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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mktsrmanipulated's picture

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

Jack Napier's picture

Markets can stay irrational longer than you can stay solvent.

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!

francis_sawyer's picture

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

knukles's picture

I been lied to?

hedgeless_horseman's picture




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


Floodmaster's picture

They need providers, we need Bernanke.

kaiserhoff's picture

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

but that's right purty and says a mouthful.

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...

tarsubil's picture

Meh, let me know when Tyler favorably mentions Rush.

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."

DoChenRollingBearing's picture

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

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.

DoChenRollingBearing's picture

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

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.

smacker's picture


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

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"

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

smacker's picture


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

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?


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.  


prains's picture

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

StychoKiller's picture

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

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. 


ghostfaceinvestah's picture

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

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. 

Doomer's picture

To the BOE:

No shit, Sherlock!

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.

pods's picture

All right, that one was good.



Jack Napier's picture

Enjoy your 3 eggs down the line.

BandGap's picture

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

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.

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

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.

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.

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 ...

InTheLandOfTheBlind's picture

glad to see that you are coming out of your slump

BandGap's picture

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

Beer me now.

fuu's picture

Best and brightest.

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?

Rainman's picture

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

cougar_w's picture

That is exactly how they play it.

Floodmaster's picture

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

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.

mktsrmanipulated's picture

alright everyone nothing to see here back to the

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.