Top Stories of the Week
When You Take a Shower, Don’t Drop the Indicator of Average Interbank Lending Rates
Former UBS (UBS) and Citigroup (C) trader Tom Hayes was sentenced to 14 years for manipulating the London interbank offered rate, or LIBOR. Hayes was essentially caught red-handed attempting to move the rate up or down to benefit traders or bankers he had favorable relationships with.
Hayes, meanwhile, offered up the “I didn’t know I couldn’t do that” defense, claiming that the rate wasn’t regulated at the time, his requests were always within the permissible range, and that the string of emails and texts that ultimately led to his conviction should make it clear that he wasn’t aware he was breaking the law.
Unfortunately for Tom, it appears as though ignorance is NOT bliss this time around, and he’s the scapegoat everyone’s been looking for.
Alpha Natural Resources ($ANRZQ) Bankruptcy Means Bad News for Naughty Children this Christmas
President Obama announced the finalized version of his plan to use the EPA to curb carbon emissions from power plants Monday. Then, as if on cue, one of the country’s major coal mining companies immediately declared bankruptcy.
In a lot of ways, Obama’s regulations are just putting the final nail in the coffin that the market had already build for the ailing coal industry. Cheap natural gas brought on by the fracking boom has devastated the use of coal for power plants in the United States. That said, Obama clearly didn’t learn not to kick an industry while it’s down, because if they’re allowed to stand, the new EPA regulations will pretty well finish off coal completely. The EPA is targeting a cut of carbon emissions to 32% below 2005 levels, and intends to push a shift towards more renewable energy.
And Now, SportsCenter’s Top Ten Disney (DIS) Earnings Whiffs
Frequently, the stock market is the world’s biggest example of “what have you done for me lately” thinking. Except, it’s really more like “what will you be doing for me in 10 years?”
Disney released its Q2 earnings report after the closing bell on Tuesday, and showed some $2.5 billion in profit on $13 billion in revenue. However, they also showed eroding profits from its cable business, with over three million people losing their subscriptions to sports giant ESPN because of shifting cable packages.
This set off a real rout for media companies on the whole, as a series of troubling earnings reports, combined with the continued success of the new-era streaming services like Netflix (NFLX) , appears to have started the migration by investors from the old-school, money-making companies to the new-school, not-making-as-much-money-but-will-someday streaming companies.
At the end of the week, Disney was off close to 10%, Viacom (VIA) lost over 20%, Time Warner’s (TWX) losses approached 10%, and Twenty-First Century Fox (FOXA) clipped almost 12.5% of its value. Meanwhile, Netflix was up over 7.5%, despite taking a beating on Friday. Also, despite producing 12.6% of the revenue Disney did last quarter and 1.1% of Disney profits. Just saying.
Now All We Have to Do is Sell Cars!
One could qualify Tesla (TSLA) as a distinctly aspirational stock. The company is certainly entrenched in the minds of the public and investors. Its signature electric luxury cars are considered the height of fashion, and its new line of lithium-ion batteries have the potential to revolutionize the nature of power generation in the future.
However, there is, in the near term, that teensy detail of actually building and selling cars. And, while stocks can frequently float into the stratosphere from whiffing big ideas, they do usually need to return to earth every once and a while – just for a check-up, if nothing else.
So it was, that investors were a touch disappointed by news that Tesla was reducing its 2015 delivery target from 55,000 to between 50,000 and 55,000, touching off the worst day for the company’s stock in two years, as it plunged nearly 13%.
No News is Bad News for Stocks
It’s the first Friday of the month, and you know what that means…JOBS REPORT! WOOHOO!
The Labor Department revealed that the labor market grew by some 215,000 jobs in July, just about exactly what analysts were expecting. The unemployment rate held steady at 5.3%. This may read as a fairly blah report, but the bigger news would appear to be how this affects the stock market by way of the interest rate tango.
With the Fed planning to raise rates from near-zero (and thus improving the value of fixed income products against stocks, as well as hurting equities) in September, each and every economic indicator between now and then is going to be seen through the filter of “will this change the mind of Janet Yellen?”
In short: No. More business as usual would appear to mean rates are going up in a month, and it was another down day for the market on Friday as a result.
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