Action Comedy TV: Showrunner Matt Nix 
SAG National Board Approves Joint Bargaining … 
BBC Drama Unfreezes Development Money; … 
Lionsgate Board Rejects Icahn's $6/Share 
Is Betting On Box Office Good For Films? 
Marvel Still Looking For Captain America 
'Sopranos' Creator To Film Rock Drama 
LIVE-SNARKING THE 82ND OSCARS... 
'ALICE' IS A MONSTER! $116.3M Blows Past … 
Oscar Not-So-Thriller: Diller Mogul Picnic 
'Precious' Sweeps 25th Indie Spirit Awards 
Howard Stern Won't Be Next 'Idol' Judge 
Justin Theroux Readying 'Zoolander 2' For … 
Mickey Rourke Wooed For Two Big Roles, … 
CBS Reups Les Moonves Through 2015 
2ND UPDATE, New Info Throughout: The Dow finished down nearly 450 points, the S&P down 57, and the NASDAQ down 109. It was one of the ugliest sessions of the past 10 days of butt ugly, with comparisons to the post-9/11 period on Wall Street. The word for Wednesday? "Deleveraging". I've already written how this bottoming out has affected film financing short and long term. (Ouch, MGM, I feel your pain.) But now there's a new worry for infotainment stocks: sinking market value.
GE (NBC Universal) fell $1.67 (-6.66%) to $23.39
Disney fell $.32 (-.98%) to $32.19
News Corp (Fox) fell $.78 (-5.75%) to $12.78
Time Warner fell $.34 (-2.41%) to $13.74
Viacom fell $1.18 (-4.59%) to $24.52
SNE fell $1.67 (-4.96%) to $32.00
CBS fell $.95 (-5.94%) to $15.05
One bright spot? The SEC is finally getting tough on naked short-selling. (See below.) Many eyes are on General Electric, the parent company of NBC Universal: its stock keeps falling because of naked short-selling after being lumped in with the embattled financials (due to GE Capital) even though this is a diversified conglomerate. Here's why this matters: big and small investors from Main Street to Wall Street all have GE in their portfolios. I doubt there's a pension fund that doesn't have at least a 2% position. But as much as Jeff Immelt is pretending to carry on with business as usual, the vultures are starting to circle. I've said it before and I'll say it again: unless and until the SEC cracks down on aggressive if not fraudulent forms of short-selling then every company in a beleaguered industry is vulnerable. Today financials, tomorrow Big Media.
But, finally the SEC has acted on behalf of all publicly traded companies against naked short-selling whereby sellers don't even borrow the shares before selling them, and then look to cover positions immediately after the sale. New rules announced today and going into effect on Thursday will include a requirement to deliver a security by the settlement date. "These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling," SEC Chairman Christopher Cox said in a statement. Short sellers and their broker dealers are now required to deliver securities by the close of business on the settlement date, which is three days after the sale, or they will face penalties. Broker-dealers failing to comply will be prohibited from further short sales in the same security unless the shares are pre-borrowed. That prohibition on the broker-dealer's activity will also apply to all short sales for any customer.
You can trace this latest wave of volatility to when the SEC lifted what had been a temporary emergency ban this summer against abusive naked short-selling in 19 stocks in the wake of the Bear Stearns disaster. That's when Lehman Brothers and then AIG got into trouble. Now Morgan Stanley finds its shares the latest naked short-selling target (down 30% despite decent earnings), and its chairman John Mack is using the media to rally public opinion against the reviled practice. I'm not saying those fortresses of money and their arrogant CEOs didn't make a mess of things all on their own. But their problems were exacerbated by the short-selling piranhas. Now SEC Chairman Christopher Cox is making those temp protections permanent and applicable to the broader market. I say it's about time since too many small investors have been hurt by investing in companies which have lost big percentages of their market capitalizations because of this fraud.
Loading ...
This whole stock thing really sucks…
As the optimists will say: It’s a good time to buy.
It’s also a good time to buy these media companies be the new broom that sweeps clean and bring in fresh blood and fresh ideas.
Nikki, you are partially right and indeed the SEC have changed the rules today on naked short-selling.
However it is not even a major reason these companies got into trouble: arrogant management who were not aware of or didn’t care about the risks they are running and they all turned down deals with the private sector to bail themselves out before losing everything for themselves and their pension fund owners.
It is also unfortunate, but nobody cares about the earnings of a company like Morgan Stanley, it is all about the balance sheets. The simple fact is that nobody knows the value of the assets the financial companies hold. Management say they are worth one thing and everybody else says they are worth something a lot less. And if they are, then the companies are much more risky on a current market basis and nobody is going to lend to such a company where they risk losing everything for a return of a few percent, hence there is a liquidity crisis and unable to raise funds the companies have to dispose of assets at fire sale prices.
