GAAP

As BofA admits, "we are increasingly concerned with this trend, as on an unadjusted basis non-commodity earnings growth has been negative 2 of the last 4 quarters, representing the worst 4 quarter average earnings growth in a non-recessionary period since late 2000."

... more than 100% of Alcoa's "EPS" in the quarter was due to what management thought was another quarter of recurring "non-recurring", non-one time "one-time" charges.

In March 2014 Wall Street’s ex-items S&P 500 earnings forecast for 2015 was about $133 per share; it ended up 20% lower at $106. Yet here they go again - the consensus for 2016 started out at $137 per share last spring, and is just now beginning to make its way back toward the high $120s. It is a barometer of the abject complacency and intellectual sloth that has descended on the casino owing to two decades of Fed coddling and seven year of free money for the carry trades. In the case of Chipotle, it was always just a burrito. In the case of the US and world economy and financial markets, it’s not even that.

The debt valuation adjustment, or DVA, will no longer be included in net income, according to revisions to the fair-value measurement standard published by the Financial Accounting Standards Board Tuesday.  The DVA rule increased net income when a bank’s bonds tanked, on the theory that the firm could buy back its bonds at a lower price and benefit from the decline in value.

At the end of the day, the current preposterous $325 billion market cap has nothing to do with the business prospects of this firm or the considerable entrepreneurial prowess of its leader and his army of disrupters. It is more in the nature of financial rigor mortis - the final spasm of the robo-traders and the fast money crowd chasing one of the greatest bubbles still standing in the casino.

The prospect that the leaders of our monetary politburo are about to be tarred and feathered by economic reality might be satisfying enough if it led to the repudiation of Keynesian central planning and a thorough housecleaning at the Fed. Unfortunately, it will also mean that tens of millions of retail investors and 401k holders will be taken to the slaughterhouse for the third time this century. And this time the Fed is out of dry powder, meaning retail investors will never recover as they did after 2002 and 2009.

The S&P 500 closed at 2052 on November 18,2014. That was 405 days ago, and despite the rips and dips in the interim the broad market average has gone nowhere.

Wall Street’s proclivity to create serial equity bubbles off the back of cheap credit has once again set up the middle class for disaster. The warning signs of this next correction have now clearly manifested, but are being skillfully obfuscated and trivialized by financial institutions. Nevertheless, here are ten salient warning signs that astute investors should heed as we roll into 2016.

• Global stocks rise but oil, Fed keep investors nervous (Reuters)
• Janet Yellen: An orthodox economist for unorthodox times (Reuters)
• House Democrats Said to Be Open to Lifting Oil Export Ban (BBG)
• Don't Count on an Oil Rally If U.S. Crude Export Ban Is Lifted (BBG)
• Germany welcomes 34-state Islamic military alliance against terrorism (Reuters)
• U.S. soldier Bergdahl may face life sentence in court-martial over desertion (Reuters)

After Tuesday’s dividend massacre, it’s plain as day that Kinder Morgan wasn’t the greatest thing since slice bread after all. That is, a “growth” business paying rich dividends out of rock solid profit margins and flourishing cash flow. In fact, it was just a momo stock on a borrowing spree.

The current stock market melt-up hardly qualifies as limp. Even the robo-machines and hyper-ventilating day traders apparently recognize that their job is to tag the May 2015 highs and then get out of the way. So when and as they complete their pointless mission, the question recurs as to why the posse of fools in the Eccles Building can’t see that they are inflating one hellacious financial bubble; and that when it blows it will deconstruct their entire 7-year project of make-pretend recovery.

Financial engineering scams like Tyco and Valeant would never happen in an honest free market. Short sellers would shut them down long before they reach egregious levels of over-valuation; and the cost of honest downside market insurance (i.e. S&P 500 puts) and market driven carry cost would dramatically reduce the profitability of speculation and the amount of punters and capital in the casino. In today’s broken markets and corrupt regime of central bank driven crony capitalism, however, bubbles inflate in individual securities, as well as in broad sectors and the market as a whole, until they reach egregious, self-correcting extremes. Then they violently implode, creating immense waves of collateral damage in the process. Perhaps then the American people will learn that Yellen & Co have actually been in the un-wealth effects business for way too long.

Roughly ONE THIRD of the advisory firms the SEC examined failed to meet custody rule requirements.

We hoped yesterday's preview would soften the blow from today's CAT Q3 earnings which were clearly going to be ugly, and surely worse than consensus estimates. Moments ago we got said earnings and as expected, they were indeed far worse than expected, with CAT reporting adjusted EPS of $0.75 ($0.62 GAAP), below consensus estimate of $0.77, while revenue of $11.0 billion also missed expectations of $11.33.This takes place even as CAT repurchased $1.5 billion in stock in Q3, or about 75% of the total $2.0 billion in buybacks it conducted in all of 2015 (compared to $8 billion in the past three years).