RELIEF RALLY?

Here is a chart from marctomarket.com.

It illustrates quite well the Santa Claus rally often seen in December as we noted yesterday.
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? financialspuds.blogspot.com/2015/12/santa-claus-rally.

The chart is an excellent breakdown of the various markets. Now let's see if it happens given tomorrow's Fed action. If investor relief is the order of the day, our guess is it will.
 
 

WHAT IF TIME

What if?

So what if one or a bunch of such questions might be in order for after the Fed's actions tomorrow. Call them 2016 what ifs.

What if next year inflation returns faster and higher than anyone suspects? A long, long shot you say given the current global picture with bottom-searing energy prices, China and all the rest. True, it's a long shot viewed through today's lenses. But what if?

What if the Fed is forced out of its analysis-paralysis straight jacket of these past several years and  forced to hike rates several times separated by very short intervals? There are a few what if here. Read both articles to find out more.

What if that doesn't happen and the Fed follows an orderly rate hike pattern as the economy returns to so-called normal? Again, read both articles to learn more.

What if as some are suggesting and Fed Chair Yellen recently offered it will be good to get a rate hike under the belt to show the economy is doing well turns out to be wrong?

fortune.com/federal-reserve-interest-rates-raise
barrons.com/articles/how-to-invest-when-the-fed-raises-rates

ADJUSTED YEARNINGS

 
 Some people call it cooking the books. Others call it gilding the Lilly. We call it human behavior.

What do you do when you want a different result from the one you got? Well, some would say if you're a rationale (whatever that means in these days), intelligent human being, you change or alter your behavior.

And that's what this WSJ story is about, "'Adjusted' Earnings Cloud Results."

What's adjusted earnings? Well, back in the halcyon days of dot-com as the Journal notes, one huge tech company practically everyone has heard of and is still around today reported beating its earnings for 14 straight quarters by one penny. That's adjusted earnings. The stock price did what any Wall Street veteran would expect in what became famous as the "Irrational exuberance" of the time, it went up.

We are not probability or odds experts, but one penny for 14 straight quarters brings up one well known street analyst of the day later reprimanded by the SEC who praised firms publicly but privately named them POSs. That's adjusted earnings.

It's corporate America and Wall Street, Jake.

A financial obfuscation of the dot-com era is making a comeback: Hundreds of U.S. companies are trumpeting adjusted net income, adjusted sales and “adjusted Ebitda.”

These adjusted measures paint a rosier picture of corporate earnings. Without them, third-quarter earnings per share fell 13% for the biggest U.S. companies, according to Deutsche Bank research, instead of falling 0.1% with them.

About one in 10 major securities filings this year used the term adjusted Ebidta—or adjusted earnings before interest, taxes, depreciation and amortization—up from one in 40 a decade ago. About a quarter of earnings-related filings this year included figures that don’t comply with generally accepted accounting principles, or GAAP, as well as more standard measures, according to a Wall Street Journal analysis of 10-K, 10-Q and 8-K filings.

The terms now crop up in quarterly earnings releases and securities filings for companies as varied as Grape-Nuts-maker Post HoldingsInc., chemical company Dow Chemical Co., wireless operator AT&TInc. and hamburger chain Wendy’s Co.

As nearly always, the corporate reason for all this: to help investors understand the balance sheet better.United Technologies Corp. last week was the latest big company to embrace adjusted earnings measures. By adhering to accounting rules, “we’re actually confusing people more than we were helping people understand what’s going on in the business,” said CEO Greg Hayes. “This is a simplification and really allows the investors to more easily understand what the businesses are doing.”

The result, however, is a new yardstick with no standard accounting definition and, often, little comparability to other companies or even other time periods. 

TOMORROW IS ONLY A DAY AWAY

 
 Correlation is a term you don't hear tossed about much today, at least not directly. There is also the Wall Street term negative correlation which is an oblique way of saying diversification.

The move toward globalization is a move away from negative correlation. In short, we're all in the same rub a dub tub. One writer discussing the possibility of a global recovery noted."It's been a rough year for emerging markets across the hoard." Yes, indeed, it has and if one were a good contrarian and felt the global economy was really on the mend, one might dump money there, value trap or otherwise.

A day before the Fed flaps it's huge lips, up or down or steady as she goes, much of the concern is about the global impact of what's been one of the MSM meme, divergence, for months.The world biggest economy hiking rates while other major players take a different direction.

That's one of the major fears surrounding Fed action. That's globalization. That's correlation.
Like that old Vegas saying, "What happens here stays here," no longer applies. It's also what a growing number of EU members are beginning to realize once they got hoodwinked into forfeiting their currencies, customs and cultures to join a monetary union.

The Unites States is linked more than ever before to major players around the world. China's slowdown has hurt other emerging markets. Japan is barely growing. Europe is struggling with low economic growth too. It's been a rough year for emerging markets across the board.

To varying degrees, all that weighs on the U.S. economy and the Fed. The concern is that the Fed's rate hike can cause a boomerang effect: (1) the Fed raises rates, (2) that hurts other economies even more, and then (3) economic woes in developing countries eventually hurt U.S. trade and economic growth.

The U.S. manufacturing sector has already shrunk as a result of the weak global economy and strong U.S. dollar. 

China's efforts, back door or otherwise, to un-peg the yuan from the dollar is about correlation. So the financial globe awaits tomorrow. Keep in mind that correlation is not always causative. The Fed hikes rates and the financial globe collapses. But perception is.

And that's why MSM memes, particularly those they work especially hard, are always dangerous. An example one might want to consider is the MSM and its characterization of Trump.

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