THERE IS A RHYTHM FOR THOSE WHO CAN HEAR IT

The tug of war between the bears and the bulls is an ongoing saga. Here's a piece from MarketWatch,

"This ‘smart money’ indicator nailed the dot-com bust, and it’s even more bearish now." 

Let's first say a word about what we like to do, though this is not investment advice for anyone nor is it intended to be construed as such. It's what we like to do and we take ownership when we do.

Sell out of the money calls and buy out of the money puts, sometimes deep out of the money puts. Now indicators are just that, indicators. Like life, but don't try to tell this to politicians and bureaucrats, there are no guarantees.

They tell you in school one of the objects of investing your hard earned capital is to provide money for firms to create growth and jobs. And so in part it is. But firms oftentimes find ways to waste that capital. (Sorry, but we just have to add this, as do politicians and bureaucrats!) No hard feelings here, just caveats have their function. 

The real object is to make money: Making money for your retirement, for your kid's education, so you can someday get off the time card cycle, so you can perhaps start your own business or so you can just set it aflame and just watch it burn. Forget that at your own peril. Never let anyone shame you into thinking that is un-American.

You don't always make money because things go up. You can make some by protecting yourself when they go down. Both have their costs and their risks.

 

“Smart money” is betting against the bulls in a huge way.
When it comes to investing in the stock market, the crowd is often wrong at extremes. A contrarian’s delight. This, according to Dana Lyons of J. Lyons Fund Management, is not one of those times. At least, if history is any indication. Of course, that’s a pretty big “if.”
Nevertheless, it’s worth noting what’s going on with the traders of S&P 100 options OEX, +0.73%

“Historically, this group has been on the right side of the market more times than not when their collective options position is at an extreme,” Lyons wrote in a blog post in which he pointed out that OEX traders have never held more put options relative to call options.
By the numbers, Friday’s readings marked the first time in history with more than three put options for every call. The record didn’t last long. On Monday, it rose to 3.3 options for every call.
This chart shows just how rare these kinds of extremes have been. To put it in perspective, between 1999 and 2014, the reading broke past two puts for every call just 15 days.

Like one of our favorite boxing sayings: There is a rhythm for those who can hear it.

marketwatch.com/story/this-smart-money-indicator-nailed-the-dot-com-bust-and-its-even-more-bearish-now-2015-12-22 

 

TEAR MANUFACTURERS

 One of the things you learn over time if you're paying attention is centralized governments--especially heavily statist ones--have an inbuilt penchant for producing tears. In most cases delayed tears.

As many of you know Argentina just held an important election to toss out one tear manufacturer in what hopefully for the Argentinian people won't be another. Argentina might be the global capitol of tears. It's a distinction that few claim to want, but many continue to vie for. Greece and some other parts of the EU should come to mind.

In a recent article former Pimco guru Mohmed El-Erian writes:

Last week, the government of newly elected Argentine President Mauricio Macri launched a bold plan to revitalize a bruised and beleaguered economy plagued by high inflation. At a time of daunting crisis conditions, one should not underestimate the importance of this move not just for Argentina, but also for other countries, where leaders are watching closely for clues about how to deal with their own economic woes. 

Thanks to years of economic mismanagement, Argentina’s economy has been badly underperforming for decades. Previous governments sought to avoid difficult policy choices and obfuscate fundamental issues by implementing inefficient controls that grossly misallocated resources and undermined Argentina’s ability to generate the foreign-exchange earnings needed to cover its import bill, resulting in domestic shortages. The recent drop in commodity prices has exacerbated the situation, depleting what little growth dynamism the economy had left, while fueling inflation, deepening poverty, and spreading economic insecurity and financial instability. 

You have to chuckle, perhaps even give El-Erian points for politeness. Describing Argentina's long standing economic woes as mismanaged is stand-up comic material.  Bruised and beleaguered are other interesting choices. But oh well. Here are some points he offers to correct the problems.

The other thing is, any scent of a meaningful move toward less statism could spell investing  opportunities. There are caveats, however, so keep your eyes focused. That way you might avoid getting caught up in any future tears because if past is prologue.......

In theory, governments in such a situation have five basic options to contain crisis conditions, pending the effects of measures to reinvigorate growth and employment engines.

· Run down the financial reserves and wealth that were accumulated when the economy was doing better.

· Borrow from foreign and domestic lenders.

