Moonraker Fund Management Claims Banks Using Bailout Money To Ramp Markets

Tyler Durden's picture

What the blogosphere has been claiming for months is starting to make its way into the institutional realm. In a brazen press release by Moonraker Fund Management, caught by Tracy Alloway at FT Alphaville, the fund is alleging that the equity-rally has been orchestrated by banks, who using bailout capital and free liquidity from the Federal Reserve, have reallocated capital to purchase equities in the open market, which of course explains a lot of the inexplicable market phenomena witnessed recently. Including why the market does not reflect the underlying economic reality and is merely a function of burgeoning liquidity, and represents an impairment of broad fiduciary interests stemming from an opaque agenda which remains hidden courtesy of the Bank-Fed duo.

Excerpts from the Moonraker press release:

September 24, 2009 - 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.

Instead of lending to businesses and homebuyers, banks may have been using some of their bailout money to buy stocks from an oversold base in March, Moonraker believes. The British Bankers’ Association’s own figures show that gross mortgage lending by the banks has fallen from a high of £21.5bn in June 2007 to £9.1bn in August 2009, while new term lending to small businesses was £796m in July, compared with around £900m last October.

Jeremy Charlesworth, Chief Investment Officer of Moonraker and manager of the Moonraker Commodities Fund and Global Opportunities Fund, commented: “Little of the bailout money given to banks seems to have been passed on to businesses or consumers. But it must have gone somewhere and it might have gone to the proprietary desks of the banks to punt the markets. Given all the calls for more transparency, it would be good if the banks could clarify this.

“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. Clearly, someone has been buying, and given that it hasn’t been ordinary investors and the institutions that does just leave the banks.

“The banks’ balance sheets will certainly have benefited from their equity holdings. If they could sell these investments into a rising market then they would be in a better position to repay their debts. But there will be a problem if the public and institutions do not join the rally and the banks have to sell equities into a vacuum.

While Moonraker is undoubtedly correct, definitive evidence will never come as long as the Fed keeps hiding in its shroud of secrecy and promotes the liquidity-based divergence between the market and the economy. Which bring to mind Barney Frank's commentary on why Congress is delaying the passage of HR 1207 - specifically so that "it wouldn't be market sensitive." Undoubtedly the market would be very "sensitive" to discovering that the Fed, in collusion with the banks, has taken equities to fundamentally unsustainable levels, especially when one considers that the bulk of market movement comes courtesy of futures positions, with large volume drop gaps getting filled by a few hundred futures in overnight trading. Just who trades these futures? Which bank prop desks move the market on little to no volume? And are these movement flow based (clients), or purely from proprietary interests, which have everything to do with bank viability courtesy of selling equity securities from a higher artificial price point.

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AN0NYM0US's picture

interesting post from alphaville Form Y-9C data

Banks’ flashy commodity positions

http://ftalphaville.ft.com/blog/2009/09/24/73741/banks-flashy-commodity-...

Bearish Spirits's picture

Trash.  When you have "unexpected" good news like we do today(jobless claims), buyers flood the market!  Nothing to see here...

Can't wait for the home numbers.

AN0NYM0US's picture

exisiting home sales below expectations

no more green shoots so are icicles beginning to form??

 

AR's picture

This entire government ochestrated scenario will not end well. The dollar unwind (rally) will badly hurt the carry traders, which has been a trade these banks have heavily employed off the March lows. Again, here are some ingrediants for the potential sell off:

Ingrediants to a nasty selloff:

 (1) Longs have no more or limited money to invest (re: funds outflows and insider sales)

(2) Longs will turn and sell this market quickly to protect/book gains made in the last 3-6 months

(3) Few shorts are left to bid this market up

(4) New shorts will enter (reinitiate) the market on weakness

(5) Government money is getting tapped out (politically, and with the public, debt ceiling)

(6) Underlying market fundamentals are weak

(7) Seasonals, cycles, and technicals strongly argue for a top and selloff, and

(8) Computer led programs and quants will pile into a negative momentum led selling

 

Divided States of America's picture

Wrong, they have unlimited money to spend.

Anonymous's picture

Banks, yes, but is it the central bank?

etrader's picture

We all know the game.

Banks can not have deflating stock assets  as it makes them even more insolvent.

FED says the Banks need to "recapitalize" and one easy way is to use the "Free" money

to keep stock assets well bid.

 

aus_punter's picture

then fellow zerohedgers it is our duty to sell too and make their exits all the more difficult

Mediocritas's picture

I have a mental image of the people at Moonraker running around in yellow jumpsuits, pretending to fire laser guns at each other and making peuuw peuuw sounds. Makes sense. It would put their fashion sense in synch with the timeliness of their analysis.

http://www.jamesbondlifestyle.com/index_clothing.php?m=cl&g=cl024

Coming soon, analysis dressed in animal skins!

Anonymous's picture

hahaha: thats fucking classic! thats what i thought of too when i first read this shit.

aus_punter's picture

hah hah - best link ive seen on here in ages

 

Anonymous's picture

Okay,

I am in the camp of banks abusing the liquidity provided by the government to prop markets, but can anyone direct me to loan application data? I want to see how many people/businesses are asking for loans and compare that to the actual lending figures.

Hey bearish - been meaning to ask you what your avatar is? To me it looks like some crazy fish.

Cognitive Dissonance's picture

Isn't it interesting that this "concept" is just now getting some MSM exposure, long after ALL the TBTF banks have issued stock in the irrationally exuberant market. Mission accomplished.

Wash and rinse, repeat.

