The Fed Put

I’ve been reading apparently serious pieces wondering where the strike price of the Fed Put is. The Fed Put is a deeply held belief in the investment community. It is the belief that the Fed will step in and save the stock market before any kind of serious decline.

The dot-com bubble did not stop until the Nasdaq 100 had lost 83% of its value. The GFC was, in fact, arrested by the Fed, which eliminated mark-to-market accounting for banks. The Nasdaq 100 at that point had lost 52% and the S&P 59%, although most of the real carnage was in real estate. Both of these bubbles were created by the Fed.

Here we are in the everything bubble. Also created by the Fed. What makes people believe, contrary to all history, that the Fed will be able to keep this one inflated?

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