I guarantee you nobody has a remote idea how much GE Capital could sell its financial assets for if it was unable to roll over its borrowings, nobody. GE like everybody else used cheap short-term financing to buy higher-yielding complex long-term financial assets and now they are stuck and deservedly the stock price is getting hammered.
The fact that short-sellers are predicting this and acting upon it, is to a large extent irrelevant.
U are such a good reporter
I think it’s a positive thing as well. A good ol’ shaking is exactly what Hwood needs. Studios are best run by storytellers, or at least CEOs who got into this business to tell stories; and not by businessmen.
I see a good future in this town.
Where are there any facts to support the idea that shortsellers are behind any of the current economic problems? Short sellers or not (and the short sellers were right in betting that stocks were over valued), this economy is in trouble because everybody was buying securities backed by home mortgages which could never be paid on time. AIG got into trouble not because of short selling but because they bought billions of dollars of under secured assets.
RICHARD – there is a difference between a true short seller and naked short sellers. It is 100% true and obvious that the naked shorts screwed over these troubled companies. Had it not been for all the naked shorts shorting these stocks, these companies would be able to sell off some of their stock to recoup some loses but because of these naked shorts tanking these stocks they have no choice but to declair bankrupcy and we the tax payers are now paying to rescue companies like fannie may and freddie mac. It also doesn’t help that their credit rating dropped 2 points in a matter of seconds only helping out the naked shorts out. They’re the only ones making money in this market while the rest of the common people(like you and me) lose our money that we invested in these companies. You want facts, do some research and you will find facts.
Thank god Bush never had the chance to invest kids going to schools money in the stock market, which was one of his campaign promises.
Nikki real cool that you caught you on to naked short selling. This form of stock selling has been blamed for all sorts problems within the market. I’ve been tracking the AIG story myself and the treasury gave it a bridgeloan. Even on wall and broad they’re wondering which bank is next. My moneynews newsletter predicts that 1,000 banks can collaspe. I kid you not but I don’t put my stock in predictions. Everyone in tinseltown should pay more attention. Watch CNBC,FOX BUSINESS and Bloomberg News and learn as much as you can. It’s what I do and I encourage everyone here too.
No one complained when all these firms were levered 50-1 to the upside, when the Fed was cutting rates or dumping cash into the system to goose the market and kill the short-sellers.
Lots of shorts (present company included) have lost LOTS of money over the past few years — even though we were 1000% correct that something stank in Denmark and that these stocks were overvalued.
Now it’s our turn. Payback is a bitch.
As has been stated, the problem is not short sellers. This is what happens when a credit bubble pops.
Does that mean we get to knock on Joe Kennedy’s door and get our money back?
I agree, naked short selling or just regular short selling isn’t the problem. Naked short selling must banned via an act of congress and not the SEC so Chris Cox’s new rule will be dropped by the courts. But the thing is that it only postpones the day of reckonining because it is the greedy corporate leaders that are enslaving us.
Nikki – as a media trader of a multibillion $ hedge fund and one who has longs and shorts I simply say going after shorts either naked or legit (I have all my borrow’s secured)is clearly ignorant. I sold long positions (1m shares+ in some cases today) with some of the stocks you named above. Goldman and Morgan Stanley’s lending desks told me they saw significant covering yesterday and today. Now, those two prime brokers saw the largest covering in years. That meant people covered stocks vs the perception that short sellers laid out more shorts positions. I predicted this global meltdown over a year ago – Feb 25th to be exact so this entire event which is far from over has not surprised me at all. I used to live in LA and typically Hollywood’s self importance thinks it’s all about them. I love also how people blame politicians like Bush. Is it Bush’s fault China’s stock market is down 60% in the past year and the Government has banned any websites that talk neg about stocks? Is it Bush’s fault the Russian market is down 55% year to date and the Government closed the markets for two days? Does anyone remember Clinton’s last year with the stock market collapsing 30% in the fourth quarter? Stop blaming short sellers and blame the people who ran all the companies poorly with bad risk management. And to all the Hollywood people – make good movies, tv shows and we won’t have a reason to short your stocks! “Go ahead…Make me cover.”
longride –
You seem like a smart guy, so I’m surprised that you don’t understand why our market, China’s market and Russia’s market are all connected. The “fault” lies with the U.S. central bank’s monetary policy. Up until today, the dollar has been the world’s reserve currency and our economy is the lever that controls all the others. Our GDP accounts for 25% of the world’s GDP by itself, so when we create massive imbalances, it’s impossible for the rest of the world to be escape the effects.
