Bear Stearns

• Despite budget win, Obama has weak hand with Congress (Reuters)
• Carney Brings In McKinsey for Bank of England Strategy Rethink (BBG)
• Bill Gates Buys Stake in Spanish Construction Company FCC (WSJ)
• Jerusalem Mayor Barkat Seeks New Term in Race Arabs Sitting Out (BBG)
• J.P. Morgan Aimed to Limit Damage (WSJ)
• EU Lawmakers Reject Draghi Call for Bank Bondholder Clemency (BBG)
• Wall Street Profits May Halve in Second Half (WSJ)
• Petrobras-led group wins Brazil oil auction with minimum bid (Reuters)
• Apple to Refresh IPads Amid Challenges for Tablet Share (BBG)
• Italy plans to offer guarantees on govt bond derivatives (Reuters)
• Berkshire Beats Apple as Favorite Stock of Tiger 21 Group (BBG)

I like Professor Shiller and respect his work. Really, I do, but... Massive bubbles, the sort of the proportion of the 2008 crisis, are nigh impossible to miss if you can add single digits successfully and are able to keep your eyes open for a few minutes at a time. Yes, I truly do feel its that simple. I saw the property bubble over a year in advance, cashed out and came back in shorting - all for a very profitable round trip. Was I a genius soothsayer? Well, maybe in my own mind, but the reality of the situation is I was simply paying attention. Let's recap:

TedBits - Newsletter

David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government - that is, the warfare state, the welfare state and the central bank...

What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut...

He calls this condition "Sundown in America".

• BOE Leaves Policy Unchanged as Carney’s Guidance Assessed (BBG)
• Surprise or not, U.S. strikes can still hurt Assad (Reuters)
• Samsung Gear: A Smartwatch in Search of a Purpose (BusinessWeek)
• 'Jumbo' Mortgage Rates Fall Below Traditional Ones  (WSJ)
• Capital Unease Again Bites Deutsche Bank  (WSJ)
• Technical snafus confuse charges for Obamacare plans (Reuters)
• JPMorgan subject of obstruction probe in energy case (Reuters)
• U.S. Car Sales Soar to Pre-Slump Level (WSJ) - i.e., to just when the market crashed
• BoJ lifts assessment of Japan’s economic health (FT)
• Dead Dog in Reservoir Helps Drive Venezuelans to Bottled Water (BBG)
• Russia Boosts Mediterranean Force as U.S. Mulls Syria Strike (BBG)

Just as natural selection selects for traits that improve the odds of success/survival in the natural world, Economic Darwinism advances people and policies that boost profits and power within the dominant environment. If there was one phrase that summarized the current malaise, it would be "The Federal Reserve's 20-year policy of easy money created an environment virtually assured to select bankers, bureaucrats, educators, and elected officials who least understood the consequences of a credit crisis." In other words, a hyper-financialized environment of near-zero interest and abundant credit rewarded those people and policies that succeed in that environment.

The US is demanding a sum of $6 billion - the total loss associated with the "London Whale" debacle - in compensation for JPMorgan's mis-selling of mortgage-backed-securities. The FT reports that, unsurprisingly, the bank is resisting the payment, which would be its single biggest penalty in a catalog of expensive run-ins with US authorities and one of the largest post-crisis settlements by any bank. The FHFA said the bank falsely claimed that loans backing $33bn of mortgage-backed securities complied with underwriting guidelines and that it "significantly overstated the ability of the borrowers to repay their mortgage loans". It seems, perhaps, it is time to trade in the old jewelry for some new Kremlin cufflinks (the enemy of your enemy is your friend?)

It’s ironic, or it seems that way to us, that two of the least understood financial markets by equity investors are two of the most systemically important – repos and gold. Even more ironic is how so many investors don’t even consider them to be all that important. In our view, stability in both markets is a pre-requisite for maintaining confidence in the financial system and keeping the credit/asset bubble inflated. The significance of these markets is not lost on governments, central banks and regulators, although the definition of “stability” in each of them is slightly different. Looking underneath the bonnet/hood, we are doubtful that either of these markets, repos or gold, can reasonably be described as “stable” right now. There also seems to be a paradox where the current low repo rates and gold prices are, we suspect, fooling people into a false sense of complacency. What’s really piqued our interest, however, is whether there is a similar issue which is increasingly impacting both of these systemically important markets? This issue relates to the availability of sufficient collateral...

