8 ms·

BlackRock Is Bailing Out Its ETFs with Fed Money and Taxpayers Eating Losses

108 points by jules-jules 6y ago

easytiger 6y ago
Quality source there
- masnaox 6y ago
  wonder if publishing the truth in this way before anybody else is the ultimate form of damage control. in this case, its highly effective
- jules-jules 6y ago
  What can you say about the substance of the article? Is it wrong in your view?
  - dv_dt 6y ago
    For one, when it says "the taxpayers will be eating the losses".. it raises some flags for me. Might just be hyperbole, but it also suggests a possible misunderstanding of the fundamentals of how the Fed operates.
    - rmrfstar 6y ago
      There is nothing magical going on. Step 1: Fed conjurs D dollars into existence Step 2: Fed trades D dollars for a stack of paper Step 3: Fed trades paper stack for (1-r)D dollars The net effect is the Fed giving away rD dollars. If the Federal government gives away any dollars, it is taxpayers footing the bill.
    - jules-jules 6y ago
      Why is this hyperbole? My understanding is that the Fed has set aside $454 billion of taxpayers’ money via the CARES act to absorb the losses in the bail out programs set up by the Fed. And this has more detail, from an earlier article [1] Senator Pat Toomey of Pennsylvania asked Quarles to clarify if the taxpayers’ money ($454 billion handed over by the Treasury to the Fed, which will then be used as equity in Special Purpose Vehicles set up by the Fed and leveraged up to $4.54 trillion to make loans and purchases of toxic assets on Wall Street banks’ balance sheets), is in fact going to be used to absorb losses on what the Fed is taking off the balance sheets on Wall Street. Quarles responded as follows: “The Treasury has the fiduciary responsibility, if you will, to the Congress for the use of the funds that are appropriated to it. So I wouldn’t want to speak for them as to how that equity should be handled. But it is true that in the construction of the 13(3) facilities [Fed’s emergency programs] that use Treasury equity, the Treasury equity is there to insure the Fed, which statutorily cannot take losses, has to be sure that it won’t, is there to insure that that cushion exists for the funding portion of the facility.” Fed Chairman Jerome Powell has already admitted that the $454 billion is to be used to absorb losses that it anticipates it will take. [1] https://wallstreetonparade.com/2020/05/wall-street-banks-paid-11-7-billion-in-dividends-to-investors-this-year-while-taxpayers-must-absorb-454-billion-of-bank-losses/ https://wallstreetonparade.com/2020/05/wall-street-banks-pai... Does this not imply exactly that, the taxpayers will be eating the losses?
      - ikeboy 6y ago
        The fact that $454 billion was set aside to eat losses does not imply that there will be $454 billion of losses, or even that there will be any losses. The Fed is buying bonds at market prices and getting paid interest - the only way they'd lose money is if the bond market as a whole loses money / is overvalued, and specifically is overvalued by more than the interest rate.
        chishaku 6y ago
        The bottom line is that taxpayers are on the hook. Since 2008, we're desensitized to this level of intervention. What will come of it? Who knows? But at least some recognize the risk in such uncharted territory. “Socialising of this risk is fraught with moral hazard” - Daniel Loeb “Today’s trading levels of stocks and bonds reflect ‘thumb on the scale’ valuations driven by persistent and massive government asset purchases and zero percent (or lower!) short-term policy rates, as well as an essentially unlimited tolerance for risk." - Paul Singer
        ikeboy 6y ago
        It's irresponsible to say the taxpayers are eating losses that hasn't happened yet and may never happen. Taxpayers didn't lose in the TARP bailout, despite similar warnings at the time. And the other side of this is the fact that without any action, the economy will collapse further than it already has, and taxpayers certainly won't be in the black if that happens.
        chishaku 6y ago
        > It's irresponsible to say the taxpayers are eating losses I didn't say they are eating losses, I said they are on the hook. Give me $1000 from your bank account. Given my recent performance, I can generate some decent return. What do you say? > the economy will collapse further than it already has With all due respect, this is my larger issue. You're not necessarily wrong. But we have no political imagination or will to think beyond what is forced down our throats. Either the Federal Reserve saves us all or we are doomed.
