Category Archives: Finance

From a shareholder’s perspective, losses from stock compensation are still loses

Yesterday I talked about the economics of Ginkgo Bioworks’ ($DNA) synthetic biology business. In that post, I mentioned that Ginkgo had a loss of 650,000,000 dollars in the third quarter of 2022, against an expected annual revenue of just 500,000,000 dollars for the full year of 2022. What I didn’t mention was that a lot of that revenue was stock-based compensation, and I’m sure the $DNA boosters would be furious at me for not saying so.

When some companies release their earnings reports, they’ll focus on the “non-GAAP” number instead of the GAAP. GAAP stands for “generally accepted accounting practices” and so a non-GAAP number is obtained by using non-generally accepted accounting aka “funny math.” For our purposes today, note that GAAP considers stock based compensation as an expense, just like wages, and all expenses must be tallied up to obtain the profit or loss for the company as a whole. But for some folks this isn’t ideal, after all stock isn’t “cash,” you can’t go bankrupt by running out of it, so why should the company have to count it as an expense? For that reason, a common non-GAAP trick is to simply remove the stock based compensation to make the numbers look better. This isn’t breaking any laws, you have to make the GAAP numbers available for anyone who wants them but nothing precludes you from focusing on the non-GAAP numbers in your press release and earnings call. Lying is illegal, but optimism isn’t. This is important for $DNA as most of their expenses in Q3 were from stock based compensation: they lost 650,000,000 dollars in GAAP earnings, but only 100,000,000 dollars when stock based compensation is removed.

For a Ginkgo booster that 100,000,000 number is the only important one. Who cares about stock? They have 1.2 billion in cash and are losing 100 million a quarter, so they can keep doing this for 12 quarters (3 years) with no problems whatsoever, and by that point they’ll be profitable so cash-on-hand doesn’t matter, right? But for an investor the stock is still very important because without a dividend the value of your stock going up is the only way you’ll make money on a company. When 500,000,000 dollars worth of stock are given to the C-suite and senior execs, that dilutes how much of the company you own with your few shares of stock. Assuming the company’s total value stays the same, you now own a smaller slice of the same size pie so the total value of your slice has gone down. Even if the folks don’t sells their stock (and trust me, they always do), the threat of that sale will also have downward pressure on the stock price as skittish investors sell off so as not to become bagholders for the C-suite. That 500,000,000 dollars still represents a loss of value to the investors and should be treated as such.

There are a lot of ways a company can pay for things, and they all have their pros and cons. A company can sell stock, or hand over stock in exchange for something, a company can use the cash it has or it can take out loans and use those instead. Then a company can do a lot of different things with the revenue that comes in, it back buy back stock (or hand out a dividend, functionally the same) pay off its loans, or let the cash pile up for use later. There are many different reasons for a company to do any of these but they all involve the movement of value to different places. A company with a wildly overvalued stock price could benefit from selling share because the cash is worth more than the (transient) value of the stock. A company in a high interest rate environment could benefit from paying down its loans more than from sitting on cash, etc etc. But stock is a thing of value, it’s a source of money that the company controls, and handing that value over to the C-suite dilutes its value for every other investor. That’s why I only like to talk about the GAAP numbers for companies.

Ginkgo Bioworks: the economics of genetic engineering

Yesterday I discussed the science of genetic engineering, or at least its application to synthetic biology. Today I’d like to discuss how Ginkgo Bioworks is trying to monetize genetic engineering and gain all the value of its total addressable market.

To recap, genetic engineering is used for the production of biological molecules. If you have a drug for curing a disease you’ll need to produce mass quantities of it to both get through clinical trials and sell to patients down the road. In modern cases, that drug will usually be produced in specially made genetically modified organisms, and then purified out of those organisms using a specific purification pathway. The end result is a pure drug, which is something that the FDA demands and patients really want as it cuts down on variability and potential side effects. This is the business that Ginkgo Bioworks wants to get into, they want to be the ones producing those genetically modified organisms and validated those purification pathways. The organism and the pathway then become akin to intellectual property (IP) for the production pathway of that drug. So say you’re a company that own a drug but has no ability to produce it at scale, Ginkgo will develop a production pathway and charge you the lowest possible price for doing so (making zero profit themselves). They do this because their IP specifies a revenue sharing agreement whereby they get a cut should you manage to sell your drug in the future. This system is what gave Ginkgo such a ridiculous valuation based on TAM, if they can be the lowest-cost provider of drug production pathways, then every single company will want to contract with them, and so they’ll get revenue from every single drug on the market.

