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Quote of the Day
“I think a simple rule of business is, if you do the things that are easier first, then you can actually make a lot of progress.”
– Mark Zuckerberg, Who on this day in 2018 would see his net worth decline $16 billion as Facebook stock plummets.
(I think this rule applies very nicely to investing as well!)
July 26th – This Day in Stock Market History
July 26th, 1934 – U.S. stocks fall 6.6% after Austrian Nazis kill the country’s chancellor and take members of the cabinet hostage.
As Italy and Germany both stage troops at the Austrian boarder, investors fear that another world war is imminent.
(Recall that the assassination of Archduke Franz Ferdinand of Austria on June 28th, 1914 was the ignition of World War 1.)
Thankfully, tensions would dissipate and the U.S. stock market would continue its recovery from the great depression low it had set less than two years prior:
July 26th, 1957 – The Soviet Union tests its first intercontinental ballistic missile.
During this period, as the Cold War really began to escalate, many believed that the United States was falling behind the Soviet Union.
3 months later, the Soviets would spook investors further by launching Sputnik.
U.S. stocks would fall 15% by the end of the year as worries about the Soviet Union’s superiority, and concerns over a future potential conflict rise.
July 26th, 2018 – Shares of Facebook fall 18%, wiping out $119 billion off of the company’s market cap. It would be the largest single day decline in a company’s market cap in history.
The decline came after Facebook missed their revenue target for the quarter, and lowered guidance.
Facebook closed the prior day with a market cap of $630 billion. It closed this day with a market cap of just over $510 billion.
You can listen to the conference call that sent the stock tumbling, here.
At one point, shares were down nearly 25%!
One year later, and shares are still about 10% below where the closed before this massive decline:
In case you are curious, prior to Facebook’s decline on this day, the record for largest single day decline in a company’s market cap belonged to Intel. One day in September 2000, as the tech bubble burst, saw Intel’s market cap decline $91 billion!
Best July 26th in Dow Jones Industrial Average History
1933 – Up 2.39%, 2.22 points.
Worst July 26th in Dow Jones Industrial Average History
1934 – Down 6.62%, 6.06 points.
Read of the Day
Facebook became the behemoth that is it today primarily due to the ‘network effect’. In essence, network effect describes a company that becomes more valuable as more users use the company’s product.
The effect was first described in a 1974 paper, written by Bell Labs researcher Jeffrey Rohlfs.
However, it was not until the technology bubble that the network effect became everyday discussion for investors, helping propel many technology company’s values into the billions during the late 1990s tech bubble and today.
Inventor, developer, and investor Marc Andreessen (founder of the Mosaic web browser, Netscape, and backer of many other tech startups) has a great blog post on the Network Effect here:
The blog post is also the source for this very cool and informative infographic:
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