Unemployment In Europe (excerpt)

On Thursday, the ECB is expected to lower its official rate from 0.75% to 0.50%. This expectation was in the financial markets even before Eurostat yesterday reported that the euro zone’s CPI rose only 1.2% y/y in April, easing from March’s 1.7% reading. That’s well below the ECB’s target of 2%.

Yesterday, Eurostat also reported that euro zone unemployment rose to 12.1% during March, an all-time high. Youth unemployment for workers under 25 years old rose to 24%. Unemployment is especially high in Italy (11.5%) and Spain (26.7%). In Italy, youth joblessness is significantly higher at 38.4%, and shockingly high at 55.9% in Spain.

Today's Morning Briefing: Jam-Packed. (1) Two policy meetings and lots of economic data. (2) Carbon copy FOMC statement? (3) Inflation may be too low for Fed and ECB. (4) Unemployment rate is certainly too high in euro zone. (5) Will ECB copy BoE’s Funding for Lending Scheme? (6) A deluge of PMIs confirming recession in Europe, slowdown in China and US, and better growth in Japan. (7) Fed district surveys for April are uninspiring. (8) Will frigid March heat up April’s payrolls? (9) Consumer confidence blossoming in the spring. (10) Fundamental Stock Market Indicator is looking up again. (11) Focus on overweight-rated Financials. (More for subscribers.)

Inflation & the Fed (excerpt)

Expected inflation in the 10-year TIPS yield has declined from a recent high of 2.59% on February 13 to 2.37% yesterday. The core PCED inflation rate fell in March to 1.1% y/y, the lowest since March 2011. I don’t understand why Fed officials are so convinced that lower inflation is a bad thing. They obviously view it as a sign of economic weakness. They also seem to fear that falling inflation will hurt demand for goods and services by eliminating buy-in-advance attitudes.

Are they aware that much of inflation’s recent improvement (IMHO) is attributable to health care costs? That’s right: The PCED medical care inflation rate was down to 1.7% in March, the lowest since April 1998. There have been significant drops in inflation rates for drugs and physician fees. Does the Fed want to see higher inflation rates in the health care industry so that people will rush to buy medical care goods and services before their prices go up?

Rent inflation has rebounded during the current economic recovery, but now shows signs of peaking. The CPI and PCED data are nearly identical and show that rent of shelter is up 2.2% y/y. It was actually falling during 2010. It accounts for 17% of the core PCED and 42% of the core CPI. Do Fed officials really want still higher rent inflation?

Today's Morning Briefing: Low Maintenance Bull. (1) A couple of simple wishes. (2) What’s charging up the bulls? (3) Hilsenrath says it all. (4) Disinflation making a comeback. (5) Why do they want more inflation? (6) Medical care inflation falling led by drugs and doctors. (7) Rent inflation peaking? (8) Hooray for Italy. (9) ECB set to ease. (10). No bank runs in euro zone money data. (11) Consumers still spending. (12) Focusing on fun-related Consumer Discretionary stocks. (More for subscribers.)

S&P 500 Revenues & US Exports (excerpt)

Both the levels and the growth rates of S&P 500 revenues and US nominal exports are highly correlated. Nominal exports remained in a volatile flat trend during the first two months of the first quarter. This might be one reason why revenues have been lower than expected during the first quarter’s earnings season. Of the 270 S&P 500 companies that have reported, 56% had negative revenue surprises. Nevertheless, analysts’ consensus revenue estimates are holding up surprisingly well for this year and next year with gains of 3.0% and 4.6%, respectively.

S&P 500 profit margin estimates are also holding up, with 9.8% expected this year and 10.5% expected next year. I expect margins to remain flat in 2013 and 2014. So earnings should grow at the same pace as revenues. For earnings, I am still predicting $110 per share this year, up 5.9% y/y, and $118 next year, up 7.3%. Obviously, I am more optimistic about the prospects for revenues than the analysts. However, because they are more optimistic on margins, they are currently predicting that earnings will be $111 and $124 this year and next year.

