If you don’t think the Fed and other central banks have transformed financial markets into debt besotted gambling casinos, consider the last few days of carnage in the media stocks. That sector is rife with bubble finance infections.
To wit, hedge fund speculators feasting on zero interest carry trades and cheap options own 10% of the 15 companies which comprise the SP Media index. That happens to be the highest hedge fund ownership ratio among all 23 SP industry sectors.
So given that the essential modus operandi of hedgies is leveraged gambling, not hedging risk, it is not surprising that they have ganged-up on the media stocks. Indeed, as Zero hedge noted with respect to this week’s sharp and unexpected sell-off:
The love affair between hedge funds and media stocks is being tested. As Bloomberg reports, hedge funds have been near-constant champions of the industry, drawn in by its high cash generation and buybacks, takeover speculation and the straight-up momentum of the stocks themselves. This week’s retreat represents the sharpest rebuke to that thesis — and one of its only setbacks in a bull market well into its seventh year.
Indeed, it has been a perfect fit. These companies—–such as Disney, Time Warner Inc., Fox, CBS and Comcast——are notorious financial engineers, using massive amounts