Daily Market Update – June 26, 2014




Daily Market Update – June 26, 2014 (9:00 AM)

Yesterday was really a day that had government imprints on just about everything from before the opening bell until after the closing bell.

It started with a government decision regarding oil exports that significantly hurt the refiners across the board.

Then came the Supreme Court decision that may have killed off Aereo and its technology while boosting the networks and local broadcasters.

Finally, there came an IRS ruling in favor of Iron Mountains quest to be considered a REIT. That battle and open question had been going on for at least three years and the sudden spike in its option premiums suggested that some kind of decision was forthcoming.

It would otherwise likely have been a very quiet day if not for those stories that continue this morning with allegations by the New York State Attorney General against Barclays and its “dark pools,” Most people would believe that whether a violation of the law or not, Barclays wouldn’t be the only one involved.

The latter two of yesterday’s decisions were known to be coming, it just wasn’t exactly clear when they would be announced, nor what the decisions would be. The oil exporting rules came as a complete surprise, not just in timing, but in content, as well.

Ultimately, whether you’re on the right side of the wrong side of a government decision it’s an unsettling way to go about things. You really can’t get any closer to pure gambling as you’re fully dependent on a decision that is going to move markets in one direction or another, with very little chance of leaving the stock unchanged.

Even worse, there are no leaks or well placed rumors to give any ideas of what is to come. Watching SBGI in the days before the decision was released was pretty laughable as the shares alternated between going higher and going lower on multiple occasions on an intraday basis. People were simply guessing and rushing to place their bets.

While that may have been the case for IRM and SBGI, it wasn’t really part of the equation for those with positions in the oil refiners. Doing a quick glance at four of the major refiners there was a market capitalization decline of more than $10 billion on yesterday’s unanticipated news and then its unexpected content.

Today doesn’t seem as if yesterday’s theme will have legs, as it’s a new day and one beginning to appear as if it will have no catalysts nor any new big stories, save what may further develop from the Attorney General’s office.

While government intervention is certainly needed it can raise havoc with markets whether through direct intervention or indirect. It’s much easier to navigate the markets when the intervention is below the radar and more geared toward creating a liquid and credible environment for trading.

Yesterday was a bit heavy handed. In the case of Aereo, it’s not even very clear that the Justices understand technology nor considered the history of the development of television, its transmission and reception. Their decision, as reflected in Justice Breyer’s eyes, was as much about definitions and drawing parallels to existing models as through an interpretation of the law.

For those old enough to remember “rabbit ears.” the Aereo is essentially a  new iteration of rabbit ears that allows transmission through public airwaves to be delivered through an internet connection. They charge a monthly fee for that service. The broadcasters claim that they are pirating protected content and charging for that content.

Go back 60 years as television was being introduced and those broadcasts over the public airwaves were worthless without antennae. The only difference between Aereo and those antennae makers of days past is that the latter didn’t lease out their products. They sold them. Had they chosen to follow a leasing model today Aereo would be nothing more than a mobile version of an old product and sales model. You paid for the product that captured protected content back then and Aereo was just evolving the relationship to a new device, unforeseen 60 years ago.

But because the past was as it was the future will likely be deprived of a new technology and some businesses suffer and others prosper, as a result.

And investors, too.