Today's Morning Briefing: Austerity & Disruptive Innovation. 1) From Tribeca to London. (2) If I had a hammer. (3) Stockman, Psy, and me. (4) Christensen, Schumpeter, and Marx. (5) Capitalism creates winners and losers all the time. (6) Politicians know how to win. (7) The anti-austerians fight back. (8) Reinhart & Rogoff’s big error. (9) Frustrated central bankers do more of the same. (10) The anti-austerity bull market in stocks. (11) The BRAINE revolution. (12) GDP is a mix of new and old normal. (13) “Mud” (+). (More for subscribers.)

S&P 500 Revenues, Commodity Prices, & the Dollar (excerpt)

Previously, I’ve observed that S&P 500 revenues are highly correlated with both world industrial production and world exports. The same goes for these revenues and the CRB raw industrials spot price index. I am predicting that revenues will be up 5%-7% this year and next year.

If commodity prices weaken further, I will have to reassess this outlook, especially if the dollar continues to strengthen. There is a strong inverse correlation between the y/y percent changes in the CRB index and the JP Morgan trade-weight dollar index. A strong dollar tends to decrease the demand for many commodities that are priced in dollars. A strong dollar also depresses the value of profits earned abroad by US companies.

Today's Morning Briefing:The Pits and the Pendulum. (1) Dr. Copper isn’t the only economist in the commodity pits. (2) CRB spot price index less volatile. (3) World exports and production rose to record highs in January. (4) The relationship between S&P 500 revenues, commodity prices, and the dollar. (5) Germany’s Ifo dipping. (6) US capital goods orders slowing. (7) China not as weak as Dr. Copper suggests. (8) Underweight-rated Materials may be oversold. (9) Focus on overweight-rated Industrials, especially enablers of factory automation. (More for subscribers.)

Dividends, Buybacks, & the Bull Market (excerpt)

Why did US stocks rally yesterday? Despite disappointing revenues, earnings expectations are holding up well during the current earnings season, with the forward earnings of the S&P 500, S&P 400, and S&P 600 all in record-high territory.

Most importantly, during the current earnings season, US corporations continue to announce dividend increases and more share buybacks. Previously, I’ve shown that this corporate cash flow into the stock market--which totaled $2.1 trillion for the S&P 500 since stock prices bottomed during Q1-2009 through Q4-2012--has been driving the bull market since it began.

On Tuesday, Apple announced that it will more than double its program to return cash to shareholders through stock buybacks and a higher dividend, spending $100 billion on the effort through the end of 2015. Its share repurchases alone will increase to $60 billion from the $10 billion it committed previously, the largest such plan in history.

Today's Morning Briefing: Money for Nothing. (1) Fearless bulls. (2) Bear raid. (3) Finding support. (4) Beware of “Dow 16,000!”? (5) Bad to ugly Markit data. (6) More recession stats out of Europe. (7) Copper much weaker than CRB spot index. (8) Bad news is still good news. (9) Draghi to the rescue? (10) Apple slices some cash for shareholders. (11) Dangerfield vs Potemkin rally. (12) Dueling ratios. (13) Dire Straits. (14) Focus on housing-related stocks. (More for subscribers.)

US Housing (excerpt)

The National Weather Service reports that last month ranked as the second coldest March in the continental United States since 2000. The average temperature across the US was also 13 degrees Fahrenheit lower than in March 2012, and a late-winter blizzard broke snowfall records in many areas.

Bad weather certainly can explain why single-family housing starts fell and existing home sales dipped in March. However, that didn’t stop the median price of a single-family existing home from rising by 12.1% y/y, the best rate of increase since November 2005.

In April, there was a two-point drop to 42 in the Housing Market Index (HMI) compiled by the National Association of Home Builders. That’s still a very upbeat leading indicator for both housing starts and new home sales. 

