Another Snapshot Of The European Recovery

What can one say... Europe's stock markets are booming, bond yields (and spreads) are tumbling... and earnings growth expectations are - collapsing...

Guest Post: Yellen's Wand Is Running Low On Magic

There's not much good news for housing these days. For a little while, the Fed's suppression of interest rates juiced housing enough to distract Americans from weak job creation and stagnant real wages. Don't have a job? No problem! Just borrow against the appreciation of your house to feed your family. But Yellen's interest rate wand looks to be out of magic. The government had a pipe dream of white picket fences for everyone. But Americans can't refinance their way to wealth. Especially in the Greater Depression.

"Ukraine's Destiny Is To Go Medieval"

"My country can cry all it likes about yesterday’s referendum vote in eastern Ukraine, but we set the process in motion by sponsoring the overthrow of an elected Kiev government that was tilting toward Russia and away from NATO overtures. The president elected in 2010, Viktor Yanukovych, might have been a grifter and a scoundrel, but so was his opponent, the billionaire gas oligarch Yulia Tymoshenko. The main lesson that US authorities have consistently failed to learn in more than a decade of central Asian misadventures: when you set events in motion in distant lands, events, not policy planners at the State Department, end up in the driver’s seat."

Elizabeth Arden Earnings Stink, Blames Weather; Stock Tumbles 15%

Q1 2014 was the first negative EBITDA quarter for Elizabeth Arden since before Lehman (June 2008) and worst quarterly EBITDA loss for the company since Q3 2001... and the rest of the data was terrible:

*ELIZABETH ARDEN 3Q SALES $210.8M, EST. $255.7M; 3Q ADJ. LOSS/SHR 84C, EST. BREAK-EVEN

The reason... come on you can guess... "an unprecedented number of weather-related store closures in our North America business during the quarter."

Fed Governor Admits Truth About QE: "Can't Go From Wild Turkey To Cold Turkey Overnight"

“I am often asked why I do not support a more rapid deceleration of our purchases, given my agnosticism about their effectiveness and my concern that they might well be leading to froth in certain segments of the financial markets. The answer is an admission of reality: We juiced the trading and risk markets so extensively that they became somewhat addicted to our accommodation of their needs… you can’t go from Wild Turkey to cold turkey overnight."

- Fed Governor Richard Fisher

Silver & Stocks Soar To Celebrate Donetsk Independence; Russell Up 4% In 24 Hours

The Russell 2000 had its best day in over 17 months today - up 2.5% (best since Jan 2nd 2013) and +4% from Friday's lows. All US equity markets exploded higher our of the gate thanks to a ridiculous spike lower in VIX (below 12) and USDJPY stop-run back through 102 which squeezed "most shorted" dramatically higher. The Dow, Trannies, and S&P all made new record high closes...and it's not even Tuesday yet! Away from stocks, silver jumped over 2% for almost its best day in 3 months. Gold rebounded over $25 from overnight smackdown lows. Oil broke back above $100. Treasury yields rose modestly (2-3bps) - majorly out of sync with equity exuberance. JPY was large and in charge of stocks but the USD ended the day unchanged. S&P futures volume was 30% below recent average.

When Not Even The "1%" Can Afford College

Since in America one now needs a Bachelor's degree (if not a PhD in economics, of course) to get a job as a waiter, according to the following chart the US may soon have a severe waiter shortage considering the cost of college tuition has outpaced even the income of the 1%. As for everyone else, forget it - want that French Polynesian belly-dancing major? Prepare to become a debt slave for life.

Bank Of America Would Like To Buy Your Gold, Seeing "No Gains Above $1315"

Last year it was Goldman Sachs telling clients to "dump your gold" (only to become the biggest buyers of the precious metal in the following quarter). Just last month, Morgan Stanley advised clients that 'gold will not see $1300 again'... and today, Bank of America joins the crowd as Macneil Curry advises "It is time to sell Gold" (to BAML we presume?)... as the range trade of the past month is completing and the downtrend is set to resume.

European Companies Write Off Half A Trillion Dollars Due To "Culture Of Late Payment"

40% of European firms say the severity of late-payment problems were preventing them from hiring as "even when the public sector pays promptly, the money doesn't sloosh down the system promptly because of the culture of late payment." As the FT reports, small and medium-sized enterprises are the hardest hit by late-payment consequences with nearly three-quarters saying nothing has changed in the last few months and in fact nearly half saying the problem is getting worse. "The late payment consequences for businesses pose a real threat to Europe’s competitiveness and social wellbeing," warns one analyst, as "companies are deliberately not sticking to the provisions of the EU directive as a way of managing their cash flow." The reason - of course - the unintended consequences of policy-makers centrally planned efforts to ensure nothing bad ever befalls an important firm/nation ever again - "It's a way of borrowing off smaller companies – and they should be held to account."

