Of course printing money always benefits the elite asset owners more than the non-asset owners, whatever those assets are. Bonds or stocks. If you are heavily invested in fixed income securities and the Fed comes along with a plan to buy up debt paper on the incredible scale of these QE programs, then who is benefiting most by the rise in value of those securities? Are you saying because they have to pay tax on their gains that they are better off than the person who does not get his assets inflated and has no gain to pay tax on? Reinvestment risk? If the bank is saying they will do and print anything to inflate the value of assets how is that a negative for the asset holders?

And yes, the Wall Street elites make their money with all this free liquidity. Unbelievable sums, and their hedge fund cronies and clients all get a piece of the pie. It's a great game if you are elite, this endless monetary stimulus. And it sucks for the man on the street. I don't see where you get cracked up on this? I also spent some time in that world. I worked in ear shot from the CFO of Merrill Lynch Investment Banking in Hong Kong. Also worked as interdealer broker, cantor fitzgerald. My client was my frat brother from university days, at the time he was head of equity derivatives sales and trading at Deutch Bank, MD, ... I also know about the game..

Some interesting points but we may not be seeing this the same. I'll just break this down to it's simplest. If you own a muni let's say and its yielding 3.5% tax-free while current yields are 1.5% - 2%, that would be re-investment risk. Not to mention the inventory for anything yielding a decent amount is scarce. Like I said, the idea for an ultra wealthy individual/family is to first and foremost retain their wealth with relatively little risk while preserving their current living standards/purchasing power/legacy. The second huge concern tends to be taxes. If you're invested in muni's again for example, your primary concern is retaining a steady stream of income without severe tax implications. Selling bonds at a premium will result in capital gains first and then you would need to find suitable bonds to reinvest in that were similar to what you had which probably doesn't exist if you're holding older paper (reinvestment risk). So ultimately, your net income will begin to decrease because of this. So with regards to inflating your fixed income securities, it's irrelevant if not a burden because of the damage it does to the underlying yield (to maturity/call). Keep in mind, I'm referring to people who are already wealthy. It creates a strange dynamic.



That's great! Executive assistant? Lol! Totally kidding! Good to see another from the biz. Were you at Cantor in NYC? As for the plain joe on the street, not sure I mentioned that but agree, they get hosed.

Aside from that, it is my opinion that the decision to buy MBS was politically influenced in that they are avoiding the issue of deficit spending by buying MBS in lieu of US Treasuries. Another crafty move by the Bernank.

This is correct if I understand what you're saying correctly - however purchasing us treasuries is not "deficit spending" and neither is purchasing MBS. Due to political realities in this country our gov't cannot take the steps that would actually help the economy (deficit spending funded by the treasury similar to Obama's stimulus package). They gov't is avoiding the politically unpopular (but smartest) option of deficit spending by relying on the Fed to "stimulate" the economy. As I have said elsewhere, this is due to a reliance on the erroneous theory of Monetarism. Because of these realities, the best option for the FOMC is to try to revive the economy by attempting to lower mortgage rates - in effect, stimulate the economy through the housing market. I don't think it is going to work as effectively as they would like it to but it will have an effect for sure.

As to it "only helping the elites" - I would say that is not correct and somewhat simplistic (sorry!). Mortgage securities come in all shapes and sizes and one main distinction is that a mortgage is either "conforming" or "non-conforming". This effects what sort of tranches the mortgage can be packaged up in to be "dealt" on the primary markets for MBS. A "conforming" mortgage has a lot of specific traits but the easiest to understand is the amount of the loan. To "conform" in this sense it has to be small. Anything over $400k-$500k (varies by market now) is "non-conforming" and will not be directly affected by this new FOMC program - thus the folks borrowing small amounts will see the benefits of this program more-so than those borrowing larger amounts. To my mind this will actually help the little guy more than the big guy.