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Clean Harbors, Compliant Analysts, and “Revenue Ex-Cat-in-the-Hat”

 When readers ask, “Is there a company out
there that’s got lower quality earnings than IBM?” the unfortunate answer is,
“How much time have you got?”
 That’s because a majority of U.S. companies
report some form of “adjusted earnings,” not to mention some form of “adjusted
revenues,” and whatever they’re “adjusting” for, Wall Street’s Finest accept
them at face value.
 Even Coca-Cola—Warren Buffett’s “perpetual” investment—has taken to reporting a revenue metric we’d never heard of before this earnings season: they call it “currency neutral, ex-structural revenue growth.”
 (If, just for fun, a company started reported “Revenue Ex-Cat in the Hat,” we wouldn’t be surprised if more than a few of Wall
Street’s Finest dutifully reported “Revenue-Ex-Cat in the Hat” in their
so-called research reports.)
 In any event, if conservative old
white-shoe folks from Atlanta can make up stuff with the best of
‘em—and the best of ‘em, of course, would be IBM—you can bet there are a whole lot
of companies that dream up all kinds of adjustments the number-crunchers on Wall Street crank into their
spreadsheets without a second thought.
 Exhibit A today in this regard is Clean
Harbors, a broken (for the moment) “story” stock whose story has been that
smart management + pricey acquisitions – “earnings adjustments” = fancy multiple, despite the
fact that the acquisitions have proved less than stellar, and the perpetual
subtraction of “adjustments” from GAAP earnings has masked a deteriorating
business model that only recently (i.e. this morning) came unmasked.
 The fact that CLH’s numbers stank is nothing
new: the company hasn’t “made the number” almost since the day its $1.25
billion purchase of Safety-Kleen closed the last month of 2012.  But do not take our word for it: quarterly
 earnings “surprises” as compiled by Bloomberg (starting with the first Safety-Kleen quarter through today’s report) read as follows: -18%, +14%, -22%, -6%, -20%.
 Of course, “earnings” for CLH, like so many
public companies today, is a construct of remarkable fluidity, excluding, just
for example, environmental liability accruals that recur like clockwork, and represent the fact that the environment remediation business of the company shells out a lot of cash to clean up after itself.
 Whatever the construct, CLH’s new, “adjusted”
EBITDA target for 2014 is about $100 million lower than Wall Street’s Finest
were expecting just one year ago.
 And that’s real money, not something the Cat
in the Hat dreamed up to keep the kids occupied.
Jeff Matthews
Author “Secrets in Plain
Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing,
2013)    $4.99 Kindle Version at
Amazon.com
©
2014 NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored.  And if you
think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the
entertainment of the reader, and the author.
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IBM 39, Emerson Electric 2

Quick!  What’s wrong with this paragraph?
 Good
day, ladies and gentlemen. Thank you for standing by. Welcome to Emerson’s
investor conference call…. This conference is being recorded today, February 4,
2014. Emerson’s commentary and responses to your questions may contain
forward-looking statements including the Company’s outlook for the remainder of
the year. Information on factors that could cause actual results to vary
materially from those discussed today is available at Emerson’s most recent
annual report on Form 10-K as filed with the SEC. I would now like to turn the
conference over to our host, Patrick Fitzgerald, Director of Investor Relations
at Emerson. Go ahead. 
 If you said, “Golly, it doesn’t include the
usual warnings about how the call ‘contains non-GAAP financial measures’,” then
you win.
 Emerson, you see, doesn’t lead with non-GAAP
financials the way some companies do—and by “some companies” we’re thinking
especially about IBM, which uses non-GAAP financials the way a magician uses
his sleeves.
 “We present GAAP numbers,” says Emerson’s famously
frank CEO, David Farr.  “Which means we include all pension costs,
all intangible amortization, and our performance share stock programs in the
consolidated numbers.   We present GAAP numbers.”
 And Farr is true to his word: All the numbers Emerson’s team discusses
on its calls are strictly GAAP—that is, they conform to generally accepted
accounting principles. 
 In fact, in Emerson’s press release yesterday,
the term “non-GAAP” appeared just twice,
at the very end of the release with a table detailing a modest GAAP to non-GAAP reconciliation that would have boosted year over year earnings growth from 5%
to 8% had the company chosen to use it.
 Emerson did not, however, choose to use it.
 IBM, on the other hand, has no such
qualms.  
 The term “non-GAAP” appeared 39 times in IBM’s
most recent quarterly earnings release, starting in the very first sentence.
 Such is IBM’s prowess at presenting the most
favorable numbers possible that, as we have seen in our previous look at the
number-massaging machine known as Big Blue, an 11% pre-tax income drop in the fourth quarter turned into
an 11% after-tax gain, thanks to the
magic of a near-non-existent 11.2% tax rate in this year’s quarter.
 Now, you may wonder how Warren Buffett, who
routinely complains about the big-shots in America who pay a lower tax rate
than his secretary, feels about that.
 We don’t. 
After all, Buffett also complains about the big-shots who don’t pay big
inheritance taxes on their wealth, yet Buffett will avoid the biggest inheritance
tax bill in American history by giving away his shares in Berkshire Hathaway ahead of time,
and rationalizes it thusly: he’s just following the rules.
 Surely IBM is just following the rules.
 But what rules, exactly, is IBM following?
 Fortunately, Bloomberg has the answer, here,
in a story that broke yesterday around the time Emerson’s clean, all-GAAP earnings were
hitting the tape.  
 Seems IBM routes “almost all sales in Europe,
the Middle East, Africa, Asia and some of the Americas” through a Netherlands subsidiary,
IBM International Group BV, which counted 205,000 employees at the end of 2012,
“only 2% of whom actually work in the Netherlands.”
 The Dutch Connection, according to Bloomberg,
helped IBM shave $1.8 billion of its expected tax provision in 2013—adding more
than 10% to the $16.5 billion in net income IBM reported.
 And that, it appears, is how what might have
been a 10% decline in net income for the full year became a modest, easily
massaged 1% drop.
 Which is why, as we’ve seen, unlike Emerson
Electric—which plays it straight down the middle—IBM prefers to focus Wall
Street on its non-GAAP, AGWICTMTQGP (“Anything-Goes-When-It-Comes-To-Making-The-Quarter-Accounting-Principles”)
number, where the weeds are deeper and the ball can be moved around without too many
people noticing.
 The problem with non-GAAP, AGWICTMTQGP-based
earnings reports, as we pointed out many times when Hewlett-Packard was popular
with the beat-the-quarter crowd, is that it allows companies to include the
good stuff from, say, acquisitions (revenues and gross profits) while excluding
the bad stuff (intangibles and employee severance costs).
 And as HP found out this week when it
years-too-late revised Autonomy’s 2010 revenues down by precisely 54%, the good
stuff isn’t necessarily as good as it appears to be at the time.
 As for how all this bears on IBM’s
set-in-stone $20 EPS “Roadmap” for 2015, we have no opinion except that IBM
will make it.
 There may be 39 uses of the phrase “non-GAAP”
in the press release announcing that $20 number, but they’ll make it.
 How can we be so confident?   Well, the recently-announced sale of the IBM
server business to Lenovo for starters. 
 Lenovo is paying IBM a couple billion for a
business that has a negative book value.  
So IBM will have, we are told by Wall Street’s Finest, a gain of $1
billion for the non-GAAP, AGWICTMTQGP cookie jar.
 Even with the SEC investigating how IBM
reports its “cloud” revenue (disclosed last year)—IBM juices up its “cloud”
revenue by including hardware and IT services in the number—we would bet they make it.
 In fact, we put the odds at, oh, 39 to 2.
  
Jeff Matthews
Author “Secrets in Plain
Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing,
2013)    $4.99 Kindle Version at
Amazon.com
©
2014 NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored.  And if you
think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the
entertainment of the reader, and the author.
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IBM: “I’ve Been Manipulated”?

 IBM, to IBMers, always stood for “I’ve Been
Moved,” a reference to the way Big Blue moved employees around the country and
around the globe to get experience as they worked their way up the ranks.
 To Wall Street, however, IBM could stand for “I’ve Been
Manipulated,” because no public company we can think of does a better job of
schmoozing Wall Street’s Finest and convincing them that there’s a there there,
when in fact the there is not quite as there as it might seem.