    - chishaku 6y ago
      > also suggests a possible misunderstanding of the fundamentals of how the Fed operates. Translation: "You plebes just don't understand." Typical Fed policy apologia.
    - ericmcer 6y ago
      Unless we are rewriting how our economy works, the Fed should have a neutral balance sheet, i.e. all the debt it creates by purchasing bonds/securities/etc. should be paid off eventually. Any Treasury securities are going to be paid off by taxpayer money. If we are entering a new type of economy (which we have been since 2008), and the Fed is no longer worried about having an ever expanding balance sheet, then we are entering modern money theory territory, which is scary to me because we completely lack the oversight needed.
- dv_dt 6y ago
  If you want a detailed technical view of what the Fed is doing I highly recommend Nathan Tankus' blog. Though I don't think he's specifically covered Blackrock's role. https://nathantankus.substack.com/ https://nathantankus.substack.com/ I'd start with the series "The Federal Reserve's Coronavirus Crisis Actions, Explained" https://nathantankus.substack.com/p/the-federal-reserves-coronavirus https://nathantankus.substack.com/p/the-federal-reserves-cor...
  - hammeiam 6y ago
    Who is that author? He seems to be the "research director" of a student group (MMN) but does he have qualifications?
    - easytiger 6y ago
      He's an ultra left wing, "defund the police", full time twitter posting noise generation machine.
      - dv_dt 6y ago
        I was surpised a little at that, and am personally ok with that, but his expertise on the Fed is pretty much tangential to those views. Tankus has been quoted in places like the Washington Post for his detailed discussion about Fed activities.
- squaresmile 6y ago
  I'm only a random passerby in finance/economics but I have seen a few blogs like this upvoted on HN. Those blogs are usually (or at least advertised to be) run by a single person (in this case, a couple). When I go to the blogs' about pages, that person barely has any experience working in finance or econ. People with past history of making money get predictions wrong all the time and here we are with bloggers who have never been in the game. Come on HN. Surely there are better sources that share these opinions.
  - jules-jules 6y ago
    >When I go to the blogs' about pages, that person barely has any experience working in finance or econ. From the about page: Ms. Martens worked on Wall Street for 21 years. The last decade of her career was spent as an outspoken critic of Wall Street’s corrupt practices, its private justice system and the repeal of the Glass-Steagall Act. (This YouTube video captures Ms. Martens testifying before the Federal Reserve on June 26, 1998 against the repeal of the Glass-Steagall Act.
    - easytiger 6y ago
      > Ms. Martens worked on Wall Street for 21 years If there was any credibility to that it might have mentioned what she did. Plenty of procedural/pm/pa jobs that don't require much holistic knowledge or qualification.
      - jules-jules 6y ago
        Do you think they would allow a low-level position to testify before the Fed? A quick search reveals that Pam Martens worked as a strock broker for what is now CitiGroup for sixteen years. She is the recipient of the Woman of Courage Award from the National Organization for Women and the Susan B. Anthony Award from its New York City Chapter. Her suit, Martens v. Smith Barney, challenging mandatory arbitration for employee grievances, including civil rights-related claims, is in its seventh year in U.S. federal courts [1]. But I am guessing you are not arguing in good faith, as you seem unable to engage with the substance of the article but instead keep attacking the source. But please do let me know if you have any issues with the contents of the article, I would be keen to hear them as you seem to be so interested in its authors. Otherwise I'll leave it at that and won't waste anymore energy on ad hominems. [1]https://multinationalmonitor.org/mm2002/02april/april02interviewmartens.html https://multinationalmonitor.org/mm2002/02april/april02inter...
adrr 6y ago
Never got why the fed is buying ETFs instead of buying corporate paper. Also why isn’t the fed buying new bonds if their goal is to inject liquidity back into the companies. Who are they really bailing out?
