OVERNIGHT

Expecting big moves in Asian stocks in particular and others in general before the Fed's wannouncement this week is like expecting politicians to stop kissing babies. It ain't gonna happen. In early trading overnight, Reuters reported Asian shares steadied early.

With all the anticipation it may turn out like Y2K that was touted to make the Interner disappear back at the turn of the century, a big yawn once the Fed finally fesses up. In other Asian news, the WSJ is reporting related to China's joining a currency basket and weakening its currency:

The Fed is widely expected to raise rates this week amid signs of a strengthening U.S. economy. Meanwhile, China’s economy is going the other direction, with Beijing cutting interest rates and making other moves to loosen monetary policy and spur slowing economic growth.

A U.S. rate increase could hinder that effort. It would likely make the dollar stronger, forcing China to intervene in currency markets to maintain the peg. That means buying yuan, often from Chinese banks, which effectively takes money out of China’s financial system at a time when Beijing is trying to make more available to its businesses and consumers.

China has big problems not to mention one of them is labor unrest and an economy after six straight rate cuts that has responded very little. Higher U.S. Interest rates could turn up the heat a bit more.

WE CITIZENS LOVE THOSE TEACHING MOMENTS

He is a senator, a Tennessee Republican who entered the highly sought after chamber eight years ago, a guy who allegedly misfiled his income from real estate, hedge funds and other investments since joining those privileged ranks.

How much allegedly--$7 million, according to the WSJ. Even in upper circles that's a chunk of allegedly. And it brings up another question: in eight years of serving your nation in Congress, how rich can one get?

Now this is not about the Senator, Bob Corker, who, tongue in cheek, one could postulate if these allegations are true, he tried to pull off a real corker on the rest of us. It's about the confidence of Americans in their elected officials and corruption. Most of the polls we've seen suggest that confidence is now lower than an inebriated duck's belly.

Now for the rest of the story, but with this proviso to keep in mind: we will call it the rules of engagement or the concept of a level playing field. Another thought to keep in mind is usually when you underpay or understate your taxes you pay interest and a penalty, a pretty hefty one.

A letter sent to the secretary of the Senate along with the new financial reports acknowledged that the senator’s previous reports didn’t comply with Senate rules.

“I am extremely disappointed in the filing errors that were made in earlier financial disclosure reports,” Mr. Corker said in a statement to the Journal. After the Journal raised questions about the prior reports, Mr. Corker hired an accounting firm to review all of his transactions.

“After completing a full, third-party review, we have corrected this oversight,” Mr. Corker said in his statement.

Under ethics rules for Congress, lawmakers are allowed to invest in just about anything, as long as they properly disclose their personal investments to the public. The purpose of the rules is to allow the public to determine whether a lawmaker has a conflict of interest. The rules don’t prevent members of Congress from voting on legislation that may affect their personal finances.

Senators often file amendments to correct small mistakes and oversights in their financial-disclosure forms, but it is unusual for a member of Congress to amend all of their financial reports in one sweep.

There are no penalties for filing amendments, in part because Congress doesn’t want to punish lawmakers for fixing prior mistakes.

“This is not a situation calling for punishment or admonition by the Ethics Committee,” said Robert Walker, a former chief counsel for the Senate ethics panel. However, the committee could use the episode as a “teaching moment” for lawmakers to “make sure they fully understand these requirements before filing their annual forms,” he said.

Others say there should be some punishment for filing inaccurate financial reports.


In several instances, Mr. Corker failed to properly disclose investments in and income from the three hedge funds in Tennessee. His report for 2014 didn’t include a gain of between $304,000 and $1.4 million in hedge fund Gerber/Taylor. 

In 2013, he failed to disclose a gain of between $100,001 and $1 million in hedge fund TSW II. And in 2012, he made a gain of $1.2 million in Pointer (QP) LP, though his previous statement reported income of $100,001 to $1 million from the hedge fund.
The amendments also show that he failed to disclose a 2014 investment in Gerber/Taylor of between $500,001 and $1 million and a 2013 investment in Pointer of between $1 million and $5 million.

In one instance, Mr. Corker significantly over reported income from an investment.
The new financial forms indicate that Mr. Corker was using an incorrect methodology to account for annual gains from the hedge funds. Mr. Corker’s office said the income was properly reported when he sold the assets.