 The quarterly earnings calls are curiously synthetic, almost antiseptic affairs, run by the CFO and focused strictly on the numbers: on the revenue number, on the cash flow number, on the share buyback number, and on the earnings number.  
 In particular, the per share earnings number.
 The CEO never graces the call, and no actual business operators discuss their business.  No success stories are told, no customers highlighted.  It is all about margins and currencies and so-called one-time charges and so-called one-time gains, and tax rates, and how all those things added up to the earnings per share that quarter.
 And, most especially, what that earnings per share means for The EPS Roadmap.
 But let’s back up a bit…
 In May 2007 IBM held an analyst meeting to introduce a “2010 Earnings Per Share Roadmap,” to “give our
shareholders a clear understanding of the key factors driving IBM’s long-term
financial objectives.”
 Those objectives were EPS growth of 14-16% and
EPS of $10-$11 by 2010.
 To get there the company spelled out five “Key Drivers” of
the Roadmap: revenue growth, margin expansion, share repurchases, acquisitions
and retirement-related savings.
 And certainly IBM got there: in the 2010 annual
report, IBM could proudly state that EPS had come in at $11.52—above the high
end of the “Roadmap” range.
 And Wall
Street loves companies that beat the
high end of anything.
 Now, it is true that the “revenue growth”
piece of the Roadmap didn’t play out as perhaps many had expected: 2010 revenues
were only 1% above 2007, the year the Roadmap was laid out. 
 But the
margin expansion and cost savings played out in spades
: from that $1
billion in extra annual revenue sprang added gross profits, added operating profits, and added net income of $ 4 billion each, give or take (mostly give).  
 Meanwhile, ample share repurchases acted like
gasoline on the fire, juicing EPS almost 60% on that tiny 1% revenue gain.
 So well did the 2010 “Roadmap” go over with shareholders and Wall Street alike, that IBM rolled out another: the 2015 Roadmap, comprising, in this order, “$8
billion of productivity improvement” (e.g. layoffs and reorgs); $50 billion in
share repurchases and $20 billion in dividends; and “four growth priorities”
that included emerging markets hitting 30% of revenue in 2015, business
analytics (e.g. Watson, the Jeopardy champ) hitting $16 billion of revenue in
2015, cloud computing hitting $7 billion of revenue in 2015, and what IBM calls
“building a smarter planet”—what everyone else calls “the internet of
everything”—hitting $10 billion of revenue in 2015.
 The bottom line of all this?  $20 in earnings per share by 2015.
 But that target came with an asterisk,
literally:
 The asterisk mentioned that the $20 target was a so-called
“non-GAAP” EPS target, which “excludes acquisition-related and non-operating
retirement-related charges.” 
 As we pointed out many times in these virtual
pages during the many occasions we poked fun at Hewlett-Packard before that
company, as a friend likes to say, hit the trees with no flaps down, “non-GAAP” means earnings not prepared in
accordance with generally accepted accounting principles
.  
 IBM’s 2010 “Roadmap” had come with no such
asterisk.
 Nevertheless, IBM’s recently retired CFO, a
key driver behind both “Roadmaps,” always said the $20 EPS target was “all-in,”
i.e. while it included gains on sales of things, it also included losses on charges of things.
 Fortunately—and quite remarkably, the casual
observer might think—those gains and charges on things at times almost exactly offset each other.
 In the first quarter of 2009, the company had
a $265 million “workforce rebalancing charge” offset by a $298 million gain
on an asset sale.
 And in the first quarter of 2010, another
“workforce rebalancing charge”—this time $560 million—was paired with another
one-time gain of $591 million.
 Neat, right?
 So adept has IBM been at matching the cost of
downsizing its operations with gains on sales of bits of those operations that
it was apparently hoping to generate a big enough gain from the sale of its
server business to offset the $1 billion “workforce rebalancing charge” it took in 2013 (these charges are one of the bigger growth items in IBM’s
P&L)—but Lenovo appeared to play hardball and the sale didn’t happen in
2013.  Meanwhile, a different, smaller sale (at a reported measly 5-times EBITA), of a
service business to Synnex, didn’t close in time to help the 2013 EPS.
 Nevertheless, IBM today proudly announced that
it had “delivered” fourth quarter EPS of $6.13 a share, “up 14% year-to-year”
to bring the full 2013 EPS to $16.28, magically in line with Wall Street’s
Finest, and right down the middle of the all-important Roadmap.
 How it got there, though, was way more complicated.
 After all, revenue dropped 5% (down 3% adjusted for
currency).  Asia-Pacific revenue was down
6%.  China revenue was down 23%.  Pretax income dropped 8%.  Pretax margins were likewise down.  Free cash flow was down 13% in the quarter and 21%
for the year.
 Yes, you read that correctly: free cash flow was down 21% for the year.
 Oh, and the company
guided first quarter 2014 EPS to something around $2.50 a share versus Wall
Street expectations of $3.27 a share—a 24% miss.
 How, then, did IBM show “up 14% year-to-year”
profits in Q4 2013?  

 And how did the new IBM CFO manage to re-affirm the all-important, almighty $20 EPS Roadmap?
 Well, with a mere 11.2% tax rate, all
targets are possible, profitability-wise.
 
 “But wait a minute, the reasonably informed observer might ask. “What is really going on here?   Economies are recovering around the
world.   Europe had a near-death
experience two years ago and is healing.  China is growing nearly 8%, not shrinking 23%.  American industry is recovering broadly. 
Our banks are healthier than they have been in a decade.  State budgets have revived and governments are spending again. 
 “So why the punk revenues at one of the largest, most important purveyors of IT equipment, software and services in that very same world? 
 “And why are ‘workforce rebalancing charges’ growing from $440 million in 2011 to $803 million in 2012 to $1 billion in
2013, even as US unemployment drops and companies from Google to Amazon to eBay
to Apple to Facebook to Salesforce can’t hire engineers fast enough?
 Well, IBM blames hardware, but IBM’s software
revenues were only up “3% to 4%,” and that includes acquisitions: the 
“all-in” approach taken by the CFO means that, unlike most companies playing the non-GAAP game, IBM does not provide organic, non-acquisition-inflated revenues.  That is 3-4% growth, inflated by acquisitions, in a world where Salesforce.com is growing 35% a
year organically, and Amazon Web Services is growing…don’t ask.   

 Meanwhile, the rest of IBM’s business, a mix of
consulting and outsourcing, has been fair-to-middling-to-poor.
 The reality, we think—never stated on an IBM
call, because the discussion never veers from the numbers, but fairly obvious all the same it would seem—is that much of IBM’s business is tied
to the 
“higher value, more profitable technologies,” touted in the IBM annual report as the areas towards which the company has been shifting its business mix over the years (think: helping a company install expensive SAP software on big-iron IBM hardware with white-shoe IBM consultants running the show, all financed by IBM) while shedding the stuff Wall Street did not care for (even its baby, the disk drive business, which IBM invented).
 And that kind of high cost IT infrastructure business is yesterday’s glory.  (Just ask Avon Products, which we will get to in a bit.)
 Of course, if you are an IBM shareholder, it has been a great ride.   After all, pretty much everything the company has been doing, like the song says, it has been doing for you.
 Here, for example, is how last year’s letter
to IBM shareholders began:
  Notice there is not one mention—not one—of
the company’s customers in that first paragraph.
 You think those customers don’t notice? 
 After reading year after year about how many billions of dollars of IBM stock were purchased by IBM using the hard-earned dollars of those customers ($14 billion in
2013, and $140 billion since 2000), you think that 
those customers, who weren’t thanked by IBM in that letter or on its earnings calls, don’t wonder how Amazon—purveyor of the very
kind of cloud offering that is allowing companies young and old to get online
without all that expensive, high margin stuff IBM pushes—speaks to its
shareholders?
 Well here’s how Amazon speaks to its
shareholders:
 By our count, Amazon uses the term “customer” twice
in the first paragraph and six times in the first two paragraphs.  

