July 16, 2013 Update

DJIA:15,484 S&P 500:1,683 NASDAQ:3,607 Gold:$1,284 Oil:$106.25 EURO:$1.31 YEN:99.65

Fair and Balanced, As Usual

For the first time in its history, Fox & Friends First has been demoted from the number one to the number two most popular morning show as CNN gains viewership momentum. Unfortunately for News Corp. (NWSA) investors, Fox & Friends is not the only show suffering on the station. Even the once dominate American Idol is seeing its ratings falter. Despite the stock’s outstanding performance over the past twelve months, the Fox Broadcasting Company has been encountering serious problems generating enough revenues to report a profit for the upcoming earnings release on August 5th. According to multiple inside sources, the corporation has been drastically cutting employee hours and hiring more unpaid interns in order to slash expenses and, consequently, inflate net income. The network has internally announced a hiring freeze; which means that instead of hiring full time production assistants, inexperienced interns are taking on the responsibilities of full time PAs and producing shows for free. In addition to squeezing employees, the company has cut back spending on office luxuries like coffee, snacks, and even dish ware for the Green Room. Sources have told me that it’s “embarrassing” for them to host guests that have agreed to be on the show because of how little comfort can be offered. Apparently the celebrities and politicians that frequently guest star have commented on how cheap the network has become. News Corp.’s frugality have left both employees and interns feeling unappreciated, which is no doubt negatively affecting their productivity levels and the quality of output. Although News Corp. is clearly in the process of jumping over a corporate hurdle, I wonder if the network’s recent struggles are a result of political backlash or if they are a representation of problems the entire industry is going through. Could it be possible that other media companies are playing the same expense-slashing game? Or are News Corp.’s profit problems unique? Last earnings season, most companies reported higher-than-anticipated earnings during a period of economic recovery. I believe that companies are feeling pressure to report even higher earnings to prove continued growth in order to ease investors’ fear of the asset bubble bursting. Were the earnings companies reported last quarter simply a result of overworking employees and cutting costs, or did revenues grow organically? Rupert Murdock may proclaim that his empire is “fair and balanced,” but the drivers of their profits may not be as honest as the corporation claims to be. 

Domestic News

• Market Update Futures are flat ahead of data on inflation & the housing market, and also ahead earnings results from Goldman Sachs, Yahoo, Johnson & Johnson, and Coca-Cola. 
• The government will release June inflation data at 8:30, which is expected to be 0.5% and would be the biggest increase in the CPI since February. The core index (which excludes energy and food) is expected to rise 2.0%
• The Federal Reserve will release industrial production data at 9:15, which is anticipated to show a 0.1% increase in June with auto production driving the growth. 
• The National Association of Home Builders will report data on the housing market index at 10:00, which is expected to read at 52 (translating to “good” conditions for builders).  

International Updates

Asia

• Market Update Traded mostly higher as a result of a weakened Yen and investor hopes that Beijing will act to avert a steep decline. 
• China reportedly created 7.25MM jobs in H1 2013, a slight increase YoY. Urban unemployment rate remains stagnant at 4.1%. 

Europe

• Market Update Markets traded mostly lower after Germany report lower-than-expected economic sentiment.   
• German ZEW dropped to 36.3 in July from 38.5 in June, missing consensus of 39.6.

Commodities & Forex

• Oil prices and most precious metals were on the rise as the dollar lost value compared to most major currencies.