The problem is… that’s not how it seems to have worked. First, Ginkgo wants to drive down the cost of producing these production pathways, but they’re competing with companies that already work at economies of scale far greater than them. Let’s start with just the first step of the producing a production pathway: you had to get DNA for your drug and insert it into an organism. There are already many companies that will do this job for you if you’re willing to pay up. Those companies include heavy hitters like Genescript (market cap of more than 3x what Ginkgo was at its peak) and Thermo Fisher (the 600lb gorilla of this sector). These companies have driven down the cost of DNA, genetically modified organisms, and other tools to the point that Ginkgo doesn’t seem much like competition. Now Thermo Fisher And Genescript to my knowledge won’t make an entire pathway for you, but they will you a large part of the pathway for dirt cheap and then sell you the tools to finish it up yourself. But that still means that for many of the steps, Ginkgo is competing with companies that are far larger than it which are better able to deploy economies of scale than it. So Ginkgo might not even be offering you the best price possible when you compare with using some of the big boys instead. And remember they need to be offering the best price possible as they don’t even make money by selling you this process, instead they need to entice you to sign the deal where they get a portion of your future revenue.

Then there’s the fact that their business model relies on successes but self-selects for failures. It’s important to start by remembering that most drugs which go through clinical trials will fail to make any money whatsoever. Ginkgo’s business model is to produce a drug production pathway and sell it for zero profit and bank on the revenue sharing portion to make them money, but they of course understand that most of these revenue sharing agreements won’t make any revenue. But then what type of drug discovery company will even take such an agreement? A large drug company (Johnson and Johnson, Pfizer) already has the in-house tools produce a drug production pathway, they have little reason to enter a revenue sharing agreement especially when Ginkgo’s cost might compare unfavorably with just buying stuff from Thermo Fisher and doing the rest themselves. A small drug company is exactly the type Ginkgo needs to go after, but what type of small drug company? A small company that has lots of money and a product they are very certain is a hit also will be dissuaded by the revenue-sharing agreement, why fork over so much future revenue unnecessarily? On the other hand a small drug company will less money, or a drug company that has a product it isn’t sure of, those would be the kind of customers who would willingly bet on Ginkgo, but they are also the customers who will be least likely to succeed at bringing their drug through clinical trials. If they have no money they could easily go bust before they make it, and if they’re unsure of their drug then it probably means their scientists know it’s a long shot. So Ginkgo’s business model is forcing it to self-select and take on the customers who are least likely to make it a lot of money through the revenue sharing agreement.

And that’s important because the revenue sharing is supposed to be how the company will grow larger, and until it grows larger it can never compete with the big boys on economies of scale, therefor never address it’s total addressable market because there will always be big companies for whom it’s cheaper not to even work with Ginkgo. This is a chicken and egg problem, they need to grow large to reach economies of scale and drive down the cost of their services, and they need to drive down the cost of their services to make it more enticing to sign those revenue sharing agreements, but as long as their services are still higher they’re stuck in a holding pattern. It’s important to note that at this point that Ginkgo had a loss-from-operations of about 650,000,000 dollars in Q3 2022 alone. They are expected to have total 2022 Revenue of around 500,000,000 dollars. They lost more in a single quarter then their expected year-long revenue and that trend shows no sign of changing. Their cash on hand at the end of all this was 1.3 billion dollars, and with plenty of stock to sell and loans to take out, they can continue this business for a while yet. I’ll talk more in a future post about their burn rate and their losses, but it’s important to note that this is where the company is: growing but not necessarily at at rate that will let it achieve lift-off. It needs find some way to make its revenue-sharing business model work, either by driving down their costs so much that other companies have to use their services or by somehow enticing more winners instead of losers to use their services. The only part of the firm that is close to break-even is the “biosecurity” arm a COVID-monitering and diagnostic service that will likely fade as the salience of COVID continues to fade. Perhaps they can pivot to new avenues of biosecurity, flu monitoring? Either way this work is much lower margin than the synthetic biology revolution that was supposed to propel their TAM, and stock price, into the stratosphere.

Ginkgo Bioworks: what is the point of Total Addressable Market (TAM)?

