Notes From Underground: Was it Really a Fat Finger Mistake by Google?

The equity markets began to sell off as the rumor of an early release of Google’s earnings proved to be correct. The earnings were significantly less than the market consensus and thus Google stock dropped 13% quickly, bringing the Nasdaq and S&P indexes down with the heavily weighted technology giant forcing a market wide sell off. My take is that this was not a mistake but Google testing the market.

Remember that Google has previously shown its animosity toward Wall Street conventions by doing its initial offering by Dutch auction on-line. It may have wanted to test the impact of a negative earnings report on the markets while they were open and let it digest the news rather than having the post markets with limited liquidity set the tone for the morning’s opening. If Google did have a plan of this nature, it would have proved very productive for while the Nasdaq remained very weak the DOW and S&Ps both regained much of their Google-inspired losses.

My opinion is supported by the recent comments by Marc Cuban, the successful technology and media entrepreneur who has been criticizing the High Frequency Trading combine and Wall Street in general. (Cuban believes that the capital formation purpose of the stock market has been turned into a casino by the high-speed traders.) Whether my conjuncture is correct, I believe that the overall market outcome a positive result. The definition of insanity is continuing doing the same thing over and over expecting different results. Maybe the Google error will yield an unpredicted positive outcome.

***The Financial Times had an article on its front page, “France steps in to save Peugeot unit–financing arm.” The story has to be on our radar as it reflects the disposition of the Hollande government. Merkel and the French are battling over austerity plans and a fiscal union, but the Hollande’s socialist government will not destroy the economy to placate the tough budget tightening stance of the German’s. The Peugeot financing group is important because it can bring down the entire corporate edifice in the same way that GMAC and Chrysler financial helped to signal the death knell of the U.S. automakers.

The article goes on to say, “France’s Government is likely to use any aid for Peugeot to put further pressure on the company over its redundancy plans, although it has all but accepted the carmaker’s proposal to close the plant at Aulney, near Paris.” A socialist government with +11%unemployment is not going to force workers to be laid off–austerity is not for the French. This is confirmed by the EU summit that is taking place today and tomorrow.

The FT reported that divisions between France and Germany deepened over the idea of a quick implementation of a banking union. Chancellor Merkel is proceeding with caution but Hollande insists, “the topic of this summit is not a fiscal union but the banking union, so the only decision that will be taken is to set up a banking union by the end of the year….”  It seems that President Hollande is taking his negotiating stance from Wimpy of Popeye cartoon fame: “I would gladly pay you Tuesday for a hamburger today.” The Euro crisis is far from over and will play out for a long time.

***ArcelorMittal announced that it wanted to sell 30% of its Canadian iron ore mine in Quebec. As iron ore prices have dropped dramatically it appears that the global steel conglomerate took on a great deal of debt in buying up its global competition. This is an important story because of the credit issue and for the potential impact on Australia. In present market conditions there is just too much iron ore and steel making capacity. We will watch to see if the Chinese mining companies or Sovereign Wealth Funds step in to secure a foreign holding and gain the needed raw material base. Some analysts maintain the today’s weakness in the Canadian Dollar was due to this news. I am skeptical as it may well be a bullish outcome for Canada’s natural resource industry.

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7 Responses to “Notes From Underground: Was it Really a Fat Finger Mistake by Google?”

  1. Eric Harbor Says:

    Marc Cuban is also successful in the sports arena taking a lousy Texas team to National Champs. He helped show how “importing” talent from Europe and teamwork can overshadow “Dream Teams.”

    And like the way how rational explanations are presented on market phenomenons as opposed to scary premonitions in some prominent news sites. Boy it’s late.

  2. Mario Says:

    Thanks Yra…Yet again another side to side shuffle for the Eropeans….Where do we expect the capital markets to be while we head into the headwinds of Europe, Brics, US elections etc?

  3. Mario Says:

    What does this mean for Europe fate? European leaders early Friday agreed to have a new supervisor for euro-zone banks up and running next year, a step that will pave the way for the bloc’s bailout fund to pump capital directly into banks throughout the single-currency area.

  4. yra Says:

    Mario–too early to comment on what supposedly comes out of another summit–more important will be the sunday election in Galicia Spain

  5. abee Says:

    so you think the whole DHR stuff is not real. Could be and you are correct GOOG has no love for the financial markets. But its not the first time something like this has happened. maybe 7 years ago yahoo released a NFP 2 min early.

  6. Joe Says:

    (Cuban believes that the capital formation purpose of the stock market has been turned into a casino by the high-speed traders.) Agree with that.

  7. yra Says:

    Abee–yes we have seen it before as you cite–but GOOG is the beacon of the utility value of the tech world and I find it not having firewalls to prevent such a happening specious—I know it was DHR but if that is the case no wonder there is so much insider trading because there are too many hands touching”significant” data

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