- gvhst 6y ago
  The Fed doesn’t do security selection. If the Fed isn’t equipped to analyze and select individuals securities. Additionally selecting individual names is a huge political concern. How do you decide which issues to buy? Personally I’d rathe the Fed buy market indices which are constructed By transparent and well understood processes instead of some opaque self brewed process. Plus the Fed is suppose to stabilize the market as a whole and provide overall liquidity to allow firms to raise money on their own. The Fed isn’t suppose to directly support individual corps. Additionally it’s important to look at how the ETFs work. I believe the ETFs in question here are LQD and HYG for investment grade and high yield respectively. These ETFs track the iboxx indicies for IG and HY. Even if the Fed is buying BlackRocks ETF, this bolsters the prices of the individual bonds, which then moves indices higher, thereby also moving up other provider’s ETFs along with the entire fixed income market. Given this is the case, one should pick the most liquid ETF for each asset class (Ideally all ETFs should be purchased weighted by the NAV or trading volume of each ETF), in that case it would be BlackRocks for US fixed income.
  - nickff 6y ago
    Just to add to your first point, it's much harder to 'game' these pre-existing indices and ETFs than it would be to game some novel and arbitrary selection criteria. These ETFs have been 'vetted' by the market over the course of many years.
  - whatok 6y ago
    The Fed isn't equipped to do security selection so that's why Blackrock is managing this facility. Blackrock is absolutely going to do secondary bond purchases (on the Fed's behalf) once that portion of the facility is up and running. The Fed has also said that they don't want to influence market share of ETFs so that's been interpreted as some sort of benchmark per manager. I believe Blackrock was around 50% of qualifying ETFs outstanding at the time. The Fed published purchases to date last week which has a pretty decent breakdown: https://www.federalreserve.gov/monetarypolicy/files/smccf-transition-specific-disclosures-5-29-20.xlsx https://www.federalreserve.gov/monetarypolicy/files/smccf-tr...
starpilot 6y ago
This is the real looting.
Etheryte 6y ago
For those not familiar with the company name, BlackRock owns iShares, which manages the largest S&P 500 ETF tracked in EUR [1]. This and many other ETFs by their brands are commonly recommended as solid entry points for beginner investors [2]. [1] https://www.justetf.com/en/how-to/sp-500-etfs.html https://www.justetf.com/en/how-to/sp-500-etfs.html [2] https://www.benzinga.com/money/best-sp-500-etfs/ https://www.benzinga.com/money/best-sp-500-etfs/
jules-jules 6y ago
It looks the site is down, here is an archive link: https://archive.is/en5hD https://archive.is/en5hD
anonu 6y ago
Garbage article. This sentence got me: Since BlackRock is allowed to buy up its own ETFs, this means that taxpayers will be eating losses that might otherwise accrue to billionaire Larry Fink’s company and investors What? The sentence indicates a deep misunderstanding of the subject which the author writes about. BlackRock is (mostly) a fund manager: they earn money on assets under management and not (broadly speaking) when the market goes up or down. If the ETFs BlackRock are buying go down, it simply means they are propping up the underlying holdings - the actual corporate bonds. They will then "create" ETF shares and give them to the Fed. Think of the ETF simply as an IOU. BlackRock has also said they will be waiving the ETF fund management fee.
- JumpCrisscross 6y ago
  This article is polemic. For a better-informed (but still critical) perspective, I recommend Matt Levine.
- earth2mars 6y ago
  is this doc on Fed site related to what they are saying. https://www.federalreserve.gov/monetarypolicy/files/smccf-transition-specific-disclosures-5-29-20.xlsx https://www.federalreserve.gov/monetarypolicy/files/smccf-tr... I see BlackRock all over the spreadsheet
  - whatok 6y ago
    Yes, that shows ETF purchases up until the date mentioned. The dollar value of purchases in there for Blackrock ETFs is around 48% which is around their existing market share for qualifying ETFs.
- exclusiv 6y ago
