Bond traders want to float contracts based on Hollywood box-office receipts

Bond traders Cantor Fitzgerald want to create a marketplace for trading box-office "contracts" -- bonds based on the performance of giant goofy Hollywood blockbusters. Max Keiser, founder of the old Hollywood Stock Exchange, has this to say: "HSX futures will actually drive the price of stars and the industry DOWN, just like introducing futures contracts in Japan in 1989 top-ticked that market and it dropped from 40,000 to 8,000 and never recovered... Hollywood studios will be able to 'short' their rivals stocks and thus drive prices lower for everything across the board. This is NOT GOOD for Hollywood. What file sharing leaves behind will get blown apart by studios shorting each other's projects trying to drive 'perception.' Just like in Japan: Cartels and Keiretsu who supported each other for decades turned on each other when annonymous futures gave them an opportuntiy to short each other without 'losing face.'"

Cantor Fitzgerald has filed an application with regulators to launch an exchange that will allow users to hedge and speculate on the financial performance of movies.
Cantor says that subject to approval from the Commodity Futures Trading Commission (CFTC), its exchange's first traded product will be "Domestic Box Office Receipt" contracts.
The contracts - expected to be listed in the first quarter of 2009 - will offer film finance professionals and traders an opportunity to hedge and speculate on the ticket sales of major film titles.

Cantor speculates on box office entertainment (Thanks, Max!)

I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.

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Ian70

The solution to this potential problem is the same as the solution to many other potential problems:

BAN STOCK SHORTING!!!!

Or at least think about it. That is all.
Takuan

heh heh…. oh yeah, this is a natural for Hollywood. It’s as if everything had been evolving to this end. All those cliches about “a long narrow celluloid money trench where pimps and thieves run free and good men die like dogs in the street”, “turns all men into cowards and all women into whores” , that Tom Cruise producer portrayal in Tropic Thunder, all fair, all true.
sammich

Takuan @ 24 – I think you’ll find that we women are allowed to opt for virgin, mother, whore or crone…
Dillo

The temptation here to buy into to this market and short the HELL out of it is almost too much.

“Stock Markets?”
‘Yes’
“Currency Markets?”
‘Yes’
“Commodities Markets”
‘Yes’
“Small countries?…”
‘I might even be able to crash the whole system…’
Takuan

come over to the oviparous side, liberate yourselves!
presterjohn

http://www.maxkeiser.com

follow the money
amoration

Every market is gamed, especially HSX — it’s a market about a gamed industry. I took up HSX playing, numbers and writing in the 90s as a way to learn quickly about markets and the movie industry. HSX became an easy way to learn how to handicap a film two years before it ever hit the theatres and spot the sure buys and sells.

Stars and films would get the short when it was evident that they were in tank mode, struggling after a high point in their career. HSX basically puts public opinion about future bankability into cold, hard numbers that can be quite cruel to performers. It’s not a system set up to benefit anyone in the industry, and Cantor Fitzgerald has a lot more games going on beyond this betting platform.

The HSX system most benefits those looking for new bargains with advertising potential and other industry insiders who need quantitative research without great expense. Adding real cash to the mix is akin to sports betting; the market language is an easy way to talk about the bets made in the game but the system itself is as gamed as trying to produce a major studio film in Hollywood.

Not to say that HSX wasn’t fun….if you want to play a game within a game with real $ on the line go right ahead; I’m sure there’s an old pro at the game who will gladly take your money.
Stefan Jones

There’s one thing we can count on in these uncertain times: If . . . sorry, when these instruments go bust and ruin a bunch of pension funds, Rush Limbaugh and Anne Coulter will find a way to blame it on Mexicans and blacks.
Church

Jennifer Openshaw, president and co-founder, WeSeed, says: “By leveraging the power of community, the 100 million Americans who don’t currently invest can learn the basic fundamentals of stock investing and become smarter, more confident, better informed and even more competitive in their jobs.”

This isn’t a joke? Really?
TJ S

Wow, I feel slimy just reading that.
zuzu

I thought Max Keiser already founded the Hollywood Stock Exchange (HSX). :p
zuzu

Ha, whoops, that’s what I get for posting before reading more than the headline. Insightful commentary by Max though. :)
mwendell

I can’t believe this. The financial mess we’re in right now is, in a very large way, due to this kind of crap; financial instruments based completely on some kind of unrelated indicator. Just like CDS’s, where people were essentially buying insurance on bonds that they didn’t own, it’s simply gambling, nothing else.

