Wednesday, October 12, 2011

Market Melt-up Continues for US Stocks

News from Europe that the Slovakian government would re-vote on extending additional bailout funds to banks via the ESFS was like a sugar-coated treat to the childish cretins of the Wall Street investment community.

Shortly after the close of markets in the US yesterday, the Slovakian parliament became the only one of 17 countries to turn down the additional relief package proposal, sending shock waves throughout the EU and the rest of the financial universe. The package needed the approval of all members. Within minutes, however, there was talk of a deal on a re-vote, paving the way for a steady flow of funds to repair badly-damaged and close to insolvent European banks which have bourn the brunt of rolling bailouts to Greece, Ireland, Portugal and soon, Spain and Italy.

There was widespread optimism that the Slovak parliament would rework the proposal to fit their agenda and save Europe from imminent collapse. As has been the case for so long with all things Euro-related, the overseeing body of the European Union (EU) and the European Central Bank (ECB), a slight shift or change in the rules always seems to be the tonic whereby the Euro remains a "viable" currency and staves off the collapse, first, of Greece, and eventually the entire structure upon which the Euro currency is based.

With such confidence that European leaders would tread along the same path upon which the US staved off financial armageddon in 2008 after the Lehman Bros. bankruptcy, stocks were sent higher throughout the session, assured that the classic Ponzi scheme of international finance has finally gone global.

Along that line of thinking, John Embry, Chief Investment Strategist of Sprott Asset Management, said, in an interview with King World News, that stocks could decline by 40% if the European crisis turns into a repeat of 2008, and added, "I think investors have to be aware of the degree of manipulation in all of the markets here and not make the mistake of being momentum players. They shouldn’t just try to go with what is working and jump on board because a lot of this is manufactured for the sake of appearances."

Exactly. Global leaders don't want to see another major disruption like that of 2008, because their main concern is holding onto the reins of power they have secured, even if it means lying about where money is coming from, going to, bank balance sheets, stress tests and just about everything else if it means they get to keep their high posts.

While banks and the people who run them are most responsible for economic calamities over the past few years, politicians share much of the blame, enabling the ill-conceived schemes of the financial class with endless bailouts, ruses and guarantees while much of the global economy is reduced to a pile of worthless, paper rubble.

There was some late-day selling - a chink in the globalist armor and yet another indication of manipulated markets as there was no move to quiet the rally - and stocks finished with only about half of the gains racked up over the session. For instance, the Dow Jones Industrials were up by 209 points at about 2:30 pm, but closed with a gain of just 102. It pays to be a tape watcher these days, as waves of both buying and selling can occur at any time on any given day, no matter the news.

Only on major company reported earnings after Alcoa kicked off 3Q earnings season with a substantial miss on income Tuesday. PepsiCo (PEP) reported before the open that it had earned 1.31 per share after some one-time items, beating the Street estimates by a penny. The gains were largely attributed to Pepsi's aggressive pricing policy in which the company boosted prices around the world on its popular soft drink and snack brands.

Therein lies the conceit and thinly-veiled deceit of Wall Street. PepsiCo saw margin compression in the quarter, as operating margin narrowed to 16.5 percent from 18 percent a year earlier. Earnings for the giant company - with revenue approaching $18 billion in the quarter - have been mostly flat for the past year. Price increases, workforce reductions, cost-cutting and balance sheet shenanigans are what drives this company these days. Growth is largely the result of internal manipulations, not market share increases. Over the past five years, growth has slowed to a mediocre 5.87% per year, though making even that low level over the past few years has been difficult.

Dow 11,518.85, +102.55 (0.90%)
NASDAQ 2,604.73, +21.70 (0.84%)
S&P 500 1,207.25, +11.71 (0.98%)
NYSE Composite 7,263.69, +102.43 (1.43%)
NASDAQ Volume 1,998,280,250
NYSE Volume 5,355,361,000
Combined NYSE & NASDAQ Advance - Decline: 5250-1511
Combined NYSE & NASDAQ New highs - New lows: 41-35 (a reversal, which should not last)
WTI crude oil: 85.57, -0.24
Gold: 1,682.60, +21.60
Silver: 32.79, +0.79

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