  > they earn money on assets under management and not (broadly speaking) when the market goes up or down Broadly speaking? Ok well what happens to the AUM when the market goes up or down? More or less AUM. More or less money no? Am I missing something? Wouldn't they have a ton to lose during these times? > Today, BlackRock has been selected in more no-bid contracts to be the sole buyer of corporate bonds and corporate bond ETFs for the Fed’s unprecedented $750 billion corporate bond buying program which will include both investment grade and junk-rated bonds. Seems like a nice setup. Especially now.
JauntTrooper 6y ago
This article's tone is wildly conspiratorial. Blackrock is the largest asset manager in the world. They manage $7.4 trillion. They're also one of the biggest providers of low cost index funds for retail investors. There's nothing nefarious about them running the Thrift Savings Plan. It's basically a 401K program for federal government workers (the public sector's equivalent, anyway). It's a really good program with great expense ratios and plenty of passive index funds. The idea that they'd be using employee funds to manipulate the stock market through future purchases is ludicrous. What exactly is "not fully understood" about Blackrock's role in the "outlandish valuations" of Apple and Microsoft? Blackrock is the #2 shareholder in each, after Vanguard, and owns 6.3% and 6.8% respectively. Much of that is in index funds like the iShares S&P 500 ETF or the Russell 1000 Growth ETF.
- whatok 6y ago
  > What exactly is "not fully understood" about Blackrock's role in the "outlandish valuations" of Apple and Microsoft? Blackrock is the #2 shareholder in each, after Vanguard, and owns 6.3% and 6.8% respectively. Much of that is in index funds like the iShares S&P 500 ETF or the Russell 1000 Growth ETF. I don't know what the original post's argument was on this but you could make an argument that the growth of passive investing largely caused by Blackrock and Vanguard has led to stretched valuations in a lot things. The mere fact that these companies make it easier and cheaper to invest means there's more money floating around chasing fewer and fewer shares given less public companies since Sarbanes-Oxley and the rapid growth of PE/M&A.
  - JauntTrooper 6y ago
    The article was insinuating something ridiculous about Blackrock secretly conspiring with global central banks to inflate asset prices. Your argument is a more reasonable one to consider. I hear it sometimes (especially from underperforming active managers), but I haven't seen much evidence of it. It's a seductive line of reasoning -- that passive funds are dumb money that buy at any price and therefore let stocks run up to unreasonable levels. You could also take the other side of it though -- that active managers get caught up in manic buying that causes bubbles, but passive index funds are price insensitive and hold stocks forever, so they let companies focus on long-term growth. I think there is probably a point where too much passive investing might make markets less efficient, but we're not close to that yet. There are still a lot of active funds out there. It was only last year that passive reached 50% of US equities. It's also probably self-correcting -- if markets become less efficient at price discovery, it gives active managers more opportunities to find undervalued stocks and generate more wealth, which will encourage more active management. In practice I think they're just another type of investor. It's not like that source of demand disappears without passive funds. If retail investors weren't putting their money in passive funds they'd be putting them in old school active funds like they used to do. The decline in the number of public companies in the 21st century is a whole other can of worms. Smaller companies just don't go public as much anymore. I don't think you can attribute it to passive investing though. I think most of it has to do with two factors: (1) it is more expensive to be a public company today due to increased disclosure and compliance costs, as you stated, but more importantly (2) the market for private funding has matured with the growth in VC, PE, and private lending so companies can stay private longer.
pochamago 6y ago
I assume a very large proportion of retirement funds are stored in these ETFs, so average people would eat the cost either way.
- whatok 6y ago
  A very small portion of pension or 401k plans are held in these ETFs. Pension funds invest in and 401k plans do offer mutual funds that have the same or similar benchmarks that these ETFs have so these facilities have helped to stabilize those.

