On this day in economic and business history...
The Dow Jones Industrial Average (INDEX: ^DJI) reached an all-time high of 14,164 points on Oct. 9, 2007, exactly five years after reaching a post-dot-com low of 7,286 points on Oct. 9, 2002. This bizarre coincidence of timing -- the only one in more than 100 years where a bull market began and ended on the same day of the year -- bracketed one of America's wildest periods of financial excess, as investors swarmed into housing bubbles inflating across the country to recoup the losses they'd sustained on dot-com IPOs gone bust.
There was nothing particularly remarkable about this bull market from an investment standpoint. Its length was slightly above average, its total gains slightly below average. The growth of the market's valuation during this period was also quite modest and far lower than that seen during the dot-com boom. However, the Dow's continued rise, in the face of growing evidence that something big and dangerous was lurking just around the corner, is somewhat unusual for investors used to the market reacting to macroeconomic trends before they become readily apparent elsewhere. Warning signs began flashing bright red in the overheated mortgage market at the start of 2007, and eagle-eyed observers had sounded the alarm far earlier still.
Even as the full scope of the crisis began to unfold, the Dow stubbornly clung to its gains -- the index was still only 15% below its October 9 peak after news broke of Bear Stearns' collapse in the spring of 2008. It was not until Lehman Brothers filed for bankruptcy that the Dow finally fell 20% below its October 9 peak, signifying a true bear market rather than a mere weak patch. It was almost all downhill from there. By the time the bear market ended, the Dow was 54% below its highs, which was only the second time in the index's history that a decline shaved off more than half of its value.
Google (NASDAQ: GOOG) acquired YouTube on Oct. 9, 2006. The $1.65 billion purchase, announced less than two years after the upstart video-streaming site went live, received a mixture of criticism and praise, as many analysts had a difficult time properly valuing a service still in the early stages of explosive growth. Google's then-CEO Eric Schmidt himself pegged YouTube's value at about $1 billion lower than its price tag in later legal filings, but defended the premium paid as a necessary cost of simply getting there first. At the time of the buyout, YouTube's sale price was roughly 100 times its annual revenues.
However, YouTube's leading position -- it controlled roughly half of the Internet video market in 2006 -- has only strengthened over time, and so too has its value to Google. By 2012, 3 billion videos were played on YouTube each day, and its massive user base was uploading two days' worth of new content every minute. A Morgan Stanley analysis conducted in 2013 found that YouTube would generate roughly $4 billion in revenue that year and would produce more than $700 million in operating income. That's a roughly 250-fold increase in revenue from the time of its purchase, and this impressive hold over the world's eyeballs led the investment bank to project that YouTube's value as a stand-alone entity would reach $20 billion by the end of the decade.
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The Fox (NASDAQ: FOX) Broadcast Network debuted on Oct. 9, 1986. It was the first time the Big Three broadcast networks had encountered any competition from a fourth network since the mid-1950s, and unlike earlier efforts, this one was backed by Rupert Murdoch's sizable fortune and fierce determination.
Murdoch's News Corp. had acquired 20th Century Fox in 1985, and just two months later it bought six major-market independent TV stations, laying the groundwork for an integrated broadcast network that could both produce and distribute content over the airwaves. Clearing regulatory hurdles and organizing the network took another year, by which point News Corp. had control of broadcasting that would reach 22% of the American population. The first program to air on the new network, a late-night talk show hosted by Joan Rivers, gained impressive early interest but soon cratered.
Fox expanded its lineup in 1987 with primetime programming, featuring both Married... With Children and The Tracy Ullman Show, which served as the launching pad for The Simpsons, then an animated short. When The Simpsons debuted as a 30-minute show two years later, it (and other programs) established Fox as the home of a different sort of entertainment, which effectively counterprogrammed the Big Three and brought News Corp. more enduring success than earlier "fourth networks."
The Fox network became one of the centerpieces of a newly independent 21st Century Fox when that company was spun off from News Corp. in mid-2013. The new company's first annual report credits the Fox television network, which earned $4.9 billion in its 2013 fiscal year, with 18% of 21st Century Fox's total revenues.
William Shatner's breakout role, before he became Captain Kirk, was "Nightmare at 20,000 Feet," a Twilight Zone episode in which he is hounded by a gremlin on the wing of his airplane. This short scene would have been impossible when Shatner was born in 1931, because two key inventions were first required to make widespread commercial air travel a reality: the jet engine and the altimeter, which was first demonstrated on Oct. 9, 1938.
The device, developed by AT&T's Bell Labs and installed in a converted United Airlines transport aircraft, was the first to provide pilots with accurate readings of their height above the Earth's surface, and is thus why the Twilight Zone episode was able to be so specific with its titling. The demonstration was explained in The New York Times the following morning:
An instrument that will add immeasurably to the safety of airplane flight, and may conceivably be modified and developed as an aid to anti-aircraft equipment and technique, was demonstrated over New York City yesterday for the first time. ...
It is said to be the first successful altimeter showing terrain clearance. The barometric altimeter, used in all planes today and considered perhaps the most important of all flying instruments, gives only the height above sea level. ...
Using the shortest radio wave ever employed for aviation purposes, the operation involves the transmission of a radio signal from the plane toward the ground, the reflection of the signal from the earth back to a receiving set in the plane and the measurement of the elapsed time between transmission and reception. This time is translated into feet and shown immediately on a dial.
The device's value was immediately apparent once the test aircraft began to climb above a nearby hillside. How catastrophic to be flying in the fog, with a reading of 5,000 feet in elevation obscuring the fact that a mountain range is rising beneath the aircraft's wings? The prototype was too large for ordinary use, but its developers at Bell Labs anticipated improvements that would soon make it feasible for regular service.
World War II helped spread this development far faster than any civilian application would have -- by war's end, the world's combatant nations had built more than 900,000 aircraft, a truly astounding number when compared to typical modern air forces that are measured in the hundreds or low thousands. Today, accurate altimeters are standard in aircraft of all types, helping ensure that whenever there's a gremlin on the wing of our airplanes, we'll know exactly how high off the ground we were when we saw it.
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