Today's Morning Briefing: Blaming the Weather. (1) What done it? (2) A soft batch or a soft patch? (3) The seasonal adjustment curse. (4) The coldest March since 2000. (5) Utility output jumped. (6) Hot home prices. (7) Outstanding oil output. (8) Stovall on going away in May. (9) Health Care is a good sector for the season. (10) It’s defensive, but still cheap. (11) A table of forward P/Es. (More for subscribers.)

The “Abe Spreads” (excerpt)

I visited with a few of our hedge fund accounts around Greenwich, CT last week. The consensus among the macro strategy funds is that the Nikkei has more upside because the yen has more downside. They have been long the Nikkei and short the yen since late last year when they concluded that Japan’s new prime minister Shinzo Abe was intent on jolting the economy with a huge increase in fiscal spending and a massive round of QE. The hedge funds remain in the trade. Some have also been shorting the DAX, figuring that the plunge in the yen relative to the euro is bound to depress Germany’s exports and economy while boosting Japan’s exports, especially of autos.

These developments could explain some of the recent performance of the US stock market. The DAX peaked at a new cyclical high on March 14. It is down 7.4% since then. Global investors may be switching out of European stocks and into American ones, especially blue-chip defensive names that are viewed as safe havens. When the new governor of the BoJ announced on Thursday, April 4 that he intends to double the balance sheet of Japan’s central bank, bond yields plunged around the world. That might have attracted more money into American stocks, especially those with a dividend yield.

Today's Morning Briefing: Flash Consensus. (1) Macro hedge funds still playing “Abe spreads.” (2) Long Nikkei and short DAX. (3) Flash mob, flash crash, and flash consensus. (4) Getting the shakes about shaky global economy. (5) Pause more likely than correction or melt up. (6) Analysts raising revenue estimates, while companies lowering guidance. (7) Technicians see lots of bearish signs. (8) Health Care may be the cheapest defensive play left. (9) Have central bankers lost their groove? (10) No recovery in sight for Europe. (11) “42” (+ + +). (More for subscribers.)

Old Normal (excerpt)

For stock investors, following the New Normal paradigm obviously has been a bad investment strategy given that the stock market is up 129% since March 9, 2009. There’s no denying that the latest recovery in real GDP has been subpar. Real GDP has increased only 1.8% on average over the past two years. However, this average growth rate rises to 2.9% excluding total government spending. That’s closer to the old normal. Needless to say, the profits recovery has been abnormally good relative to GDP.

Today's Morning Briefing: The New Abnormal. (1) Some hits and some misses for the New Normal. (2) Eight centuries of data can’t be wrong. (3) Scholars challenge Reinhart/Rogoff findings. (4) Seeking and finding the old normal in private-sector GDP and in profits. (5) Yellen favors “lower for longer.” (6) Fed seeks to promote “prudent risk-taking.” (7) For gold bugs, deflation is the new abnormal. (8) Dudley isn’t worried about inflation. (9) CPI inflation rates remain subdued in the G7. (More for subscribers.)

Technology (excerpt)

The IT sector has significantly underperformed the S&P 500 so far this year. I haven’t been keen on the sector mostly because of the commoditization of both hardware and software. The proliferation of digital devices has depressed PC sales. The Cloud may be doing the same by allowing users of the devices to do more of their computing up there rather than down here on their PCs. The Cloud may also allow more users to rent rather than to own the software they use.

Nevertheless, as I recently observed, the IT sector is the cheapest it has been since 1995. IT companies tend to generate good cash flow. If they pay more of it as dividends, then they might sport higher valuation multiples as do dividend yielding stocks in other sectors. So we recommend a market weight in the sector.

The data released in the Fed’s March industrial production release for the information processing industry are uninspiring. Output of computer and peripheral equipment is down 49.2% since the record high during May 2008, and is down at levels not seen since the end of 2004. Communication equipment output has been flat for the past year, and in a flat range since 2000. On the other hand, semiconductor output is at a record high. Capacity utilization is depressed at 65.3% for computer manufacturing. It is 71.1% for semiconductors and 79.0% for communication equipment.

