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Bank Of England Admits "Stocks Don't Reflect Economic Reality"

Tyler Durden's picture




 

The Bank of England's Financial Policy Committee (BoEFPC) warns there is "evidence of the re-emergence of... behavior in financial markets not seen since before the financial crisis," citing the increased issuance of synthetic products and added that banks have "little margin for error against a backdrop of low growth in the advanced economies," despite what we are told about their 'fortress balance sheets. Bloomberg Businessweek adds that the BoE were careful not to scare the public, they add, events currently "did not appear indicative of widespread exuberance in markets. But developments would need to be monitored closely." This following the Fed's warnings of 'froth' in the credit markets suggests central bans are considerably more concerned at blowing bubbles than they want to admit in public. ECB's Weber recently commented that he feared, "the recent rally in financial markets could be a misleading signal," which appears confirmed by the BoEFPC noting that equity performance since mid-2012, "in part reflected exceptionally accommodative monetary policies by many central banks... But market sentiment may be taking too rosy a view of the underlying stresses."

 

Via Bloomberg BusinessWeek,

The Bank of England said rising equity markets don’t reflect the underlying economic situation and warned that investors may be underestimating risks in the financial system.

 

Gains by equities since mid-2012 “in part reflected exceptionally accommodative monetary policies by many central banks,” the BOE’s Financial Policy Committee said today in London in the minutes of its March 19 meeting. “It was also consistent with a perception among some contacts that the most significant downside risks had attenuated. But market sentiment may be taking too rosy a view of the underlying stresses.”

 

...

 

The FPC’s comments on the advance in equity markets echo remarks last month by UBS AG Chairman Axel Weber, who said the economy hasn’t kept up with investor sentiment.

 

“I fear the recent rally in financial markets could be a misleading signal,” Weber, a former European Central Bank Governing Council member, said at an event in London with BOE Governor Mervyn King and Federal Reserve President Ben S. Bernanke. “We’re not really out of the woods yet.”

 

...

 

In their discussion, the FPC members noted the potential threats to the financial system from increased risk appetite among investors.

 

This was evident in the re-emergence of some elements of behavior in financial markets not seen since before the financial crisis, including a relaxation in some U.S. credit markets of non-price terms and increased issuance of synthetic products,” the committee said. “At this stage, they did not appear indicative of widespread exuberance in markets. But developments would need to be monitored closely.”

 

The FPC also said that banks’ leverage ratios, a measure of their debt to equity level, would remain “very high” even after the new recommendations were met. It said there would be “little margin for error against a backdrop of low growth in the advanced economies.”

 

...

 

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Fri, 04/05/2013 - 12:17 | 3413158 mktsrmanipulated
mktsrmanipulated's picture

texas taking its gold back from the fed.....nice

Fri, 04/05/2013 - 12:21 | 3413173 Jack Napier
Jack Napier's picture

Markets can stay irrational longer than you can stay solvent.

Fri, 04/05/2013 - 12:23 | 3413195 kaiserhoff
kaiserhoff's picture

Stocks don't reflect economic reality.

Easy call.  Not much of anything reflects economic reality, or democracy, or rule of law for that matter.

Forward Soviet!

Fri, 04/05/2013 - 12:26 | 3413211 francis_sawyer
francis_sawyer's picture

Newsflash:... There is no spoon...

Fri, 04/05/2013 - 12:28 | 3413218 TheSilverJournal
TheSilverJournal's picture

What is real?

Fri, 04/05/2013 - 12:31 | 3413238 McMolotov
McMolotov's picture

Teri Hatcher's boobs?

(also spectacular)

http://www.youtube.com/watch?v=BL2PicT9Kng

Fri, 04/05/2013 - 12:35 | 3413254 knukles
knukles's picture

Waaaaaaaaaaaaaaaait...
I been lied to?

Fri, 04/05/2013 - 12:49 | 3413280 hedgeless_horseman
hedgeless_horseman's picture

 

 

 

Tell us more about REAL RETURNS in financial markets. 
I'm so very interested.

 

Fri, 04/05/2013 - 12:57 | 3413339 Floodmaster
Floodmaster's picture

They need providers, we need Bernanke.