Ginkgo Bioworks ($DNA) is a stock that I’ve heard a hell of a lot about. The idea of “DNA as a programming language” is something a lot of stocks and hype-mongers trade on, because it promises the insane growth of the Tech industry but with whole new markets where you can get in on the bottom floor. What if you could invest in Apple, Amazon, and Google in the 90s? Well now you can by investing in $DNA and other biotechs like it. Their tech is supposed to be the future, and is supposed to make us all a lot of money (if we invest in it).

Part of the appeal of investing in “DNA as a programming language” comes down to the concept of “total addressable market” or TAM. TAM is a way to calculate the greatest possible revenue you could ever achieve, by bringing your product to every person on earth who wants it and charging them a fair price. Valuation based on TAM aren’t necessarily ridiculous, Facebook is used by just about 1 out of every 2 people on earth these days, so if you had gone back to 2008 you could have realized just how monstrous Facebook would become by looking at their TAM (and deciding Facebook and not MySpace would win the war). So investing based on TAM might have made you money if you’d thrown it at Facebook. Sure, these days Facebook only gets a few bucks in ad revenue per person, that’s still several billion every year. So bringing your product to every single person in this wonderful world of ours, all 8 billion people, is almost guaranteed to make you some money.

Ginkgo and DNA-based companies like it have some eye-watering TAMs because DNA and biotech is so fundamental to everything the world economy does. Agriculture? Modern crops are all engineered (yes, even your GMO-free crops are engineered, they just use different techniques to get around people’s prejudices). Health? Modern medicines are all engineered and grown in cell culture vats. Commodities? Biochemists are already working on using engineered proteins to create all sorts of industrial chemicals, or to clean up industrial waste, so that’s yet another avenue for biotech revenue. There are endless possibilities for using proteins and cells in industry, so there are endless amounts of money you could conceivably make bringing your product to these industries. But what Ginkgo brings isn’t any particular protein, or any particular cell, they supposedly bring a platform to create all proteins, and all cells at a lower cost than anyone else. Ginkgo wants to be a shovel salesman in the Biotech gold rush, and they think they can sell shovels to every company on earth. Whether you’re a Big Pharma company producing drugs, an AgriTech selling seeds to farmers, or even a mega-factory trying to comply with the EU’s industrial pollution directives, biotechnology can help you and Ginkgo can help biotechnology.

Here’s what Ginkgo says it does: say you want to make a drug and get FDA approval to sell it to sick people. Your drug needs to meet the highest standards of quality control, every batch needs to be identical to the others in all the right ways so that what the sick people get is the same every time. Any sort of variation can be deadly in these cases, and the FDA looks very disapprovingly at variation for this reason. But producing a drug at scale is hard and expensive, even at the relatively modest scale needed for phase 1-3 clinical trials. This is supposed to be where Ginkgo comes in. They’ll create a modified cell for you which makes the drug all on its own. They’ll produce a purification pathway that is easy to use and gets consistent results. Then you can grow up that yeast cell into massive colonies (easy enough, yeast eat anything) and harvest them to purify the drug they are producing (again, this should work).

The problem is this pipeline doesn’t necessary lead them to the TAM-style valuation that once sent their stock price skyrocketing. Most drug products start by being produced in an academic lab at ultra-small scale, and for these purposes making the cells and purification pathways yourself is actually the cheaper option vs paying a big company to do it for you. Once you have a cell and a purification that sort-of works, you publish it and it gets picked up by some massive biotech that wants to monetize it. Now this company isn’t starting from a base of nothing, the work that the academic lab already published will probably be a very strong base from which the company can make its own cells and purification pathway (with only minor tweaks to what the academic lab did). And because it’s so easy to do this, again it rarely makes sense for a big company to partner with Ginkgo to do these things, especially when it’s not just the cost but also Ginkgo’s business model you have to deal with. See, when Ginkgo does something for a Biotech company, they don’t just as for money upfront. Ginkgo writes contracts that say that if you use the cells and purification pathways they create, then they will get a certain percentage of your revenue or profit (negotiable, of course). This was sold as an unbeatable deal that would catapult Ginkgo to the stratosphere and help them reach the valuation predicted by their TAM, understanding why this deal is failing is key to understanding why Ginkgo is failing.

I’ll talk more about the specifics of Ginkgo’s deal and why I think they will never manage to address their theoretical TAM in another blog post. For now, reflect on the fact that $DNA is in the exclusive club of stocks that lost over 85% of their value in the last year, $CVNA is another. I think both businesses were predicated on a business model that was more science fiction than fact.

Small point: why is Ford stock such a bad deal?

