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

Dow Five Day Rally Ends; Alcoa Misses 3Q Earnings

From the first indication given by Alcoa (AA) after the bell on Tuesday, this earnings season may not be in investors' best interests.

The world's largest manufacturer of aluminum products reported earnings per share of 15 cents, on analyst expectations of 22 cents per share. Revenue was above estimates, at $6.42 billion on estimates of $6.22 billion, but higher costs and some sluggish sectors crimped income down to $172 million for the quarter.

Chairman and CEO Klaus Kleinfeld made a couple of interesting comments regarding the quarter's results on CNBC, shortly after the data release. Kleinfeld said that "fear is taking a toll," noting the overwhelming sentiment that investors were wary of the crisis in Europe and a potential global recession and noted that Alcoa was a "competent company in a very nervous world.

The stock was being hammered lower in after-hours trading, down

After Monday's huge upside rally, markets seemed hesitant on Tuesday, and stocks traded in choppy, range-bound fashion. The Dow moved less than 80 points from the lows to the highs on the day.

Another factor keeping trading to a minimum on light volume was the debate in Slovakia on the vote to approve an expanded Eurozone bailout fund. Shortly after markets closed in New York, Slovakian lawmakers on Tuesday rejected participating in an expanded euro rescue fund, significant because the measure needed unanimous approval from all 17 currency members.

With tiny Solvakia standing up against bank bailouts and more depreciation of the Euro against major currencies, the breakup of the Euro seems all but academic at this point. It's become clear over the past few months and years that only the Northern European countries are fiscally balanced and able to cope with market pressures, while those in the South - particularly Greece, Italy, Spain and Portugal - do not share the same financial disciple as displayed by say, the Germans.

Without expanded emergency capabilities, European banks will face a liquidity and solvency crisis similar to what happened in the US in the aftermath of the Lehman Bros. collapse and the contagion from it will almost certainly spread globally, though to what degree is as yet unknown.

The Slovakian Parliament decision and Alcoa's big miss on earnings should make for interesting trading on Wednesday in all markets, from Asia to Europe to the US.

Dow 11,416.30, -16.88 (0.15%)
NASDAQ 2,583.03, +16.98 (0.66%)
S&P 500 1,195.54, +0.65 (0.05%)
NYSE Composite 7,161.26, -12.19 (0.17%)
NASDAQ Volume 1,684,082,875
NYSE Volume 4,318,042,000
Combined NYSE & NASDAQ Advance - Decline: 3717-2705
Combined NYSE & NASDAQ New highs - New lows: 37-60
WTI crude oil: 85.81, +0.40
Gold: 1,661.00, -9.80
Silver: 32.00, +0.02