Market Philosophy: What You Got?

This is all mediated through the financial system. The Fed buys the ETFs from big banks. And they are using a sponsor—in this case, asset manager giant BlackRock—to execute its purchases. Here’s a convenient list of the sales from the banks and the ETFs being held, though another sheet in the spreadsheet is more comprehensive for the ETF purchases.

Do you see the word “iShares” appearing in eight of the ETFs listed? Yeah, well that’s BlackRock. Of the $1.58 billion in holdings, $746 million come from BlackRock ETFs. That’s about 47 percent of the total. So BlackRock, as the sponsor for the Fed, made 47 percent of its purchases in BlackRock ETFs. A separate chart lists aggregate holdings of $1.31 billion. BlackRock ETFs make up about 48 percent of them.

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ETFs from State Street or Vanguard (the other two in the Big Three asset managers) track corporate bonds as well as BlackRock’s. Yet BlackRock ETFs comprise nearly half of the purchases thus far. Since they’re administering the purchases, it’s natural to wonder about a conflict of interest.

Investors may be lemmings sometimes but they’re not idiots. They’re correct to figure that a corporate bond ETF-buying program directed by one of the leading sellers of corporate bond ETFs will work out in the way described. So we’ve seen huge inflows into BlackRock corporate bond ETFs. “Traders Pour $1 Billion Into Biggest Credit Fund ETF to Front-Run Fed,” blares this Bloomberg headline, and to mildly translate, it means that investors, knowing that the Fed is about to buy a lot of the BlackRock iShares Investment-Grade Corporate Bond ETF (known as LQD), dumped $1 billion into it in anticipation. Those inflows came on March 23, the day that the Fed announced it would buy corporate bond funds. This kept growing: by May 20, LQD had $46.7 billion in it, compared to 28.2 billion on March 19.

Z wrote

I do not pay any attn to your index Harv

Z wrote

You are probably about 15% below

Harvey wrote

.

Z wrote

You are probably about 15% below

5% down since the late Feb high for stocks. I'm 40% in bonds.

Z wrote

This market is nuts

nepa wrote

Z wrote

This market is nuts

On November of 2006 the first alarm bells rang for what we now call the Great Recession.  The market stood just south of 12k.  We bottomed out just North of 6.6k in March of 2009.  We didn't recover to the pre-crisis level until May of 2012.

Quantitatively, on a number of levels, the current market behavior defies traditional wisdom.  That should say something in terms of risk.

I just bought 15 acres of land... seems like a safer investment than our national casino we call equity markets.

x10003q wrote

Traditional financial wisdom rarely encounters a pandemic. Most companies will come out of this leaner.

Good luck with your land.

x10003q wrote

. Most companies will come out of this leaner..

nepa wrote

demand will suffer as the effects of the stimulants start to wane.  

witch hobble wrote

nepa wrote

demand will suffer as the effects of the stimulants start to wane.  

This has not been my experience.......oh, wait....you’re talking about the stock market. Carry on.

nepa wrote

x10003q wrote

Traditional financial wisdom rarely encounters a pandemic. Most companies will come out of this leaner.

Good luck with your land.

Thanks x

You're right, but I think we're looking at a situation where it will take a few years for demand to recover.  Some sectors remain unaffected.  A few sectors may even grow faster than before.  All that being said, aggregate demand will suffer as the effects of the stimulants start to wane.  High unemployment and various fear related aspects will also constrain overall demand in the mid to long-term.  The equity markets appear to be moving contrary to the current economic outlook.

I think we're in for a crazy ride.

Z wrote

Well there goes this thread into the dumper

Let’s me put it this way
If you care about your retirement accounts there is only one choice in this election to make
It would also be best for the market that the status quo remains in regards to control of house senate and WH
If all three go one way And should a certain the nutty lady who falsely claimed to be an Native American becomes Sec Tres you can kiss your retire savings bye bye.  We would see the Dow below 15k
If that happens buy gold and guns

Z wrote

Well there goes this thread into the dumper

Let’s me put it this way
If you care about your retirement accounts there is only one choice in this election to make
It would also be best for the market that the status quo remains in regards to control of house senate and WH
If all three go one way And should a certain the nutty lady who falsely claimed to be an Native American becomes Sec Tres you can kiss your retire savings bye bye.  We would see the Dow below 15k
If that happens buy gold and guns