In my first post on Cult of the Lamb, I offhandedly mentioned that it was retailing for the price of two shares of Ford ($F) stock, and that it was the better deal. This led to one friend asking me: “wait, why is Ford stock not a great deal?”

For the last 40-odd years Ford (and most American car companies) went through a mini-death spiral.  Profit margins shrank badly and caused them to lose a lot of value.  On top of it Ford is a “dividend king” stock, it pretty much always pays a hefty dividend which means investors like to hold it but you shouldn’t expect it to increase in value because money handed to the investors is money not being used to grow the company

Still, it’s true that Ford is down about 40% year to date while the broader stock market is down only 20% (Meta aka Facebook is down 60%, if you want to see what a disaster looks like).  Probably a lot of that is a combination of inflation (real wages are down 3.2% this year, and there was 0% real wage growth in 2021 due to inflation) and also the fact that EVs/plug in hybrids are the future and Ford barely does that.  Tesla is an all EV company and Toyota has become an all Hybrid company, both of them are expected to grow their revenue next year while Ford is expected to shrink.  Tesla was dummy overvalued in 2021 but it’s still a growing company and that counts for a lot.

So Ford as a company is worth less than it was in the 80s and it doesn’t have a plan to fix that.  It still pays a 4% dividend but so does a government bond these days and bonds are risk free.  If you buy Ford you’re hoping it goes up but you can’t really expect it to since revenue is shrinking.  You’re praying someone at the company figures this out and shakes things up.  If they could figure it out they might go somewhere.  Toyota produces 3x the amount of cars Ford does, but Ford produces 3x the amount that Tesla does.  5 years ago I remember thinking Tesla was a scam because Tesla produced less than 1/40 of the cars Ford did, but as I told you I was wrong in my bet against Musk (really I was in an echo chamber) because Tesla has grown and Ford has shrunk.  People buy Tesla stock expecting it to keep growing, people buy Ford stock hoping it stops shrinking.  Ultimately Ford’s history this century doesn’t make that seem like a good bet.

I no longer consider interview offers that don’t come with a salary range

I have a job, but in a market like this there’s no reason not to be looking out for a better one. Studies have shown that the best way to get a raise is to move to a new job, and although there’s costs involved the benefits can be massive, especially as American workers have taken a real-wage paycut of 3.2% this year when factoring in inflation. So I’ll humor any recruiter who wants to talk to me. What I won’t humor is recruiters who aren’t upfront about their salary range. Don’t be fooled, companies never start hiring for a job without already knowing what salary they’re willing to pay, budgets are written and approved long before they even start reaching out for resumes. So every company knows exactly what range of salary they’re willing to pay, but they want to use the asymmetry of a job search to pay less than the market rate for labor.

Usually getting a job requires you to submit a resume, do a few interviews, and then see if you get hired. Companies want salary negotiations to only start after this whole process because they know it’s better for them than the worker. The worker has already spent several hours of their precious time applying to this company, so if they’ve made it to the offer stage they now have to decide whether they’ll accept a low-ball salary offer or go through the whole rigamarole all over again with another company and have no guarantee that that company won’t low-ball them as well. If the salary is transparent from the beginning, then workers won’t waste their time interviewing with companies that are below their salary range and so will be paid what they’re worth.

For shitty companies that pay peanuts, making the salary transparent would kill them. No one would ever interview with them because the price they’re paying for labor is just too cheap. That means the company can’t hire any workers and eventually goes bankrupt and blames “no one wanting to work”. But if salary is not transparent, then shitty companies that pay peanuts can rope in suckers, string them along for some interviews, and then give them a low-ball offer and hope the worker is too tired of interviews to go out and look for something better. Companies that pay good salaries are also harmed by salaries not being transparent because workers don’t actually know if a good company pays well since they can’t reliably compare them to a shitty company.

So if you ever see a company that won’t give you the salary range up front, it’s a shitty company trying to hide how little it pays. Good companies that pay well have every incentive to advertise the fact that they pay well so they can attract the best talent. For that reason, I never speak to companies that don’t tell me the salary range up front.

Controversy time: I don’t like ESG investing

ESG (Environment, Social, Governance) is a scoring system some folks have come up with to score which stocks you can “ethically” invest in vs those you shouldn’t. The problem I have is that it seems like a bunch of woo.