 And instead of talking about raising gross
margins, operating margins and net income margins, as IBM does in its annual
report, Amazon talks about lowering prices to those customers.
 No wonder just last month Avon Products
jettisoned a $100 million-plus ERP implementation that “did not show a clear
return on investment.”  For the record, SAP
was the ERP system, with IBM WebSphere being used to build the “user
interface,” such as it was.
 And that’s exactly the kind of big budget
project IBM’s wheelhouse has been crafted for. 
 And those are exactly the kind of projects that are giving way to the brave new world of Web 2.0.
 Perhaps that’s also the reason why every quarter in the last couple years IBM’s revenues seem to be down, or shy of forecasts, or both; and why every
quarter last year IBM’s free cash flow was down year-over-year; and why last October the company revised
its cumulative “Roadmap” cash flow downward from $100 billion to $85 billion; and why the company seems to be trying to jettison any kind of non-sexy business that makes something that plugs into a wall.
 Of course, just as there are dangers in
analysts leaning too much on management for direction, there are dangers in
managements leaning too much on analysts for direction—like when IBM listened
to everyone telling them to get rid of that dopey old disk drive business.
 After all, that dopey old disk drive business is now a hot,
hot, hot “cloud” business…t
he very kind of business IBM wants to brag about on its earnings call.
 But not to worry, the $20 EPS Roadmap still stands…with an asterisk, of course. 
 Makes you wonder who’s being manipulated here.
Jeff Matthews
Author “Secrets in Plain
Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing,
2013)    $4.99 Kindle Version at
Amazon.com
©
2014 NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries
will be ignored.  And if you think Mr.
Matthews is kidding about that, he is not. 
The content herein is intended solely for the entertainment of the
reader, and the author.
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Shazam! From the Boss to the King to John & Paul (But Not George or Ringo), Not to Mention Jessica & Nick

2013 Editor’s Note:  The most unnerving aspect to this year’s holiday music survey is the unavoidable, near-totalitarian presence of an
insipid cover version of George Michael’s already-plenty-insipid-for-our-taste-thank-you-very-much
“Last Christmas,” which, as we point out below has one of the most inane choruses
ever written (no mean feat there), which wouldn’t be so bad except it is repeated over and over and
over until you want to hand yourself over to Vladimir Putin’s security forces
and let them do their worst.  
 The perpetrator of this latest holiday music
outrage is, it turns out, Taylor Swift, about whom your editor knows nothing except
she adds exceedingly little to a song that needed plenty of help to begin
with.
 But, as always with these annual surveys, your
editor digresses.

 On the happier side of the music world, this
last year has seen a number of excellent new rock memoirs, of which Kinks
front-man and songwriting genius Ray Davies’ is the most interesting.
 The centerpiece of the story line in Ray’s “Americana” is his shooting in New Orleans
some years back, but interspersing that tale he manages to tell much of the story
of his career.  
 If you want to read how Ray came up with
classics like “Better Things” (why couldn’t that
be a Christmas song?   It’s as much about
the holidays as “Same Old Lang Syne,” about which your editor has plenty to say
later on), this is your book.
 Neil Young’s “Waging Heavy Peace,” which came out last year, is even better than
“Americana,” however, and more fun to keep picking up when the mood strikes: Neil’s recollections are loopy, digressive, and admittedly unsure in some cases
(at one point he compares his memory
of a drug bust with Stephen Stills’ recollection of the same drug bust—and given
that Neil only stopped “smoking weed” the year before writing the book, as he
admits, it’s no wonder their recollections are very different), but like all things Neil Young, he says what he means
and means what he says.  
 And if you’re wondering where songs come
from—great songs, eternal songs—Neil’s book is the place to begin.  

 Would that a holiday song may one day spring from the fecund mind
of Neil Young himself, for while he professes more of a Native American religious spirit than a
Judeo-Christian one, either way, it would be so long Taylor Swift.
 Merry Christmas, Happy
Hanukkah and a Good New Year to all!
—JM,
December 7, 2013

2012 Editor’s Note: We interrupt this holiday
music review to bring you a potential stocking-stuffer that ought to bring
tidings of good cheer…  





 2011 Editor’s Note: Back by popular demand,
we’ll again try to keep this year’s update brief…but past performance would
tell you not to hold your breath.  Here goes.
 Our
annual holiday music survey—highly biased, rankly unscientific and in no way
comprehensive—covers new ground this year, to wit: the SiriusXM
all-holiday-music channel.
 Actually,
there are two such channels courtesy of the satellite radio
monopolists at SiriusXM.  There’s one for “traditional” music of the Bing
Crosby kind, in which human beings sing traditional Christmas songs while other
human beings play musical instruments to accompany those songs; and there’s
another channel for everything else, including the Auto-Tune-dependent
sensation Michael Bublé, who has only gotten more popular—unfortunately—this
year, along with a new presence not entirely unexpected but nonetheless
frightening in its implications: Justin Bieber.
 Enough
said about that, for our main beef with SiriusXM is not the
presence of yet another teen idol on the holiday music scene.
 Our beef lies with the soul-less quality of
the entire SiriusXM gestalt, which requires its three thousand channels
to carry songs strictly on the basis of whether they share either a common date
of issue (as on the “40’s at 4,” “50’s at 5,” “60’s at 6” et
al
 channels), or a common target audience demographic.
 Among
the later, for example is the “Classic Vinyl” channel, which is
essentially a “Classic Rock” channel (“Classic Rock” being a Baby Boomer
euphemism for what our parents knew as “Oldies” radio) that plays the
WNEW-FM playlist from around 1968 to 1978. And nothing else.
 And
there is the “Classic Rewind” channel, which is another Oldies
channel that plays the WPLR-FM playlist from about 1979 to the late 1980s. And
nothing else.
 Then
there’s “The Bridge,” a Baby Boomer euphemism for “Easy Listening.”  It
plays Oldies of the James Taylor/Carole King/Jackson Browne vein.
 And
nothing else.
 Certainly
there are one or two such channels that manage to jump around between
genres (The Spectrum is worthwhile on that score).  But, in the main, each
SiriusXM channel is tightly focused on a specific, narrowly defined
demographic…sometimes scarily so.
 
Here we’re thinking of the “Metal” channel, which plays loosely
defined “songs” that consist of young men screaming their apocalyptic
guts out above what appears to be a single, head-banging, machine-gun-style guitar-and-drumming
musical track that never, ever changes.
 
You marvel at where these guys came from, what portion of the domestic
methamphetamine supply they consume, and how many serial killers might be
listening to “Metal” channel at the very same moment as you.
 
 If Beavis and Butt-Head could afford a car,
this would be their channel.
 Unfortunately,
no matter which channel you pick and who the purported “DJ” may be
(there are a lot of old-time, smokey-voiced, recognizable DJs on the various Sirius
Oldies channels) you’ll hear a sequence of songs that all sound like a
computerized random-number-generator picked ‘em.
 Listening
to the “60’s at 6” channel, for example, you may hear a great Beatles single
like “Hello, Goodbye” from 1967, followed by the wretchedly excessive
“MacAurther Park” from 1968, followed by an unrecognizable chart-topper from
1962 that nobody plays anymore because it wasn’t any good even in 1962.
 The
listener ends up flipping around from channel to channel and wondering why the
bandwidth-happy SiriusXM monopolists don’t just give each artist its own
channel, as they in fact do for Springsteen, Elvis and Sinatra.
 Those are channels you might expect to find, but there is, oddly enough, no
Bob Marley or Rolling Stones channel—and, head-scratcher of all
head-scratchers, no Beatles channel.
 In
fact, the absence of The Beatles from the SiriusXM digital bandwidth relative
to, say, the Eagles and Fleetwood Mac, is one the great mysteries of our age.
 After
all, the Beatles individually and collectively contributed 27of the Rolling
Stone Top 500 Songs of All-Time or 5.4% of those songs, yet they get nowhere
near 5.4% of the SiriusXM airplay, whether on “Classic
Vinyl,” “Classic Rewind,” “The Bridge,” “60’s on
6, ” “70’s on 7,” “The Spectrum” or any of the other
three thousand channels here.
 You
quite literally have as much chance of hearing “Snoopy and the Red Barron” on
SiriusXM as “Revolution.”
 So
why then is there a Jimmy Buffett channel (called “Margaritaville,” of
course)?
 Having
gotten all that off our chest, we can move on, since SiriusXM’s holiday
channels add no new material to our annual survey because most of the songs are
widely played everywhere else.
 Furthermore,
we’ve been asked to assemble a “Top Ten Worst” list of holiday songs
for this review.  The problem is there are just so many, as we’ll be getting
to shortly.  Rod Stewart’s somnambulant “My Favorite Things,” which
sounds like he’s reading the lyrics from a child’s book of verses, is right up
there, while Dan Fogelberg’s “Same Old Lang Syne” stands out in any crowd
of non-favorites.
 Easier,
then, to simply identify the All-Time, Number One, No-Question-About-It
NotMakingThisUp Worst Holiday Song of All Time, and let everyone else argue
about the remaining 9.
 It is “The 12 Pains of Christmas.”
 This
so-called comedy song takeoff on “The 12 Days of Christmas,” a pleasant
English Christmas carol discovered by a U.S. schoolteacher from Milwaukee and
used by her in a Christmas pageant in 1910, is an easily forgettable
humorous novelty song that is neither novel or humorous, in any way.
 It
isn’t even fun writing about, so we won’t bother: we’ll simply
move on to something pleasant, which happens to be an entirely
different sort of humorous novelty song that is both novel and humorous,
and, therefore, well worth a mention here.
 We’re
talking about the wonderfully bizarre, catchy, Klezmer-style cover
of  “Must Be Santa,” from Bob Dylan’s 2009 Christmas
album, “Christmas in the Heart.”  (Yes, Bob Dylan made a Christmas
album.)
 The
music is fast and cheerful, and Dylan’s low, growly voice is almost
indistinguishable from Tom Waits.  (The truly bizarre music video is not
to be missed, watch it here.)  After you get over the initial
shock of hearing Bob Dylan singing what most Baby Boomer parents will recall
being a Raffi song, it becomes impossible to not enjoy.
 Another
glaring absence from our previous years’ commentary is neither novel or
humorous, and inconceivably does not appear to qualify for the SiriusXM
random-song-generator holiday song playlist despite being many-times more
worthwhile than most of the SiriusXM catalogue, whether holiday-themed or not.
 The
song is “2000 Miles” by the Pretenders, and it belongs on anybody’s Holiday Top
Ten.
 If
hearing Chrissie Hynde on that original song (she’s also recorded some good
Christmas covers, including one with the Blind Boys of Alabama) doesn’t get you
in a mellow holiday mood, nothing will.
 
