Thursday, Sep 24, 2009

If you are long stocks read this

FT Alphaville: This bank-engineered equity rally

"Moonraker Fund Management, the independent investment boutique, is concerned that banks may have been using their bailout money to buy equities, helping to fuel a rally that is vulnerable to a major correction if they consequently sell in thinly traded markets."...
Another valid point - "The banks have every right to use the money they borrow in any way they choose. But it would be good to know how much of the bailout money has been used to buy equities." - it is taxpayer money after all...

Posted by mountain goat @ 01:19 PM (1067 views)
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4 Comments

1. rumble said...

"The banks have every right to use the money they borrow in any way they choose."
The banks demonstrate incompetence, so the government gives the banks free rein?!?! It's hopeless.

Thursday, September 24, 2009 01:55PM Report Comment
 

2. fubar said...

Agreed rumble - a very counter intuitive position. Hopeless. Sit back, relax and enjoy the bumpy ride of history.

Thursday, September 24, 2009 02:49PM Report Comment
 

3. bellwether said...

And the banks investing into the market is being encouraged by government. As I have said many times the Obama Admin are big on Schiller and his "animal spirits" thesis, sort of like the field of dreams "build it and they will come" ,and the hope is that by gunning the market you get a virtuous cycle of optmism and hope that feeds off itself.

What they ignore (because they cannot solve) is the Elphantine debt that must be worked off (to a signficant extent) before genuine green shoots appear. You get to a point when credit cannot expand and you must allow it to contract to move forward again.

Some good comments from Meredith Whitney quoted on Alphaville in similar vein.

http://ftalphaville.ft.com/blog/2009/05/12/55782/whitney-i-call-this-the-great-government-momentum-trade/

Thursday, September 24, 2009 03:12PM Report Comment
 

4. icarus said...

QE money goes into buying bank stocks too. This partially recaps the banks, which can return the favour by buying government bonds. This certainly appears to have happened in the US.

Thursday, September 24, 2009 04:08PM Report Comment
 

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