Fri, 04/05/2013 - 13:22 | 3413412 kaiserhoff
kaiserhoff's picture

I'm not usually much for chart porn, HH,

but that's right purty and says a mouthful.

Fri, 04/05/2013 - 13:22 | 3413415 Skateboarder
Skateboarder's picture

Epic post is epic.

Fri, 04/05/2013 - 12:24 | 3413198 DoChenRollingBearing
DoChenRollingBearing's picture

12:21 US ET -- Rush Limbaugh just mentioned (re jobs numbers) "Stage Name" Tyler Durden @ Zero Hedge on his radio show.  This is at least the FIFTH time I have heard Rush favorably mention ZH...

Fri, 04/05/2013 - 12:35 | 3413244 tarsubil
tarsubil's picture

Meh, let me know when Tyler favorably mentions Rush.

Fri, 04/05/2013 - 12:44 | 3413283 DoChenRollingBearing
DoChenRollingBearing's picture

My point is that Zero Hedge is gaining a lot of credibility out there in the Real World.  I do not wait for Tyler to do anything.

We had a saying when I lived in Texas: "You hold your breath, you die."

Fri, 04/05/2013 - 12:55 | 3413323 DoChenRollingBearing
DoChenRollingBearing's picture

12:52 PM, Rush mentions ZH again, as a source of real information that the MSM will not tell us.

Fri, 04/05/2013 - 13:31 | 3413434 Skateboarder
Skateboarder's picture

Hittin up the crew is the only way to get real news. Tylers and us are pals - we're all trying to save our fucking hides from a maniacal cabal of looters, pillagers, and warmongerers. Tylers give us the real deal from having done actual investigation and deduction. CNN makes you an infant bitch.

Rush Limbaugh is a Class-A idiot.

Fri, 04/05/2013 - 13:36 | 3413462 DoChenRollingBearing
DoChenRollingBearing's picture

Without ZH and FOFOA, I would have a lot less gold than I do now.

Fri, 04/05/2013 - 18:39 | 3414568 CH1
CH1's picture

Rush Limbaugh is a Class-A idiot.

Rush Limbaugh is a complicated individual, just like the rest of us. He has virtues, he has vices.

But he's a person, not a cartoon character - either a good one or a bad one.

Fri, 04/05/2013 - 14:04 | 3413544 smacker
smacker's picture

 

Is it possible that Limbaugh is trying to ride on the coattails of ZeroHedge's obvious success?

Fri, 04/05/2013 - 12:57 | 3413330 Ahmeexnal
Ahmeexnal's picture

Convolute that with "DON'T MESS WITH TEXAS"
Sadly, the rest of the US sheeple are forced to believe it is "DON'T MESS WITH TAXES"

Fri, 04/05/2013 - 12:58 | 3413344 Disenchanted
Disenchanted's picture

Lush Rimbaugh has no connection whatsoever with the "Real World."

Where would you or I be if we were to go doctor shopping for a hillbilly heroin connection?

Answer: J-A-I-L

Fri, 04/05/2013 - 14:01 | 3413541 smacker
smacker's picture

 

erm. I thought ZeroHedge IS the real world, not all that pap spewed out by MSM.

Fri, 04/05/2013 - 12:53 | 3413317 Bearwagon
Bearwagon's picture

Do your homeworks and get project mayhem going! I know for what I stood them days at the front door, and had Tyler beat me up with his damned broom ... don't you?

 

Fri, 04/05/2013 - 19:26 | 3414732 PhysicalRealm
PhysicalRealm's picture

Rush Limbaugh is an obnoxious hypocrite, but he has a lot of followers who believe everything he says and treat him like some kind of fucking god. 

This was done by an actress friend of mind and it's brilliant - the definitive moment on WTF is wrong with Rush.  Worth a couple mins of your time.  https://www.youtube.com/watch?v=Yq62k5SoeEI  

 

Fri, 04/05/2013 - 12:23 | 3413192 prains
prains's picture

MOAR,MOAR,MOAR.......until its.......WOAR,WOAR,WOAR

Fri, 04/05/2013 - 19:56 | 3414827 StychoKiller
StychoKiller's picture

O.T.:  And a little child shall lead them (More like a total Ignoramus!)

