Good money after bad continues to flow in Europe like cheap wine….

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Yelp Conference Call Commentary
During the conference call, YELP commented that mobile remains a top priority and focus and that the company is very encouraged with the trends it is seeing. On average, 6.3 million mobile devices accessed YELP per month during the quarter, which is up 80% from a year ago. In terms of monetization, YELP says that mobile is even better than on the web, and it is already monetizing this traffic. It says that the performance of ads is actually better than on the internet.

Regarding its expansion into new markets, YELP said it is now in 80 markets and that it added 11 new cities in the quarter, 8 of which were international. Later this year, the company is planning on launching a European sales force to support its growth in that geography. Overall, YELP says that there are 180 markets in the U.S. with over 250,000 people — which it believes is a good benchmark for markets it wants to be in — and says that there are more than 1,000 of these markets in the world. Over the long-term, it would like to consider all of these markets, but in the near-term, mangement stated that it is difficult forecast how many it will enter. Generally speaking, the company says that it wants to grow at a healthy clip, but not outgrow themselves.

From a longer-term perspective, YELP says that it is striving to achieve 30-35% adjusted EBITDA margins. In the shorter term, though, the company will continue to invest in new markets and will remain focused on growing the topline. This suggests that sales & marketing expense will remain elevated in coming quarters. For this quarter, sales & marketing, as a percent of sales, was 69% compared to 68% a year ago.

While there is a well-defined set of regulatory measures to address too-big-to-fail, the same cannot be said for the second major challenge revealed by the crisis: the instability of the shadow banking system. Although some elements of pre-crisis shadow banking are probably gone forever, others persist. Moreover, as time passes, memories fade, and the financial system normalizes, it seems likely that new forms of shadow banking will emerge. Indeed, the increased regulation of the major securities firms may well encourage the migration of some parts of the shadow banking system further into the darkness–that is, into largely unregulated markets. And it bears reminding that, just as the fragility of major financial firms elicited government support measures during the crisis, so the runs and threats of runs on the shadow banking system brought forth government programs such as the Treasury’s insuring of money market funds.

Reform measures to date are not wholly unrelated to the shadow banking system, and wholesale funding more generally. Dodd-Frank addresses the associated issue of derivatives trading by requiring central clearing of all standardized derivatives and margining of non-cleared trades by major actors in over-the-counter derivatives markets. Strengthened capital and liquidity standards for prudentially regulated institutions should help by giving increased assurance to counterparties about the soundness of these firms. But in periods of high stress, with substantial uncertainty as to the value of important asset classes, questions about liquidity and solvency could still arise, even with respect to well-regulated institutions. In fact, the supposed low-risk lending transactions–typically secured by apparently safe assets–that dominate the shadow banking system are likely to be questioned only in a period of high stress. It cannot be overemphasized that this systemic effect can materialize even if no firms were individually considered too-big-to-fail.

Interesting and productive academic debates continue over the sources of the rapid growth of the shadow banking system, the precise reasons for the runs of 2007 and 2008, and the possible sources of future problems. The conclusions drawn from these debates could be important in eventually framing a broadly directed regulatory plan for the shadow banking system. Domestically, among member agencies of the FSOC, and internationally, among members of the Financial Stability Board, policy officials are engaged in these debates and their implications for reform. But policymakers cannot and should not wait for the conclusion of these deliberations to address some obvious vulnerabilities in today’s shadow banking system.

Two areas where the case for reform in the short-run is compelling are money market funds and the tri-party repo market. The requirement adopted by the Securities and Exchange Commission (SEC) in 2010 for a greater liquidity buffer in money market funds was a step in the right direction, but the combination of fixed net asset value, the lack of loss absorption capacity, and the demonstrated propensity for institutional investors to run together make clear that Chairman Schapiro is right to call for additional measures. As to the tri-party repo market, there are several important concerns. A major vulnerability lies in the large amount of intraday credit extended by clearing banks on a daily basis. An industry initiative to address the issue led to some important operational improvements to the tri-party market, but, to be frank, fell short of dealing comprehensively with this problem. So it now falls to the regulatory agencies to take appropriate regulatory and supervisory measures to mitigate these and other risks.

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Scared money finds no place to invest other than bonds; German yields hit record lows.

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NEW YORK (Reuters) – Bill Gross, founder and co-chief investment officer of bond giant PIMCO, told CNBC on Tuesday that the U.S. could be headed toward a credit rating downgrade if it does not tackle its deficit.

Gross cited a U.S. structural deficit figure between six and eight percent greater than any other country besides Japan and the United Kingdom, and added “until we address that structural deficit then yes, we’re headed to AA territory.”

