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(CNBC)   Federal Reserve to buy individual corporate bonds. Investors respond by buying individual corporate stonks   (cnbc.com) divider line
    More: News, Bond, Debt, Bond market, Finance, Financial markets, individual corporate bonds, Federal Open Market Committee, Federal Reserve System  
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772 clicks; posted to Business » on 15 Jun 2020 at 4:03 PM (24 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



Voting Results (Smartest)
View Voting Results: Smartest and Funniest

 
2020-06-15 4:24:52 PM  
19 votes:
More welfare for the wealthy.
 
2020-06-15 4:24:42 PM  
19 votes:
Picking winners and losers, etc. etc.
 
2020-06-15 4:27:34 PM  
14 votes:
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Keep that sugar rush going. What's the worst that could happen? Well, other than crashing the stock market so bad it makes crashing to 19,000 look like a joke.
 
2020-06-15 5:02:48 PM  
11 votes:
Imagine if we supported the poor and unemployed as vigorously as we protect the bottom line of corporations.
 
2020-06-15 4:40:57 PM  
11 votes:
Brought to you the party that brought you   "no socialism"  The government buying junk bonds is about as socialist as you can get. A fourteen year old could figure how to exploit this for profit. Get loan, declare bankruptcy. Profit.
 
2020-06-15 5:28:41 PM  
9 votes:
This is f*cking horsesh*t.  The Fed has lost its mind.  It was shady enough buying bond ETFs but now they're going to straight buy corporate paper.  Uh huh and what happens when Hertz still goes bankrupt?  Who takes the haircut, because I'm pretty sure the taxpayer didn't ask for this one. Or are you going to keep them afloat at the expense of Avis shareholders and price discovery?  How do you decide which companies you're going to buy and which ones you're going to let fail, call your buddies at Blackrock and GS?
 
2020-06-15 5:43:32 PM  
8 votes:

relaxitsjustme: This is f*cking horsesh*t.  The Fed has lost its mind.  It was shady enough buying bond ETFs but now they're going to straight buy corporate paper.  Uh huh and what happens when Hertz still goes bankrupt?  Who takes the haircut, because I'm pretty sure the taxpayer didn't ask for this one. Or are you going to keep them afloat at the expense of Avis shareholders and price discovery?  How do you decide which companies you're going to buy and which ones you're going to let fail, call your buddies at Blackrock and GS?


The Federal Reserve does not spend taxpayer money.  They are a Central Bank - when they want money, they wish it into existence and use it to purchase financial assets.  When those bond coupons are paid back to the Federal Reserve, the money is sent back into the void.  If a bond that was held on the FR balance sheet were to default, it would represent a permanent expansion of the money supply.
 
2020-06-15 4:58:39 PM  
8 votes:

sgarri7777: Brought to you the party that brought you   "no socialism"  The government buying junk bonds is about as socialist as you can get. A fourteen year old could figure how to exploit this for profit. Get loan, declare bankruptcy. Profit.


The Federal Reserve is not really "The Government".  They are a Central Bank that is supposed to act as a lender of last resort during a crisis.  The normal way of doing this is by lending to financial institutions that would then lend to these companies (and take a cut along the way) - this is just cutting Wall St. out of the direct money flows.
 
2020-06-15 4:44:10 PM  
7 votes:

TotallyHeadless: Distressed individual corporate bonds AKA Junk Bonds


FTFA:

Under the latest guidelines, the Fed said it will buy, on the secondary market, individual bonds that have remaining maturities of five years or less. Those purchases will go along with the ETFs the Fed already has been buying, which are balanced toward investment-grade indexes but also include some junk bond funds that track debt which had been investment grade before the crisis but had been downgraded after.

And

Issuers must have been rated BBB- or /Baa3

That's not terribly junk-y and the targets seem to be companies that were deeply effected by the pandemic, which isn't a terrible idea.  I'm more shocked that stonks went *up* on this news - it should be terrifying that the Federal Reserve is doing completely unprecedented shiat.
 
2020-06-15 4:30:42 PM  
7 votes:
I don't want to pay for that garbage!
 
2020-06-15 5:33:13 PM  
6 votes:
Christ.

When do we become adults & eat our @&#%ing vegetables?
 
2020-06-15 5:35:05 PM  
5 votes:
Some comments I picked up off Twitter:

All your #bonds are belong to us

Can't wait for the much needed liquidity injection into the Pokémon trading card market

But we can't afford healthcare for all.

I have a 1991 Tahoe with 247,000 miles on it. Maybe I can sell it to The Fed

Income inequality, nope never heard of it
 
2020-06-15 5:06:20 PM  
5 votes:
Back in my day we called this "picking winners and losers"
 
2020-06-15 8:20:36 PM  
4 votes:
We are whitnessing the beginning of the currency failure. They went from gov bonds, to ETFs to now corporate bonds. In the last 3 months they have printed and bought 3.1T in assets and added it to their balance sheet. All else being equal, if the markets were trading at pre covid levels, we are way worse off today just based on the printing.

But every central bank is doing this. It's a race to print our way out of this. And that will not end well. Tomorrow will be an odd day too. Powell speaks to Congress at 10am (does it twice a year on top of the normal 8 FOMC meetings). But now he might get questioned on his actions.

Should be a doozy.
 