Merry
Christmas, Happy Hanukkah and Good New Year to all.
—JM,
December 4, 2011 

 2010 Editor’s Note: Back for the third consecutive year by
popular demand, we’ll try to keep this year’s update brief—but don’t count on
it.
 For
starters, we’re going to plug a book: Keith Richards’ autobiography, “Life,”
which happens to be one of the best books ever written—and we don’t just mean
“Best in the Category of ‘Memoirs by Nearly-Dead Rock Stars’.”
 It
is a great book, period.
 The
story of how ‘Keef’ (as he signs sweet letters to his Mum while rampaging
across America), Brian and Mick developed the Rolling Stones’ sound, for
example, is worth the price alone (in short, they worked really hard;
but the full story is much better than that).
 Yet
there’s more—much more. Guitarists can soak up how Keith created his own guitar
sound; drummers will learn—if they didn’t already know—Charlie Watts’ high-hat
trick (and from whom he stole it); while songwriters had better prepare
themselves to be depressed at how Mick wrote songs (‘As fast as his hand
could write the words, he wrote the lyrics,
’ according to one session man
who watched him write “Brown Sugar”).
 And
that’s just the rock-and-roll stuff.
 The
sex-and-drugs stuff is also there, and the author lays it all out in his
unfettered, matter-of-fact, straightforward style, often with the first-person
help of friends and others-who-where-there (and presumably of sounder mind and
body than you-know-who: the drug and alcohol intake is truly staggering) who
write of their own experiences with the band.
 Okay,
you may say, but how exactly is Keith Richards’ autobiography relevant
to our annual review of holiday songs?
 Well,
while furtively reading snatches of ‘Life’ during a stop at the
local Borders (we expect to see the book under the Christmas tree sometime
around the 25th of this month, hint-hint), we happened to hear another musical
legend perform one of our favorite offbeat Christmas songs in the background,
and it occurred to your Editor that of all the bands out there that could have
done that same kind of interesting, worthwhile Christmas song, The Rolling
Stones probably top the list.
 What
with Keef’s bluesy undertones and Mick’s commercial-but-sinister instincts on
top, it would have certainly made this review, for better or worse. (Along
these lines, The Kinks’ cynical, working-class “Father Christmas” is one
of the all-time greats, and doesn’t get nearly enough air-time these days.)
 Now,
for the record, the offbeat Christmas song that triggered this excursion was “’Zat
You Santa Claus
?”—the Louis Armstrong and The Commanders version from the
1950’s. (The song was later covered, like everything else but the Raffi
catalogue, by Harry Connick, Jr.)
 Starting
out with jingle bells, blowing winds and a slide-whistle, you might initially
dismiss “’Zat You?” as a sadly commercial attempt by Armstrong to get in
on the Christmas song thing, except that his familiar, Mack-the-Knife-style
vocal comes over a terrific backbeat that turns it into what we’d nominate for
Funkiest Christmas Song Ever Recorded:
Hangin’ my stockin’/I can hear a knockin’
’Zat you, Santa Claus?…
One peek and I’ll try there/Uh-oh there’s an eye there

’Zat you, Santa Claus?


Please, ah please/ah pity my knees
Say that’s you Santa Claus
(That’s him alright.)
 It is a delight to hear, and the fact that it is suddenly getting more
air-time this season is a step-up in quality for the entire category—or would
be, if not for the apparent installation of Wham!’s “Last Christmas” in
the pantheon of Christmas Classics.
 A
1980’s electro-synth Brit-Pop timepiece, “Last Christmas” combines a
somewhat catchy tune with lyrics that make a trapped listener attempt to open
the car door even at high speeds to get away:
Last Christmas, I gave you my heart

But the very next day you gave it away

This year

To save me from tears,

I gave it to someone special
 Considering
the fact that the songwriter (Wham!’s gay front-man, George Michael) decided to
repeat that chorus six times, the full banality of the lyric eventually gives
way to incredulity: “Let me get this straight,” you begin to ask
yourself. “This year he’s giving his heart to ‘someone special’… so who’d
he give it to last year? The mailman?
”


 “Last
Christmas
” does have the distinction of being the biggest selling single in
UK history that never made it to Number 1. Furthermore, all royalties from the
single were donated to Ethiopian famine relief, the same cause which led to
creation of what turned out to be the actual Number 1 UK single that year, “Do
They Know It’s Christmas?
”


 “Do
They Know
…” is a song that has received some push from readers to receive
an honorable mention in these pages, and while it is certainly an interesting
timepiece, with much earnest participation from the likes of Sting, Bono and
even Sir Paul, it is not nearly as worthwhile as an album that seems just as
prevalent these days: A Charlie Brown Christmas by jazz
pianist Vince Guaraldi.


 How
a jazz pianist was hired to create the music for a TV special with cartoon
characters is this: the producer heard Guaraldi’s classic instrumental “Cast
Your Fate to the Wind
” on the radio while taking a cab across the Golden
Gate Bridge.
 One
thing led to another, and thanks to that odd bit of chance, future generations
will have the immense pleasure of hearing a timeless, unique work of art every
year around this time. (A second odd tidbit for our West Coast readers:
Guaraldi died while staying at the Red Cottage Inn, in Menlo Park—of a heart
attack, however, and not the usual, more gruesome fate of musicians who die in
hotels.)
 One
second-to-last note before we move on: we have been heavily lobbied by certain,
er, close relations to include Mariah Carey’s “All I Want For Christmas is
You
” as a worthwhile holiday song—despite our previously expressed
misgivings about her contribution to the genre (see below).


 And
we have to admit, her “All I Want…” leaves behind the incessant vocal
pyrotechnics that made some of her other Christmas covers (“Oh Holy Night,”
for example) unbearable, at least to our ears.
 In
this case she seems to trust the song to take care of itself, which it does in
fine, driving, upbeat style. Now, as Your Editor previously hinted, all he wants
for Christmas is Keef’s book. And it had better be there, if, as previously
noted, you get our drift.
 Finally,
and speaking of autobiographies, we happened to read Andy Williams’ own book
this past year and must report that our reference to Williams below was overly
harsh. For one thing, his book is as honest as Keef’s; for another, as a singer
not necessarily born with the vocal equipment of, say, Mariah Carey, the man
worked at his craft and succeeded mightily where many others failed.
 Which,
we might add, is, after all, the hope of this season.

And
so, we wish for a Merry Christmas, Happy Hanukkah and Good New Year to all.
JM,
December 13, 2010




2009 Editor’s Note: 
Back by popular demand, what follows is our
year-end sampling of the Christmas songs playing incessantly on a radio station
near you, and it demands from your editor only a few updates this holiday
season.
 For
starters, we have not heard the dreaded duet of Jessica Simpson and Nick Lachey
singing “Baby, It’s Cold Outside” thus far in 2009, and for this we are most
grateful.
 Indeed,
if it turns out that their recording has been confiscated by Government
Authorities for use as an alternative to lethal injections, we’ll consider
ourselves a positive force for society.
 On
the other hand, we are sorry to report an offset to that cheery development, in
the form of a surge in playing time for Barry Manilow’s chirpy imitation of the
classic Bing Crosby/Andrew Sisters version of “Jingle Bells.”
 For
the record, “Jingle Bells” was written in 1857…for Thanksgiving, not for
Christmas. And it’s hard to imagine making a better version than that recorded
by Bing and the three Andrew Sisters 86 years later.
 But
Manilow, it seems, didn’t bother to try.

