SWIFT

The attached Barron’s article appeared in December 2007 as an outlook for the year ahead, and Wall Street strategists were waxing bullish. Notwithstanding the advanced state of disarray in the housing and mortgage markets, soaring global oil prices and a domestic economic expansion cycle that was faltering and getting long in the tooth, Wall Street strategists were still hitting the “buy” key. In fact, the Great Recession had already started but they didn’t have a clue: "Against this troubling backdrop, it’s no wonder investors are worried that the bull market might end in 2008. But Wall Street’s top equity strategists are quick to dismiss such fears."

"Make no mistake – this is an equity bubble, and a highly advanced one. On the most historically reliable measures, it is easily beyond 1972 and 1987, beyond 1929 and 2007, and is now within about 15% of the 2000 extreme. The main difference between the current episode and that of 2000 is that the 2000 bubble was strikingly obvious in technology, whereas the present one is diffused across all sectors in a way that makes valuations for most stocks actually worse than in 2000. The median price/revenue ratio of S&P 500 components is already far above the 2000 level, and the average across S&P 500 components is nearly the same as in 2000. The extent of this bubble is also partially obscured by record high profit margins that make P/E ratios on single-year measures seem less extreme (though the forward operating P/E of the S&P 500 is already beyond its 2007 peak even without accounting for margins)."

While the allegations in the lawsuit are well-known to frequent (and all other) readers of Zero Hedge, we recommend reading the full filing as it explains in clear English just what the fixing process worked. Perhaps what is more interesting are the abnormalities in the price of gold as highlighted by Derksen, which clearly show the critical role the daily fix has in the manipulation of the price of gold, both in a downward and upward (mostly downward) direction: whichever suits the London Fix member banks.

• Argentine holdout NML says government "choosing" to default (Reuters)
• Crunch time for Gaza truce talks as death toll passes 800 (Reuters)
• Don’t Tell Anybody About This Story on HFT Power Jump Trading (BBG)
• U.S. Accuses Russia of Shelling Eastern Ukraine (BBG)
• France’s Wheat Exports in Question as Rain Spoils Quality (BBG)
• Tapering in action: Lower printer sales hurt Xerox's revenue (Reuters)
• No liquidity? No Problem, there's an ETF for that: Bond ETFs Swelling in Europe as Trading Debt Gets Tougher (BBG)
• Herbalife hires ex-Biden chief to fend off regulators (NYPost)
• GM recalls far from calamity for some dealers who find new customers, business (Reuters)
• Bad weather likely cause of fatal Air Algerie crash: French officials (Reuters)

• EU Works to Punish Russia as MH17 Bodies Leave Rebel Area (BBG)
• Bodies From Malaysia Airlines Flight Begin Long Trip to Netherlands (WSJ)
• Israel pounds Gaza as Kerry arrives (Reuters)
• U.S. judge dismisses Republican lawsuit over Obamacare subsidy for Congress (Reuters)
• Israel Soldier Missing Amid Assault on Hamas in Gaza (WSJ)
• Detroit Retirees Vote in Favor of Pension Cuts (WSJ)
• Russia Axes 1st Bond Sale in 3 Months as Ukraine Drives Up Yield  (BBG)
• Wall Street Cut From Guest List for Jackson Hole Fed Meeting (BBG)
• Credit Suisse to Exit Commodities, Posts Big Quarter Loss (BBG)
• Draghi Cedes Euro Control to Yellen on Fed Rate Wagers (BBG)

"Sanctions have a boomerang effect and without any doubt they will push U.S.-Russian relations into a dead end, and cause very serious damage, and it undermines the long term security interests of the US State and its people."
"This means that U.S. companies willing to work in Russia will lose their competitiveness next to other global energy companies." Putin said the sanctions will hurt Exxon Mobil Corp which has been given the opportunity to operate in Russia. "So, do they not want it to work there? They are causing damage to their major energy companies." Putin said the sanctions will hurt Exxon Mobil Corp which has been given the opportunity to operate in Russia. "So, do they not want it to work there? They are causing damage to their major energy companies."

One can't help but wonder just how concerned the powers that be are becoming when such an esteemed mainstream media outlet as Bloomberg News would deem fit to defend the almighty US Dollar. "There are always people who say the dollar is going to be replaced, but it hasn't happened," chides one strategist (clearly forgetting that nothing lasts forever). As growing concerns of "exorbitant privilege" spread from the usual anti-imperialist foes (Russia and China's de-dollarization) to close allies like France and now to the world's growth engine - BRICS, it seems defending what was previously unquestionable itself should be grounds for alarm...

