Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp...
by ikeboy on Thursday June 04, 2020 @05:36PM
(#23422152)
Somewhat, but to make that argument you'd have to show what percentage they're buying and how prices have moved. I don't think there's evidence of a large effect currently.
Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp...
by loeg on Friday June 05, 2020 @02:45PM
(#23432232)
That wouldn't be conclusive, as one could readily make the argument that prices would have fallen without the Fed support.
The logic here is armchair economics 101: supply and demand. The Fed is propping up demand.
Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp...
by ikeboy on Friday June 05, 2020 @03:03PM
(#23432482)
Econ 101 distinguishes between buyers with market power and buyers without.
You also need to distinguish between the expectations channel and the purchase channel. The Fed announcing it's going to pump money into the economy decreases expectations of a severe ongoing recession, which reduces the probability of default, which raises bond prices.
In some trivial sense, sure, but not really; by pouring tons of money into these funds, it is moving the market price. Real market prices are below the levels propped up by the Fed.