Today's Morning Briefing: Not Too Swift. (1) Three-speed global economy. (2) IMF gives a haircut to 2013 world growth. (3) IMF still upbeat about 2014. (4) US more likely to impress than depress. (5) Construction and energy output leading the way. (6) Europe fiddles while Draghi pleads. (7) European SMEs are stressed. (8) Don’t hold your breath for euro zone banking union. (9) Weak yen should boost Japan’s exports, though maybe not to China. (10) Regulators shining a light on China’s shadow banking system. (11) Focus on market-weighted Information Technology. (More for subscribers.)

Gold & Stocks (excerpt)

Friday’s selloff in commodity prices was triggered by a disappointing retail sales report for the US. Monday’s plunge was triggered by weaker-than-expected GDP news out of China for the first quarter. In a phone conversation, one of our accounts concluded, “The market is discounting that there is no growth anywhere in the world.” I’m not so sure about that, but I do respect the relationship between the stock market and commodity prices.

Indeed, the CRB raw industrials spot price index is one of the three components of our Fundamental Stock Market Indicator (FSMI), which has been highly correlated with the S&P 500 since 2000. The recent rally in the S&P 500 to new record highs hasn’t been confirmed by our FSMI, which backed off from its cyclical high during the last week of March and first week of April.

The price of gold tends to follow the underlying trend in the more volatile CRB raw industrials index. So gold’s two-day free-fall of $203 per ounce to $1,360 is unsettling if investors see it as a harbinger of a widespread plunge in commodity prices resulting from a much weaker global economy. I don’t see it that way. Nevertheless, gold’s precipitous descent only one week after the Bank of Japan announced a massive QE program suggests that investors are losing their confidence in the power of central banks to stimulate economic growth. As a result, gold bugs may no longer be convinced that inflation will heat up, notwithstanding the monetary excesses of the central banks.

Today's Morning Briefing: Global Growth Scare. (1) No gold medal for the metal. (2) MEI sectors leading on the way down. (3) Emerging and submerging economies. (4) Has the global economy stopped growing? Of course not! (5) Is gold a leading indicator for anything? (6) Giving up on inflation. (7) China is still growing faster than any other economy. (8) Global oil demand growth increasing, not decreasing. (9) So why are oil prices falling? (10) Earnings still in record territory. (11) Focus on underweighted S&P 500 Energy sector. (More for subscribers.)

Gold (Excerpt)

That was a very bad break for gold on Friday. The nearby futures contract price plunged $63 to $1,501 an ounce, down 20.5% since its record high of $1,889 on August 22, 2011, and the lowest level since July 4, 2011. Other precious metals prices also dropped sharply that day. That’s a bit surprising given that a week ago, the BoJ announced plans to double its balance sheet over the next two years, which should have been bullish for precious metals. Obviously, when they failed to rally on this news, the path of least resistance was downwards. Similarly, the price of gold fell in February despite a bullish Valentine’s Day press release from the World Gold Council.

In the 2/21 Morning Briefing, I wrote: “Over the past few years, I’ve been asked on several occasions about my opinion on gold. I responded that my problem with gold is that I only know how to value assets with coupons, dividends, or earnings. I also observed that the price of gold had already increased sevenfold since January 20, 2001. … It has been a crowded trade, as evidenced by the high levels of net long positions held by both large speculators and small traders, according to the Commodity Futures Trading Commission. With so many bulls around, the lack of upside price momentum since late 2011 must have convinced some of them, especially the big hedge funds, to lighten up.” They lightened up some more on Friday.

Today's Morning Briefing: Back to the Future. (1) The 1990s and now. (2) US looks fairest of them all. (3) What about Japan and China? (4) Heavy metals. (5) Bullish news depresses gold. (6) Upside for US in commodities’ downside. (7) When supply exceeds demand. (8) Fracking adds up. (9) Trend still up for retail sales. (10) S&P 500 Retailers should continue to outperform as forward earnings rises to record high. (11) “The Place Beyond the Pines” (+ +). (More for subscribers.)