The senator also under reported rental income from his commercial real-estate investments in Corker Properties, a company he founded years before being elected to the Senate. The forms show he reported his investment income after expenses, though Senate rules require lawmakers to disclose gross income before expenses are paid.

As a result of the accounting error, Mr. Corker’s new forms show additional income of at least $3.8 million between 2007 and 2014 from his commercial real-estate holdings.
The Journal’s calculations were made using a very conservative methodology using the low end of the numerical ranges in which senators are required to disclose their finances. The actual numbers are likely higher.

 You gotta love those teaching moments. Most of those we get, however, usually come with an exorbitant interest rate and a hefty penalty.

THE FED RESERVE OF GROPING

A story headline in the WSJ today, " Mystery of Missing Inflation Weighs on Fed Rate Move,"  perpetuates one of today's greater myths.

There's plenty of inflation around. The only thing missing is honest, accurate ways to measure it, something you learn early on isn't in the lexicon of central bankers. And never will be. Sure oil prices are down as are prices at the gas pump. And, yes, commodity prices in general are in a slump. There's some unusually warm weather around we can all probably thank climate change for and natural gas prices reflect the weather.

But we're all paying more for lots of things the Fed and its shills don't want to include in their many phony indexes. Housing and rents are good examples. Municipal services are another. Professional license and continuing education fees, college tuitions and health care including insurance premiums are others. And there's the long standing problem of flat wages; that's inflationary. Or how about the COLA crowd who just got gypped. Talk to them; see if they think there's any inflation around.

A business acquaintance owns a scrap iron business, most of which he exports overseas. The strong dollar and low commodity prices are affecting his world and his profit margins. For him that's inflation. The cost of medicare to it recipients increases annually and by no small percentage, either. What we have here is a simple case of that old saying, it depends on whose ox is getting gored.  Federal  Reserve bureaucrats have ample reasons to gerrymander the figures. It's not just the sole province of shady politicians and their campaign managers.It's called potential chaos in paradise resulting in a possible change of the guard.

As nearly everyone knows they're lots of two provider families out there not to forget all the one-provider families daily scrapping hard to get a life. Many of them have young kids who require daycare several days a week. Talk to them about the prices of that daycare. Ask them if there's any inflation afoot.

The Journal article, however, indirectly makes our case for us.

The Fed’s poor record of predicting inflation has set off debate within the central bank over the economic models used by central bank officials. Fed Chairwoman Janet Yellen, in a 31-page September speech on the subject, acknowledged “significant uncertainty” about her prediction that inflation would rise. Conventional models, she said, have become “a subject of controversy.” 

That it took her 31 pages to say such should scare the you know what out of you. To be kind we would substitute skewed for conventional as in an agenda. And here's another interesting paragraph from the article.

Fed officials are coming around to the idea that inflation is influenced by the thinking of families, investors and business owners. Price movements, up or down, can become a self-fulfilling prophesy, according to economists.

Wasn't that what the so-called "Wealth effect" that the Greenspan, Bernanke and this Fed openly and shamelessly pushed, to influence those families and business people? Isn't that what rampant fiscal spending by the government is suppose to be about, persuasion?

The real problem here is groping. What a friend of ours calls The Federal Reserve of Groping.

CRUDE OIL SPILLOVER

A lot has been written lately about the spillover effects of trouble in the oil patch. We have touched on it several times. Just how pervasive is it, well, this article might give you a glimpse.

It is a buyer’s market.” This phrase is omnipresent on most oil trader’s lips these days as crude oil prices continue to slide. None typifies this better than the current state of the Nigerian crude oil market. Overhang, glut, oversupply, unsold barrels, are some of the words most associated with Nigerian crude.

Rewind to almost a decade ago: Nigerian crude was every refiners’ oil of choice. Most of them wanted to refine Nigerian light sweet oil in order to produce a substantial amount of middle distillates and gasoline, the profit-making products for refineries.

Now fast forward to the present day. Nigerian crude has lost its appeal. With the growing pace of technological advancement in refineries that can take a greater variety of crude grades, Nigerian crude is no longer the talk of the town.