The credit bubble that is now collapsing was caused, pure and simple, when Greenspan’s Fed kept interest rates artificially low during the three to four years post-9/11. And you can bet that Greenspan was under pressure from the Bush administration to keep that rate low to spur the economy — because every single branch of government was under pressure from the political arm of this administration in a coordinated effort to ramp up the military money machine.
As Nobel-prize winner Joseph Stieglitz has publicly said, there is a direct connection between the credit housing bubble and the financing of the Iraq War. Instead of raising taxes to finance the War on Terror, the Fed (under the direction of Bush/Cheney) flooded the U.S. with cheap money. It was a catastrophic fiscal decision — and the days of reckoning have begun.
Why do you think Paul O’Neill, the Secretary of the Treasury, resigned in 2002? He wouldn’t go along with the plan — turn on the money spigot, make everyone feel rich with their soaring home prices, and the citizenry will be too fat and complacent to say no to $200 Billion a year in war spending on the next generation’s credit card.
Was that “Bush’s fault”? If you define “fault” as “culpability for the consequences of the intentional choices of his subordinates,” then, um, yeah, it’s Bush’s fault.
The Bush Paradox is that by being a total trainwreck of a leader, Bush has illustrated the useful function of government: policies have consequences, and bad policy has catastrophic consequences.
Jmay
Well, I wasn’t really looking for a political discussion as I was thinking more about how people blame short sellers and why the media stocks are down but I agree with you about the Fed and easy money. Look I can blame Bush for a lot of things but I’d lay more blame on Greenspan (who is no fan of the Bush’s if you have read his book). Every President he has served under (4 of them) all have asked for lower rates since it spurs on the economy. As far as financing the Iraq war – it’s been less than 1% of the GDP and likely less than that. Look what Bush inherited – a bubble bursting – just like the next President will inherit. I would lay total blame on Greenspan and the Fed as they created the tech bubble and the credit bubble. Greenspan by the way takes no blame! He felt he could inject money in at 9am everyday (I watch the Repo action closely) and cut rates to avoid the recession from the tech bubble wreckage. He did allowed the $ to get killed in order to push the world to buy cheaper US goods and services. That lifted commmodities and generally helped see an inflow of funds to foriegn and emerging markets. As far as housing, this was the same mania as other times brought on by cheap money borrowing. The bottomline is you can blame Bush, Greenspan, whoever but people in this country need to take responsibility for the high debt levels in credit cards and home mortgages they themselves incurred. I am not a fan of bailing companies out or consumers for that matter. The next President will make bad policies as well. We’re screwed. Have a nice day.
Short selling, whether naked or not, is only a bad thing when the sellers are manipulating the market by spreading false rumors. There’s NO evidence at all to suggest this has been happening.
In fact, if we had more short sellers in the past couple years, the housing bubble never would have gotten so bad. Whether you’re betting that stocks will go up or down, you’re adding information to the market. This helps things as long as you’re not spreading false rumors.
jmay, thank you for that well thought out explanation. I whole heartedly agree. The US, and by connection, the world economy was and still is a house of cards. The banks were leveraged in some cases 50-1 based wholly on what turned out to be misconceived and somewhat imaginary worths of homes and assets. Being overlevered is fine until something goes wrong, and in a house of cards, once one card falls, well, the rest is bad news.
The most unfortunate part of all of this is the lack of education by the average, and even above average and well-educated Americans. Look, I don’t defend the banks or the lack of regulation in the mortgage and credit crisis or the Bush administration, but an individual going out and financing 100% of a $3m home using an adjustable mortgate is just plain ridiculous unless they had the cash flow, which requires a good amount of cash flow. The mortgage mess is a result of greed on all sides (consumers wanting what they can’t have, lenders believing they can continue making high margins and hedge funds using mortgage backed funds as collateral to make huge trades in other markets).
The credit crisis is terrible and 1,000’s of jobs will be lost and millions of people worldwide will be effected, but I think we need this sort of jolt. The world needs to start thinking about how to properly do business and the United States needs to start learning how to operate within its own means. We have become a nation built on nothing. Thousands of investment bankers, traders and consultants make huge amounts of money based upon assets that only have value because someone is willing to believe they do. But, once people see the real value of these “assets”, things fall apart.