The idea is that companies shouldn’t just try to make the most money, they should also protect the environment, advance social justice, and govern themselves responsibly. Yet I’m reminded again of how FTX (you know, the folks who stole investor’s money) got really high scores on ESG despite being a complete criminal enterprise. Other dicey factors seem totally ignored in ESG rankings as well, TotalEnergies SE ($TTE) is a French company directly funding the Russian Genocide of Ukrainians by continuing to ship LNG out of Russia and yet it’s considered a “leader” in the Social category. An otherwise identical company like Exxon-Mobile ($XOM) is considered just “average” in the Social category despite no longer operating in Russia since the war began, so it seems like a little genocide between friends doesn’t affect TotalEnergies’ ESG scores all that much. One wonders just what does affect ESG in that case.

This may seem unfair, after all TotalEnergies is just trying to make money, right? And their LNG is in heavy demand by customers, right? Yet that is exactly what ESG scores are supposed to act against, the tyranny of capitalism to externalize all costs onto the rest of society. Tesla for instance is merely a 9/10 in the Environmental category because despite moving the largest number of cars in history off of fossil fuels, their cars use lithium and the mining of lithium hurts the environment. This is a cost that Tesla externalizes to the rest of us, yet it’s a necessary cost to run their business so they get an ESG ding. But it seems ESG scores are applied randomly and say more about the scorer’s personal biases than anything to do with the companies themselves.

So here’s my advice: forget ESG entirely. If you want to invest ethically, then look at the companies you’re investing in and weigh the costs and benefits yourself. Does Apple adding new privacy features make up for the horrific conditions at the Foxxcon factories? Then go ahead and invest. But that’s a very personal ethics question that no one else can answer for you. If you instead export that question to some ESG-ified ETF, then you’re just letting someone else’s biases run your investment account. And those people might not know the first damn thing about Environmentalism, Social Justice, or Corporate Governance.

Always double guessing my stock choices

I don’t know if other folks do this, but every time I buy a stock I stop to double guess myself. If I see a stock that looks FANTASTIC, good P/E, good dividend, good growth, it may seem like a perfect buy. But I always stop and ask myself “if it’s such a great buy, why isn’t everyone else buying it, why hasn’t the price been pushed up?” Usually this leads me to double checking and realizing the reasons which I had not previously noticed. For instance, it was pointed out to me that Big Box retail stores are very highly valued right now, Walmart is selling at a higher P/E than Microsoft and Apple just for example. It seems that in the current economy, people are looking for the security of retails rather than the growth of Tech. But there’s no way Walmart is worth about 50 P/E, so it doesn’t make sense to buy it at this price point. Macy’s however ($M) is selling at just around 8 P/E. It’s a big box retailer with steady cash flow, doesn’t it look like a perfect buy? But why is it selling so low and Walmart is selling so high? I looked and Macy’s forward P/E isn’t so good, it’s expected to be around 10 or 12. So it looks like right now Macy’s is expected to be a shrinking company, and that’s why it’s being sold on discount. So now I have a better idea of exactly what bet I’m making, do I expect Macy’s P/E to go down that much or might they buck the trend and remain stable or grow? That will tell me whether I actually want to buy their stock or not.

In a market as efficient as the stock market, there are rarely any free 20$ bills on the sidewalk, you always have to wonder “if this move makes sense then why isn’t everyone doing it?” and that will make you realize the downsides of the bet you’re making.

Short post, just want to vent

I encourage anyone to read this tweet thread as it sums up perfectly my anger with how the FTX scandal is being covered. This is a news story about a crypto exchange doing what all crypto exchanges do, steal clients money to fuel their vices. And yet the framing in most stories you find will not be about how SBF stole client’s money, but about a “lack of controls” and “failures of governance” which are corporate-ese ways of downplaying SBF’s crimes and making him seem like just a CEO who couldn’t quite handle it. This cannot possibly be by accident, most journalists understand framing and most journalists on twitter are laser-focused on complaining about other people framing things in ways they don’t like. So why is the framing surrounding the FTX saga downplaying SBF’s crimes and normalizing his actions? Why are so many stories trying to focus attention on SBF allegedly raising new funds, instead of on the fact that he stole funds in the first place? Why is his opinions and personal life being written about with more detail than the lives he destroyed through theft? Go find some of SBF’s villains, it shouldn’t be hard. Write about them struggling to pay the bills because they lost it all in his exchange. Hopefully find some who have finally learned that all crypto is a scam, and write about how they had to lose their house in order to learn that lesson. Most of the journalists currently humanizing SBF and ignoring his victims would have screamed bloody murder if the same had been done to Bernie Madoff, so why the fuck are they doing it now.