 Instead, Barry and his back-up
group, called Expos, simply copied Bing’s recording, right down to that stutter
in the Andrews Sisters’ unique, roller-coaster vocals on the choruses, as well
as Bing’s breezy, improvised, “oh we’re gonna have a lotta fun” throwaway line
on the last chorus.
 Sharp-eared
readers might say, “Well, so what else would you expect from a guy who sang ‘I
Write the Songs
’…which was in fact written by somebody else?”


 We
can’t argue with that, but we will point out another annoyance this year: the
enlarged presence of Rod Stewart in the Christmas play-lists.
 Don’t
get us wrong: we like Rod Stewart—at least, the Rod Stewart who gave the world
what Your Editor still considers the best coming-of-age song ever written and
recorded: “Every Picture Tells a Story.”
 It’s
the Rod Stewart who gave us “Do Ya Think I’m Sexy?” we’re less crazy
about.  So too the Rod who chose to cover “My Favorite Things” (for the
definitive version of that classic, see: ‘Bennett, Tony’) and “Baby It’s Cold
Outside” with Dolly Parton (for an only slightly more offensive version of this
one, see: ‘Simpson, Jessica’ and ‘Lachey, Nick’).
 As
an antidote to Rod, we suggest several doses of Jack Johnson’s sly, understated
“Rudolph the Red-Nosed Reindeer,” which seems to be gaining recognition, and
anything by James Taylor—especially his darkly melancholic “Have Yourself a
Merry Little Christmas.”
 Of
all the singers who recorded versions of this last—and Sinatra’s might be the
best—it is Taylor, a former junkie, who probably expresses more of the intended
spirit of this disarmingly titled song.
 After
all, the original lyric ended not with the upbeat “Have yourself a merry little
Christmas, let your heart be light/Next year all our troubles will be out of
sight,” but with this:


 “Have
yourself a merry little Christmas, it may be your last/Next year we may all be
living in the past.”


 No,
we are not making that up.  The good news is it should keep Barry Manilow
from be covering it any time soon.


JM—December
19, 2009




Wednesday, December 24, 2008


Shazam! From the Boss to the King to John & Paul (But Not George
or Ringo), Not to Mention Jessica & Nick
 Like
everyone else out there, we’ve been hearing Christmas songs since the day our
local radio station switched to holiday music sometime around, oh, July 4th, it
feels like.
 And
while it may just be a symptom of our own aging, the 24/7 holiday music
programming appears to have stretched the song quality pool from what once
seemed Olympic-deep to, nowadays, more of a wading pool-depth.
 What
we recall in our youth to be a handful of mostly good, listenable songs—Nat
King Cole’s incomparable cover of “The Christmas Song” (written by an
insufferable bore: more on that later); Bing’s mellow, smoky, “White
Christmas”; and even Brenda Lee’s country-tinged “Rockin’ Around the Christmas
Tree” (recorded when she was 13: try to get your mind around that)—played over
and over a few days a year…has evolved into a thousand mediocre-at-best covers
played non-stop for months on end.
 Does
anybody else out there wonder why Elvis bothered mumbling his way through “Here
Comes Santa Claus”? 

It actually sounds like Elvis doing a parody of
Elvis—as if he can’t wait to get the thing over with. Fortunately The King does
get it over with, in just 1 minute, 54 seconds.
 Along
with that and all the other covers, there are, occasionally, the odd original
Christmas songs—the oddest of all surely being Dan Fogelburg’s “Same Old Lang
Syne.”
 You’ve
heard it: the singer meets his old lover in a grocery store, she drops her
purse, they laugh, they cry, they get drunk and realize their lives have been a
waste…and, oh, the snow turns to rain.
 So
how, exactly, did that become a Christmas song?
 Then
there’s ex-Beatle Paul McCartney’s “Wonderful Christmastime,” which combines an
annoyingly catchy beat with dreadful lyrics, something McCartney often did when
John Lennon wasn’t around.

 (After all, it was Lennon who replaced McCartney’s
banal, teeny-boppish opening line for “I Saw Her Standing There”—“She was just
seventeen/Never been a beauty queen” is what McCartney originally wrote—with
the more suggestive “She was just seventeen/You know what I mean,” thereby
turning a mediocre time-piece into a classic.)
 But
Lennon was not around to save “Wonderful Christmastime” even though McCartney
actually recorded this relatively new Christmas standard nearly thirty years
ago, before Lennon was shot.
 It
rightfully lay dormant until the advent of All-Christmas-All-The-Time
programming a couple of years ago. Fortunately, by way of offset, Lennon’s own
downbeat but enormously catchy “Happy Xmas (War is Over)” is played about as
frequently as “Wonderful Christmastime.”
 Who
but John Lennon would start a Christmas song: “And so this is Christmas/And
what have you done…”?  Of course, who but Paul McCartney would start a
Christmas song, “The moon is right/The spirit’s up?”
 If
anything explains the Beatles’ breakup better than these two songs, we haven’t
heard it.
 Now,
we don’t normally pay much attention to Christmas songs. If it isn’t one of the
aforementioned, or an old standard sung by Nat, Bing, Frank, Tony, Ella and a
few others, we’d be clueless.
 But
thanks to a remarkable new technology, we here at NotMakingThisUp suddenly
found ourselves able to distinguish, for example, which blandly
indistinguishable female voice sings which blandly indistinguishable version of
“O Holy Night”—Kelly Clarkson, Celine Dion, or Mariah Carey—without any effort
at all.
 The
technology is Shazam—an iPhone application that might possibly have received
the greatest amount of buzz for the least amount of apparent usefulness since
cameras on cell phones first came out.
 For
readers who haven’t seen the ads or heard about Shazam’s wonders from a
breathless sub-25 year old, Shazam software lets you point your iPhone towards
any source of recorded music, like a car radio, the speaker in a Starbucks, or
even the jukebox in a bar—and learn what song is playing.
 Shazam
does this by recording a selection of the music and analyzing the data. It then
displays the name of the song, the artist, the album, as well as lyrics, a band
biography and other doodads right there on the iPhone.
 Now,
you may well ask, what possible use could there be for identifying a song
playing in a bar?
 And
unless you’re a music critic or a song-obsessed sub-25 year old, we’re still
not sure.
 But
we can say that Shazam is pretty cool. In the course of testing it on a batch
of Christmas songs—playing on a standard, nothing-special, low-fi kitchen
radio—heard from across the room, without making the least effort to get the
iPhone close to the source of the music, Shazam figured out every song but one
(a nondescript version of a nondescript song that it never could get) without a
hitch.
 And,
as a result, we can now report the following:
 1)
It is astounding how many Christmas songs are out there nowadays, most of them
not worth identifying, Shazam or no Shazam;


 2)
All Christmas covers recorded in the last 10 years sound pretty much alike, as
if they all use the same backing track, and thus require something like Shazam
to distinguish one from the other;


 3)
Nobody has yet done a cover version of Dan Fogelburg’s “Same Old Lang Syne,”
which may be the truest sign of Hope in the holiday season;
 4)
None of this matters because Mariah Carey screwed up the entire holiday song
thing, anyway.



 Now,
why, you may ask, would we pick on Mariah Carey, as opposed to, say, someone
who can’t actually sing?
 Well,
her “O Holy Night” happened to be the first song in our mini-marathon, and it
really does seem to have turned Christmas song interpretation into a kind of
vocal competitive gymnastics aimed strictly at showing off how much of the
singer’s five-octave vocal range can be used, not merely within this one
particular song, but within each measure of the song.
 In
fact Mariah’s voice jumps around so much it sounds like somebody in the studio
is tickling her while she’s singing.
 More
sedate than Mariah, and possibly less harmful to the general category, The
Carpenters’ version of “(There’s No Place Like) Home for the Holidays” comes on
next, and it makes you think you’re listening to an Amtrak commercial rather
than a Christmas song (“From Atlantic to Pacific/Gee, the traffic is
terrific!”), so innocuous and manufactured it sounds.
 Johnny
Mathis is similarly harmless, although his oddly eunuch-like voice can give you
the creeps, if you really think about it. Mercifully, his version of “It’s
Beginning to Look a Lot Like Christmas” is short enough (2:16) that you don’t
think about it for long.
 Now,
without Shazam we never would have known the precise time duration of that
song.
 On
the other hand, we would we never have been able to identify the perpetrators
of what may be the single greatest travesty of the holiday season—Jessica
Simpson and Nick Lachey, singing “Baby it’s Cold Outside.”


