The good people at Dow Jones indices are busy dragging themselves into the current century, and good for them. But while they are replacing AT&T — which originally stood for “American Telephone and Telegraph” — with Apple in the world’s most storied benchmark, the Dow Jones Industrial Index, maybe they should consider another futuristic leap and acknowledge that price does not equal value.
Apple’s arrival in Charles Dow’s creation was accompanied by the observation that it will sit at number six – behind Visa, Goldman Sachs, 3M, IBM and Boeing. It’s share price, $129 or so at pixel, is a smaller number than, say, Visa at $274. Read more
Financial pundits, academics, fund managers and analysts all have an amazing tendency to over-complicate matters.
Sometimes, however, it takes just one person spelling out the obvious to really get to the root of the problem. Read more
News Corp has named Lex Fenwick, a former chief executive of Bloomberg, as chief executive of Dow Jones, the publisher of The Wall Street Journal. The FT says Mr Fenwick fills a position that has been empty since July when his predecessor, Les Hinton, stepped down in the midst of the phone hacking scandal at News Corp’s UK newspaper arm, which he had run for 12 years before joining Dow Jones in 2007. Separately, the FT reports digital subscriptions to the New York Times online edition stabilised revenues at the publisher’s flagship title in the fourth quarter of 2011, but group results were dragged down by a further decline at About.com, its consumer information website. Arthur Sulzberger Jr, chairman and interim chief executive officer, told analysts that a search for a new chief executive was “in its early stages”, and emphasised that the board was looking for an executive “with digital and brand building experience”, without mentioning any need for experience in print publishing. The group made no mention of any dividend plans, saying instead priorities for its cash would be addressing its underfunded pension plans and paying off $75m in notes maturing later this year. It cut net debt from $597m to $493m over the course of 2011, reducing interest expense in the period from $23.2m to $15.5m.
News Corp is facing fresh questions about its newspaper operations, after allegations that circulation figures for the European edition of the Wall Street Journal were boosted by complex cut-price deals with a sponsor to which it had promised editorial coverage, the FT reports. On Wednesday, The Guardian alleged that ELP had been paying just 1 cent per copy for 12,000 daily copies of the WSJE, equivalent to 16 per cent of its circulation, to be sent to students bearing its name. Dow Jones denied that it had effectively bought thousands of copies of its own paper through complex agreements with ELP and two “middle men” companies and said it paid ELP for conference services.
Talks are taking place that could see the Dow Jones Industrial Average come under the same umbrella as the S&P 500 index, the FT reports, citing three people familiar with the discussions. Spokespeople for McGraw-Hill, owner of Standard & Poor’s, and CME, the Chicago derivatives exchange owner which bought 90 per cent of Dow Jones Indexes in 2010, declined to comment. Dow Jones, the News Corp subsidiary that owns 10 per cent of Dow Jones Indexes, and Dow Jones Indexes itself also declined to comment. The discussions were first reported by News Corp’s WSJ, also citing unnamed sources familiar with the situation. The FT’s sources cautioned that the talks had been going on for about a year and could change or fall apart. However, they added that the plan under discussion would see McGraw-Hill own almost 75 per cent of the joint venture, which would be housed in McGraw-Hill Markets, the financial services company that is to be formed when the media conglomerate spins off its education business next year. CME would have almost 25 per cent of the joint venture, with Dow Jones retaining a small stake.
Global stock markets continued to rally on hopes that the US Federal Reserve may still unveil a third dose of quantitative easing, after minutes released from the last Fed board meeting indicated that several policymakers backed further monetary easing to support economic growth, the FT reports. However, gains and volumes also continued to be light, as traders marked time ahead of a speech next week by US president Barack Obama, billed as a major policy address, and the US jobs report on Friday. While expectations may not have changed, traders are for the moment unwilling to bet on any worsening in economic or sentiment conditions. The S&P 500 was up 0.4 per cent at midday, paring gains of more than 1 per cent earlier, though the Dow Jones Industrial Average has inched into positive territory on the year by adding 0.4 per cent on Wednesday. “Investor cyclical fears may have gone too far, too fast,” said Lena Komileva, global head of G-10 strategy at Brown Brothers Harriman. “But it is unclear if this corrective drift…can be extrapolated into the final months of the year and early 2012, and this uncertainty about the macro-economic outlook may serve as a self-reinforcing drag on business, consumer and investor activity into the year end.”
Les Hinton, chief executive of Dow Jones, is being blamed by people close to News Corp, for failing to get to grips with the News of the World phone hacking scandal when he was in charge of Rupert Murdoch’s UK newspaper group, the FT reports. Hinton could become the most senior casualty of the crisis, deflecting blame from James Murdoch and Rebekah Brooks. According to The Guardian, Hinton was among five News International executives who had access to the News of the World’s 2007 internal inquiry on hacking. Seperately, the FT says UK prime minister David Cameron is trying to find a way to delay News Corp’s takeover of British Sky Broadcasting in light of the hacking scandal.
Spotted: Vix, the ‘fear gauge’, up nearly 28 per cent on Tuesday.
Traders have sought safe havens in gold and the dollar, after a day of international unease begun by North and South Korean forces firing artillery at each other, the FT reports. The Dow’s energy components brought it down to 1.3 per cent in edgy trading also influenced by the developing crisis in the eurozone, but the Dollar Index was up 1.1 per cent, the WSJ adds. Russia, China and the United Nations have urged restraint following North Korea’s attack on civilian targets, the FT says, although South Korea said its military remains at ‘crisis status’, the NYT reports. FT Alphaville captures earlier Asian market sell-offs.
Can’t wait for the SEC’s flash crash report?
Then try this alternative, from data firm, Nanex. Read more
Did a hedge fund advised by Nassim Taleb cause the Flash Crash? The WSJ notes that a an options bet by the Universa fund might have triggered risk offsets elsewhere, starting a tsunami of hedging sales. Somewhat ironic for the creator of the Black Swan concept, if true, FT Alphaville notes. Read more
As the market tries to figure out what the hell happened after 14.00 EST on Thursday — was it the trading robots or a fat finger — Tobias Levkovich of Citigroup has issued a warning to clients:
In the S&P 500 over time, we cannot find strong evidence of sharp snap backs that reward investors for taking on more risk.
Does anyone remember the high-frequency-trading outrage that erupted last summer? Prepare yourself for a redux, says FT Alphaville. The blame for Thursday’s Dow Jones rout has swiftly shifted from a fat-fingered Citigroup trader to the rise of the machine-trading bots.That’s right, the bots took $1,000bn off the DJIA (at one point). The SEC and CFTC have said they are reviewing “unusual trading activity that took place briefly this afternoon” as an official said an anomalous surge in selling had been identified. Read more
CME Group, the world’s biggest futures exchange, has struck a deal with Dow Jones for a joint venture in which the Chicago trading giant will take control of the Dow index business from News Corp. CME will take 90% of the joint venture and the Dow 10%. The deal values the index business at $675m, at the low end of expectations when News Corp began exploring a sale last year.
The CME Group, the world’s biggest futures exchange, is in talks to buy Dow Jones’s index business from News Corp for as much as $700m – in a further sign that international financial exchanges are looking to diversify their sources of revenue. The negotiations follow Dow Jones’s agreement in November to sell its one-third stake in Stoxx, the index company, to Deutsche Börse and SIX, its Swiss partner, for $309m.
News Corp has unveiled its biggest restructuring of Dow Jones since its $5.6bn takeover of the financial information business in 2007, merging its consumer and enterprise divisions. The reorganisation formalises a process that has accelerated in the past year and will see the departure of Clare Hart, president of the enterprise business. Dow Jones’ enterprise division contributed 60% of group profits shortly before the Bancroft family sold the company to Rupert Murdoch.
Will today be the day when the Dow recaptures this psychologically important level and we have to release the Rally Monkey from his cage?
Blow- out figures from Intel and JP Morgan were pointing toward a strong start on Wall Street on Wednesday. Read more
Please welcome James K. Glassman — the just-selected head of former Republican president, George W. Bush’s new Texas think tank.
From the George W. Bush Foundation press release: Read more
There is no $2.2bn bid for Gulf Keystone Petroleum.
Repeat. Read more
You decide. (Note, the DJIA currently ahead +321.22 points).
The DJIA – 1956 to 2009 (Click to enlarge – without the scribblings).
Wall St tumbles; Dow hits lowest since ’97 – Reuters
FTSE 100 down 90 points.
UK’s public debt surges towards £1,200bn Read more
A financial stability plan – $2 trillion
An economic stimulus – $838bn
Watching Wall Street’s reaction – priceless
Geithner’s plan has not impressed. Light on detail and loaded with caveats, it’s also managed to circumvent the thorny issue of pricing toxic assets. Kevin Petrasic, senior counsel with the Banking and Financial Institutions Group at law firm Paul Hastings, puts it well: Read more
News Corporation faces a potential deadlock once Rupert Murdoch’s heirs take over, according to a forthcoming biography of the 77-year-old media tycoon. An agreement giving equal economic rights in the Murdoch family’s stake in News Corp to all six of its chairman’s children – but voting control to the eldest four only – contains no provision for breaking tied votes, the book reports. “A two-to-two vote means absolute deadlock in the affairs of one of the world’s largest companies,” writes Michael Wolff, author of ‘The Man Who Owns the News’, to be published Dec 2. He quotes Murdoch saying the arrangement could yet change, giving votes to Grace and Chloe, his young children by Wendi, his third wife, “when they are 25 or 30 or something”. However, his older children and the family’s lawyer told Wolff there was no such plan to renegotiate the trust that manages the 38% stake. The book stirs speculation about Murdoch’s likely successor following the 2005 decision by Lachlan, his eldest son, to step down from executive duties and highlights the role of James, the heir presumptive who runs News Corp’s European and Asian operations, in News Corp’s 2007 acquisition of Dow Jones.
Friday was another rollercoaster day of market activity, with selling in the last 45 minutes of the day wiping out earlier gains. For those caught in the maelstrom, you can console yourselves with the knowledge that these really are exceptional times, even as they seem to be becoming the norm.
Dshort.com has a nice table of historical intraday volatility on the Dow since 1928. Over the 80-year period, average intraday volatility is about 1.8 per cent, according to the web site. But, there have been 64 days when it exceeded 8 per cent and 14 of those have happened since Sept. 29, this year. More over: Read more
Leading this evening’s rout was GM. Shares in the car maker plunged $2.15, or 31 percent, to a 58-year low of $4.76 after S&P dropped this bombshell:
NEW YORK (Standard & Poor’s) Oct. 9, 2008–Standard & Poor’s Ratings Services
today placed its ratings on U.S. automaker General Motors Corp. (GM),
including the ‘B-’ long-term corporate credit rating, on CreditWatch with
negative implications. Read more
The patient is not responding. US markets have gone into cardiac arrest.
Dow 8,579.19 -678.91 (-7.33%)
Oil prices fell below $125 for the first time in six weeks yesterday, fuelling a rally in equities and declines in other commodities. The S&P 500, Dow Jones and Nasdaq are now all out of bear market territory. The dive in energy and agriculture commodities prices will also be welcomed by central banks facing rising inflation. The Reuters-Jefferies CRB, a global commodities benchmark, hit its lowest level since early May on Wednesday, dropping 13 per cent from a record high set in early July. Bankers said investors’ exit from commodities was due to a combination of concerns about weakening global economic growth; an attempt to lock in gains from earlier record price rises, and fears that price volatility could lead to big losses. Meanwhile, US government scientists have discovered that the Arctic holds as much as 90bn barrels of undiscovered oil and has as much undiscovered gas. The report is likely to add impetus to the race among polar nations, such as Russia, the US, Denmark, Norway and Canada, for control of the region.