Fri, 04/05/2013 - 12:31 | 3413237 Wile-E-Coyote
Wile-E-Coyote's picture

The BOE knows what's coming. Some trying to distance themslves from the hangmans noose. Old Mervin is off in a few months, retirement. He is getting quite outspken in a reserved sort of way.

Normal service will be resumed when Carney takes over. High speed digital presses being fitted right now in the bowls of the Threadneedle street. 

.

Fri, 04/05/2013 - 12:40 | 3413277 ghostfaceinvestah
ghostfaceinvestah's picture

speaking of not reflecting reality, there seems to be a recent divergence between the billion price project and CPI recently.

http://bpp.mit.edu/usa/

Fri, 04/05/2013 - 13:52 | 3413517 Panafrican Funk...
Panafrican Funktron Robot's picture

Thanks for this, looks like the move from sterilized to unsterilized QE beginning in January is having it's intended effect. 

Fri, 04/05/2013 - 12:51 | 3413310 Doomer
Doomer's picture

To the BOE:

No shit, Sherlock!

Fri, 04/05/2013 - 12:20 | 3413162 MillionDollarBonus_
MillionDollarBonus_'s picture

The "fundamentals" don't matter. Follow the chart. The 4 year chart of the S&P 500 is in a clear uptrend. Until that trend changes, I'm a buyer.

Fri, 04/05/2013 - 12:21 | 3413175 pods
pods's picture

All right, that one was good.

+1

pods

Fri, 04/05/2013 - 12:22 | 3413176 Jack Napier
Jack Napier's picture

Enjoy your 3 eggs down the line.

Fri, 04/05/2013 - 12:21 | 3413178 BandGap
BandGap's picture

I have to love your enthusiasm. Keep it up, until you can't.

Fri, 04/05/2013 - 12:22 | 3413181 Abraxas
Abraxas's picture

You're right MDB! Fundamentals don't matter in this crazy world.That's all what it matters. You somehow seem much more agreeable.

Fri, 04/05/2013 - 12:39 | 3413269 Diet Coke and F...
Diet Coke and Floozies's picture

So, how is your FB IPO stock doing MDB? Did you cost average?

 

"Get me in at any price!" - MDB

Fri, 04/05/2013 - 12:53 | 3413319 market le pew
market le pew's picture

Thats what they all say, but the day the market turns you will not get out as markets will be halted limit down before they open.

Fri, 04/05/2013 - 12:58 | 3413337 Kirk2NCC1701
Kirk2NCC1701's picture

MDB, your model works iff (if and only if) you know the turning point, and are able to cash in on the Greater Fool model.  Until then, yes of course, you make lots of fiat money.  Those who lack your MDB (insider) knowledge are likely to get sheared or slaughtered.

Fri, 04/05/2013 - 12:58 | 3413340 Bearwagon
Bearwagon's picture

Oh, I see: Your following the chart has clearly taken you to such heights, that you are in dire need of oxygen! Quick! You will bevome unconscious soon, and if you then get somwhat higher, you'll get problems with lack of outside pressure ...

Fri, 04/05/2013 - 14:52 | 3413711 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

glad to see that you are coming out of your slump

Fri, 04/05/2013 - 12:19 | 3413168 malikai
malikai's picture

Heresy!

Fri, 04/05/2013 - 12:21 | 3413170 BandGap
BandGap's picture

How many more will see a naked emperor in the upcoming days? This is so fucking pointless.

Beer me now.

Fri, 04/05/2013 - 12:22 | 3413182 fuu
fuu's picture

Best and brightest.

Fri, 04/05/2013 - 12:26 | 3413207 Global Hunter
Global Hunter's picture

When I read the headline I thought 'did they go off script on purpose or by accident?" 

After reading it it occurred to me that King is on his way out to be replaced by Dodge and the current regime that is on its way out is going to hint at some honesty to give the whole thing an air of impartial and honourable respectability. The next regime comes in and all of this is forgotten.

Isn't that how they play it?

Fri, 04/05/2013 - 12:33 | 3413223 Rainman
Rainman's picture

Yes..there is ' toldja so ' book writin' money to be made.