2020-06-15 5:05:41 PM  
4 votes:
I see we've abandoned Too Big To Fail for Too Sycophantic To Fail.
 
2020-06-15 4:13:53 PM  
4 votes:
Distressed individual corporate bonds AKA Junk Bonds
 
2020-06-15 4:46:16 PM  
3 votes:

sgarri7777: Brought to you the party that brought you   "no socialism"  The government buying junk bonds is about as socialist as you can get. A fourteen year old could figure how to exploit this for profit. Get loan, declare bankruptcy. Profit.


But, see, it's not socialism when the 1% are the beneficiaries, because... because... TRICKLE DOWN ECONOMICS!  Yeah... that's it.  These people are the JOB CREATORS, after all.
 
2020-06-15 10:16:44 PM  
2 votes:

lincoln65: GregInIndy: Christ.

When do we become adults & eat our @&#%ing vegetables?

Economics is not a morality play.


I've said this before: We possess a knowledge called macroeconomics. We understand such concepts as inflation and recession; Deficit and surplus gov't spending. On an abstract level, we know what we need to do. We just don't want to do it. that would be unpleasant in the short term.

It's similar to someone on a diet eyeing a piece of cake. In the short term, he really wants that cake, but in the long term, he knows he will live longer if he instead eats fruits and vegetables and sticks with his diet and exercise through the long haul.

In the long term, it would be nice if we stopped printing more money every time we wanted to spend more. It would be nice if our government saved during times of plenty so we'd have more when times were bad.

But this cake is so delicious.
 
2020-06-15 7:12:18 PM  
2 votes:

OptionC: TotallyHeadless: Distressed individual corporate bonds AKA Junk Bonds

FTFA:

Under the latest guidelines, the Fed said it will buy, on the secondary market, individual bonds that have remaining maturities of five years or less. Those purchases will go along with the ETFs the Fed already has been buying, which are balanced toward investment-grade indexes but also include some junk bond funds that track debt which had been investment grade before the crisis but had been downgraded after.

And

Issuers must have been rated BBB- or /Baa3

That's not terribly junk-y and the targets seem to be companies that were deeply effected by the pandemic, which isn't a terrible idea.  I'm more shocked that stonks went *up* on this news - it should be terrifying that the Federal Reserve is doing completely unprecedented shiat.


Stocks went up on the news that almost every company is too big to fail now.
 
2020-06-15 5:59:47 PM  
2 votes:
The greatest FREE MARKET on Earth. Glad I sold my puts at open. Another run back to 320-25... this is nuts.
 
2020-06-15 5:56:53 PM  
2 votes:

relaxitsjustme: I have a 1991 Tahoe with 247,000 miles on it. Maybe I can sell it to The Fed


2009 has entered the chat.
 
2020-06-15 5:49:46 PM  
2 votes:

OptionC: sgarri7777: Brought to you the party that brought you   "no socialism"  The government buying junk bonds is about as socialist as you can get. A fourteen year old could figure how to exploit this for profit. Get loan, declare bankruptcy. Profit.

The Federal Reserve is not really "The Government".  They are a Central Bank that is supposed to act as a lender of last resort during a crisis.  The normal way of doing this is by lending to financial institutions that would then lend to these companies (and take a cut along the way) - this is just cutting Wall St. out of the direct money flows.


Yea your right but when these bonds go belly up who is paying for it? No bank without government backing would make those loans in the first place. The days of just printing money to kick the can down the road is going to come to an end.  We may be able to go a few more years but this too big to fail is not going to end well.
If we let all these companies go bankrupt we're screwed. If we let these companies with massive debt unrelated to there basic business model off the hook we're screwed too. I guess you gotta pick your poison.
 
2020-06-15 5:16:28 PM  
2 votes:
At this rate, we won't have to worry about toilet paper, we can just use dollar bills.
 
2020-06-16 8:17:28 AM  
1 vote:

lincoln65: GregInIndy: Christ.

When do we become adults & eat our @&#%ing vegetables?

Economics is not a morality play.


We as a people used to enjoy and indeed revel in our thrift and frugality because we knew it was the key to both our individual and mutual long-term prosperity.

Now it's take for yourself while you can and screw the future. It isn't "morality" to plan and go without a bit now to make something even bigger and better happen in the future. It's just smart planning. And those who are good at doing it? They're the ones who end up better-off in the long term.
 
2020-06-16 6:38:49 AM  
1 vote:

flondrix: OptionC: The Federal Reserve is not really "The Government". They are a Central Bank that is supposed to act as a lender of last resort during a crisis. The normal way of doing this is by lending to financial institutions that would then lend to these companies (and take a cut along the way) - this is just cutting Wall St. out of the direct money flows.

Then they don't have to do what Trump tells them to do, do they?


Trump threatened to fire Powell and ruin his reputation if he didn't stop gradually increasing interest rates and instead put them close to zero to create a temporary Stonks bubble.  Now Trump is demanding Powell buy Stonks directly, junk bonds too.
So no, the fed isn't an independent thing, maybe we should elect the board members, separate them from the executive branch oversight, and require qualifications.
But that is the kind of nuanced political discussion we can't have in this country anymore.  Just watch idiocracy if you have any questions.
 
2020-06-15 5:24:25 PM  
1 vote:
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