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1 PM UPDATE: Because it took everyone by surprise that the financial bailout bill failed in the House Of Representatives. This is terrible news for media stocks, Wall Street, and Main Street as the credit markets literally start to shut down. The S&P alone has lost 8% of its value. Today’s market plunge was the biggest single day drop, even worse than post-9/11. Though the 1987 crash was worse proportionately. Can the bailout be salvaged?
MONDAY, September 29, 2008
GE (NBC Universal) fell $2.15 (-8.51%) to $23.10
Disney fell $3.02 (-9.22%) to $29.73
News Corp (Fox) fell $1.18 (-8.91%) to $12.07
Time Warner fell $1.31 (-9.22%) to $12.90
Viacom fell $1.85 (-7.25%) to $23.66
Sony Corp fell $1.65 (-5.09%) to $30.76
CBS fell $1.10 (-7.14%) to $14.30
DreamWorks Animation fell $1.34 (-4.18%) to $30.68
Marvel Entertainment fell $1.36 (-3.95%) $33.05
Editor-in-Chief Nikki Finke - tip her here.
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All the Hollywood BS paies with the fate of the country. It really is trite in these times. My Dad grew up in Depression, I heard all the stories I don’t want to live through them. Goodluck to everyone, hopefully we all get through this.
SOS
The last time there was a depression (let’s hope we don’t actually go there) the media was one of the few areas that did manage to survive – people huddled around radio and movies as one of the few forms of entertainment worth their meager dollars. Is there any reason to think that if the economy totally tanks that money won’t move TOWARDS media because it’s a fairly safe bet? It probably won’t benefit indies much, but even if half of the country’s wealth disappears on paper, what is left is still going to be looking for places with growth potential.
Just like every other drop, the market will rebound, eventually, and media company stocks will be fine. Think of this as a buying opportunity, bailout or not.
Frankly, I just want the damn thing over with, regardless of what happens. The longer this is allowed to continue, the more harmful I think it will be for the economy, because this is time that is being wasted which could have been spent beginning the recovery process from whatever decision is made.
I think the bailout will happen – maybe with some amendments, but it’ll be pushed through.
Still nowhere as bad as Black Monday 1987. Today we dropped about 7%. In 1987, the drop was over THREE TIMES as bad… 22.6%
Here are the facts:
Today’s drop
10,365.45 DJIA
–777.68 pts
–6.98% drop
Black Monday 1987
1739 – DJIA
- 508 pts
- 22.6% drop
A week ago I said on this site that it was wrong to blame short sellers for this market decline. Blame everyone… too much leverage in markets and consumers. Simple as that people.
“This is terrible news for media stocks, Wall Street, and Main Street as the credit markets literally start to shut down.”
This is terrible news for everyone. Smells bad for the opening of Paris tomorrow, especially with a meeting between the French President and the banking sector representatives scheduled tomorrow morning. Not to mention Mr Sarkozy’s quasi-churchillian address of last thursday.
Like we say here: “Jusqu’ici tout va bien, jusqu’ici tout va bien…”
There are few things to take into account.
1) As a percentage (6.98%), this isn’t nearly as big as 1987 which had a 22.6% fall on Black Monday. (BTW, the market ended up for the year at the end of 1987)
2) Since 1987, the DJIA has grown from 1,739 (Black Monday’s lowest figure) to 10,365 after the markets closed today. That’s just under 600% increase in 21 years or around 28% a year. The market is still overpriced.
The biggest problem we have is FORECLOSURES and the Wall Street Bailout plan didn’t have strong provisions to stop them.
Foreclosures:
Drive down housing prices
Make home loans much more difficult since the collateral is a depreciating asset
Significantly reduce the net worth of all Americans
Drive the consumer spending down (which accounts for 2/3rds of our economy)
Make is easier to walk away from a loan since many Americans now owe more than their home is worth.
Further drive us into the recession
WHAT TO DO?
I’ve sent this to many in congress. While it may be hard to swallow bailing out those who made bad decisions, I think that bailing out Main Street will help us all with a more stable housing market. That will then “trickle up” to the markets.
Federal Assistance Act of 2008
Purpose: To halt continued increase of foreclosures, stabilize the housing markets, stop the slide of the value of the mortgage securities at the heart of the banking issue and keep people in their homes.