Anonymous's picture

Come on people, do you really think this move off the lows was based on anything other than manipulation ?

The move down caught many powerful families off guard and, combined with Madoff took alot of "smart" and "old" monies down with it...

this whole move has been to allow some of those powerful fortunes a somewhat graceful exit, courtesy of the taxpayer, -need proof look at the mutual flow for the last 2 weeks...right on cue, back from "time off" ....time to sell.

Who the hell else would be supporting AIG....daytraders?!

I think not!

Anonymous's picture

If the banks are using the Fed's money to invest in the equity market, whose stock do you think they are buying. Their own of course. This way they can pump up their own share price to give the impression they are doing well.

What a BS game Uncle Ben has created!

ToNYC's picture

Bernanke knows a FED audit is Toto pulling at the Wizard's curtain. So fitting that today is the 70th anniversary, and to keep the Empire State Building's global cred skirts clean, the obelisk will glow red for ruby slippers rather than green for the emerald city aka the Amadi-nejad opposition color. Perhaps the Princetonian scholar will reach into the grab bag of his fellow scholar at the Institue for Advanced Study and most illustrious colleague, and relate the monetary equivalent of

quantum mechanics, the Heisenberg uncertainty principle which states that certain pairs of physical properties, like position and momentum, cannot both be known to arbitrary precision. That is, the more precisely one property is known, the less precisely the other can be known. This is not a statement about the limitations of a researcher's ability to measure particular quantities of a system, it is a statement about the nature of the system itself as described by the equations of quantum mechanics. According to the uncertainty principle, it is, for instance, impossible to measure simultaneously both position and velocity of a microscopic particle with any degree of accuracy or certainty.

but really, what else happened to the money and where did the FHC GS get the new 16B for bonuses this quarter...ZIRP times leverage with flash attachment...it's good to be king.

 

Ivanovich's picture

This gets filed in the "No Shit Sherlock" folder.

Anonymous's picture

"...may have been..."???? Heh-heh.

Assetman's picture

While Moonraker is undoubtedly correct, definitive evidence will never come as long as the Fed keeps hiding in its shroud of secrecy and promotes the liquidity-based divergence between the market and the economy. Which bring to mind Barney Frank's commentary on why Congress is delaying the passage of HR 1207 - specifically so that "it wouldn't be market sensitive."

 

1.  First off, Barney Frank is doing his darnest to placate the banking lobbies to which he is beholden.  Problem is, his consitiuency won't let go of HR 1207 as it's written.  Somehow, he's going to find a way to sleaze his way around this issue.  I'd like to see how he does this.

2. I realize this is a techicality, but... shouldn't the accusations from Moonraker be more directed at the BoE versus the Fed in this instance?  I understand the main point (banks getting free moola to manipulate the equity markets), but he we have a British hedge fund complaining what is happening in their local environs.  Ans yes, you can easily extend that to what is happening in the U.S.-- it's just that no one has seemed to openly complain about it.

Anonymous's picture

The Mother of All Sucker Rallies is getting set to head south. Much pain and grinding of teeth to follow.

Groty's picture

Why limit it to "bailout money"?  BAC (Merrill Lynch) has almost $1T of deposits, many that are FDIC insured.  Same with JPM (Bear Stearns).  Why can't they be using those deposits to play the casino?

Bankster T Cubed's picture

keeping these banks alive was the worst thing possible

of course they're behind this pump-and-hope-to-dump

they are run by total criminals

as for Barney Frank......bankster whore #1

Anonymous's picture

You called Barney Fwanks "a whore?"

I do hope that you know that you owe whores an apology. They admit what they are.

Steve

ShankyS's picture

The ultimate pump and dump (as insiders leave thru the back door with even more of the sheeples money). Fucking crooks. All of them. America was the recipient of an ass fucking (sans KY) by these bastards.

Anonymous's picture

and they keep the law and the people, the collective bird...non-recourse thievery!

Anonymous's picture

And when the music stops the banksters would sell, sucking again the hot air out of the room, leading the way down. However, given gov't committment to absolutely backstop them, volatility may be unusually strong - probably punctuated by a number of black swan events of varying severity.

-AnonymousZero

Gilgamesh's picture

And just to prove to everyone that they are not going to give in and grow a conscience (ala Moodys circa Fall 09), S&P comes out full guns blazing on the banks with Strong Buys across the board.  And they'll raise you already all-time new-high price targets.

Anonymous's picture

i hope this wasn't meant to be a news flash....

on the other hand, the dollar is the new darling of the carry trade and it is thus likely that much money has wound its way to equities, and other instruments....

wallstreetwino's picture

Banks are under orders to gun the market -- their access to free money is conditional on their willingness to participate in Propalooza 2009.  No more funny business of raiding financials (or innocuous sovereigns) into the ground...

Anonymous's picture

And what's going to stop them from selling these same shares to drive the market down so they can load up on even more of middle class America's loot?

Anonymous's picture

Can someone explain the difference...

I have just assumed this was case the past few months. Once people started talking about a “liquidity driven rally” and “FED pumping in more liquidity” I just assumed that meant banks balance sheets are strenghted by the FED with more cash and the banks use that cash to buy assets, ie Treasuries, bonds, and equities. So now I’m a bit confused, how is this breaking news? Can you explain how everyone talking about a “liquidity driven rally” is different from this revelation that banks are using excess reserves to buy equities. I feel like I either knew something all along or was making a wrong assumption about the phrase “liquidity driven rally.” I’ll error on the latter until I get an explaination. Thanks