You cannot time the market

When you look at the stock market, it’s very human to want to “time” it, that you can buy a stock at it’s lowest point, sell it at its peak, and make oodles of cash. When Apple first IPO’d, it was selling for about 14 cents (when stock splits are taken into account) and it reached an all time high at closing of 180.96$ just within the last year. If you’d bought 1000$ of Apple stock at IPO, and sold them in January, you’d be a millionaire. Even if you weren’t born in 1992, if you’d bought 1000$ of Apple stock in January of 2019, you could have caught it at a price of 37$, giving you a nearly 500% return if you’d sold it in January 2022. This isn’t even taking into account the dividends paid by Apple, which would have increased your return even more especially if you’d reinvested them back into Apple!

But timing the market is impossible, or at least that’s what mainstream economists usually think. It goes back to what I’ve said about The Efficient Market Hypothesis, the stock market is believed to approximate a random walk, therefore it is impossible to know exactly when the bottom is, for the market or for any stock. Therefore the hypothesis says it’s impossible to buy at the bottom and sell at the top except by dumb luck. Even if the hypothesis is wrong (Warren Buffett doesn’t believe it), it is still likely to be functionally impossible to time the market because no one can bring together all the knowledge of the entire economy to accurately declare “yes, this is the bottom”

As a silly example, I follow a lot of stock twits on various social media forums, and the consensus in mid-October was that inflation was still roaring and we had a long way to fall. Since then the S&P 500 has gone up around 15%. Will it pull back down? Maybe, but maybe not. Either way, sitting on the sidelines and losing the opportunity to make a 15% free return a month in a half was probably a dumb move. If people could really, reliably time the market, then investing in mid-October to get a free return through late November would have definitely been the play. And if we’re due for a pullback then you could sell now and keep your winnings. Yet I heard not a peep of this kind of advice through mid-October, so I don’t think any of those stock twits could time the market.

Even more silly of an example is looking back at the recent market crash of 2008. The market bottomed completely in march 2009 and rose from there, but it didn’t stop takemongers from claiming that we were due for an even worse crash any day now.

I know my examples are just anecdotes, but basically I haven’t seen any single person who could reliably time the market over any timecourse whatsoever. Timing the market isn’t value investing it isn’t finding good companies at good prices, it would be going all-cash at the top and going all-in at the bottom, and doing this multiple times a year in order to maximize your returns on each up- and down-swing. You occasionally see hedge funds or take-mongers say they’ve gone all cash, but they then usually miss the bottom of the market by a lot and quietly re-enter it after the big gains have already happened, without ever admitting they were wrong.

In these cases, the old adage is probably the most correct: time in the market beats timing the market.

Yes it’s OK that J Powell killed your puts

I’ve been trawling through old internet posts, and I found something interesting from March 2020. I won’t quote it directly but the gist was this:

I knew the market would crash due to Coronavirus, now that rat bastard J Powell comes in and pumps the market with free money, killing all my puts. What the fuck is this? Are you going to buy my puts from me now since they’re *distressed assets*?

As should be obvious this comes from the time when the Federal Reserve announced they would take every possible measure, including buying “distressed assets” in order to maintain liquidity in the market. Obviously anyone who was hoping a liquidity crisis would create a market crash was SOL, but for the good of the nation as a whole it’s better that our economy keeps chugging than a few disaster capitalists make it rich.

But it does raise a somewhat unfortunate truth: the Federal Reserve mostly buys up the assets of rich institutions that don’t need the help. The Fed buying someone’s underwater mortgage doesn’t actually help them, they’re still underwater and in debt, but it does help the bank that wrote the mortgage and is now facing a loss. The bank gets to offload the “distressed asset” (ie bad loan) and go use that money to make more money, while the mortgage owner just gets a new person they have to pay. It’s genuinely true that the Fed gives the greatest help to those already wealthy, and those of us not wealthy have to live with the consequences. Although all of us are helped in a way by the Fed maintaining liquidity in the economy, we aren’t helped to nearly the same extent as the banks that get to offload their bad decisions onto the government. I think it’s good that the Fed maintains liquidity, but I think there need to be more strings attached, demanding equity in exchange for liquidity would be a very fair trade in my book. And if banks don’t want the Government to own a percentage of them, then they can just refuse the free money.