Daily Market Update – August 6, 2014 (Close)
With another morning getting ready to get off to a negative start, there were some significant events that could have been causes for concern today.
The first two were really pretty unusual. Both 21st Century Fox and Sprint had withdrawn their buyout bids for Time Warner and T-Mobile, respectively.
There can certainly be a myriad of reasons for having done so, but it just doesn’t happen that often. Pfizer did so recently, but that was very complex, including a reluctant target, British regulatory factors and potential backlash from its planned tax inversion.
Usually once a company sets its sights on another company there’s a battle ahead if the target expresses reluctance. You don’t often see the suitor just walking away.
In the case of the Time Warner deal it’s entirely possible that Rupert Murdoch isn’t interested in what could have been a prolonged battle. After all, how much longer would it then take for him to even see benefits from such a deal? All the money in the world may not buy you time when “natural causes” is staring at you.
In the case of T-Mobile, Sprint may have realized that while with a merger they would have gotten the talents of John Legere, on the negative side they would have gotten John Legere.
That may have been enough.
Much more ominous would be the realization by both potential suitors that their targets were already fully priced. It can’t be entirely lost on people that Murdoch’s previous large acquisitions have come at precise market tops.
Then there’s the matter of Italy slipping into recession. Although it’s not as if they have had the most dynamically growing economy over the past 25 years, a recession is good for no one.
Meanwhile, Germany has announced a cancelation of a defense deal with Russia and Russia has blocked sales of some Brown-Forman products, such as “Jack Daniels,” due to “sub-standard quality.”
So that was the backdrop for this morning, as we came off another large loss that followed what may have been some illusory gains on Monday.
Yesterday’s decline saw some disagreement over the root cause.
There were those that said the decline was due to comments from the Polish Prime Minister regarding the prospects for an imminent Russian invasion of Ukraine.
Others believed that the decline was due to technical factors with the S&P 500 breaching support at 1926 and immediately dropping 6 points as algorithms started selling programs.
Of course, no one thought that maybe the interplay of the two was at hand, because that would be giving credence to others and other ideas.
The hope was that today might ignore the early signs that pointed toward a negative day and look at the bright side of lower prices as it has done on so many previous occasions over the past 20 months.
Well, one for two isn’t bad.
At least the early drop was largely ignored, although there were some really large droppers, today. But as far as taking advantage of some of the even further depressed prices, neither I, nor anyone else seemed to be in that sort of mood.
Tomorrow? Maybe, but first we have to see what the ECB does and we will likely take some cue from them at least to start the morning.