Update: “China’s stock market falls for the 5th straight day,” Timothy B. Lee,Vox
“China’s stock market plunges for the fourth straight day,” Timothy B. Lee, Vox
“China 2015: beware the links with 1929,” Larry Elliott, The Guardian
“Why the Chinese slowdown everybody knew was coming is causing a freak-out,” Chico Harlan, Washington Post
On Friday Wall Street deflated with a mighty belch, as the Dow dropped over 500 points, the worst one-day loss since 2008. Overall there’s been a 10 percent drop from the May 19 peak, so it’s officially a “Market Correction.“
Why? Some blame it on the fears about the instability of China’s economy, others on the EU and Greece, or the Fed, or the low price of oil and other commodities, or the Zodiac.
Last week media and cable stocks slid and tumbled while Netflix stocks jumped 20%. CBS, Disney, Comcast, all down. Viacom dropped 41% over the last 3 months while Netflix is up 56% in the same quarter; during that time DISH Networks lost 81,000 paid subscribers. Time/Warner (HBO) stocks are at a 9-month low. 21st Century Fox stocks dropped 12%.
What’s a conventional paid-subscriber media business to do? If you can’t beat ’em, join ’em.
“’We’re in a mature-to-declining kind of linear TV business as we know it,’ said Dish Network Corp. Chief Executive Charlie Ergen on an earnings call Wednesday. ‘We think we’re at the beginning stages of [a streaming] business that’s going to grow and accelerate.’”
— “Media stocks clobbered as Netflix drives customers to dump cable,” Trey Williams, MarketWatch
More:
“Cracks in the cable business send media stocks tumbling,” Thad Moore, Washington Post
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1953: GM President Charles Erwin Wilson tells the Senate Armed Services Committee “for years I thought what was good for the country was good for General Motors and vice versa.”
2009: The United States Government takes 60 percent ownership of General Motors, 912 million shares.
2012: GM buys back 200 million shares of its own stock from the government for $5.5 billion; company execs are now allowed to use corporate jets again.
June 2013: The U.S. Treasury sells off 30 million shares in GM.
December 2013: The Federal government sells off its remaining shares in General Motors, leaving taxpayers with a net $10.5 billion loss on the total $49.5 billion bailout. The Canadian government still owns $4.2 billion in GM preferred shares and the United Auto Workers union owns $5.4 billion in GM stock.
Related:
“With The Government Gone, GM Can Now Start Paying Its Execs Big Bucks,” Aaron Foley, Jalopnik
“New study estimates the effect on the U.S. economy of successful restructuring of General Motors” (press release), Center for Automotive Research
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The Fender Musical Instrument Corporation (FNDR) filed papers to trade stock on the NASDAQ exchange. Founded by Leo Fender in 1946, the firm manufactures the iconic Stratocaster and Telecaster electric guitars.
From Robert Reich:
“The stock market has as much to do with the real economy as the weather has to do with geology. Day by day there’s no relationship at all. Over time, weather and geology interact but the results aren’t evident for many years. The biggest impact of the weather is on people’s moods, as are the daily ups and downs of the market.
The real economy is jobs and paychecks, what people buy and what they sell. And the real economy — even viewed from a worldwide perspective — is as precarious as ever, perhaps more so.”
More here.
Have a happy Labor Day.
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Congress is holding hearings about the May 6th stock market plunge, when share prices fell 1000 points in minutes. The SEC has summoned exchange officials to Washington to explain the event, the largest one-day drop in Wall Street history.
What caused the sudden sell-off? The Typo Theory holds that the panic started when a Citigroup trader typed a “B” instead of an “M” on his computer, selling $16 billion in P&G shares instead of a mere $16 million. The huge transaction triggered automated trading programs at all brokerages and made things much worse in minutes.
Unrelated world events were first said to have caused the drop and conspiracy theorists soon chimed in, but most sources believe that the initial data entry error caused the computer-driven, snowballing sell-off.
How can such catastrophes be avoided? Some authorities want to eliminate the automated “high-frequency trading” programs used by brokerages or put automatic blowout protectors (“trading curbs”) on them. We have a simpler solution: just move the “B” and “M” farther apart on stock brokers’ computer keyboards.
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Bonuses for employees of Wall Street financial firms were up at least 17 percent in 2009. You remember 2009 — TARP, unemployment, foreclosures and all that (so tiresome).
More:
Market Watch: “Wall St. bonuses climbed 17% to $20.3 billion in 2009.”
New York Times DealBook: “The Big Money’s Back in Town.”
Disgraced golfer Tiger Woods danced his “heavily-choreographed apology” for adultery on TV and the stock market rose, notes the Wall Street Journal.
While correlation is not causation and past results do not guarantee future performance, this is The Year of the Tiger.
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