· Cut public-sector spending directly, while creating incentives to induce lower private-sector expenditure.

 · Generate revenues through higher taxes and fees, and earn more from abroad.

· Use the price mechanism to accelerate adjustments throughout the economy, as well as in trade and financial interactions with other countries. More:

project-syndicate.org/commentary/argentina-macri-economic-action-plan-by-mohamed-a--el-erian-2015-12

LOOKS, SOUNDS AND SMELLS SAME

It's a long read but one worth it if you seek to understand the Fed and its inner workings.

You also get a glimpse of its expansionary financial muscles at work. The author tactfully uses the term aggrandizement. The Fed is like that giant sucking sound we've all heard about, sucking up more and more financial terrain in its growing regulatory efforts to be all in one and one in all.

Here are some excerpts.

In recent quarters, I’ve remained adamant that the immediate first step of the Federal Reserve in normalizing monetary policy should have been to reduce the size of its balance sheet. The Fed’s failure to prioritize that first step, in the apparent desire to maintain an aggrandized role in the U.S. financial markets, has significantly increased the risk of a collapse from the speculative extremes the Fed has created in recent years. Given the increasing risk-aversion evident in market internals, we doubt that even a reversal of last week’s rate hike would materially reduce that prospect.

To see why, it’s important to understand how the Federal Reserve’s tools - open market purchases, interest on reserves, and reverse repurchases - actually work in affecting the economy and the behavior of speculative investors.

Let’s begin with open market operations. Traditionally, the Fed has used open market purchases of Treasury securities in order to affect short term interest rates. The Fed’s transactions don’t really accomplish this by directly pressuring market prices higher and lower. Instead, the Fed has traditionally determined the level of short-term interest rates by determining the quantity of zero-interest money that must be held across the economy as a whole.

Specifically, when the Fed goes out and buys a Treasury bond from the public, it pays for that bond in the form of currency and bank reserves (known as “base money” or “monetary base”). The bond becomes an asset on the Fed’s balance sheet, and the base money is a liability of the Fed. As a reminder that currency is a liability of the Fed, look at one of the pieces of paper in your wallet that reads “Federal Reserve Note.” The same is true for bank reserves. Bank reserves are deposits that banks have with the Federal Reserve. They are assets to the banks, and liabilities to the Fed.

In short, when the Fed makes open market purchases of government bonds, it takes those bonds on as assets, and creates new liabilities in the form of currency and bank reserves.
 .....
Moreover, as we should have learned from the global financial crisis, when the Fed holds interest rates down for so long that investors begin reaching for yield by speculating in the financial markets and making low-quality loans, the entire financial system becomes dangerously prone to future crises. If the Fed's mandate is really to support long-runemployment and price stability, the first priority of Congress should be to rein in this cycle of activist Fed intervention; to end the Fed's ability to promote yield-seeking speculation and malinvestment that only produces inevitable crises and weakens long-run U.S. economic prospects.

 The fact is that a quarter-point hike comes too late to avert the consequences of years of speculation, and while the hike itself will have little economic effect, the timing is ironic because a recession is already likely. The main effect of a rate hike will be to add volatility to an already speculative and now increasingly risk-averse market. The Fed’s real policy error, as it was during the housing bubble, was to hold interest rates so low for so long in the first place, encouraging years of yield-seeking speculation and malinvestment by doing so.
 ......

advisorperspectives.com/commentaries/20151214-hussman-funds-deja-vu-the-fed-s-real-policy-error-was-to-encourage-years-of-speculation 

INFLATION: IT'S HOW YOU MEASURE IT

A recent article in the fiscal times, "11 things that will cost more in 2016," starts:

You don’t have to be an economist to know that wages haven’t changed much over the past decade. Most Americans only need to look at their paycheck for proof. 

That stagnation, combined with a strong dollar and low oil prices, has helped keep a cap on the prices that we pay for goods and keep inflation at historically low rates for the past few years.

The first paragraph, though clearly understated, is true. You don't have to be an economist. If you have a pulse beat, you qualify.  The second paragraph is just plain misinformation. Inflation isn't at historically low rates. But how it gets measured is. And energy prices have been up and down over the last decade. Here's a chart we've posted before on commodity prices in general during that decade. The chart speaks for itself.

The author goes on to list the 11 things that will cost more in 2016. The first one, surprise, surprise, is healthcare. The second one is homes and the third tuition, all three of which are intimate parts of what once was the American dream.

