The Counter-Attack on Irrational Exuberance May Be Beginning in Merrie Olde England

Back to basics from at least one part of the Bank of England?  (LINK):

BOE Says Investors May Be Taking ‘Too Rosy’ a View of Stress 

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.”...

They focus on the US :

“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.”

And on the UK.  Fractionally-reserved banking remains risky under all current proposed capital regimes:

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.”

There's not a lot to argue with in the above.  Though one might quibble with Dr. Weber.  What stocks are doing is rational.  They are rising in price as the quantity of currency units in which corporations do business increases rapidly.  The major risk to this market view is that these currency units are debt-based.  Their underlying value is based on confidence, which can change.

Unfortunately, this statement out of the MPC comes in March 2013, not March 2009.  And it's a bit of a damp squib for any dreamer who thinks there's any near-term hope of a seriously sound, unleveraged financial system.  But better late that they say this than never.