Fri, 04/05/2013 - 12:31 | 3413231 cougar_w
cougar_w's picture

That is exactly how they play it.

Fri, 04/05/2013 - 12:51 | 3413215 Floodmaster
Floodmaster's picture

For as long as Investment Banking exist, the whole thing will remain a fraud

Fri, 04/05/2013 - 12:30 | 3413219 IamtheREALmario
IamtheREALmario's picture

When was the last time that financial markets were tied in any way to fundaments? Pre 1913? Financial markets are now a policy tool of the central banks and those whe benefit from them and nothing more.

Fri, 04/05/2013 - 12:30 | 3413220 mktsrmanipulated
mktsrmanipulated's picture

alright everyone nothing to see here back to the bid.....lol

Fri, 04/05/2013 - 12:29 | 3413221 orangegeek
orangegeek's picture

S&P500 Daily is up 17% since November.

 

http://bullandbearmash.com/chart/sp500-daily-drops-higher-volume-macd-tu...

 

So no, it's not a reflection of reality.  But this doesn't help the shorts nor the expired puts.

 

The market is an emotional system.  "billiard ball theory" rarely applies.

Fri, 04/05/2013 - 12:29 | 3413222 cougar_w
cougar_w's picture

The whole thing sounds like a Monty Python script. Understated caution while ones hair is on actual fire.

"We're not out of the woods yet." <smoke from head> "Could be a misleading signal here." <smell of burning hair> "Don't want to see too rosy a picture there just yet." <flames leaping>

Fri, 04/05/2013 - 12:32 | 3413230 HD
HD's picture

Bank of England must not watch CNBC - 'cause everything is just super.

 

Fri, 04/05/2013 - 12:49 | 3413302 knukles
knukles's picture

I rarely have the sound on CNBS... just watch the numbers but this a.m. saw the jobs data ... hoping to see Santelli.
No such luck
But the other dickwads... Holy Jesus... Every excuse under the sun why the number was misleading, shit's happy happy joy joy, celebrate, BTFD... whatever.
And all that crap while the screens are showing stock futures plummeting, yields collapsing (30 year treasury up 2.5% today, BTW) and gold rallying.

What planet are these people from?
Oh yeah, the Propaganda Channel!
I forgot

Told Mrs K that I almost was ready to break the telly....
Told me to calm down or I'd get my Thorazine enema early.

Fri, 04/05/2013 - 13:01 | 3413352 Ned Zeppelin
Ned Zeppelin's picture

Best for overall happy horse shit is the Fox News show with that blonde and that Trapper John dude.  Whatever he is selling, steer clear of.  Wacko. 

Fri, 04/05/2013 - 13:06 | 3413363 kaiserhoff
kaiserhoff's picture

Marriage wouldn't be so bad, except that nothing pisses off a woman more than seeing a man relaxed and happy, or just doing his own damn thing and having a good time farting around.

Such is life.

Fri, 04/05/2013 - 14:55 | 3413727 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

women need reasons to be pissed off?  i missed that memo

Sat, 04/06/2013 - 00:00 | 3415445 knukles
knukles's picture

I thought once past the first mini menopause at about 13 they were permanently pissed-off, no excuses needed?

Fri, 04/05/2013 - 14:56 | 3413720 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

the good olde thorzine enema... not to be confused with the corzine enema.  i would describe it, but we all know by now what that wash out feels like

Fri, 04/05/2013 - 15:02 | 3413746 WTF_247
WTF_247's picture

So far BTFD wins again - it wins about 95% of the time.  So far you would be up 10 pts in ES doing just that today.

Pick almost any stock (with a dartboard) and buy it - you will be up as well.

 

I will believe we have shifted over when I see the BTFD pushes way up and then gets destroyed by EOD, or STFR takes over (Short the Fucking Rally).  Until then you have to just play along or get killed trying to fight it.

Fri, 04/05/2013 - 12:43 | 3413256 Going Loco
Going Loco's picture

Doesn't matter what the BoE says. What brought Northern Rock down was Robert Peston's damning analysis of the situation on the BBC Radio4 morning programme, when he used the words "may be able to survive". Within an hour queues had started to form outside Northern Rock branches. In the UK it's Peston who matters.