On the surface, there is nothing spectacular about the weekend news that JPMorgan is seeking to sell its 1 Chase Manhattan Plaza office building. After all, the former headquarters of Chase Manhattan Bank, located deep in the heart of the financial district and which was built by its then chairman David Rockefeller, is a remnant to another time - a time when banking was about providing loans, not about managing and trading assets which has become the realm of Midtown New York, and since JPM already has extensive Midtown exposure with its offices at 270, 270 and 245 Park, the 1 CMP building always stood out as a bit of a sore thumb. Of course, as Zero Hedge readers first learned, the big surprise is literally below the surface, some 90 feet below street level to be exact, where the formerly secret JPM gold vault is located, which also happens to be the biggest commercial gold vault in the world.

It is well-known that as part of the S&P500's ascent to new records, investor margin debt has also surged to all time highs, surpassing for the past three months previous records set during both prior, the dot com and the housing, stock market bubbles. And as more attention has shifted to the topic of speculator leverage once more, inquiries into the correlation between bets upon bets and stock performance are popping up once more, in this case in a study by Deutsche Bank titled "Red Flag! - The curious case of NYSE margin debt." Of particular note here is a historical comparison of margin-debt warnings that have recurred throughout history but especially just before major stock bubble crashes, such as in the period 1999/2000, 2007/2008 and of course today, which have time and again been ignored. Here is what was said then, what is being said now, and what is ignored always.

This insane world was created through decades of bad decisions, believing in false prophets, choosing current consumption over sustainable long-term savings based growth, electing corruptible men who promised voters entitlements that were mathematically impossible to deliver, the disintegration of a sense of civic and community obligation and a gradual degradation of the national intelligence and character. There is a common denominator in all the bubbles created over the last century – Wall Street bankers and their puppets at the Federal Reserve. Fractional reserve banking, control of a fiat currency by a privately owned central bank, and an economy dependent upon ever increasing levels of debt are nothing more than ingredients of a Ponzi scheme that will ultimately implode and destroy the worldwide financial system. Since 1913 we have been enduring the largest fraud and embezzlement scheme in world history, but the law of diminishing returns is revealing the plot and illuminating the culprits. Bernanke and his cronies have proven themselves to be highly educated one trick pony protectors of the status quo. Bernanke will eventually roll craps. When he does, the collapse will be epic and 2008 will seem like a walk in the park.

Greed; corporate arrogance; lobbying influence; excessive leverage; accounting tricks to hide debt; lack of transparency; off balance sheet obligations; mark to market accounting; short-term focus on profit to drive compensation; failure of corporate governance; as well as auditors, analysts, rating agencies and regulators who were either lax, ignorant or complicit. This laundry list of causes has often been used to describe what went wrong in the credit crunch crisis of 2008-2010. Actually these terms were equally used to describe what went wrong with Enron more than twenty years ago. Both crises resulted in what at the time was the biggest bankruptcy in U.S. history — Enron in December 2001 and Lehman Brothers in September 2008. Naturally, this leads to the question that despite all the righteous indignation in the wake of Enron's failure did we really learn or change anything?

Problem ... What Problem?

Facts are treasonous and dangerous in an empire of lies, fraud and propaganda. It is maddening to watch the country spiral downward, driven to ruin by a psychotic predator class, while the plebs choose to remain willfully ignorant of reality and distracted by their lust for cheap Chinese crap and addicted to the cult of techno-narcissism. We are a country running on heaping doses of cognitive dissonance and normalcy bias, an irrational belief in our national exceptionalism, an absurd trust in the same banking class that destroyed the finances of the country, and a delusionary belief that with just another trillion dollars of debt we’ll be back on the exponential growth track. The American empire has been built on a foundation of cheap easily accessible oil, cheap easily accessible credit, the most powerful military machine in human history, and the purposeful transformation of citizens into consumers through the use of relentless media propaganda and a persistent decades long dumbing down of the masses through the government education system. This national insanity is not a new phenomenon. Friedrich Nietzsche observed the same spectacle in the 19th century: “In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.”

Back in June 2011 we first reported how "Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly" in an article that explained, with great detail, how Goldman et al engage in artificial commodity traffic bottlenecking (thanks to owning all the key choke points in the commodity logistics chain) in order to generate higher end prices, rental income and numerous additional top and bottom-line externalities and have become the defacto commodity warehouse monopolists. Specifically, we compared this activity to similar cartelling practices used by other vertically integrated commodity cartels such as De Beers: "the obvious purpose of "warehousing" is nothing short of artificially bottlenecking primary supply." Over the weekend, with a 25 month delay, the NYT "discovered" just this, reporting that the abovementioned practice was nothing but "pure gold" to the banks. It sure is, and will continue to be. And while we are happy that the mainstream media finally woke up to this practice which had been known to our readers for over two years, the question is why now? The answer is simple - tomorrow, July 23, the Senate Committee on Banking will hold a hearing titled "Should Banks Control Power Plants, Warehouses, And Oil Refiners."