So one could postulate that inflation has and will only go up for those foolish enough to still believe in the American middle class dream. Number four is another interesting one since it is in many ways  something those hopeful home buyers seek to avoid, rent. Here's the rest of the list in numerical order, five through 11. Girl scout cookies; food in general; airfare; hotels; and, yes, money, since it ain't free; bitcoin; and the last one, one we should most not accept, the price of the 2016 election.

Now all the items on that long list are not necessarily those of daily use, but many, for many Americans, use them quite frequently.


















Here's another chart to show how renters fared versus wages over that decade. Those low wages didn't seem to hold rents in check much. For at least seven of the 10 years rents increased and in most of those seven years they increased dramatically, well above those flat or stagnant wages.

To be fair, the fiscal times published a companion list of 10 things that will cost less in 2016. Check it out and see how many you plan to either use or to buy. Computers, bonds; drones; airfare, owing to, as the article cites, cheaper energy prices; gold; iPhones; heating costs; and antiques.

If there's any one out there who believes this is some sort of fair trade off--one of Sir Alan Greenspan's huge fantasies he tried to propagate during his reign of bubble mania at the Federal Reserve,we hope, in honor of the latest Star Wars release, the Force blesses you.

And by the way, holding interest rates artificially below their natural level--the natural level has to do with price discovery, something you'll never see with a market-intrusive Fed--low interest rates themselves cause inflation.

OVERNIGHT

China has some big problems and two of them are industrial over production and a glut of property. Despite recent government efforts, investors appear unconvinced that their government's latest move will solve them.

In overnight trading the WSJ reports most Asian stock indexes fell with few exceptions.

Shares in China fell Tuesday as investors met Beijing’s latest efforts to boost its economy with skepticism.

The Shanghai Composite Index fell 0.5% to 3623.56, although it remains at its highest levels in almost a month. Analysts say they are unconvinced about the feasibility of Beijing’s latest economic blueprint after an annual economic conference wrapped up Monday.

Japan’s Nikkei Stock Average was down 0.1%. The benchmark was lower for the third-straight day, bringing its losses to about 3% since the Bank of Japan announced adjustments to its easing program last Friday.

Hong Kong’s Hang Seng Index was down 0.1%, while Australia’s S&P/ASX 200 was flat and South Korea’s Kospi fell 0.1%.

A communiqué of the Central Economic Work Conference, released by China’s official Xinhua News Agency Monday, showed that Chinese leaders next year aim to tackle long-term problems haunting the world’s No. 2 economy, such as persistent industrial overcapacity and a property glut.

STAY DILIGENT

Here is a good, succinct discussion of some of the potential problems going into 2016.

marctomarket.com/2015/12/four-drivers-of-investment-climate-in

We have touched on all of them several times--China's transition to domestic consurmerism versus buying everything in sight; the fungibility of commodities and emerging markets, where you see one the other is close by; the dollar and the yuan; the latest Wall Street betnoir term, divergence; the EU and Japan and you can add the Tawain central bank that eased the money supply to a long list of others; the Fed, interest rates and their impact.

There is little doubt the strong U.S. dollar and the spreads in the bond market it creates are worth watching. Of import too is it's impact on the earnings of multinationals. Then there is gold, the one relic much of the investment community loves to hate.

So where will the surprises come from and what might they be? The EU, heaven forbid, given another tragic terrorists attack could become a smoking hot political cauldron of separatism, spreading the fear and further doubt about EU viability.  And the same this election year in the U.S. Though it's hard to see how, inflation might also surprise. Those easy money spigots were open for a long time and in several places.

With China apparently declaring it's no longer the commodities buyer of last resort and the Fed opting, at least for the nounce, to purchase a ticket on that train, who knows what could happen? So enjoy the read and stay diligent in 2016.

FEDERAL RESERVE LEADERSHIP

We realize that when we post or share stories like this one from The Daily Bell, a libertarian site, people will roll out their usual barrage of epithets, it comes with the territory. People assume we belong to this or that group snd so forth. We don't.

We are not hate mongers of any sort. There is an old Hollywood western movie, now a classic, famous for one line: "Prove it." We are simply in search of the truth, not the mostly doctored up, managed stuff MSM coughs up daily.