CNBC Appearance

The Stock Market (Excerpt)

Previously, I’ve shown that the current bull market in the S&P 500 since 2009 through 2013 so far has tracked a virtually identical course as the prior one from 2003-2007. Indeed, they both fit on the same scale for the S&P 500 from 600-1600. (However, the last bull market was somewhat less volatile than the current one, so the go-away-in-May advice was an even less successful strategy back then.) The previous bull market was gored by a global credit crunch.

This time, central banks have flooded the global capital markets with liquidity, which is one of the main reasons I expect that 2013 will part ways with 2007. Government bond yields in the US, Germany, France, and Japan have dropped to record or near-record lows this week following the BoJ’s pledge to double its balance sheet over the next two years. Dodgy credits have also benefitted from the global bond rally, most notably among the sovereign debts of the peripheral euro zone countries and high yield bonds.

The result has been that many investors are scrambling to load up on even more stocks paying dividends.

Today's Morning Briefing: Super Market. (1) 1665 is only 5% above yesterday’s close. (2) The trick to riding bulls. (3) Who cares about Italy and Cyprus, or Lil’ Kim? (4) Technicians seeing bad stuff in their charts. (5) Don’t bet against the three richest men in the world. (6) Irrational exuberance, here we come? (7) Scrambling for dividend-yielding stocks as central banks push bond yields closer to zero. (8) Performance Derby is a mixed bag so far in April consistent with broad bull market. (9) Still keen on bull’s outperformers: Consumer Discretionary, Financials, and Industrials. (10) Not as keen on Energy and Materials. (11) IT is cheap. (More for subscribers.)

Education & Unemployment (Excerpt)

People with more education tend to have lower unemployment rates than those with less education. The jobless rate for workers with a BA degree or higher was only 3.8% in March versus 11.1% for those with less than a high school diploma and 7.6% for those with a diploma, but no college.

The bad news is that higher education may be losing its value as a sure way to get a job, especially a good one. That’s because too many people are going to college and majoring in subjects that may not meet the requirements of the available jobs. So there may be an excess supply of highly educated people who aren’t qualified to fill the job openings.

In March, there were 49.2 million people in the labor force with a BA degree or higher. That’s up 20.4 million in the past 20 years. Over the same period, the number with some college or an associate degree rose 9.2 million to 37.2 million in March. While the unemployment rates for college educated workers are relatively low, their jobless rates currently remain relatively high at this late stage of the business cycle.

Just as troubling is that many of the people coming out of college may be taking jobs requiring relatively low skills. If so, then they are inadvertently boosting the unemployment rates for people with less education. People with college degrees may be crowding out those with high school degrees in the labor market. The former college students are increasingly saddled with debts to pay for their education and are especially anxious to get a job, any job to make their loan payments. Of course, quite a few are simply defaulting on their loans.

Today's Morning Briefing: Why No Jolt in JOLTS? (1) JOLTS showing fewer job gains than official tally. (2) Help is wanted. So why aren’t hires rising faster? (3) Maybe job seekers aren’t qualified for the jobs. (4) Could more job openings cause unemployed to stop looking? (5) Fed’s doves won’t be happy if jobless rate falls on shrinking labor force. (6) Average duration of unemployment remains too high. (7) A degree will still get you a job, but maybe not one that requires a degree. (8) College degrees crowding out high school diplomas? (9) Analysts spent Q1 cutting earnings estimates across the board. (10) Fiscal Cliff deal could boost earnings. (More for subscribers.)