We should find a way to make all financial instruments represent something real. A mortgage is a loan on property, a stock is an ownership stake in a company, etc. Everything else is just legalized gambling (and usually with other people’s money).
insert

I don’t see what’s so bad about this. As long as the trading is open and whoever is selling this don’t-call-it-insurance insurance has proper reserves, I don’t see what the problem is. Yes, it’s just gambling, but what’s wrong with gambling?

This kind of market would not bring down the economy. If you had all the banks investing, it could, which is what just happened, but the worst that would happen here is bringing down the (monopolized) entertainment industry. Which I kinda think would be a good idea.
Anonymous

It’s gambling on a gamble.
If you understood that, then you understand how movies are really made in Hollywood.
Procrastes

It sounds like a great setup for a novel. What if Cantor was secretly backed by a consortium of clever but deranged indie filmmakers who saw this as an opportunity to knock Hollywood out and fill the void with romantic comedies about the sex lives of pill bugs?
grimc

@MWENDELL

Completely agree. The sheer gall these idiots have to try and get permission to do what essentially put the country in this current mess.

I’ve got one word why this is doomed to fail:

Ishtar.
technogeek

This really feels like the build-up for a shaggy dog story…

“You say you want to invest in a WHAT?”

“Bond. James Bond.”

(I agree it’s probably a gamble rather than an investment, and one of the major problems in recent years is that people forgot about the difference between the two. I’m not convinced it’s worse than betting on the ponies, but I’m not convinced it’s better either. Just remember, all gambling games are run for the benefit of the professionals, and if you don’t see the sucker at the table it’s you.)
karengeier

Remember the famous Enron “we’re going to trade weather” speech? Yeah, this is as solid as that.
Machineintheghost

Strange timing for this announcement, given the economy and so forth. But if there’s one group of professionals in the private sector with even more experience throwing huge amounts of money away on manifestly stupid projects, it has to be movie producers.

Some people in the number crunching world have had their eye on Hollywood for some time:

http://www.newyorker.com/archive/2006/10/16/061016fa_fact6?printable=true

but my favorite is the study that found, for a particular set of years, that “Winona Ryder, Sharon Stone and Val Kilmer were associated with a smaller box-office revenue.”

http://www.nytimes.com/2006/08/28/business/media/28cast.html?ei=5090&en=66b8f9ce879c8df3&ex=1314417600&partner=rssuserland&emc=rss&pagewanted=print
peter x

Cant wait for this.

So then we’ll need a government funded insurance program to protect hedge fund investors against future Ishtar and Heavens Gate sized bombs.
HeruRaHa

Oh yes this will be just great… let’s have more jackasses getting rich off of false wealth by buying and selling non-existent concepts. *sigh*

I’m not the only one who’s commented on the financial idiocy of such a move, so I’ll just make this observation:

As if American cinema wasn’t already bad enough… they’ll start making movies according to speculative trading and we’ll be subjected to a slew of low-budget “Blair Witch” style crap with massive marketing hype. Or maybe 90 minute “reality” shows…
zuzu

http://en.wikipedia.org/wiki/Hollywood_accounting

In accountancy, Hollywood accounting is the practice of distributing the profit earned by a large project to corporate entities which, though technically distinct from the one responsible for the project itself, are typically owned by the same people. This has the net result of reducing the project’s reported profit by a substantial margin, sometimes eliminating it altogether. This is most often done to reduce the amount which the corporation must pay in royalties or other profit-sharing agreements.
SaveAmerica_Kill_a_Broker

WTF!
Someone better start shooting those stupid fuc*s before they completely destroy our country!!!
Keith

It’s like they want us to all be hobos living in cardboard shanty towns.

American Capitalism: It has a bridge in New York it would like to sell you.
LaraH

couldn’t happen to a nicer industry…
Avram

They’re just setting up for a modernized remake of The Producers, aren’t they?
Anonymous

I’m not saying this means anything, but I used to work in the Hollywood Stock Exchange building, at an unrelated company that was just renting office space. When my company paid its rent each month, the check was made out to Cantor Fitzgerald. Evidence of a conspiracy?

Yes.
Bwentman

Ha. They e-mailed me earlier today. Might get to participate in the beta.

Kinda looking forward to it. Diggin some HSX. $130 mil in fake money…..what’s wrong with throwin some real cash in the mix?