In this article it mentions Americans "struggle to pay for food and shelter." To that we would add healthcare. Truth, real truth, is suppose to be palatable to all sides, at least the airing out and search for it. Once upon a time the stock market indexes were held up by what was called The Nifty Fifty. The meme then was you could buy them and hold them forever. Today, it's The Nifty Few holding up the ceiling.

There's some tough talk in here. But the truth is hardly ever soft. In our years of studying and being in the markets, more than a kernel, to those who wish to take their blinders off. Our experience may not invalidate yours. But in no way does yours invalidate ours in a so-called free, open society. And in no way is it a violation of any hate speech, hate mongering or zero tolerance of today's of dangerous PC code.

Anthony Wile: Are there other reasons for this hike now that we are not hearing about? 

Jay Taylor: Yes, I think so. In addition to having some firepower for future rate decreases and to try to maintain some credibility, I think the preservation of the petrodollar is a main concern. Both China and Russia have not tried to hide their hatred for the petrodollar, which 
has enabled the U.S. to engage in systematic theft of global resources. The Chinese and Russians have been dis-hoarders of the dollar and have been piling into gold. Reportedly, the Russians have been building their gold stockpile as they sell their oil to China not for dollars but for gold. The BRICS are systematically setting up their own banking system to compete with the petrodollar system that has been the heart of the Anglo-American and NATO world post World War II. So raising rates has the effect of making the dollar somewhat more 
desirable vis-a-vis the even more pathetic global currencies.  

Anthony Wile: Overall, has the Fed been doing a good job managing the economy? Can the Fed manage the economy? 

Jay Taylor: The idea that a group of people can better manage markets than the collective and spontaneous wisdom of millions of market participants is as ridiculous as believing in the tooth fairy. Why in the world have we not learned anything from the experience of the Soviet Union? Not only has the Fed not been doing a good job, they have been systematically destroying capitalism by disallowing price discovery of capital. Not only that but they have been involved in bailing out criminal banks that lied and stole during the housing bubble. Not only is the Fed a complete failure in terms of doing what it is supposed to do, it is also a criminal organization made legal by criminal politicians. 

Anthony Wile: What's your impression of Janet Yellen? Is she in charge? Are others? 

Jay Taylor: The shareholders of the Fed – the money center banks are in charge. She, like the president of the U.S., is merely a well-indoctrinated puppet.

 Anthony Wile: What's your impression of the Fed these days? Is it losing credibility? Is it damaged in the eyes of the public? 

For the answer to that question you'll have to read the article. 

thedailybell.com/exclusive-interviews/36700/Anthony-Wile-Jay-Taylor-Fed-Leading-Us-Into-Global-Insolvency 

Jay Taylor: Of course, in my eyes and in the eyes of most Austrian economic thinkers, the Fed has been losing its credibility for years. It was created supposedly to reduce the business cycle. But history shows, starting with the Great Depression, that they have only served to exacerbate the business cycle by creating endless bubbles. Not only that; they have destroyed the purchasing power of the U.S. dollar by something like 97% since the Fed's birth in 1913. The only question remaining is how long will it take before Pinocchio's nose is so long that the whole world sees it as the fraud that it is? - See more at: http://www.thedailybell.com/exclusive-interviews/36700/Anthony-Wile-Jay-Taylor-Fed-Leading-Us-Into-Global-Insolvency/#sthash.UJEU096O.dpuf

Jay Taylor: Of course, in my eyes and in the eyes of most Austrian economic thinkers, the Fed has been losing its credibility for years. It was created supposedly to reduce the business cycle. But history shows, starting with the Great Depression, that they have only served to exacerbate the business cycle by creating endless bubbles. Not only that; they have destroyed the purchasing power of the U.S. dollar by something like 97% since the Fed's birth in 1913. The only question remaining is how long will it take before Pinocchio's nose is so long that the whole world sees it as the fraud that it is? - See more at: http://www.thedailybell.com/exclusive-interviews/36700/Anthony-Wile-Jay-Taylor-Fed-Leading-Us-Into-Global-Insolvency/#sthash.CEbUpDt3.dp thedailybell.com.