108 points by jules-jules 6y ago

easytiger 6y ago

Quality source there

masnaox 6y ago
wonder if publishing the truth in this way before anybody else is the ultimate form of damage control. in this case, its highly effective
jules-jules 6y ago
What can you say about the substance of the article? Is it wrong in your view?
- dv_dt 6y ago
  For one, when it says "the taxpayers will be eating the losses".. it raises some flags for me. Might just be hyperbole, but it also suggests a possible misunderstanding of the fundamentals of how the Fed operates.
  - rmrfstar 6y ago
    There is nothing magical going on. Step 1: Fed conjurs D dollars into existence Step 2: Fed trades D dollars for a stack of paper Step 3: Fed trades paper stack for (1-r)D dollars The net effect is the Fed giving away rD dollars. If the Federal government gives away any dollars, it is taxpayers footing the bill.
  - jules-jules 6y ago
    Why is this hyperbole? My understanding is that the Fed has set aside $454 billion of taxpayers’ money via the CARES act to absorb the losses in the bail out programs set up by the Fed. And this has more detail, from an earlier article [1] Senator Pat Toomey of Pennsylvania asked Quarles to clarify if the taxpayers’ money ($454 billion handed over by the Treasury to the Fed, which will then be used as equity in Special Purpose Vehicles set up by the Fed and leveraged up to $4.54 trillion to make loans and purchases of toxic assets on Wall Street banks’ balance sheets), is in fact going to be used to absorb losses on what the Fed is taking off the balance sheets on Wall Street. Quarles responded as follows: “The Treasury has the fiduciary responsibility, if you will, to the Congress for the use of the funds that are appropriated to it. So I wouldn’t want to speak for them as to how that equity should be handled. But it is true that in the construction of the 13(3) facilities [Fed’s emergency programs] that use Treasury equity, the Treasury equity is there to insure the Fed, which statutorily cannot take losses, has to be sure that it won’t, is there to insure that that cushion exists for the funding portion of the facility.” Fed Chairman Jerome Powell has already admitted that the $454 billion is to be used to absorb losses that it anticipates it will take. [1] https://wallstreetonparade.com/2020/05/wall-street-banks-paid-11-7-billion-in-dividends-to-investors-this-year-while-taxpayers-must-absorb-454-billion-of-bank-losses/ https://wallstreetonparade.com/2020/05/wall-street-banks-pai... Does this not imply exactly that, the taxpayers will be eating the losses?
    - ikeboy 6y ago
      The fact that $454 billion was set aside to eat losses does not imply that there will be $454 billion of losses, or even that there will be any losses. The Fed is buying bonds at market prices and getting paid interest - the only way they'd lose money is if the bond market as a whole loses money / is overvalued, and specifically is overvalued by more than the interest rate.
      - chishaku 6y ago
        The bottom line is that taxpayers are on the hook. Since 2008, we're desensitized to this level of intervention. What will come of it? Who knows? But at least some recognize the risk in such uncharted territory. “Socialising of this risk is fraught with moral hazard” - Daniel Loeb “Today’s trading levels of stocks and bonds reflect ‘thumb on the scale’ valuations driven by persistent and massive government asset purchases and zero percent (or lower!) short-term policy rates, as well as an essentially unlimited tolerance for risk." - Paul Singer
        ikeboy 6y ago
        It's irresponsible to say the taxpayers are eating losses that hasn't happened yet and may never happen. Taxpayers didn't lose in the TARP bailout, despite similar warnings at the time. And the other side of this is the fact that without any action, the economy will collapse further than it already has, and taxpayers certainly won't be in the black if that happens.
        chishaku 6y ago
        > It's irresponsible to say the taxpayers are eating losses I didn't say they are eating losses, I said they are on the hook. Give me $1000 from your bank account. Given my recent performance, I can generate some decent return. What do you say? > the economy will collapse further than it already has With all due respect, this is my larger issue. You're not necessarily wrong. But we have no political imagination or will to think beyond what is forced down our throats. Either the Federal Reserve saves us all or we are doomed.