 “Singing”
is actually too strong a word for what they do. Simpson’s voice barely rises
above a whisper, and you cringe when she reaches for a note, although she does
manage to hit the last, sustained “outside,” no doubt thanks to the magic of
electronics.
 Thus
the major downside of Shazam might be that it can promote distinctly
anti-social behavior: having correctly identified who was responsible for this
blight on holiday radio music, the listener might decide that if they ever ran
across the pair in his or her car while singing along with the radio too loudly
to notice, they wouldn’t stop to identify the bodies.
 Fortunately,
the bad taste left by that so-called duet is washed away when Nat King Cole’s
“The Christmas Song” comes on next.
 Thanks
to Shazam, we learn that this is actually the fourth version
Nat recorded. The man worked at his craft, and it shows. This is the best
version of the song on record, by anyone, and probably one of the two or three
best Christmas songs out there, period.
 The
second those strings sweetly announce the tune, you relax, and by the time
Cole’s smoky, gorgeous voice begins to sing, you’re in a distinctly Christmas
mood like no other recording ever creates.
 (Unfortunately,
the song’s actual writer, Mel Tormé, had the personality of a man perpetually
seething for not getting proper recognition for having written one of the most
popular Christmas songs of all time. We did not learn this from Shazam: we once
saw Tormé perform at a small lounge, during which he managed to mention that
he, not Nat King Cole, wrote “The Christmas Song”—as if this common
misperception was still on everybody’s mind 35 years later. When that news
flash did not seem to make the appropriate impression on the audience, he later
broke off singing to chew out a less-than-attentive audience member, completely
destroying the mood for the rest of the set.)
 Like
that long-ago performance by the “Velvet Fog,” the pleasant sensation
left behind by Cole’s “Christmas Song” is quickly soured, this time by a male
singer performing “Let it Snow, Let it Snow, Let it Snow” in the manner of
Harry Connick, Jr. doing a second-rate version of Sinatra.
 Who
is this guy, we wonder?
 Shazam
tells us it’s Michael Bublé. We are pondering how such a vocal lightweight
became such a sensation in recent years—the answer must surely be electronics,
because his voice, very distinctly at times, sounds like it has been
synthesized—when John Lennon’s “Happy Xmas” comes on.
 It’s
a great song, demonstrating as it does Lennon’s advice to David Bowie on how to
write a song: “Say what you mean, make it rhyme and give it a backbeat.” The
fact that Lennon had the best voice in rock and roll also helps.
 Unfortunately,
his wife had the worst voice in rock and roll, and a brief downer it is when
Yoko comes in on the chorus like a banshee. (Fortunately she is quickly drowned
out by the children’s chorus from the Harlem Community Choir.)
 The
other songs in our Shazam song-identification session are, we fear, too many to
relate.
Sinatra,
of course; Kelly Clarkson, an American Idol winner who essentially does a pale
Mariah Carey impersonation; Blandy—er, Andy Williams; and one of the best: Tony
Bennett.
 Then
there’s Willie Nelson, who has a terrific, understated way of doing any song he
wants—but sounds completely out of place singing “Frosty the Snowman.” One
wonders exactly what kind of white powder Willie was thinking about while he
was recording this, if you get our drift.
 Oh,
and there’s Coldplay’s “Have Yourself a Merry Little Christmas,” which pairs
the sweetest piano with the worst voice in any single Christmas song we heard;
Amy Grant, a kind of female Andy Williams; the Ronettes, who are genuinely
terrific—a great beat, no nonsense, and Ronnie singing her heart out with that
New York accent; and then Mariah again, this time doing “Silent Night” with
that same roller-coaster vocal gargling.
 Gene
Autry’s all-too-popular version of “Here Comes Santa Claus” would be bearable
except that he pronounces it “Santee Closs,” which is unfortunate in a song in
which that word appears like 274 times. ‘N Sync is likewise unbearable doing “O
Holy Night” a cappella, with harmonies the Brits would call cringe-making, and
Mariah-type warbling to boot.
 Hall
& Oates’s “Jingle Bell Rock” is too easy to confuse with the other
versions of “Jingle Bell Rock”—thank you, Shazam, for clearing that up—while
Martina McBride manages to sound eerily like Barbra Streisand imitating Linda
Ronstadt singing “Have Yourself a Merry Little Christmas.”
 Winding
things down is Dan Fogelburg’s aforementioned “Same Old Lang Syne,” and here we
need to vent a little: something about the way he sings “liquor store”—he
pronounces it “leeker store”—never fails to provoke powerful radio-smashing adrenalin
surges.
 Fortunately,
we suppress those urges today, because the Shazam experiment concludes with one
of the best Christmas songs ever recorded. Better than Bing, and maybe even
better than Nat, depending on your mood.
 It’s
Bruce Springsteen. The Boss. Doing “Santa Claus is Comin’ to Town”…
live.
 Yes,
this song was recorded live, and despite its age (more than 25 years old), the
thing still jumps out of the radio and grabs you.
 Now,
as Shazam informs us, this particular recording was actually the B-side of a
single release called “My Hometown.” (Back in the day, kids, “singles” came
with two songs, one on each side of a record: the “A” side was intended to be
the hit song; the “B” side was, until the Beatles came along, for throwaway
stuff.)
 Fortunately
nobody threw this one away.
 Springsteen
begins the familiar song with some audience patter and actual jingle bells;
then he starts to sing and the band comes to life. Things move along smoothly
through the verse and chorus…until ace drummer Max Weinberg kicks it into
high gear and the band roars into a fast shuffle that takes the thing into a
different realm altogether.
 Feeding
off the audience, The Boss sings so hard his voice slightly breaks at times.
Then he quiets down before roaring back into a tear-the-roof-off chorus,
sometimes dropping words and laughing as he goes.
 This
is real music—recorded in 1975 during a concert at the C.W. Post College—with
no retakes, no production effects, and no electronic vocal repairs, either.
 Try
doing that some time, Jessica and Nick.
 Actually,
come to think of it, please don’t.
Merry
Christmas, Happy Hanukkah and a Good New Year to all.

Jeff Matthews

Author “Secrets in Plain Sight: Business and Investing Secrets of Warren
Buffett”
(eBooks on Investing, 2013)    Available now at
Amazon.com
© 2013 NotMakingThisUp, LLC


The
content contained in this blog represents only the opinions of Mr.
Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr.
Matthews may hold either long or short positions in securities of various
companies discussed in the blog based upon Mr. Matthews’ recommendations. This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. Also, this blog is not a
solicitation of business by Mr. Matthews: all inquiries will be ignored. The
content herein is intended solely for the entertainment of the reader, and the
author.
Categories
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A Question for Mary Jo: What Is Your Definition of Earnings?