In the past six years Nigeria also lost its biggest customer, the US, which now buys only a small amount of Nigerian crude oil due to the dramatic rise in domestic shale production. And Nigeria has still not been able to adapt to this loss.

 blogs.platts.com/2015/12/14/nigerian-crude-no-longer-talk-of-town

OUR VIEW

 
Here is a post from AP that should interest anyone and everyone interested in maintaining their right to free speech in this country. We have written recently articles: Open Letter To Ron Paul and 
MSM Continues Assassination and Open Letter To Mark Zucherberger that apparently received over site complaining about the content violating guidelines.  

This is a common thing today. Our content was simply about a difference of opinion and one's individual right to express those opinions without being labeled a hater or some other often used epithet. These well-chosen epithets are hardly benign. There are designed to strike fear at the least and to silence at the most.

In journalism there are at least three defenses against slander or libel: truth, fair comment and matter of public record. Unless those three have been redacted, buried in some hidden legislation, we believe they are still valid.The comments we made that were allegedly deemed offensive or in violation were not only true but matters of  pubic record. 

We realize that slanted news presentations, like attractiveness, is in the beholder's eyes, but it's a known and well-publicized fact that many MSM organizations, right and left, slant their news. And numerous polls, if one can believe them, reflect that fact. And people who legitimately voice them are hardly the ones who need sensitivity training.

Nor were they in any way meant to be malicious or mean-spirited, two more poplularly used labels against anyone who dares to differ with current so-called accepted wisdom. Differences of opinions can run deep, but that doesn't make them hateful speech or racist. 

BEIJING (AP) -- Police scuffled with protesters and journalists at a Beijing courthouse Monday as a prominent rights lawyer stood trial on charges of provoking trouble and stirring ethnic hatred with online commentary critical of the ruling Communist Party.

Chinese protesters and foreign rights groups said Pu Zhiqiang's trial at the No. 2 Beijing Intermediate Court amounted to political persecution, and foreign governments including the U.S. called for his release. Pu denied the charges and the trial concluded about midday, with Pu's lawyer Shang Baojun saying a verdict and sentence would be delivered at a later date.

"Pu Zhiqiang is a lawyer with a conscience," activist Yang Qiuyu said in a brief interview outside the courthouse while a policeman tried to grab him. "This is why he is now under arrest. We support him, and that means that we are also defending our own rights."

It should stirke you as curious that U.S.government offcials often call for a person's release when it happens in a foreign country but not when it happens here.

That's our view. We hope you know yours.

hosted.ap.org/dynamic/fronts/HOME?SITE=AP&SECTION=HOME

SANTA CLAUS RALLY?

As the end of 2015 grinds down ( And we think given the recent market behavior it's been a grind for many investors.), the Santa Claus rally that usually happens comes into question again. Will it happen or no?

The end of December is usually kind to stocks, so watch for “an oversold bounce in the coming weeks,” says Ari Wald, technical analyst at Oppenheimer & Co., in a note. That seasonal trend is shown in the chart above from Wald.

“However, strategically, we believe Q4 strength has marked an opportunity to sell weaker trends ahead of what we expect to be a Q1 ’16 correction,” he adds. “We see downside risk to 1900 over the coming months.”
marketwatch.com/story/what-technical-analysts-are-watching-after-last-weeks-big-market-selloff-2015-12-14

OVERNIGHT

Reuters rseported falling energy prices added to investor worries as Asian equities and the Chinese yuan recorded 4.5 year lows in trading Monday as the day of reckoning for the Fed's first interest rate hike in nearly seven years nears.

Trouble in the oil patch continues to contribute to the beggar thy neighbor global central bankers are playing. The People"s Bank of China continued Monday to guide the yuan lower, "setting," as Reuters reported, "a yuan/dollar official midpoint at the weakest since July 2011."

In a related story the WSJhttp://www.wsj.com/articles/dont-be-afraid-of-chinas-currency-gift-basket,investors were told the recent Chinese move to join a basket of currencies this time around appeared to be for real.

Every five years, China promises the world a currency basket, only to remain tethered to the U.S. dollar. Investors should be on guard that this time the basket is for real. Late Friday, in typical Chinese policy maker style, a currency department of the People’s Bank of China released a cryptic, unsigned editorial saying it would begin to publish a reference rate for the yuan against a trade-weighted basket of 13 currencies. The implication is that this new reference rate will be more important than focusing exclusively on the yuan’s rate versus the dollar. The PBOC said the new rate would be of “great significance.”