  - chishaku 6y ago
    > also suggests a possible misunderstanding of the fundamentals of how the Fed operates. Translation: "You plebes just don't understand." Typical Fed policy apologia.
  - ericmcer 6y ago
    Unless we are rewriting how our economy works, the Fed should have a neutral balance sheet, i.e. all the debt it creates by purchasing bonds/securities/etc. should be paid off eventually. Any Treasury securities are going to be paid off by taxpayer money. If we are entering a new type of economy (which we have been since 2008), and the Fed is no longer worried about having an ever expanding balance sheet, then we are entering modern money theory territory, which is scary to me because we completely lack the oversight needed.
dv_dt 6y ago
If you want a detailed technical view of what the Fed is doing I highly recommend Nathan Tankus' blog. Though I don't think he's specifically covered Blackrock's role. https://nathantankus.substack.com/ https://nathantankus.substack.com/ I'd start with the series "The Federal Reserve's Coronavirus Crisis Actions, Explained" https://nathantankus.substack.com/p/the-federal-reserves-coronavirus https://nathantankus.substack.com/p/the-federal-reserves-cor...
- hammeiam 6y ago
  Who is that author? He seems to be the "research director" of a student group (MMN) but does he have qualifications?
  - easytiger 6y ago
    He's an ultra left wing, "defund the police", full time twitter posting noise generation machine.
    - dv_dt 6y ago
      I was surpised a little at that, and am personally ok with that, but his expertise on the Fed is pretty much tangential to those views. Tankus has been quoted in places like the Washington Post for his detailed discussion about Fed activities.
squaresmile 6y ago
I'm only a random passerby in finance/economics but I have seen a few blogs like this upvoted on HN. Those blogs are usually (or at least advertised to be) run by a single person (in this case, a couple). When I go to the blogs' about pages, that person barely has any experience working in finance or econ. People with past history of making money get predictions wrong all the time and here we are with bloggers who have never been in the game. Come on HN. Surely there are better sources that share these opinions.
- jules-jules 6y ago
  >When I go to the blogs' about pages, that person barely has any experience working in finance or econ. From the about page: Ms. Martens worked on Wall Street for 21 years. The last decade of her career was spent as an outspoken critic of Wall Street’s corrupt practices, its private justice system and the repeal of the Glass-Steagall Act. (This YouTube video captures Ms. Martens testifying before the Federal Reserve on June 26, 1998 against the repeal of the Glass-Steagall Act.
  - easytiger 6y ago
    > Ms. Martens worked on Wall Street for 21 years If there was any credibility to that it might have mentioned what she did. Plenty of procedural/pm/pa jobs that don't require much holistic knowledge or qualification.
    - jules-jules 6y ago
      Do you think they would allow a low-level position to testify before the Fed? A quick search reveals that Pam Martens worked as a strock broker for what is now CitiGroup for sixteen years. She is the recipient of the Woman of Courage Award from the National Organization for Women and the Susan B. Anthony Award from its New York City Chapter. Her suit, Martens v. Smith Barney, challenging mandatory arbitration for employee grievances, including civil rights-related claims, is in its seventh year in U.S. federal courts [1]. But I am guessing you are not arguing in good faith, as you seem unable to engage with the substance of the article but instead keep attacking the source. But please do let me know if you have any issues with the contents of the article, I would be keen to hear them as you seem to be so interested in its authors. Otherwise I'll leave it at that and won't waste anymore energy on ad hominems. [1]https://multinationalmonitor.org/mm2002/02april/april02interviewmartens.html https://multinationalmonitor.org/mm2002/02april/april02inter...

