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Daily Market Update – October 22, 2015 (8:30 AM)
The earnings keep coming as this week and next are traditonally the busiest ones for earnings of the DJIA members and key S&P 500 players. For the most part the results have been pretty underwhelming with the same tired story of companies reporting beats on earnings, but having missed on revenues. I still don’t quite understand what investors get so hung up on the EPS metric, especially when it is so easily manipulated, as has been the case for the past couple of years with an avalanche of stock buy backs. There has to be some better way of comparing relative performance from one time period to the next and to your peers. More importantly, there has to be some measure that’s less easy to bend through the use of investor’s cash that’s sitting in the corporate bank vault. Granted, there are always different accounting tools that can be used to accentiate certain aspects of both items in the assets and liabilities columns, but there should be some replicable measure that simply looks at operating revenues and operating expenses that strips out all of the fudge factors that creep in to those numbers. That’s too easy and makes management too accountable for performance, so that will never happen. Part of it is also due to the IRS code that allows for periodic manipulation and difficulty in making those quarterly comparisons. One thing that you rarely hear anymore when earnings are being reported is the phrase “clean number.” There are just so many adjustments from quarter to quarter that investors are often left to shoot blindly when earnings are released, so it’s no wonder why you so often see incredibly wild gyrations immediately after the earnings are released, although they are also accentuated by the low trading volume seen in the after hours or prior to the market’s opening. Maybe there should simply be a freeze on trading from the time earnings are reported to the end of the conference call. Right. As if that’s ever going to happen, as gambling is still a big part of “investing” and there are many who play for the big moves and very quickly take profits or cut losses, if they can find someone on theother side of the trade, This morning looks like another relatively quiet one, although the futures have been slowly working their way higher, especially the DJIA which is getting a very big pop from McDonalds as its earnings have surprised everyone and its shares are taking their single biggest one day move that I can ever recall. With no really consistently positive news coming from earnings, there doesn’t appear to be anything to convince the FOMC that this is the time for them to raise rates next week. They are no doubt paying attention and they have no doubt listened to the views of overseas central banks and the IMF. While there may be no partying this week on the floors of the stock exchanges, that may change next week in anticipation of free and easy money policy continuing, even though the anticipated rate increase would still leave us in the same kind of environment. But until then the rest of this week will likely be just sitting back and seeing what opportunities may present themselves or get taken away, with regard to those positions expiring this week. After having opened 3 new positions and with only a single position expiring next week, I’d like to have some opportunity to raise cash through assignments in order to create new positions next week and keep the income generating cycle moving forward. |