Overall Plan: Supplement all the homeowners who have payments that they cannot afford by up to 50% to a maximum of $1,000 per month for the next 24 months. Then stagger them back into the market if the housing situation has not improved. This will:
1) Stabilize the housing market by removing the bank owned properties that are dragging down the housing markets.
2) Stop the slide of the valuation of the mortgage securities that is causing the banking crisis.
3) Free up the credit market.
4) Return the faith of the American people that their biggest asset is no longer at high risk and increase consumer spending to put the economy back on track.
Steps to be taken:
1) Place a 90 day moratorium on foreclosures.
2) Create a litmus test for homeowners currently in the foreclosure proceedings to be operated by the banks who are foreclosing.
a. Must be primary residence (speculators will not be assisted)
b. Must have enough income to pay the subsidized payment.
c. Must prove that they cannot make the current payment.
3) If they meet the test then we would:
a. Make the bank alter the terms of the loan to reduce the interest rate to a reasonable rate to be determined.
b. Pay half their mortgage (percentage is not set in stone) up to a maximum of $1,000 per month directly to the bank as long as they paid their mortgage on time.
c. Take a lien on the house that is if it sold at a profit, we are repaid.
Assuming there are 4,000,000 homes in foreclosure, that 75% of them meet the criteria, and they all use the maximum supplement amount, we could keep 3,000,000 homes off the market for approximately $36 billion dollars a year or $72 billion for the two year commitment. That is less than the AIG bailout.
By utilizing this approach at the foreclosure level we are assisting those who need it most and not the very corporations whose greed and mismanagement forced us into this situation to begin with.
It may not be the silver bullet, but unless Congress STARTS OVER AGAIN, they won’t get it right by working with the Bush/Paulson/Bernake Bailout plan as a starting point.
Hey I know what you mean. I was surprised like everyone else becouse I expected the house Republicans to go onboard. This makes Black Monday 1987 look a tea party to be honest with you.
Since I like to follow to business I can tell you on my Moneynews newsleter I can tell you that over 1,000 banks are risk. Just this morning in the UK one bank got faced similar problems. How far down the rabbit hole does this finicial problem run? Honeslty I believe congress should stay out of the market. But I believe that all three sides should put thier differences aside and solve this problem. I heard the backstory that SecTreasury Paulson was staring at his computer screen and he saw that the stock market was five trades away from a meltdown. The story is documented in the Wall Street Journal by the way. I’ve been trying to find it.
A colleague told me recently that the entertainment business is basically recession-proof. Anybody familiar with this theory, and if true, the reasoning?
Dr. Pepper was the #1 soda in the country before the Great Depression. But Coca-Cola was the one that was very aggressive with their advertising at the time, and has been #1 ever since. Is it just because advertising isn’t going away any time soon?
Eagle Eye’s box office take showed people were still going to the movie theaters over the weekend, so maybe our economy won’t totally tank. Of course, people might have spent some money because they figured the bailout bill would be passed.
I guess we’ll see how it goes tomorrow.
The biggest problem could begin if Banks cut credit card limits on the consumer! That would hamper the spending for big ticket items which would be devistating on all retail outlets! WALLSTREET has raped this country!
Comment by dennitzio
“The last time there was a depression (let’s hope we don’t actually go there) the media was one of the few areas that did manage to survive – people huddled around radio and movies as one of the few forms of entertainment worth their meager dollars.”
I’ve read that before too, but one thing to keep in mind; in 1929 it didn’t cost $100M to make a movie. Like the financial industry, automakers and other corporate entities, Hollywood is dependent on credit to get the big bux needed to churn out those blockbusters.
According to CNBC.com, Hollywood is having better luck getting funding than most other industries ….. SO FAR. I wouldn’t count on that to continue as more BIG banks fail or get bought out 5 minutes before they fail. C’mon, we lost WaMu and Wachovia in the last 4 days!
And in the midst of all this financial turmoil my idiotic Guild sends out that insipid letter to the AMPTP. Makes me want to burn my SAG card!
The only good thing that could come out of that letter is maybe a few producers will choke to death while laughing their asses off.
Let’s hope not. The US Treasury isn’t intended to be a rainy day fund for the financial sector. There are other avenues available to cushion (but not entirely prevent) the blow. The problem is that taking these other avenues might involve a devaluation of the related assets, and the financial sector is flatly refusing to accept the prospect of shouldering losses.