The U.S. is currently rated AA plus by Standard & Poor’s and AAA by Moody’s and Fitch.

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FINRA Sanctions Four Firms $9.1 Million for Sales of Leveraged and Inverse Exchange-Traded Funds

“The Federal Reserve criticized how some of the 19 largest U.S. banks calculated potential losses and planned dividends in this year’s stress tests, people with knowledge of the process said.

The critiques will be part of feedback letters sent to the lenders this week that cover everything from data collection to risk measurement, said three of the people, who declined to be identified because communications with the Fed are private. Flaws included marking down all housing prices at the same rate, rather than matching them to specific regions, and planning dividendsthat could drain needed capital….”

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Australia took rates down 0.50% to 3.75%.

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Elections next weekend could determine if Greece is to stay in the EU. If by chance they leave some fear the Euro could unravel quickly.

Not to mention president elect Hollande could be elected shortly in France help the unwind spiral right quick….

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High energy prices were to blame….

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“Spanish Economy Minister Luis de Guindos ruled out seeking a bailout hours before Standard & Poor’s cut the country’s credit rating to three levels above junk and a report showed unemployment jumped close to a record.

“Nobody has asked Spain, either officially or unofficially” to turn to Europe’s bailout mechanisms, he said in an interview in Madrid late yesterday. “We don’t need it.”

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Yields went from 5.24% to 5.84%….

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From Institutional Investor, read about the 5 well-known fund managers who now have less than $1 billion AUM.

S&P to assess the effect of Spain’s two notch sovereign downgrade to BBB+ on Spanish issuers/banks

A sad reality….

Andrew Mason, CEO of GRPN, “chugged” a beer during a serious company meeting, which has drawn out the prohibition crowd at CNBC to ridicule him as being “immature.”

Mason delivered this message, reports Shira Ovide of the Wall Street Journal, after chugging beer from a company fridge. At one point during his presentation, his “voice broke and he said ‘Sorry, too much beer.'”

Sorry, but this is the very definition of making a mountain out of a mole hill.

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“Meredith Whitney was on CNBC’s Closing Bell today.

Jeff Cox at CNBC.com spotlights one area where she’s wildly bullish. She likes the agriculture and commodity states that are ‘right-to-work’ where businesses are creating jobs:

“I am wildly bullish on the U.S. in particular markets…I think the U.S. market looks terrific (though) as a collective the U.S. market is not going to grow all together,” she said during a “Closing Bell” interview.

“There’s opportunity from Texas all the way up to North Dakota, and you can play every industry on that basis,” she added. “It’s the agriculture-commodity belt — also the Right to Work states. That’s where businesses are moving because it’s easier to operate and create jobs. So you see a massive demographic shift to those areas.”

But there are three stats in particular she doesn’t like: California (which is the worst) followed closely by Illinois and New Jersey. In Illinois, in particular, she cited something new about parents being forced to pay for school busses because finances have gotten so bad.

Some other points she made: (video)

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“Hundreds of small banks can’t afford to repay federal bailout loans, a top watchdog will warn Wednesday in a report that challenges the government’s upbeat assessment of its financial-system rescue.

Christy Romero, special inspector general for the Troubled Asset Relief Program, said 351 small banks with some $15 billion in outstanding TARP loans face a “significant challenge” in raising new funds to repay the government.

Ms. Romero made the comments in her quarterly report to Congress, the first since the Senate approved her appointment in March as special inspector general for the program. She urged the government and regulators to find a way to help banks raise funds to repay the loans.

“The status of those banks is one of the major issues facing TARP nearly four years after the financial crisis,” the report says.

The report is the latest sign of a yearslong squeeze on smaller banks, those with less than $1 billion in assets. Their numbers and profitability have been declining due in part to regulatory and technological changes that made bigger institutions more profitable.

StoneCastle Partners LLC, a New York firm that has invested in about 800 community banks, estimates that community banks need $90 billion in fresh capital to clean up their balance sheets and acquire other institutions.

Many of the banks cited in the report aren’t known outside of their neighborhoods, where they count local business owners and prominent families as their investors and customers. Some cater to specific customers. For example, Saigon National Bank in Westminster, Calif., serves the Vietnamese community through one branch.

Saigon National, which received $1.5 million in TARP funds, has missed 13 dividend payments to the government worth $265,328. The report cited the bank, which has $59 million in assets, as one of the smallest that received TARP funds. William Lu, the bank’s president and chief executive couldn’t be reached for comment…”

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