Global Trade & S&P 500 Revenues (Excerpt)

The good news is that the global economy is growing, with the volume of world exports rising to a record high in January. The bad news is that the growth rate is in the low single digits--at 2.5% y/y during January. S&P 500 revenues per share is highly correlated with the volume of world exports. I still expect that revenues will increase by 5%-7% this year and next year. I am encouraged to see that the consensus expectations of industry analysts for revenues both this year and next year have been rising over the past few weeks. They now expect an increase of 5% both this year and next.

Today's Morning Briefing: Pump It Up. (1) Whatever-It-Takes goes global. (2) Central bankers gone wild. (3) Mandate madness. (4) Delusional macroeconomists. (5) From the Great Moderation to the Great Recession to the Great Deformation. (6) BOJ pumping air into global bond bubble. (7) Draghi’s best-in-class balance sheet. (8) Obama’s subprime solution. (9) Are agency mortgage REITs too hot? (10) Global trade growing, but slowly. (11) S&P 500 revenues expectations rising. (12) Focus on Transportation industries. (13) My favorite robot. (More for subscribers.)

US Employment (Excerpt)

I wasn’t disappointed by Friday’s employment report because I don’t pay all that much attention to the preliminary payroll estimate for the latest month, which was only 88,000 for March. Rather, I give much more weight to the regular revisions in the previous two months' payrolls, which were both increased by a total of 61,000 for January and February. Over the past three months through February, payrolls are up 211,700 on average, the best since the three months through March 2012. Over the past 12 months, revisions added 449,000 to the jobs tally, based on first-reported data. During economic expansions (recessions), revisions tended to be to the upside (downside).

Previously, I’ve noted that the monthly employment report has so much information that it can be confusing. Pundits tend to make it even more confusing since optimistic ones usually will find some numbers to support their view, while pessimists can do the same. So I was surprised to hear that the commentators assembled on CNBC Friday morning all seemed to conclude that it was an unambiguously bad report. I disagree.

To cut through all the noise, I focus on just one number, which I calculate by multiplying aggregate hours of private industry workers by their wage rate, i.e., average hourly earnings. The resulting YRI Earned Income Proxy (YRI-EIP) is highly correlated with wages and salaries in private industries, which is included in the monthly personal income report. My proxy was boosted by the upward revisions in payrolls and now shows a solid gain of 2.8% over the past five months to a fresh record high.

Today's Morning Briefing: Not so Bad. (1) Friday’s shocker wasn’t so shocking. (2) Revisions are more useful than first estimates. (3) Proxy for wages & salaries at record high. (4) Mixed bag of employment indicators. (5) Bad weather vs. fiscal drag. (6) No rush to phase out QE after Friday’s numbers. (7) The puzzling weakness in the labor force. (8) The Baby Boomers are checking out. (9) Draghi is committed to the euro, but admits ECB has limits. (10) Draghi disses Dijsselbloem twice in one day! (More for subscribers.)

Brave New World (Excerpt)

In the Brave New World (BNW), robots like Baxter will replace assembly line workers. In this world, the risk of ultra-easy monetary policies isn’t consumer price inflation. Even now as we approach the dawn of the BNW, such inflation remains remarkably low despite the best efforts of the central banks to boost it. The CPI inflation rate among the G7 economies was only 1.6% y/y during February, and even lower at 1.4% excluding food and energy. In the US, PPI inflation rates are close to zero. In the euro zone, the CPI inflation rate is just 1.7%, and 1.4% excluding food and energy. Japan continues to experience deflation despite years of NZIRP and QE.

In the BNW, pumping more liquidity into financial markets won’t stop consumer price deflation, but it will inflate asset prices, a.k.a. asset bubbles. Central bankers like Ben Bernanke at the Fed and Haruhiko Kuroda at the BOJ are still using models based on the 1930s. They are clueless about the BNW. That’s why they are so committed to doing whatever it takes to avert deflation. They can’t even imagine that productivity-led deflation should be welcomed as the best way to boost the purchasing power of all consumers, whether employed or on government support.