“What is your definition of the dollar?”
—Rep. Ron Paul to Federal Reserve
Chairman Ben Bernanke, March 2, 2011
 We have a simple question for the commissioner
of the SEC, and it’s a takeoff on the question famously asked of Ben Bernanke
by the take-no-prisoners crackpot otherwise known as Ron Paul.
 Our question for Mary Jo White is this: “What
is your definition of Earnings?”
 We ask it on the heels of the recent Target
Corporation quarterly earnings call, in which the company led each discussion of
so-called “earnings” with the phrase “Adjusted EPS” rather than GAAP EPS.
 Here’s how they started their script:
 Target’s second-quarter financial results
reflect strong US profit performance in spite of soft traffic and sales…. As a
result, we delivered second-quarter adjusted EPS of $1.19, at the high end of
our expectation going into the quarter. Our GAAP EPS of $0.95 was in the middle
of our expected range, reflecting higher than expected dilution of $0.21 from
our Canadian segment. As we monitor the economy and consumer sentiment, we
continue to see a mix of signals in which emerging optimism is balanced with
continuing challenges.
And here’s
how they concluded before taking questions:
 For
the full year, we’ve become incrementally more cautious in our US sales
outlook, given our own recent results and those of our competitors. … Even with
our more tempered sales expectation we believe full-year adjusted EPS will
remain in the $4.70 to $4.90 range we provided previously, although our
expectation has moved to the low end of that range. We expect full-year GAAP
EPS will be approximately $0.95 lower than adjusted EPS reflecting $0.82 of
dilution from the Canadian segment combined with a net $0.13 of dilution from
the credit card portfolio sale and associated debt repurchase.
 By way of background, Target recently entered
the Canadian market after buying a bunch of store leases from Hudson’s Bay two
years ago.  The newly opened Canadian Target
stores are losing money at the moment. 
Quite a bit of money—something like half a billion dollars in their first year. 
 Target management, not wanting to spook the easily-spookable analyst community on Wall Street, simply subtracts
those losses, along with some other stuff, from its GAAP EPS (readers may
recall that “GAAP” accounting means, to be clear, earnings in accordance with
Generally Accepted Accounting Principles) to create something it calls “Adjusted
EPS.”
 And Wall Street’s Finest dutifully report what Target gives them.
 In fact, in my inbox following the call were
half a dozen Wall Street analyst reports using the “Adjusted EPS” figures in
their earnings—and Price/Earnings—tables.
 Not the GAAP EPS figures.
 Readers will recall that it was the
bastardization of GAAP earnings into non-GAAP, made-up, adjusted earnings that fooled
Hewlett-Packard’s investors into thinking the company was doing better than it
was doing for so many years.
 In its defense, of course, Target will argue
that investors want to see the “underlying” earnings from the company’s core
business, and that certainly has an appealing sense of logic to it.
 However, the company’s investment in Canada is
not a one-off.  It is not a science
experiment.   It is not, yet, a
“discontinued operation.”
 It is, in fact, part of the company’s core
business.  
 Indeed, hundreds of public companies across America right now are investing in things that may or may not pay off, yet they do not exclude the expense of those things in “Adjusted earnings.”
 Worse, Target includes expected earnings from Canada in the out-years of their
financial forecasts, as they bragged on their call:
 We’re still very confident in our Canadian
strategy, stores and team and continue to believe the segment will generate
$0.80 or more of EPS in 2017.
 So, as with Hewlett-Packardwhich
routinely excluded the bad stuff from acquisitions (goodwill amortization and restructuring
costs) in its “Adjusted” earnings while including the good stuff (sales, gross
profit and operating income, such as it was) from acquisitions— we have a retailer that
wants Wall Street to exclude the bad stuff (upfront costs of entering Canada)
and include the good stuff (future earnings from Canada).
 That sort of freeform, highly elastic notion
of “Adjusted Earnings” ended badly for HP and the Wall Street analysts who bought into it,
not to mention the poor shareholders who couldn’t fathom why HP’s stock kept
going down even though the “Adjusted” earnings looked so good.
 Now, we’re not suggesting Target is ever going to look like HP. 
 It’s just that your grey-haired editor can’t
help but recall when Target’s nemesis, Wal-Mart, opened its first stores in
Canada back in 1994, using the same technique of buying existing stores (in Wal-Mart’s
case they were old Woolco stores) and turning them into Wal-Marts.
 And we recall that, unlike Target, Wal-Mart
did not reported “Adjusted EPS.”
 But for those who weren’t around back then, here’s
a copy of Wal-Mart’s earnings report the first year after it entered Canada:

 If Wal-Mart could report earnings without “adjusting”
them, why can’t Target?
  And, what, Madam Chairman, is your
definition of “Earnings”?
Jeff Matthews
Author “Secrets in Plain
Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing,
2013)    $4.99 Kindle Version at
Amazon.com
©
2013 NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored.  And if you
think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the
entertainment of the reader, and the author.
Categories
Uncategorized

Corporate Raiders 2.0: When Carl and Bill and George Met Mary Jo

Carl Icahn @I_Make_Money_You_Have_A_Problem_With_That? Have taken large position in APPLE.  See BIG GAINS soon.
Bill
Ackman 
@Never_Shorting_Again.  You don’t use ALL CAPS, Carl.  This is Twitter, not Facebook.  And we have taken a bigger position in Air Products
than you have in Apple.

Icahn:  My Apple is
bigger than your Air Products.

Ackman:  Show me.
Icahn:
 
I don’t have to show YOU, punk. 
Ackman: What’s your thesis on
Apple, Carl?
Icahn: Talked
to Tim Cook.  Very nice chat.  Says they are coming out with a “smart” phone
in September. 
Ackman:   They already make a
smartphone.  Like, their fifth iteration.
Icahn:  Oh, Mr. Big Words.  Tim Cook says it will read fingerprints.  That would save police time doing stop
& frisk.  IT WILL BE BIG.
Ackman: Fingerprints?  It’s
biometric, Carl, not for fingerprinting.
Icahn: It’s
biotech, too!  A “smart” phone AND
biotech drug.  APPLE WILL BE BIG.
Ackman:  There’s those caps again.  Who types for you, old man?  Your
great-great-great grandson?

Icahn:
 
Punk.  Your mother was a camp-follower.
Ackman:
 
Don’t know what that means.
 Translate.

Icahn: Look it up in the dictionary.
Ackman:
 
Dictionary!  Okay Carl, getting my Webster’s down from the shelf right now…
Icahn: You are a punk.  A snotty, wise-guy punk.
Ackman:
 
Is that the only adjective you
know?  I’ll give you my thesaurus, too.  You can put it on your bookshelf next to the
Encyclopedia Britannica collection.
Icahn:  A wise-guy punk.
Ackman:  Anyway, “punk” is
good.  The Ramones were punk, Carl.   But you
were probably more a Vic Damone guy, right?

Icahn: A spoon-fed, daddy’s boy punk.
Ackman: ‘Danke Schoen,’ was that your song, Carl?
Icahn:
Wayne Newton sang that, not
Vic Damone.

Ackman:
 
Sorry, Carl.  I was trading stock options between classes in
junior high while you were out there bankrupting airlines.
Icahn:  I didn’t bankrupt any airline!
Ackman:  Ever hear of TWA?
Icahn:  I rescued TWA!
Ackman:  Like the Godfather
rescued Moe Green.
Icahn:  [Very bad language] Punk!  So today you’re bankrupting department stores.  Give me a break.
Ackman:  Ever been in a
Penney’s?  They needed all the help they
could get.  We tried.
Icahn:  I shop at TJ Maxx. I never pay retail, Bill.
You know that.

Ackman: You paid retail for DELL.  How’s that working
out for ya?

Icahn: Better than Penney’s for you.  Think I’ll
short Penney.  Right now.

Ackman: Go ahead.  I’ll loan you my stock.
Icahn: Serve you right, you punk.  Better yet, gonna
buy more Herbalife right now.

George Soros @George_Swings:  Good idea Carl, I’m going to buy more
HLF too.

Ackman:
 
Hi George, didn’t know you were
on this thread

Soros:  No, I’m not on the treadmill.  
Ackman:  I said, “thread.”  That’s what this is called.
Icahn:  He’s a little deaf, Ackman:  Give him some respect.
Soros:  I just had sex with a very pretty young supermodel
from Belarus
.  I met
her in Davos shopping with my 5th ex-wife.  Thought I would say that.
Ackman:  Save it for Facebook,
George.  This is Twitter.
Soros:  My assistant is putting the video up on
YouTube.  Then she will leak it to the New
York Post.
Icahn:  You might not want to do that, George.
Ackman:  Are we done here,
gentlemen?
Icahn:  Not with you, punk.  I’m buying more Herbalife right now.
Ackman:  Go ahead.  I’ll sell you mine.
Icahn:
 
??? Thought U were short HLF.
Soros: #$%@#$%@  I
thought so too.  Carl, you told me Ackman
was short $1B HLF.

Icahn: That’s what he told everybody at that stupid
conference, George.  So I went long. 

Soros: My face is not as wrinkly as it
appears in the New York Post.
Icahn:  George, what are you talking about?
Soros:  I am watching the video in my private
nightclub.  It’s midnight in
Switzerland.  Or St. Barts.  Wherever we are.

Ackman:
 
Sorry to tell you guys, but we
actually covered the HLF last week.  Went long.

Icahn: U r such a kidder.  Am buying 1mm right now,
market not held.

Ackman:
 
I am not kidding.  We’re
long.  1 million shares of HLF, sold to you.

Soros:
 
This HLF is going down now,
Carl.  What did you do?

Icahn: I just bought 1mm and it hasn’t had an uptick yet.
Soros:
 
I can’t concentrate on the
video.  What is happening, Carl?