adrr 6y ago

Never got why the fed is buying ETFs instead of buying corporate paper. Also why isn’t the fed buying new bonds if their goal is to inject liquidity back into the companies. Who are they really bailing out?

gvhst 6y ago
The Fed doesn’t do security selection. If the Fed isn’t equipped to analyze and select individuals securities. Additionally selecting individual names is a huge political concern. How do you decide which issues to buy? Personally I’d rathe the Fed buy market indices which are constructed By transparent and well understood processes instead of some opaque self brewed process. Plus the Fed is suppose to stabilize the market as a whole and provide overall liquidity to allow firms to raise money on their own. The Fed isn’t suppose to directly support individual corps. Additionally it’s important to look at how the ETFs work. I believe the ETFs in question here are LQD and HYG for investment grade and high yield respectively. These ETFs track the iboxx indicies for IG and HY. Even if the Fed is buying BlackRocks ETF, this bolsters the prices of the individual bonds, which then moves indices higher, thereby also moving up other provider’s ETFs along with the entire fixed income market. Given this is the case, one should pick the most liquid ETF for each asset class (Ideally all ETFs should be purchased weighted by the NAV or trading volume of each ETF), in that case it would be BlackRocks for US fixed income.
- nickff 6y ago
  Just to add to your first point, it's much harder to 'game' these pre-existing indices and ETFs than it would be to game some novel and arbitrary selection criteria. These ETFs have been 'vetted' by the market over the course of many years.
- whatok 6y ago
  The Fed isn't equipped to do security selection so that's why Blackrock is managing this facility. Blackrock is absolutely going to do secondary bond purchases (on the Fed's behalf) once that portion of the facility is up and running. The Fed has also said that they don't want to influence market share of ETFs so that's been interpreted as some sort of benchmark per manager. I believe Blackrock was around 50% of qualifying ETFs outstanding at the time. The Fed published purchases to date last week which has a pretty decent breakdown: https://www.federalreserve.gov/monetarypolicy/files/smccf-transition-specific-disclosures-5-29-20.xlsx https://www.federalreserve.gov/monetarypolicy/files/smccf-tr...

starpilot 6y ago

This is the real looting.

Etheryte 6y ago

For those not familiar with the company name, BlackRock owns iShares, which manages the largest S&P 500 ETF tracked in EUR [1]. This and many other ETFs by their brands are commonly recommended as solid entry points for beginner investors [2]. [1] https://www.justetf.com/en/how-to/sp-500-etfs.html https://www.justetf.com/en/how-to/sp-500-etfs.html [2] https://www.benzinga.com/money/best-sp-500-etfs/ https://www.benzinga.com/money/best-sp-500-etfs/

jules-jules 6y ago

It looks the site is down, here is an archive link: https://archive.is/en5hD https://archive.is/en5hD

anonu 6y ago

Garbage article. This sentence got me: Since BlackRock is allowed to buy up its own ETFs, this means that taxpayers will be eating losses that might otherwise accrue to billionaire Larry Fink’s company and investors What? The sentence indicates a deep misunderstanding of the subject which the author writes about. BlackRock is (mostly) a fund manager: they earn money on assets under management and not (broadly speaking) when the market goes up or down. If the ETFs BlackRock are buying go down, it simply means they are propping up the underlying holdings - the actual corporate bonds. They will then "create" ETF shares and give them to the Fed. Think of the ETF simply as an IOU. BlackRock has also said they will be waiving the ETF fund management fee.

