re: Federal Reserve pledges asset purchases with no limit to support markets
#45Earlier quoted context omitted.
and BOJ https://www3.boj.or.jp/market/en/menu_etf.htm The scale of BOJ's ETF purchases is quite something.
A foreshadowing of all developed country central banks’ actions. It’s only a matter of time before the Fed, BOE, and the ECB do so at similar scale. Incredibly disappointing as an educated investor that you must be judicious about asset acquisitions and allocations, and yet central banks just make the money printer go brrrrr when they deem it necessary (something, somewhere is always “too big to fail”).
What would you prefer? 20% unemployment?
Anyway, central banks don't really do asset allocation -- they buy the least risky assets they can. Their real goal is to keep the currency from deflating.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#46I'm afraid this is another wealth grab similar to 2008 but x10 bigger. What was an international health emergency turned into another large scale robbery of the common folks.
Could you elaborate on how its a wealth grab?
Short:
There are money runs on funds causing liquidity issues. Funds sell assets to market makers for cash to give rich people their money. This causes a downwards spiral and asset prices plunge.
Now, the fed will continue to buy assets (eg. but not limited to corporate bonds which have tanked and taken out a couple firms and MMs) so that rich people can liquidate their assets.
We will be bag holders as the fed will own corporate bonds that – frankly – the existing financial system players expect to default. We take the hit and own junk so that wealthy people can extract money now.
This is the high level to my knowledge. Please add more colour and correct me if there are things that I'm missing :)
Re: Federal Reserve pledges asset purchases with no limit to support markets
#47The USA just went Zimbabwe
Absolutely terrible comparison.
The Zimbabwean dollar is not the world's reserve currency. Zimbabwe cannot park a naval fleet off the coast of any country that tries to move away from the Zimbabwean dollar, or direct the worlds largest banks to freeze assets, or apply crushing economic sanctions.
The US is probably the only country in the world that can print money without runaway inflation, and I don't doubt that we will maintain dollar hegemony with force if needed.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#48Earlier quoted context omitted.
A foreshadowing of all developed country central banks’ actions. It’s only a matter of time before the Fed, BOE, and the ECB do so at similar scale. Incredibly disappointing as an educated investor that you must be judicious about asset acquisitions and allocations, and yet central banks just make the money printer go brrrrr when they deem it necessary (something, somewhere is always “too big to fail”).
What would you prefer? 20% unemployment? Anyway, central banks don't really do asset allocation -- they buy the least risky assets they can. Their real goal is to keep the currency from deflating.
Whoa there with the false equivalency. Helicopter money would be more helpful than propping up the wealth of the top wealth brackets using price floors through broad scale asset purchases. Literally give away hundreds of billions of dollars to citizens who will spend it right this minute. Have the government be economic demand of last resort to steady the ship until people can actually move about again. There will be no inflation to speak of due to how GDP has plummeted over the last few weeks.
Monetary velocity > asset price protection. The stock market isn’t the economy, people producing, consuming, and exchanging fiat in the process are.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#49Earlier quoted context omitted.
It stops the stock market slide. Which is more valuable than political talking points. Eventually these bankers are going to start doing some math and see that with 0% interest rates and unlimited firepower on Treasuries, there’s going to be massive pent up demand after this medical crisis is solved. Money will be lent to everyone, including airlines and leisure companies because there’s simply no where else to put t…
I think it's just as likely that the markets will simply stop performing any sort of useful price discovery function, leading to huge misallocations of productive resources -- resources we desperately need right now.
That honestly happened a while back with the shift to longer periods of VC funding.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#50Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…
"Fed to lend against stocks and bonds in bid to stabilize markets"
https://www.ft.com/content/cf485398-689d-11ea-800d-da70cff6e...