Jay Taylor: Of course, in my eyes and in the eyes of most Austrian economic thinkers, the Fed has been losing its credibility for years. It was created supposedly to reduce the business cycle. But history shows, starting with the Great Depression, that they have only served to exacerbate the business cycle by creating endless bubbles. Not only that; they have destroyed the purchasing power of the U.S. dollar by something like 97% since the Fed's birth in 1913. The only question remaining is how long will it take before Pinocchio's nose is so long that the whole world sees it as the fraud that it is? - See more at: http://www.thedailybell.com/exclusive-interviews/36700/Anthony-Wile-Jay-Taylor-Fed-Leading-Us-Into-Global-Insolvency/#sthash.CEbUpDt3.dpuf

Jay Taylor: Of course, in my eyes and in the eyes of most Austrian economic thinkers, the Fed has been losing its credibility for years. It was created supposedly to reduce the business cycle. But history shows, starting with the Great Depression, that they have only served to exacerbate the business cycle by creating endless bubbles. Not only that; they have destroyed the purchasing power of the U.S. dollar by something like 97% since the Fed's birth in 1913. The only question remaining is how long will it take before Pinocchio's nose is so long that the whole world sees it as the fraud that it is? - See more at: http://www.thedailybell.com/exclusive-interviews/36700/Anthony-Wile-Jay-Taylor-Fed-Leading-Us-Into-Global-Insolvency/#sthash.CEbUpDt3.dpuf

Jay Taylor: Of course, in my eyes and in the eyes of most Austrian economic thinkers, the Fed has been losing its credibility for years. It was created supposedly to reduce the business cycle. But history shows, starting with the Great Depression, that they have only served to exacerbate the business cycle by creating endless bubbles. Not only that; they have destroyed the purchasing power of the U.S. dollar by something like 97% since the Fed's birth in 1913. The only question remaining is how long will it take before Pinocchio's nose is so long that the whole world sees it as the fraud that it is? - See more at: http://www.thedailybell.com/exclusive-interviews/36700/Anthony-Wile-Jay-Taylor-Fed-Leading-Us-Into-Global-Insolvency/#sthash.kSxDMFou.dpuf

Jay Taylor: Of course, in my eyes and in the eyes of most Austrian economic thinkers, the Fed has been losing its credibility for years. It was created supposedly to reduce the business cycle. But history shows, starting with the Great Depression, that they have only served to exacerbate the business cycle by creating endless bubbles. Not only that; they have destroyed the purchasing power of the U.S. dollar by something like 97% since the Fed's birth in 1913. The only question remaining is how long will it take before Pinocchio's nose is so long that the whole world sees it as the fraud that it is? - See more at: http://www.thedailybell.com/exclusive-interviews/36700/Anthony-Wile-Jay-Taylor-Fed-Leading-Us-Into-Global-Insolvency/#sthash.kSxDMFou.dpuf

CHILLOUT AT YOUR OWN PERIL

What didn't happen is usually as important if not more so than what did. Each year around this time we get projections and expectations about the market. There's no shortage of them. And there never will be.

For 2015 many were calling for 10 percent or better returns and near double digit increases in earnings of the S&P 500. Other surprises included the Fed's paralysis about hiking interest rates and just how low oil prices could go.

For a while the market celebrated those plunging oil prices, but if every cloud has a silver lining, every silver lining has a cloud, as an investor associate likes to remind. And as has been noted by many, the 45 percent drop in oil prices in 2014 didn't prevent a follow-up 30 percent decline so far in 2015.

Like a room full of measles, that can be contagious. See the current junk bond market and the panic there that now exceeds not just those highly-margined, peripheral producers who borrowed cheap money heavily and depended mightily on such to make a profit.

And a funny thing happen to consumers on the way to lower punp prices, a so-called beneficiary of those plummeting energy costs.

American consumers are getting a windfall of billions of dollars a week thanks to low fuel prices. The U.S. economy has little to show for it.

The price of a gallon of regular gasoline fell to $2 nationally Sunday and was well below that in much of the country, AAA said, marking the lowest price outside of a recession in more than a decade. As a result, Americans reaped more than $100 billion in savings this year alone, or about $550 per licensed driver, according to the motorists group. 

When gas prices began plummeting last fall—they were above $3.50 a gallon as recently as August 2014—many economists predicted the savings would act as a giant tax cut by jolting long-weary consumers into stronger spending and pushing up sluggish economic growth.

Instead, the economy remains mired in the slow-growth trajectory that has marked the economic expansion over the past 6½ years. Consumer-spending growth outside of gasoline has decelerated, advancing 3.8% from a year earlier in October, far slower than the comparable 4.9% gain in October 2014, according to Commerce Department data. Consumer spending accounts for more than two-thirds of U.S. economic output, according to the WSJ.


