Four Bad Bear Markets — so how does our current market compare? Pretty bad.
AP: In downturns over the past 60 years, the S&P 500 has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak. [reblog buzzsuggest]
The Financial Reaper: “Sometimes I hate my job.”
Bernanke Sez: A clever Wordle cloud highlighting Uncle Ben’s latest report to congress.
MyGallons.com aims to let consumers pre-purchase tomorrow’s gasoline, at today’s record prices using a debit-like membership card at the pump — the assumption being that we’ll one day fondly reminisce about $4.00+ per gallon. Its an interesting sign of the times, but I can’t help but question their model: what happens when their escrow holdings (in money market funds and t-bills) cannot outpace the cost of gasoline in the short or long-term? I’m no T. Boone Pickens, but his plan sounds like a better solution than fostering a populace of unqualified oil speculators. [via Springwise]
Lehman Brothers cut its ratings on a number of top entertainment companies yesterday, also lowering its industry rating to “negative”, citing concerns over the economics of media within the ongoing fragmentation of audiences and distribution.
“To be clear, our fear is that the damage that digital distribution inflicted on the music industry will replicate itself in the movie industry, and our fears are too great to justify keeping neutral or positive ratings on the creators and distributors of movie and TV content,” analyst Anthony DiClemente wrote in a research note.
“In reality, while there are many obvious differences between music/audio and movie/video media forms, the core properties of video distribution and consumption are not different enough from music content to continue to justify why movie/TV content will be spared fragmentation.”
The crux of Lehman’s analysis lies in forecasting that the decline of DVD revenues (Netflix CEO Reed Hastings has previously speculated the format could peak as early as 2013) will outpace the growth of new models. Read another way, more focu$ is being given to sustain the life of the familiar than in accelerating the growth of new alternatives.
Translation: the industry must innovate with real conviction, and endeavor to catalyze change rather than react to it with the unwilling trepidation that so quickly brought the music business to its knees. Hollywood does NOT have to cede its future to disruptive technology… rather, it should build itself upon it, become better and more relevant because of it, and lean into the wave rather than bracing for impact.
Lehman’s assumption that movies will follow the erosion of the music industry because they have similar “properties of distribution and consumption” also assumes that Hollywood has learned nothing from recent history. Let’s hope prove they’re wrong.
![General Motors: 50 Years of Flatline [Article]](http://24.media.tumblr.com/8o52Jg11sap4d7honWIayl9o_500.jpg)
General Motors: 50 Years of Flatline [Article]
This morning FORTUNE spilled the beans on a “friendly” $1,000,000 wager between investing maven Warren Buffett and hedge fund middlemen Protégé Partners, in which the Oracle contends that he can best the returns of his opponent’s funds-of-funds portfolio with nothing more than an S&P500 index fund [Vanguard’s VFIAX, to be exact]. The bet — which concludes on December 31, 2017 — is being managed by LongBets.com, with all of the proceeds going to charity.
Warren Buffett, a lifelong disciple of value investor Benjamin Graham (as is John Bogle, Vanguard’s founder), has often stated that the long-term investor is best served by low-cost, diversified index funds rather than expensive self-proclaimed experts:
A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.
My money is with Buffett on this one… quite literally. You only have to dig into the article’s cost analysis, or pick up a copy of Benjamin Graham’s The Intelligent Investor, to see why.
BusinessWeek looks at the universal law of political campaigns, Wall Street earnings, and Hollywood box-office projections: under-promise and over-deliver. “You set expectations as low as possible, telling anyone who asks that you’ll be happy to eke out a small win. The media buys in, and then you revel in the smashing win that follows. In politics, it’s called spin. It’s the same in Hollywood.”
Wallstrip: Video Games vs. Blockbusters
Hollywood special effects house Digital Domain — who has realized the effects for such blockbusters as Transformers, iRobot, Pirates of the Caribbean, and Titanic — intends to go public with an offering of 6 million shares valued at $68.8 million, reports Seeking Alpha. As a result, the company released an updated S-1 filing which offers an interesting, if not grim, insight into the competition and pressured margins of the special effects business.
The visual effects and animation industry is very competitive. There are typically multiple visual effects and animation studios bidding for the same project. The high degree of competition in the market suggests that reputation, size, financial strength and tight cost management will be increasingly important for success.
While special effects have become an essential staple of summer blockbusters, the economics for their creators would appear suffocating: since 2004, the company has failed to generate a profit, with losses of $19.9 million in 2007, $1.67 million in 2006, and $4.17 million in 2005. Digital Domain may not be the best proxy for the industry at-large, however, as reduced capital investment in recent years has ceded power to the likes of Industrial Light & Magic, ImageWorks (SNE) and Peter Jackson’s Weta.
Most interestingly, the filing sheds light onto Digital Domain’s shift toward simultaneously developing effects-driven feature films and video games with the same engine:
It is our intent to focus on entertainment properties that can be exploited through the convergence of feature films and video games, and we have entered into an agreement with Warner Bros. Pictures to produce a digitally-animated “proof of concept” piece for the possible future joint development of a full length animated feature film and video game based on the 1980’s animated television series Thundercats, with both the film and the game to be produced within the common architecture of a video game engine.
Yet it is also quick to point out: “We have no experience producing or releasing visual effects-driven or animated feature films and no recent experience developing video games”. At a proposed share price of $12-14, your money might be better served by simply enjoying their impressive work on the big screen for now.
Related Information:
The San Francisco-based company sold 406 million shares at $44 and will begin trading today on the NYSE under the ticker symbol “V” (for Value?).
I do stuff. Most of said stuff occurs at the intersection of entertainment and technology, with a marketing and strategy twist. This is where I think aloud, look upon the future, and rant about all things interesting and ridiculous. You can reach me at mgriswold[at]gmail.com
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