Edit: Listening to Peston that morning was a bit like reading Reggie Middleton's analyses of banks nowadays. Peston had a copy of the latest balance sheet of Northern rock and was going through it live on air, line by line, explaining why they had run out of cash and why they might be insolvent not just illiquid. The presenter tried to shut him up but he just kept going. I don't suppose 1% of the audience knew what he was on about or how to read a balance sheet but they got the message OK. 

Fri, 04/05/2013 - 13:31 | 3413438 Bam_Man
Bam_Man's picture

Ahhh. Good old Robert Peston. He was great as Professor Harold Hill in "The Music Man".

Fri, 04/05/2013 - 13:52 | 3413515 smacker
smacker's picture

 

Preston was simply the messenger.

What brought Northern Crock down was a) its spiv management who indulged in absurd levels of lending risk, and b) the man who brought most things down in his time - Gordon 'Jonah' Brown - who abandoned City regulation by stuffing his newly created FSA with old cronies who had little or no knowledge of The City and were outflanked at every move by City slickers and even more spivs.

Did I mention spivs? ;-)

Fri, 04/05/2013 - 12:50 | 3413304 Satan
Satan's picture

Michael Lewis is gonna make a killing...

Fri, 04/05/2013 - 12:59 | 3413346 Ned Zeppelin
Ned Zeppelin's picture

If you're still a believer in AAPL, here's the jump the shark story for you:  http://www.businessweek.com/articles/2013-04-04/apples-campus-2-shapes-up-as-an-investor-relations-nightmare#r=rss

And I had the experience recently of returning 2 brand new iPad 4s to Best Buy for the reason that the Wifi simply did not work.  The third time I got an iPad 2, which works fine.  The store clerks told me they are being returned like mad for this reason. Something weird is going on there - we had the same experience with iPhone 4s at our house.  How can the great Apple get something so simple as Wifi connectibility screwed up? I was eyeing up the Surface thinking it looked pretty cool and probably worked on Wifi.  Not what the wife wanted though. 

The BOJ easing - Japanese yen developments are big.  Watching them closely. 

Fri, 04/05/2013 - 13:35 | 3413437 screw face
screw face's picture

The technology is extremely infected,who did that,

with little or no oversight from humans, "thangs" will get worse, rosta! 

 

Fri, 04/05/2013 - 13:05 | 3413349 Kirk2NCC1701
Kirk2NCC1701's picture

"We're not out of the woods yet." 

/No shit.  We're just heading deeper into the woods: Welcome to Fangorn forrest! /s

Wait till Treebeard's people discover what Saruman did to their kind, i.e. robbed them of their wealth and lives, to support Sauron's army and his "One Fiat-ring to Rule Them All".   Metaphorically speaking.

Fri, 04/05/2013 - 14:04 | 3413549 Lewshine
Lewshine's picture

Boy these equity quants have absolutely NO imagination. Rescue and freeze frame. All the psychological numbers are quickly covered up - Minus 100 = Down 89 (way more consumable and of course much easier for CNBC's Sue (roll her in flour to find the wet spot) Herrera's daily ringing: "And stocks that are well off their mid morning lows" comment that forces us to buy MOAR!!!

Fri, 04/05/2013 - 15:09 | 3413776 WTF_247
WTF_247's picture

Quants = big banks = under orders from Fed = getting free money from Fed to pump the markets higher.

Why would you slap the hand that is feeding you.  Just do what you are told and you make big bonuses.

Although it only works until someone blinks - at that point the game is up and panic sets in to lock in profits.  We have yet to even approach that point - any and all dips are bought. Some recover fully that day, others takes a day or two but they always do.  BTFD = free money.  Ignore what you see on the screen. Do not look at charts.  Do not interpret price action.  Just buy it and wait 3 days.

Sat, 04/06/2013 - 08:00 | 3415788 ozzz169
ozzz169's picture

at least he has the balls to admit it...  anyone with half a brain can tell the market is not pricing in event risk properly.  China/Japan/Europe/(insert just about any other country/region here)

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