Basically the financial giants are throwing a fit, and refusing to accept anything less than face value for the assets despite the fact that this is now a “buyer’s market.” They’re not willing to accept that market forces are no longer working in their favor. Now that the tide has turned they want to change the rules of the game. When they were kids they must have been the playground bullies that called every coin toss “Heads I win, Tails you lose.”
“Everything is worth what its purchaser will pay for it.” –Publilius Syrus
I am a media trader for a large hedge fund. I was covering some media names today… I took some profits today. Some people made money. I love American capitalism.
Actually, this is how the financial giants toss coins.
For those not too up to date, the man is Ricky Ricardo and the coin flipper is his wife Lucy as taken from a late 4th season episode of “I Love Lucy.”
During the last Depression, people gathered around the radio and movies, because there was actually talent in the Industry.
No talent, or creativity coming out of Hollywood today, and so the Entertainment Industry will feel the heat.
The credit markets will not shut down. Credit will, and is currently, being extended to debtors of good risk. It’s the sweetheart loans, and sub-prime phony-baloney that won’t be happening anymore.
NO Bailout. We don’t steal from the taxpayers to give to reward greedy Wall St. Misanthropes for their evil doings. Not when there’s an election a month away, and if the Legislature wants to stay in office !
The People rule, and they say NO !!!! Call your local Senator, and keep those calls to the House Reps coming !!!!! KILL THE BAILOUT !!!!
Beyond all the specifics of subprime mortgages, credit crisis, credit default swaps, bank bailouts, and Wall Street (yes, I know it seems like Wall Street is not a specific, but it is) the dollar has finally become unglued. Like 9/11, if in ten years you were to look back and try to find the moment when the US turned that big corner and everything began to change, it would be this week.
But as incredible as it may seem, you will notice the difference in your life even more than 9/11. Because in many ways, this is far worse for America, because the US has proved that it can and will hobble its hard won place in the world for the sake of a 2/3 consumer-driven cowboy economy of SUV’s and MTV Cribs. This ‘New World Order’ as Bush Sr. once referred to is indeed real, but will not look like anything he intended. Russia, China, and India will collectively crowd the US dollar out of the market as the US Treasury is forced to finally take chase after American debt that began way back in 1971. Remember when it all began? (No, Reagan did not magically erase the debt.) During that last quagmire? Remember, the one Johnson found himself in the middle of?
You are going to hear a lot about infrastructure and rebuilding the American Dream and investing in the American worker from the next US President, but make no mistake – this is not FDR’s Depression. This is the Planet Earth of 6,726,916,180 human inhabitants chasing after diminishing sources of food and energy. The Earth is now the size of a marble. It is clear which continents will be taking the lions share of its available spoils in the next century. And it is clear that they won’t be paying for it with greenbacks. The US election is irrelevant with regard to this reality. Iraq is irrelevant. Iraq is lost, that is certain. But be aware that the US military upper brass has already begun realigning its strategies toward the sober reality that long term natural resource wars are on the horizon.
Again, this is not about CDO’s or subprimes or bailouts. This is a big giant dollar sunset, and Americans would do well to imagine that battleship gray may well be the new color of their future and their children’s future. I pray for this country, because at its heart it is just. Our people are smart and inventive and resourceful. Unfortunately, our government has called upon us to do nothing except shop for the last ten years while we invaded and precision bombed two foreign countries. This is moral corruption on an unprecedented scale. And this is not just Bush’s sins we are paying for – Clinton changed nothing with regard to our economic Achilles heel. I pray that paying our debts to the world does not smother our ability to see the light that brought us to these shores. Liberty. It will be the first casualty. Protect it at all costs. It is already on the block.
First I’m please to hear that the entertainment business is still holding strong despite the tough economic times. What has made this economic downturn so interesting is the fact it has baffled economist. No jive. They’re having a hard time classifying it as a recession.