Icahn:  [Bad word] This
[very bad word] punk [bad word] us.

Soros:
 
I fired my pilot for less,
Carl.

Icahn:
 
U can’t fire me, George, I
don’t work for U.

Soros:
 
U will if Herbalife keeps going
down.  Can’t U twit something?

Ackman:  It’s ‘tweet,’ George.   You want Carl to ‘tweet’ something.
Icahn:  I’ll tweet U right in the East River, U punk.
Ackman:  You and what army,
Carl?
Soros:  I want no armies involved.  I am devoted to peace.  And sex.  
Sex and peace.
Mary Jo White @Better_Late_Than_Never:  Excuse
me, gentleman, good afternoon.  We at the
SEC have been monitoring these conversations.
Ackman:  I was wondering when
you would get around to it.
Icahn:  Holy [bad word].  Ms. White. 
What are you doing on this thread?
Soros:  Is that a woman who joined us?
White.  We are monitoring all
these conversations. 
Icahn:  How the $$#@ do you do that?
White:  Ever hear of an
agency called the NSA?
Soros:  She’s from the agency?  I wasn’t expecting her so soon.  Let her in, fellows.
Ackman:   Not that kind of agency,
George. 
White:  We are getting
worried that unscrupulous billionaires may be using social media to promote
their stocks after they build a position.
Soros:  Position?
Icahn:  Not that kind of position, George.  Keep quiet.
Ackman:   You’re in trouble,
Carl.
Icahn:  What’s the difference between me tweeting I
buy Apple and you telling a conference you’re short Herbalife?
Ackman:  I laid out the facts
as I saw them.  You promoted a stock
price.
Icahn:  This HLF keeps going down.  Why didn’t you tweet that you covered your
Herbalife and went long?
Ackman:  It was my way of
saying ‘Danke Shoen’ Carl.
Icahn:  Punk.
White:  Mr. Icahn, we need to
get together.  You too, Mr. Soros
Soros:  A three-way! 
I will send the jet to pick you all up…
Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren
Buffett”
(eBooks on Investing, 2013)    $4.99
Kindle Version at Amazon.com
© 2013
NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored.  And if you
think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the
entertainment of the reader, and the author.
Categories
Uncategorized

This Just In: Hedge Fund Billionaire Now Advertising in “I’m Desperate” Magazine

 First, let’s just say right up front that Bill
Ackman is a genius.
  That’s how you
generally get to be a billionaire, Donald Trump notwithstanding.
 But his gambit yesterday—leaking on CNBC a
letter to the board of JC Penney, of which his hedge fund is the largest
shareholder, that urges pushing out the same CEO he just brought back
(Myron Ullman) after pushing him out once before in favor of ex-Apple genius
Ron Johnson, who pretty much destroyed the JC Penney as we knew it in favor of
a slicker, more upscale thing called ‘JCP’ (the stock ticker, get it?) which
JCP’s customers did not get at all, and from which they left in droves—smacks
of desperation.
 Doubly so because Ackman floated the name
Allen Questrom, a true retailing genius (whose name we here at NotMakingThisUp
previously floated as the one guy who could have turned around Sears) and whose name was almost certainly calculated to get JCP (the stock ticker) turned up, owing to Questrom’s high
standing on Wall Street, after so many days of JCP (the stock ticker) turning down.
 So flagrantly desperate does Ackman’s gambit appear that the
first thing that came to mind was the scene in Arrested Development where good
son Michael Bluth discusses resorting to asset sales to rescue the family
business, prompting valley-girl sister Lindsay to protest for all she’s worth
(which is not much):
 Michael Bluth: “I’m even selling the company jet.”
 Lindsay Bluth Fünke: “Great, so now we don’t have a car or a jet?  Why
don’t we
just take an ad out in
I’m Poor Magazine?”
 Seeing Ackmanwho has been lashing out like
there’s no tomorrow at Herbalife short-squeeze engineer, Carl Icahn and Herbalife short-squeeze pile-onner George Soros
add poor Myron Ullman to his hit list, you
wonder, “Why doesn’t he just take an ad out in I’m Desperate Magazine?”
 And unfortunately for Ackman, desperation is the
last thing any investor wants to advertise.
 A far better model from popular culture for investors would be the Godfather: 
 “Never tell anybody outside the Family what you’re
thinking…”

Indeed.

Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren
Buffett”
(eBooks on Investing, 2013)    $4.99
Kindle Version at Amazon.com
© 2013
NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored.  And if you
think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the
entertainment of the reader, and the author.
Categories
Uncategorized

The Most Important Article You Didn’t Bother Reading Today

  The most important article you didn’t bother
reading today appears in the Wall Street Journal, and it looks like this:

  The reason it is the most important article in
today’s Wall Street Journal is the undeniable fact it reports, which is that
after much hemming and hawing, Spain’s banks are now, finally, blowing out bad
real estate to bottom-feeding hedge funds.
 And so the healing has begun in the Spanish
real estate market, which is to the E.U. as Florida, Phoenix and Southern
California are to the United States.  
 What with the U.K. economy already catching
fire—believe me, it’s on fire: just look at the data—today
’s report makes our previous look at the stodgy crowd-think-gussied-up-as-economic-analysis from the IMF (see “Headlines That Make You Just Want to Run Out And Buy As If Your Life Depended On It”) seem too mild.
 We would, as the saying goes, bet dollars to donuts that the IMF, which only last week provided that gloomy, never-getting-better
prognostication for Spain’s economy, will be proven gloriously wrong.
 Buy Spain, buy it now.
Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren
Buffett”
(eBooks on Investing, 2013)    $4.99
Kindle Version at Amazon.com
© 2013
NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored.  And if you
think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the
entertainment of the reader, and the author.
Categories
Uncategorized

Headlines That Make You Just Want to Run Out And Buy As If Your Life Depended On It


Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren
Buffett”
(eBooks on Investing, 2013)    $4.99
Kindle Version at Amazon.com
© 2013
NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr.
Matthews.   Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations.  This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever. 
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored.  And if you
think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the
entertainment of the reader, and the author.
Categories
Uncategorized

And Speaking of Insider Trading, Did You Hear One About The Trader Who Didn’t Let The Tipster Finish What He Was Saying?

 Last night before the
close I received an instant message passing along mention of “an incredibly unusual trade”
in the options of Booz Allen Hamilton, ticker BAH—better known as the home of
government secrets-discloser Edward Snowden.
 Seemed that somebody had bought 7,600 worth of call options (equivalent to 760,000 shares of stock) in BAH, which normally trades fewer than 20 options on any given day.
 Specifically, the buyer bought 7,600 worth of September $20 calls (the stock closed the day at $19.32) for 85 cents.  “This name has LESS than 1,000 in total open
interest,” my messenger noted—meaning the buyer had just bought 7.6-times the
number of existing options of all stripes extant in BAH.
 That, as I say, was
last night, not long before the market closed for trading.
 This morning, lo and
behold, the Wall Street Journal is reporting the following:

 Accenture in Talks
to Buy Booz & Co.

An Acquisition Would Beef Up Strategy and
Operations Consulting

 Unfortunately for the
massive call option buyer in BAH, “Booz & Company” is entirely different from “Booz
Allen Hamilton,” having been spun out some years ago as a private company.
 Or, perhaps it’s highly fortunate that our option buyer didn’t finish listening to his (or her) tipster
before hanging up the phone and placing the order.
 Because if indeed
Accenture was in talks with “Booz Allen Hamilton,” Mr. 7,600 September 20 BAH Calls
might be getting a call of a different kind right about now, and it would not be pleasant.
 As it is, the buyer—who,
to be fair, could have had any number of reasons to make the trade (might have
been a short-seller looking to hedge a position prior to the company’s earnings
report this morning, for example)—can finish reading the Wall Street Journal
without interruption.
Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren
Buffett”
(eBooks on Investing, 2013)    $4.99
Kindle Version at Amazon.com
© 2013
NotMakingThisUp, LLC              
The
content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and
clients advised by Mr. Matthews may hold either long or short positions in
securities of various companies discussed in the blog based upon Mr. Matthews’
recommendations.  This commentary in no
way constitutes investment advice, and should never be relied on in making an
investment decision, ever.  Also, this
blog is not a solicitation of business by Mr. Matthews: all inquiries will be
ignored.  And if you think Mr. Matthews
is kidding about that, he is not.  The
content herein is intended solely for the entertainment of the reader, and the
author.