Quotes of the Day: On Moral Hazard

by Marty Mazorra CFP®, ChFC® Founder & Co-Chief Investment Officer

Stocks staged an impressive turnaround this morning on this news:

“The Federal Reserve is expanding its foray into corporate credit to now buy individual corporate bonds, on top of the exchange-traded funds it already is purchasing, the central bank announced Monday.”

Here’s Artemis Capital’s CIO Christopher Cole on moral hazard:

“Imagine if the Fed (via tax-payer funded Treasury SPV) back-stopped the debt of Enron and Worldcom back in the early-2000s?

Both of these companies were “fallen angels” that employed a lot of people.”

Everyone loves a buoyant market. Thing is, in the long run it matters how we get there…


Trader/CNBC commentator Jim Iuorio agrees:

“There is nothing good about the Fed buying corporate bonds. This is a wild overreach and dramatically increases the likelihood of this ending in terrible tears..this is no joke..”

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