Donetsk Warns Ukraine Army Located In The East To "Leave In 48 Hours" Or Face War

Update: And just to make sure Russia has a catalyst: UKRAINE FORCES ATTACK EASTERN CITY OF SLOVYANSK, INTERFAX SAYS

With the US having voiced its support for Ukraine's "anti-terrorist" operations, and Russia strongly supportive of pro-Russian people's decisions to regional self-determination, the threats coming from the newly independent regions are a concern (that markets clearly do not care about):

*DONETSK ARMY SAYS WILL FIGHT UKRAINE FORCES IF DEADLINE IGNORED

Ukrainian military forces have 48 hours to leave the region or Donetsk own "anti-terrorist" forces will fight. Of course, with the US already saying the referendums are illegal and not recognizing them, we suspect it will be time for more sanctions soon (despite the lessons below).

U-2 Spy-Plane-Inspired Radar Crash Was Sparked By Insufficient RAM

Having admitted that last week's air traffic control system crash was due to the fact that a U-2, Cold War-era, spy plane still in use by the U.S. military sparked a "glitch" in radar systems and grounded all west coast planes for over 45 minutes, Reuters reports that an inside account suggests this was due to a common design problem in the U.S. air traffic control system  - a lack of memory in the computer! What is perhaps more worrisome, in theory, the same vulnerability could have been used by an attacker in a deliberate shut-down, the experts said, and "shows a very basic limitation of the system," and could be used as a new "attack surface."

Is The Market Consolidating Or Topping?

"Good" economic news and "stronger than expected" earnings reports have apparently buoyed the market against the drain of liquidity from the Federal Reserve. Today, the market ripped higher at the open as hopes of a "QE" program from the ECB rippled through the markets. Despite commentary from the mainstream media that the markets are doing great, the updated chart below shows the markets continuing its tug-o-war between support and resistance. This is an important point to remember. While it is certainly possible that the markets could ratchet higher from here due to the "psychological momentum" that currently exists, the likelihood of a runaway bull market from here is remote.

Spanish Ruling Party Politician Assassinated In Broad Daylight

Until recently, it was mostly bankers that were the victims of a perplexing epidemic of untimely deaths, either at their own hand or the result of someone else's rage. Today that changed in Spain when hours ago a member of the ruling Partido Popular, and president of the council of Leon, Isabel Carraso, 59, was assassinated in broad daylight on a street in the center of the city of Leon. Her death was certified at 5:20 pm local time.

And The Best Performing Economy In The World Is...

Ireland's Services economy is expanding at the fastest pace in the world, according to the latest round of survey-based PMI data from Markit. The worst...contraction... France Construction

Russia Demands "Immediate Talks" With Kiev; Says Referendums Show "Real Mood" Of People

UPDATE: AP reports Pro-Russian protesters declare independence for the Luhansk region in eastern Ukraine.

With local reporters citing officials claiming "direct talks between the eastern regions of Ukraine and Kiev are now out of the question", Russia's foreign ministry has commented directly that:

*RUSSIA SAYS SEPARATIST REFERENDUMS SHOW 'REAL MOOD' IN EAST
*RUSSIA EXPECTS KIEV GOVT TO REACH OUT TO EAST, WANTS 'RESULTS'

Adding that the Dontesk and Lugansk referenda short evidence of the people's strong will to make decisions on their own, Russia wants "immediate" talks in Ukraine on state governance... and cites Kiev's criminal unwillingness to engage in dialogue with his people.

Goldman Says European QE Will Come In 2015 At The Earliest, If At All

  • Goldman’s Andrew Wilson Says QE in Europe a 2015 Story If at All
  • European economy would have to weaken significantly before QE comes into play, said Andrew Wilson, co-head of Global Fixed Income and Liquidy management team at Goldman Sachs Asset Management.
  • Says Draghi has foreshadowed policy easing at next meeting, expects ECB to cut rates 1-2 times before they look to other methods such as an LTRO
  • Says if other methods don’t work it would “ultimately have to be QE”

Spot The Goldman And Glencore Aluminum Warehouses

Across the 137 warehouses that the London Metal Exchange has begun tracking, 2 stand out. Having been at the center of allegations of manipulation of the metals markets - most notably Aluminum - thanks to monopolistic warehousing, the following report from the LME will not entirely shock that none other than Goldman Sachs (and Glencore) have simply incredible waiting times for delivery of the base metal. We discussed the monopolization (thanks to lax Fed regulation) here, here, here, and here and as Reuters reports lengthy logjams at warehouses monitored by the LME, the world's oldest and biggest market for industrial metals, prompted bitter criticism by consumers and sparked a wide-ranging reform program at the exchange. With nearly 2-year-waits for Aluminum delivery by Goldman - we are sure regulators will see nothing wrong at all.