But they are now, and that's what matters. When prices fell the first time, it didn't even take a week before the government passed the largest stimulus ever, 80% of which went to corporations. Investors know that the government will do anything to underwrite their risk.

The mandate of the fed is to have maximum employment and price stability. With the impact of social distancing to businesses there was no other alternative to protect employment rather than fed buying securities so the govt has funds for fiscal stimulus to prop up employers that might otherwise go bust (and may still).

The stimulus is intended to protect jobs and livelihoods, not to react to movements in the stock market (even if the current president seems to think so)

Agreed. The entire exercise has been about mitigating chaos. A freefalling stock market _and_ overwhelmed hospitals would cascade badly. Any lives saved was a byproduct.

For better or worse, agreed or not, the US' gov diverted - for now? - an implosion. The Fed can't eliminate risk. It also can't guarantee future returns.

False, most of the stimulus went to 1) direct payments to the bottom 90% and 2) small businesses with less than 50 employees.

That was a later program. You're misunderstanding because he used the word "stimulus". There were multiple rounds. The first, was a huge corporate giveaway.

The first one was .4% the size of the cares act and it was for healthcare, not corporate giveaways:

More than $3 billion for "research and development of vaccines, as well as therapeutics and diagnostics"

$2.2 billion "in public health funding to aid in prevention, preparedness and response efforts — including $950 million to support state and local agencies"

Almost $1 billion for "medical supplies, health-care preparedness, Community Health Centers and medical surge capacity"

$1.25 billion to fight COVID-19 internationally.

source: https://en.wikipedia.org/wiki/Coronavirus_Preparedness_and_R...

You are correct. The original commenter was incorrect in the assertion of the order of the bills "passing" - "it didn't even take a week before the government passed the largest stimulus ever".

I'm referencing the CARE Act.

https://en.wikipedia.org/wiki/Coronavirus_Aid,_Relief,_and_E...

Granted the one you reference was passed prior, the CARE Act was introduced first. The CARE Act was never in danger of being dropped, as the market was counting on it (it is filled with pork).

https://www.federalreserve.gov/newsevents/pressreleases/mone... , the fed is buying junk corporate bonds

They announced their intention but I don't believe they have actually bought any yet [0, 1]. Also, their balance sheet shows they are buying predominately U.S. Treasury securities and Mortgage-backed securities [2].

[0]: https://www.cnn.com/2020/05/04/investing/fed-junk-bonds-etfs...

[1]: https://twitter.com/TruthGundlach/status/1256352949787176960

[2]: https://www.federalreserve.gov/releases/h41/current/

Nah. That doesn't guarantee a return. It might mitigate the downside but there's still risk. No one takes on risk to break even.

You invest for a return. Stopping a slide yesterday has little to do with getting a return tomorrow.

The future. New products. New ideas. Etc. That's where a return comes from. Not the Fed.

> Investors know that the government will do anything to underwrite their risk.

The FED only steps in for once in a lifetime risks that impacts the market broadly. Any risk specific to individual firms, which is all the risk between these broad market events.

These once-in-a-lifetime risks have been happening about every 10 years lately. It's also important to remember that there are sectors of the economy receiving huge subsidies. One of the most striking is banking, which derives a good proportion of its value from the federal government guarantees on deposits[0].

[0]http://www.adriendavernas.com/papers/valuationofbanks.pdf

> The FED only steps in for once in a lifetime risks that impacts the market broadly.

Those risks overlap. It's not effectively once-in-a-lifetime, as of the last century.