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)

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

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.  


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.

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.



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


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

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

S&P500 Daily is up 17% since November.


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.

Do NOT follow this link or you will be banned from the site!