But the congressional vote on this bailout took everyone by surprise. Now the blame game has started in the beltway,a game that Gordon Gekko would’ve enjoyed. Speaker Pelosi is feeling the heat and it started this morning for her statements. For a corporate perspective she demostrated poor crisis leadership. For a calling your opposite negation party names doesn’t solve anything; just this morning on Morning Joe on MSNBC Joe ripped into Chris Van Holland when he tried to blame Republicans when members of his own party voted against it. Also Pelosi didn’t go in with the votes. Now some who believe in free markets,Like I do, this could be leading down the road to socialism. Actions speak louder than words. Honestly both party incumbents in congress could face a public vote bloodbath over this one.
But it’s not the end of the world. Other sectors of the economy are holding up. But the real culprit for the unraveling here is the depressed housing market,this market needs to be propped up. But I suspect from the housing downturn,the credit crunch and the subprime mortgage problems started. Feel free to disagree here.
But I heard some bright spots in California. That housing is started to pick up in sales; New York and South Florida just need to follow the lead.
Dear Hollywood,
You’re going to be fine!
Some of the studios might get whacked, but all-in-all, Hollywood will survive without too much trouble.
As for the bailout?
NO BUCS!
Welcome to the roller -coaster ride of Wall St. No suicides, homicides or bailouts allowed. Please keep your hands and feet inside the car, sticking your neck out is optional. Just as long as it’s not mine.
Remember, that it’s all about your perception of ‘credit‘. None of the ‘money’ on Wall Street is real, it’s all paper tiger trash. All tangible assets will still be there tomorrow. Your house and city won’t disappear overnight.
This ‘financial meltdown’ is being done to keep you from real issues; lost jobs, wage, health care, and pension erosion, immigration and the wars on drugs and terror. All of which have contributed to this credit, mortgage and bank dilemma.
The root causes of this crisis is deregulation by the government.
There is a simple solution to this problem. It’s listed below and will pay for itself.
1) Immediate levy of an 80% tax on all incomes over 10 million per year.
Tax rate to adjust down to 30% per $100,000. These rates to be in effect for the next four years. If you made big bucks, you should pay big bucks, no exceptions.
EXAMPLE: Rush Limbaugh will have to ‘get by’ on about $27 million from the $105 million that he’s paid. Either amount is ‘lottery’ money to the average American.
Big actors will ‘take home’ 4 million out of their usual 20 million movie salary. Tough, but they’ll survive. Sell a yacht or an extra house. Taxes were higher than this in the 1950’s for millionaires.
2) Immediate 10% reduction on all government contracts. No exceptions. ‘No-bid’ contracts to be reviewed for revision and imposition of limitations.
3) Immediate 10% reduction on all elected officials salaries in the government (Executive, House of Representatives and the Senate) Since they can’t do their jobs, they deserve a pay cut. They’re lucky we can’t fire them outright.
4) Immediate yearly bonus cap for ALL employees, agents, managers or officers of companies, not to exceed 10% of annual salary. No adjustments or exclusions. This to include shares of stock or any other investment instrument.
5) Price gouging fine of 25%, minimum, on all excess profits from market manipulation for any ‘vital necessity’; such as: energy (oil, gas, propane, coal, electricity, etc.), food, health care and products, and clothing. A temporary price cap to be put into place as penalty for a 3-6 month period.
6) 90 Day moratorium on mortgage rates, to be extended as needed, on a monthly basis. This will allow the market to stabilize over the winter, which is a slow time for sales.
7) Minimum 50% equity share in every business that requests assistance from the government. Government to be first to recover investment when asset is liquidated or there is a return on profits.
IF no action is taken on a fair and comprehensive restructuring of the financial system, then:
ALL AMERICANS SHOULD STAY HOME ON 7 OCTOBER 2008 TO REMIND THE COMPANIES AND THE GOVERNMENT WHO REALLY RUNS THIS COUNTRY!
IT’S ‘WE THE PEOPLE’!
October 7, 2008, is the 243rd anniversary of the Stamp Act Congress. One of the first attempts to insure the rights of citizens of America. Look it up, read about it, learn our history.
TAKE ACTION TODAY; CALL, EMAIL OR WRITE CONGRESS!
We trust in our government to manage our money and provide for our security. When they don’t, we the people must assert our rights to demand proper service.
The proposal above is not perfect, nor complete. It’s an outline of what needs to be done, without putting the entire burden on the average American.
NO BUCS!
NO BAILOUT for UPPER CLASS SWINDLERS!
Tom like that radical plan of yours. Now who else should get paycuts: state goverment employees should get thier pay cut by 10%