The issue that is really interesting now is how far does the government go to keep certain business afloat. Was the AIG bailout the right thing to do? Certainly, there is no argument that a corporation as large as AIG with such a wide reach would be disastrous, but can we keep sending this message to corporations that if you take a risk and make money, that’s great, but if you are wrong, we will help you out. At some point mommy and daddy need to stop bailing out the kids and let them grow up on their own. I am not an expert and I am not in the finance industry, but I think that the worst is yet to come in this financial crisis. And, with the Presidential election upcoming, bad could become catostrophic.
A friend who works as a tax lawyer just joked, what’s next, on our tax returns our refund options will be 60 cents on the dollar in cash or 1:1 in shares of fannie, freddit or AIG?
I hope that things dont’ get worse, but I fear bad things are too come.
Let me say it again. Blaming the current “volatility” as Nikkia says it on short sellers is nonsensical. The problems with the economy are systematic caused by a variety of reasons, the most prominent being the sub prime lending and real estate bubble situation and the spending on the Iraq War. And the Wall Street geniuses made short term profits without any view toward the long term instability of their machinations. It’s possible that some short sellers contributed to telescoping the time frame for the meltdown but if anybody believes that this economy is sound except for the actions of the short sellers, I have some credit swap guaranties that you can buy at a fire sale price.
re: the Bush stuff, we don’t know what any other president would have done in his situation. But we do know what Bush did, and that was exert all the political pressure he could on the Fed to keep interest rates low and the economy seeming healthy when in fact it has been very sick for the past 3-4 years. Anyone with an interest in financial markets and a brain could see this coming – it was just a question of when. Bush et. al’s actions here were completely consistent with everything else he has done in office – spend, spend, spend like a drunken madman because after all you’re out of office in eight years and the bill isn’t going to come until you’re long gone. It’s classic slash and burn. “Well I’M not gonna be around when the shit hits the fan.” Luckily he at least caught this one while still in office, but crisis #2 is going to be worse and he’s in a very large way responsible for it as well.
#2 is our debt servicing, which is really going to kick in due to the extra $5 trillion he’s added on to the deficit. What we’re seeing today is a correction, albeit a very very very painful one. The debt is going to be a flat out catastrophe if we don’t change and fast. In the future we’re no better than the #2 economy (prob #3 if we include the EU) with massive debt to a very aggressive country with the #1 economy, and significant political/cultural differences between us. It is going to be very ugly for our children who will HAVE to pay off all the debt we’re incurring – or borrow even more. Sooner or later the lenders stop lending and then the shit really hits the fan, all because the generations of the last 30 years wanted expensive wars, cheap oil, low taxes, and lots of services, but weren’t too big on the idea of paying for all that.
let is rain, you’re obviously a shortseller because only a shortseller would so hilariously refuse to acknowledge why Wall Street is so fucked up. Half this shit is the fault of the shorts who sell stocks they don’t even own just to make money themselves and to laugh as they fuck over the REAL investors. The other half of this shit is the fault of incompetent CEOs who, like Zucker at NBC, fail upward and rake in the cash doing so. And both are all about the greed of a chosen few. All this shortseller talk about a company being “overvalued” is such bullshit because how can a company’s worth – and be honest now though I know it’s hard for the like of you – to drop millions of dollars in a day when nothing has changed? It can’t. It’s just the work of greedy scum-sucking shortsellers. And we all know how most of them got their jobs – the same way a lot of actors get jobs – bending over.
>>Short selling, whether naked or not, is only a bad thing when the sellers are manipulating the market by spreading false rumors. There’s NO evidence at all to suggest this has been happening.<<
BWAHAHAHAHAHAHAHA!
Oh my God. You really ought to be writing comedy for a career. I hear Two And A Half Men is in desperate need of some comics. I laughed so hard I think I just wet myself.
The SEC under Cox brought a lot of this on themselves because they are responsible for the increased volatility in the stock market. And they are not addressing the initial problem that they caused. This is a copy of an email I sent to clients and friends on July 27, 2007:
“NO TICKIE, MUCH SICKIE by Don Coyne
The powers that be seem excessively cruel;
They’ve abolished the required uptick rule.
And so the market seems more of a beast
Since daily ranges have now increased.
As shorting traders go to town
And push the market further down,
They’ll also help each rally extend
As covering comes in to help the trend.
It now will test most traders’ ability
To cope with the increased volatility.
Earlier this month the short uptick rule – which only allows short trades to take place when a stock trades higher than the previous trade – was eliminated by the SEC. Now any individual stock can be shorted all the way down. I don’t know what they were thinking, but it does seem likely to contribute to more and greater wide-range days.”
Don Coyne
Coyne Capital Management
dscoyne@hotmail.com