Equities
Let’s get started in the equities sector, which suffered one of the worst weeks in recent memory, with Thursday’s market action dropping the benchmark S&P 500 index to 1,833 points, down more than 2% against the prior session. The Dow Jones shed nearly 270 points, and is now 1.62% below its January opener. However, the laggard continues to be the NASDAQ, which after suffering a 3% loss in valuation marks its worst performance since November of 2011.
During intra-day trading, 99% of the NASDAQ 100 index all saw red, indicative of a comprehensively severe reversal in prior bullish sentiment. Reasons for the downtrend include a volatile options expiry season, a mass rotation out of so-called “momentum” names into venerable value plays, and geo-political instability.
Precious Metals
Not surprisingly, gold and silver finally broke away from their short-term doldrums, closing at $1,319 and $20.04 respectively, and recent developments should be long-term bullish for the metals. However, don’t overlook palladium, which closed on the bid at $788 and may launch even higher due to potential threats of Russian nationalization.
GM’s Faulty Ignition Switches
On the domestic front, one of the most controversial issues to hit the American corporatist landscape was General Motor’s handling of a vehicular defect that is directly tied to the deaths of 12 drivers. In an attempt at damage control and reputation restoral, GM’s CEO Mary Barra issued a testimony before a Congressional hearing. Unfortunately, the court of public opinion was not swayed, and Barra herself was the subject of a parody skit on Saturday Night Live.
At the heart of the matter is a faulty ignition switch which allows external stimuli, such as poor road conditions, a jarring impact, or excessive weight attached to the ignition key, to forcefully move the ignition switch out of the “run” position. The resultant action leads to an engine shutdown in mid-drive, along with many of the safety features that are electronically operated.
In response to the confirmed tragedies that were caused by the defect, GM issued a recommendation that car owners should avoid weighing down their key rings with anything more than the key and fob, according to a Reuters article. However, the contention amongst government officials and industry watchdogs is that GM knew about this problem much earlier and failed to respond substantively until their customers suffered injuries or fatalities.
Very few are going to completely side with GM : the American people have been screwed over by every color of the corporate spectrum and this appears to be yet another example of white-collar malfeasance. That said, this is also a classic struggle between government oversight and personal responsibility.
An ignition switch is a catalyst, not a coat-hanger, and as such, is not designed to handle the weight-load of your house keys, your mailbox keys, your titanium alloy flashlight, and whatever else that people dangle onto their ignition switch. Unfortunately, the poor choices that some of us make may now result in further government interference that affects all of us.
And that will do it for this edition. Thanks for watching, and we’ll see you next week!