This morning we learn that the BOJ voted unanimously to significantly increase its purchases of Japanese government bonds and extend the average maturity of the bonds it purchases from three years to seven years. Mr. Kuroda has previously said that he would do "whatever it takes" to drive growth. Sure enough, the bank added that it would also buy relatively riskier assets such as exchange-traded funds and real estate trust funds!

Today's Morning Briefing: Brave New World. (1) The future is coming. (2) World State as drug dealer. (3) Gordon, Stockman, and Huxley. (4) Alternate state of mind. (5) Robotics Revolution. (6) Foxconn wants to get rid of “animals.” (7) Google’s vision. (8) Meet Baxter, the friendly humanoid. (9) No lunch breaks, just $4 an hour and some WD-40. (10) A disaster for cheap labor in EMs? (11) More income inequality, more taxes, and more government. (12) Clueless central bankers are fighting the last war. (13) BOJ will be buying Nikkei ETF. (14) Fed’s doves ready to compromise with hawks. (15) Sequester nicked March economic indicators. (More for subscribers.)

Food Prices (Excerpt)

Last week, the USDA pegged corn stocks as of March 1 at 5.399 billion bushels, above the average analyst estimate of 5.013 billion bushels. The USDA also said farmers would plant the highest corn acreage since 1936. The nearby futures price of corn has tumbled from a recent high of $7.41 per bushel to $6.41. Wheat prices are also down sharply over this period.

Lower grain prices should keep a lid on food inflation, which is a positive development for consumers' purchasing power and should allow the Fed to maintain its ultra-easy monetary policy. Of course, the Fed tends to track inflation excluding food and energy. The core CPI was up only 2.0% y/y during February. The personal consumption deflator rate was even lower at 1.3%.

Today's Morning Briefing: Heartland. (1) On the road again: Houston, Fort Worth, Dallas, & KC. (2) What’s the matter with us? (3) No country for cranky old men. (4) Accentuating some positives, once again. (5) Laffer is rooting for the Red team. (6) Food and fuel prices stop ascending and could descend. (7) Profits in GDP making new highs. (8) Why are stock prices rising while earnings estimates have been chopped? (9) One hotspot is heating up, while another is cooling off. (10) Technicians don’t like what they see in the charts. (11) Europe falls deeper into recession. (12) The prairie sky in Texas. (More for subscribers.)

Cyprus & Lehman (Excerpt)

While the Cyprus Moment seems to have come and gone, the risk is that the country’s bailout plan has set the stage for a run on euro zone banks. The biggest shocker, of course, was that the deal included a “bail-in” of uninsured depositors in Cypriot banks and the imposition of severe capital controls. Fears of a possible financial contagion are reflected in the 7.6% drop in the FTSE Eurofirst 300 Banks Euro Index since January 28. Also down ytd are the stock markets of Greece (-4.3%), Spain (-3.2), and Italy (-9.2).

Cyprus may be a one-off unique situation. So far, it hasn’t triggered a financial meltdown comparable to Lehman. However, there is at least one similarity that is disturbing: Both reflected “bailout burnout” by policymakers. On the other hand, this time financial market participants may be less panic prone knowing that the ECB will do whatever it takes to defend the euro. When Lehman hit the fan, no one had a clue of the Fed’s unprecedented QE response to the resulting financial crisis. So far, Italian and Spanish government bond yields remain relatively low. The S&P 500 Bank stock price index is down only 2.5% since March 15.

Today's Morning Briefing: Seasonal Adjustment? (1) Bernanke’s spin on wacky seasonal pattern. (2) Stay or go? (3) Timing corrections is tricky. (4) BLS economists beg to differ. (5) Europeans get agitated in the spring, then go to the beach in August. (6) Triple top? (7) Still aiming for 1665 for S&P 500 by yearend. (8) Cyprus and Lehman are examples of “bailout burnout.” (9) Fiscal drag nicks US M-PMI. (10) EMs emerging more slowly. (11) Little Kim is having growing pains. (12) Q1 shows relatively broad bull market. (More for subscribers.)