Another surprise has been the strength of the U. S. dollar and the havoc it been causing. The greenback is up 22 percent over the past two yeas with what many expect more strength to follow in 2016. For evidence of the damage check out multinationals and emerging markets.

The dollar is a major component of the divergence meme and the uncertainty and fear associated with that. Most commodities are dollar denominated, thus part of the reason countries like China want to un-peg from it. Spreads on sovereign bonds, especially at the long end, are also impacting dollar strength as the U.S. flashes growth hopes around the globe.

This might be seen as economic blaspheming but so be it. The strong dollar quite likely has hoodwinked the Fed into miscalculating low inflation. It's not nearly so low as any honest, straight forward, unfiltered man or woman on the street in Middle America would prove.

Healthcare costs are soaring, if you think not ask those who've seen a doubling or tripling in their premiums since Obamacare. Or ask employers facing ever-rising prescription drug spending costs for their employees. According to the WSJ, quoting a benefits consultant, "Nationally, employers' pharmacy costs are rising about 9.5% this year and will go up 10% in 2016."

“This is a tsunami,” said John Bennett, president and chief executive of Capital District Physicians’ Health Plan in Albany, N.Y., a nonprofit insurer with corporate clients. Pharmacy costs are “the single biggest driver of our medical inflation in the last few years.”

Recall prescription drugs were touted as a way to hold down costs by cutting down on the need for in-patient care or hospitalization. Recall also the usually loser here is the patient and the quality of services  received. Employers respond because push leads to shove.

In tackling them, employers are becoming more aggressive. Many have expanded requirements that doctors obtain advance approval from health-plan administrators for certain costly drugs, a practice called prior authorization. For instance, about 89% of employer health plans now mandate prior authorization for certain anti-inflammatory drugs for diseases like rheumatoid arthritis, up from 61% in 2007, according to survey by drugmaker EMD Serono Inc.

Another increasingly common strategy is “step therapy,” which requires that patients be treated with lower-cost drugs before the health plan will pay for a more expensive option. This year, about 69% of employers had step-therapy rules, compared with 56% in 2011, according to the Pharmacy Benefit Management Institute, a research organization. 

A newer tactic is pursuing supply contracts that cap annual price increases for drugs at a set percentage, says Jim DuCharme, CEO of Prime Therapeutics, a pharmacy-benefits manager that negotiates such deals.





Here's another chart about inflation. The bottom line is every cloud has a silver lining and every silver lining has a cloud. Forget that at your own peril. Now that the Fed has come up with a new way to tamper with things in the future, however, a foolproof way we are told, we should all just take a deep breath and chill out.

SENTIMENT INDICATOR

This time of year there is a lot of sentiment in the air, the well known so-called "Goodwill and peace on earth" to all supposedly among them.

So what's the sentiment in the market among investors given the Fed's long awaited recent interest rate hike? Well, according to the latest American Association of Individual Investors survey, it's not so cheerful. Apparently, only 24 percent consider themselves bulls, only the 10th time since the bull market started in 2009 that percentage has dropped below 25 percent, according to the latest issue of Barron's.

Some will say it's a good contrarian indicator. Maybe and maybe not.

The Standard & Poor's 500 has gained 7.9% on average during the six months after a sour survey, only slightly better than all six month periods, Barron's noted, quoting data from an investment group. This suggests that during this bull market, at least, individual investors have not been the 'Wrong Way' Corrigans that they have the reputation for being.

KEEP THE CHINESE DEVALUATION IN VIEW

The chart below is from marctomarket.com/2015/12/great-graphic-large-yuan-devalution and it  covers what we have noted in our latest financialspuds.blogspot.com/2015/12/overnight about the situation of the Chinese economy. Its is still a beggar thy neighbor move whatever you call it.

Obviously, there is no consensus among economists. As Chandler notes: We suggest that China has merely confirmed what it has been doing.  The close link between the yuan and dollar prevents China from pursuing a more independent monetary policy. The removal of accommodation by the Federal Reserve, which is widely expected this week, is not appropriate for China, though the data over the weekend (industrial output, retail sales, and fixed asset investment) suggests the world's second largest economy may be stabilizing. 

We all now know what the Fed's actions were last week. And as we noted in our previous post, financialspuds.blogspot.com/2015/12/managed-numbers, you need to keep your eye on which approach Chinese officials take, further devaluation or what.