• Xi Says China Conflict With U.S. Would Be Disaster (BBG)
• Short selling drops to lowest level since Lehman (FT)
• Scoping the new subprime as watchdogs cry 'bubble' (Reuters)
• Carlos Slim to break up América Móvil empire (FT)
• Jury Acquits Rengan Rajaratnam in Insider-Trading Case (WSJ)
• Hamas rockets land deep in Israel as it bombards Gaza Strip (Reuters)
• Hong Kong Buyers Queue for New Homes After Prices Plunge (BBG)
• Rebel Stronghold in Ukraine Braces for Its Showdown (WSJ)
• Tiny Houses Big With U.S. Owners Seeking Economic Freedom (BBG)
• Chinese Cash-Bearing Buyers Drive U.S. Foreign Sales Jump (BBG)

The Great Depression did not represent the failure of capitalism or some inherent suicidal tendency of the free market to plunge into cyclical depression - absent the constant ministrations of the state through monetary, fiscal, tax and regulatory interventions.  Instead, the Great Depression was a unique historical occurrence - the delayed consequence of the monumental folly of the Great War, abetted by the financial deformations spawned by modern central banking. But ironically, the “failure of capitalism” explanation of the Great Depression is exactly what enabled the Warfare State to thrive and dominate the rest of the 20th century because it gave birth to what have become its twin handmaidens - Keynesian economics and monetary central planning. Together, these two doctrines eroded and eventually destroyed the great policy barrier - that is, the old-time religion of balanced budgets - that had kept America a relatively peaceful Republic until 1914. The good Ben (Franklin that is) said,” Sir you have a Republic if you can keep it”. We apparently haven’t.

The proof is clear. According to SWIFT, China’s renminbi is now the second most used currency in the world for global trade settlement, putting it ahead of even the euro. It’s happening. And based on the data, it’s completely obvious (as we continued to chronicle) to just about everyone but the US government. However, we were still surprised to see an article in the Financial Times’ banking intelligence subsidiary (‘The Banker’) entitled "The US’s dollar domination is coming to an end." This reality has become obvious to just about everyone... Reserve currencies come and go. So will the dollar. This is nothing new.

As of this moment, US equity futures are perfectly unchanged despite what has been an almost comical reactivation of the 102.000 USDJPY tractor beam. Considering the pair has been trading within a 75 pips of the 102.000 level for the past month, one has to wonder when and what the next BOJ Yen equilibrium level will be reset to. Oddly enough, even as the USDJPY is very much unchanged, the Nikkei continues to rise suggesting that, as Nikkei reported, the GPIF is already investing Japanese pension funds in stocks. Which is great for the Nikkei catching up with the global bond bubble, what is not so great is what happens when the market realizes that the largest holder (excluding the BOJ) of JGBs is dumping, and the world's most illiquid major sovereign bond market rushes for the exits. Just recall the daily halts of Japanese bond trading from the summer of 2013 - we give it 3-6 months before it returns with a vengeance.

"In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” - The Fourth Turning - Strauss & Howe – 1997

With another day of little otherwise completely irrelevant macro news (because following last night's abysmal Australian jobs data one would think the AUD would be weaker; one would be wrong), market participants - all 3 of them - and algos (which have finally uncovered where Iraq is on google maps) are finally turning their attention to the latest conflict in Iraq (because they obviously no longer care about the martial law in Thailand or the civil war in Ukraine), where the Al Qaeda spin off ISIS overnight seized at least 310K B/D in refinery capacity in northern Iraq according to the Police, and what is more concerning, is now less than a 100 kilometers away from Baghdad. Will ISIS dare to venture further south? Keep an eye on crude for the answer.

Sticker shock. Expect to pay a lot. Hellishly hot in the summer and shockingly less sexy than advertised. But the city and local people, called Cariocas, are clean and the crime is greatly exaggerated. The Marvelous City is amazing in many ways. But if you look closely, you see the same old corruption and thuggery, the same painful poverty and injustice, that plague many states. And then there's the Brazilian prostitutes, called programas, who frequent the bars and brothels of Copacabana and Ipanema as well as Central Rio... People in Rio and Brazil are the same as anywhere. They want the same things. Happiness, diversion, laughter, distraction, the so-called good things in life. A slightly larger piece of the pie. The World Cup is just a showcase and a distraction. Bread and circus on a grander scale.

"When an activist movement holds the moral high ground against a repressive establishment power structure, the establishment’s primary recourse is to target the character of its principles. The secondary recourse is direct confrontation. If a dissenting organization is not mindlessly vicious in its methods, then simply make it 'appear' vicious. If it is not hateful in its rhetoric, then artificially tie it to people who are. And if a government really needs to kick-start a crackdown, it can engineer its own man-made calamities and blame the groups that most threaten its authority."