Climateer Investing: BIS: "Overall, it is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally"

We take the Bank for International Settlements very seriously, links below.
From the Wall Street Journal:

Global Markets' Strength Doesn't Reflect Economic Outlook, Central Banks Say
Investors Could Be Unprepared for Interest-Rate Rises, Says BIS

BRUSSELS—Buoyant financial markets are out of kilter with the shaky global economic and geopolitical outlook, the Bank for International Settlements said in its annual report published Sunday.

The warning from the BIS, a consortium of the world's top central banks, comes as financial markets—from stocks to bonds to commodities—have been enjoying a broad-based rally in the first half of 2014, reflecting investor optimism over expansionary central-bank monetary policies.

"Overall, it is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally," the report read.

Investor jubilation stems partly from the commitment by the world's largest central banks, such as the U.S. Federal Reserve and European Central Bank, to keep interest rates low while economies continue to recover from recession. Markets have been resilient in the face of uneven growth in the U.S. and Europe, as well as political and economic unrest in Ukraine, the Middle East and elsewhere.

"Financial markets are euphoric, in the grip of an aggressive search for yield…and yet investment in the real economy remains weak while the macroeconomic and geopolitical outlook is still highly uncertain," said Claudio Borio, the head of the BIS's monetary and economic department.

Central bankers meet around every two months at the BIS's headquarters in Basel, Switzerland. The group doesn't set policy, but rather serves as a forum for central bankers to exchange views about financial markets and the global economy.

While global growth has firmed, the BIS said, it is still below its precrisis levels. The world economy was up 3% in the first quarter of 2014 compared with a year earlier—weaker than the 3.9% average growth rate between 1996 and 2006. In some advanced economies, output, productivity and employment remain below their precrisis peak....MORE

Here are the BIS':
Press Release
Annual General Meeting presentations
Annual Report

In 2011 I tried to communicate my thinking on the BIS, note the dates:
Why You Really, Really Want to Listen to the Bank for International Settlements

On June 26, 2007 (i.e. pre-"Quant-quake", pre-Bear Stearns, pre-ought-eight-near-catastrohe) we posted a short little piece:
"(Off-topic) Banks' banker warns of downturn":

THE risk of a 1930s-style economic slump has been heightened by "euphoric" markets tapping cheap global credit, one of the world's pre-eminent financial institutions has said.

In its annual report, the Bank for International Settlements noted that the conditions that led to the Great Depression of the 1930s and the Asian crises in the 1990s reflected the current environment.
From The Age
On April 28, 2010 it was Greece: "Exposure fears weigh on French, German banks"
From MarketWatch:

Banks with local subsidiaries, government-lending exposure most at risk

Banks in France and Germany have the biggest exposure to Greece of non-Greek lenders are also heavily exposed to other potentially at-risk countries, with those firms that operate local subsidiaries or with big local-authority funding activities likely to face the heaviest losses, analysts said.

The latest figures from the Bank for International Settlements show French banks have $75.2 billion of exposure to Greek borrowers, while the industry in Germany has an exposure of $45 billion. The U.K. trails a relatively distant third, with exposure of $15.1 billion....
There is a reason the BIS is known as the "Central banker's central bank".
Here's their website. I try to visit a couple times per month.

Sunday, June 29, 2014

BIS: "Overall, it is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally"