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Big Media Stocks Tank, Almost Nothing Left To Support The Market

Bloomberg just posted an analysis of the recent correction in media stocks (Another major pillar of the bull market is collapsing) that contains some surprising, occasionally amazing stats. Consider:

  • The 15-company S&P 500 Media Index has posted annualized returns of more than 33% since 2009. Prior to Tuesday, these stocks had risen 531%, from an aggregate market cap of $135 billion in March 2009 to about $650 billion.

  • This index has fallen by 11% in the past two days, led by Disney and Viacom, which are down 12% and 18% respectively. Five stocks — Disney, Time Warner, Fox, CBS and Comcast — lost almost $65 billion of value in two days.

  • Many of these companies are reporting lower sales while propping up their earnings per share with stock buybacks. Investors are finally seeing through the con.

  • One analyst observes that “An argument can be made that [the media bust] is an indicator of consumer sentiment, because that’s where media revenues come from.”

  • Now an already thin market — where most stocks were down while the major indexes were making new highs — has virtually no support. “More than 100 percent of this year’s increase in the S&P 500 is attributable to two sectors, health-care and retail, the tightest clustering for an advancing year since at least 2000.”
  • Among the many interesting things about the rise and fall of the old media stocks is that these companies were supposed to be the victims of technology. Everyone is replacing cable services with Netflix and Hulu, while movies, being digital files, are supposed to go the way of records and books, easy to make and download and therefore increasingly hard to sell at a profit.

    But there they were, dominating the market. If this was a fluke — i.e., the last gasp of an industry about to be swamped by digitization — then it’s hard to know what these guys are really worth.

    And with heath care and retail all that remain to prop up the market, it’s hard to know where the overall bottom might be.

    12 thoughts on "Big Media Stocks Tank, Almost Nothing Left To Support The Market"

    1. I think the best chance for equities will be after the Fed meeting in September.
      There is currently a very ugly look to the HYG/JNK high yield charts. They are being dragged lower by falling commodity prices which are being driven lower by the ONE WAY DOLLAR PLAY. That is a VERY LARGE Divergence between High Yield and Equities and in a thinning market it is cause for concern. However with Stock Buybacks at historic levels and who knows what else going on to support markets you can’t really put too much money against the bull….at least until we see the SP 500 moving average break below it’s 12 month moving average (and should it not break above on a re-test) we should watch for imminent central bank easing) Central Banks did NOT throw trillions upon trillions at this Asset Boom to let it unravel. When they Took the path of Reflation instead of writing away debt 6 years ago the dye was CAST. There is still some ammo in some central bank somewhere to jawbone a bit more risk taking should that happen, thou things can unravel fast should the SP break below its 12 month moving average and then fail a retest.
      Right now I think that either oil bottoming or the if the fed does not act in September and I think that will let HYG/JNK bounce a bit. At that point I think equities could run 6-8% Sept thru December. Stock Buy Backs are strong, they are not going anywhere, the market is Thinning that Is something to watch for. We shall see If any Central Bank throws some more liquidity on the fire.

      I think the FED hands are is acting FIRST And FOREMOST to avoid a Global Crisis.
      I believe that Europe was a situation that demanded the ECB-FED do something to weaken EURO to keep inflation (Price inflation down) and Keep Europe out of any sort of Deep recession that develops pockets of depressionary Characteristics to help financial system stability. Europe Will continue on QE for the foreseeable future and I think the Fed will try to do a token hike in December and closely monitor the markets response. Having to reverse course is something they fear greatly as it would cost them their multi year plan of normalization and they would lose credibility. WHEN THE FED MAKES A MOVE to raise rates they do not want to do it in a technically weak market.

      1. I prefer to take my chances. Basically, I don’t believe in or agree with the wisdom of “kicking the can.” The status quo is always to claim “the abyss” if such and such governmental/Fed policy isn’t continued, expanded or allowed. Do you at least agree that kicking the can only exacerbates the eventual fall out? Is that not a reason to stop the insanity now? For that matter, if the aftermath would be so bad for “us” and power more consolidated for the PTB, why the delay (from their perspective)? I think it’s more true that it will be worse them – as in the spirit of 1789 on steroids.

        1. Take your chances , i can respect if its in the context of a world where the fed fails and we don’t crash. However i think there are too many people who think that our consumption driven economy has some sort of fail safe under it, where things hit some magical floor and the economy springs back up. It are these folks, who i guesstimate don’t want to think critically about this, who have busy lives and children to care for and would not want to dream of a world that is as fragile as the one we actually live in. I CAN respect that viewpoint, but it is those folks who will wonder”what the heck happened” . Monetary systems do not have a infinite life. Political systems that side with creditors when the SHTF are not enjoyable places to live. The fed and world central banks are not blowing an asset boom just for giggles. This is a last ditch effort to keep a boom going and the dye was cast for the path forward when they decided to reflate assets and not force bad debts to be written down following financial crisis. That would have required a multi year very bad recession (depression is more like it ) to work all that thru the system, now we are beyond that. Inflate or crash sounds very alarmist, sometimes there is a reason to be concerned

          1. One thing I’m saying is that I am not convinced that there would have been such a “depression” starting in 2009 if the bailouts and QE didn’t occur. Sure, there would have been losses but the losers would have been the banks and financial institutions primarily, and not necessarily “everyone”. I agree that now is different because the debt levels are even higher and “they” have managed to off-load that debt onto the public so a default now makes “us” seem like Greeks – supposedly. However, just as we were told Greece would have fallen into “the abyss”, “we” didn’t get to see what really would have happened had Greece defaulted. I say it would not have been so terrible and Greece would have recovered whereas now they never will (zombie state). The bigger losers would have been the EU system itself and the EU authorities. Ditto for the rest of us. For once I’d like to see something done – or not done – that goes against the advice and desires of the PTB. My bet is we would all learn that the “emperor has no clothes” and the men behind the curtain are liars and frauds. Therefore, I AM hoping for something that causes this abomination to unwind, just to see if the world comes to an end and that voices like yours are so right. As I said, I’ll take my chances.

    2. Media relies mostly on ad sales no? Like most of our big tech companies do. So what’s next do you reckon?

    3. . . . . . . “Nothing Left To Support The Market

      Wrong. There are the printing presses at the fed. And support the market they will, economy, prudence, and sanity be damned!

      1. The Fed/FOMC can’t pump fast enough to overcome that great sucking sound… and when there are no more “greater fools,” there’s really no reason to bother.

        1. What? The greater “fool” becomes the Fed itself – “the buyer of last resort.” Furthermore, it’s all digital now so there is no “pumping” or “printing” (unless people want cash). The problem is how screwed up things would be if/when the Fed becomes the major share holder of most of the Fortune 500 corporations. Actually, that would be terrifying because that would mean that the Fed has managed to exchange inherently worthless FRNs (be they cash or a binary sequences in memory chips) for real assets – businesses that produce real valuable stuff. Amazing. I’m not saying it will happen, but what a coup if it did!

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