JumpCrisscross 6y ago
This article is polemic. For a better-informed (but still critical) perspective, I recommend Matt Levine.
earth2mars 6y ago
is this doc on Fed site related to what they are saying. https://www.federalreserve.gov/monetarypolicy/files/smccf-transition-specific-disclosures-5-29-20.xlsx https://www.federalreserve.gov/monetarypolicy/files/smccf-tr... I see BlackRock all over the spreadsheet
- whatok 6y ago
  Yes, that shows ETF purchases up until the date mentioned. The dollar value of purchases in there for Blackrock ETFs is around 48% which is around their existing market share for qualifying ETFs.
exclusiv 6y ago
> they earn money on assets under management and not (broadly speaking) when the market goes up or down Broadly speaking? Ok well what happens to the AUM when the market goes up or down? More or less AUM. More or less money no? Am I missing something? Wouldn't they have a ton to lose during these times? > Today, BlackRock has been selected in more no-bid contracts to be the sole buyer of corporate bonds and corporate bond ETFs for the Fed’s unprecedented $750 billion corporate bond buying program which will include both investment grade and junk-rated bonds. Seems like a nice setup. Especially now.

JauntTrooper 6y ago

This article's tone is wildly conspiratorial. Blackrock is the largest asset manager in the world. They manage $7.4 trillion. They're also one of the biggest providers of low cost index funds for retail investors. There's nothing nefarious about them running the Thrift Savings Plan. It's basically a 401K program for federal government workers (the public sector's equivalent, anyway). It's a really good program with great expense ratios and plenty of passive index funds. The idea that they'd be using employee funds to manipulate the stock market through future purchases is ludicrous. What exactly is "not fully understood" about Blackrock's role in the "outlandish valuations" of Apple and Microsoft? Blackrock is the #2 shareholder in each, after Vanguard, and owns 6.3% and 6.8% respectively. Much of that is in index funds like the iShares S&P 500 ETF or the Russell 1000 Growth ETF.

whatok 6y ago
> What exactly is "not fully understood" about Blackrock's role in the "outlandish valuations" of Apple and Microsoft? Blackrock is the #2 shareholder in each, after Vanguard, and owns 6.3% and 6.8% respectively. Much of that is in index funds like the iShares S&P 500 ETF or the Russell 1000 Growth ETF. I don't know what the original post's argument was on this but you could make an argument that the growth of passive investing largely caused by Blackrock and Vanguard has led to stretched valuations in a lot things. The mere fact that these companies make it easier and cheaper to invest means there's more money floating around chasing fewer and fewer shares given less public companies since Sarbanes-Oxley and the rapid growth of PE/M&A.
- JauntTrooper 6y ago
  The article was insinuating something ridiculous about Blackrock secretly conspiring with global central banks to inflate asset prices. Your argument is a more reasonable one to consider. I hear it sometimes (especially from underperforming active managers), but I haven't seen much evidence of it. It's a seductive line of reasoning -- that passive funds are dumb money that buy at any price and therefore let stocks run up to unreasonable levels. You could also take the other side of it though -- that active managers get caught up in manic buying that causes bubbles, but passive index funds are price insensitive and hold stocks forever, so they let companies focus on long-term growth. I think there is probably a point where too much passive investing might make markets less efficient, but we're not close to that yet. There are still a lot of active funds out there. It was only last year that passive reached 50% of US equities. It's also probably self-correcting -- if markets become less efficient at price discovery, it gives active managers more opportunities to find undervalued stocks and generate more wealth, which will encourage more active management. In practice I think they're just another type of investor. It's not like that source of demand disappears without passive funds. If retail investors weren't putting their money in passive funds they'd be putting them in old school active funds like they used to do. The decline in the number of public companies in the 21st century is a whole other can of worms. Smaller companies just don't go public as much anymore. I don't think you can attribute it to passive investing though. I think most of it has to do with two factors: (1) it is more expensive to be a public company today due to increased disclosure and compliance costs, as you stated, but more importantly (2) the market for private funding has matured with the growth in VC, PE, and private lending so companies can stay private longer.

pochamago 6y ago

I assume a very large proportion of retirement funds are stored in these ETFs, so average people would eat the cost either way.

whatok 6y ago
A very small portion of pension or 401k plans are held in these ETFs. Pension funds invest in and 401k plans do offer mutual funds that have the same or similar benchmarks that these ETFs have so these facilities have helped to stabilize those.