Just because it is publishing a rate, of course, doesn’t mean it has to follow it. In 2005, when China began to allow a gradual appreciation against the dollar, it said it would follow a basket. It repeated that promise in 2010, when it began to allow appreciation again after pausing during the global financial crisis.

But back then, a basket wasn’t in China’s short-term interests. The dollar was weakening, so even as the yuan appreciated against the U.S. currency, it weakened against its biggest trading partner’s currency at the time, the euro, and against the yen.

 Now is different. Staying tied to an ascending dollar means China has allowed its currency to become very strong against basically the entire world—except for the U.S. And it is at a time when Beijing has struggled to get the economy to respond to stimulus moves.

Following a basket will lead to further depreciation against the dollar. If done slowly and gradually, markets may absorb the change in stride, notwithstanding howls from the U.S. Congress. Yet the chance for dislocation remains high given that companies don’t invest based on a currency basket. Dollar exposure through offshore borrowing is a fact of life for Chinese real-estate companies, airlines and energy firms.

No doubt the timing—just before the U.S. Federal Reserve is this coming week expected to lift interest rates from near-zero levels—is aimed at getting ahead of further dollar strength. But it is not just a calculated, race-to-the-bottom depreciation. Following a basket is arguably a more rational way for China to let its currency adjust to economic circumstances.

TECHOLOGY IS AS IT DOES

Here are two stories one should be aware of. Recently, we mentioned that robots, not climate change, could turn out to be the biggest nemesis of humans. Since nearly everyone has a mobile phone these days, maybe the second story is also a prelude  to the destruction of humans. At least, any pretense of human privacy.

.telegraph.co.uk/news/worldnews/northamerica/usa/12047454/Elon-Musk-launches-1bn-fund-to-save-world-from-

dailymail.co.uk/news/article-3356608/So-terrorists-Homeland-Security-deployed-hi-tech-spy-plane-scoops-tens-thousands-phone-calls-one-time-San-Bernardino-days-massacre.

VOLATILITY WATCH

We've always been a bit amused to see how much investors love volatility when it's to the upside. When it appears in any other direction, choppy or straight to the down side, it becomes a MSM topic and something onerous if not outright sinister.

But volatility is inherent in the definition of markets. At the very least it's implied or should be. You know, sorta like the concept of marriage. Now that the Fed's set to crank up the old interest rate cycle and the market's exposed its skittish underside once again with the Dow Friday off 300 or so points, the volatility bugs are out in force warning investors like it's something new.

It ain't. But here's a sample from Reuters.

http://www.reuters.com/article/us-usa-stocks-weekahead

WILL IT STICK?

There's an old story, though we've never verified either it's origin or it's veracity, about some young Harvard guys sitting around tossing a chunk of gooey-gunk that reportedly became a best-selling toy against their office wall to see if it stuck.

From our view that's what next week's Fed rate hike--if it happens--will turn to be about. The market of course will twit and twitter over patience--that is, how much the Fed will display before further bumping up rates should their pile of trailing indicator data so dictate.

The meme being the threat  of rising rates lower stock prices. (See Friday's market selloff.) But patience is probably an incorrect term. Paralysis comes to our mind, but we're certain many Fed defenders will take issue with that. After all, after all this time, that request of the late Rodney King is still floating around out there.

With the current market worry about junk bonds safety becomes a bigger priority that might be somewhat helped by higher interest rates. The numbers on Third Avenue high yield fund tell an interesting  story. The term panic might not be an overstatement here.

According to what we've read, last summer, approximately 18 months ago, the fund had $3.5 billion in assets. As of last week it had plunged to $789 million. Some might call that a haircut. We call it, PC hall monitors aside, a scalping.

The odds on a rate hike next week have changed somewhat given Friday's big selloff in stocks and the latest high yield bond nightmare. And if you look there are other troubling signs in emerging markets, to mention just one. So the Fed, which has self-inflicted much this damned-if you-do, damned-if-you-don't scenario, will be forced to show its hand, one way or another.

As a neighbor of ours who lives and inhales the marker recently said:"It couldn't happen to nicer bunch of incompetent bureaucrats."