LIG Investment Advisers

Cash IS A Position

2010-05-06T13:21:00.001-07:00

Today is the kind of day where you have to remind yourself, "cash IS a position". If you're an active investor, it's a mistake to think that you always have to hold a stock to be "in the market". You can be "in the market" because you do your research and focus on what the market dictates. And in some cases, the market may dictate that you need to get out of all positions and stay there for a bit. That's OK, holding cash is still a position and you are still in the market.

Most of my investing models are based on weekly numbers anyways, so focusing on the result today is fine as long as the bigger pictures is kept in mind.

Book Review: "The Quants"

2010-05-03T10:53:00.001-07:00

There's few things that I enjoy more than being able to spend some time at my local bookstore and browse through the latest titles in the business & finance sections. I flip through many books, but there's a relatively few number that I actually decide to buy and invest time in. Scott Patterson's "The Quants" caught my eye right away because it started with a little bit of history and a chapter on Ed Thorp.

If the name does not ring a bell, Ed Thorp is considered to be the Godfather of card-counters and other folks that consistently beat blackjack (or "21") in casinos. What's more important that his theory on casinos, is his approach to numbers and the way the statistics plays a role in most situations that involve investing for returns, like the stock market.

The Quants provides a very insightful look into the world of traders that apply sophisticated statistics and modeling software to the securities and futures markets. In particular, it focuses on the quant hedge funds that are largely responsible for the financial meltdown of the US economy in 2007 and 2008. Patterson is a writer for the Wall Street Journal and after reading this book, with the very exclusive and in-depth interviews it contains, it's clear that Patterson is one of the few writers that could have written this book and I'm glad he did.

Make no mistake about it, there are no heroes in this book. The Quants provides a series of steps of what not to do with your investments. If you really want to understand the driving forces behind the economic meltdown and how it applies to your portfolio, I'd recommend this book.

FOMC Keeps Interest Rates At Historically Low Levels

2010-04-29T09:35:00.001-07:00

In case you're not already aware, the Federal Reserve has managed to introduce, and keep, extremely low interest rates in their effort to help the economy. This was first started in December of 2008 and yesterday it was announced that these low rates would remain unchanged and continue for the time being.

This announcement came with little surprise due to two main factors. First, low interest rates are good for an ailing economy. In theory, it helps the economy because money is very "cheap" to borrow. This should have a multiplying effect on the rest of the economy as business borrow more, spend more, sell more, etc. It also helps because it affects consumer spending with things like the rates on car loans and home loans.

The second reason why the FOMC announcement was not surprising is because the Fed is always concerned with the nasty specter of Inflation. Recall that the basic definition of inflation is "too much money chasing too few goods" which is a recipe for prices rising. Well, with the current state of the economy, that's a very small threat. In fact, consumer prices have been dropping and inflation seems like it will be kept at bay for a good time to come.

So, what does this all mean to you as a consumer? It means that right now is a great time to buy a home. 30-year fixed mortgage rates have been hovering around the 5% level for quite some time. That is an extremely low rate for such a large loan and long period. Don't forget that there are two elements to buying a home; there is the price and the interest rate. Too many people focus on price and not enough focus on the interest rate. Even a small move in interest rates (as low at half a percentage point) can mean a large difference in your monthly payments and the overall payments during the life of a loan. A home that you may be able to afford this year will not be affordable to you next year simply because the interest rate changed.

It's difficult to say when interest rates will change. The only thing that is certain is that they will change and it will have a material effect on the economy and, possibly, your checkbook.

Movie Futures Market Approval: One Step Forward, One Step Back

2010-04-21T08:57:00.001-07:00

A lot of investors have been trying to make sense of the recent approval of the movie futures markets. This blog post attempts to clarify the current situation.

We know that there are currently two players in the movie futures exchange effort. Both companies, Veriana Networks and the Cantor Exchange, will require two approvals in order to actually trading in movie futures.

The first approval is to become what's known as a "Designated Contract Market" or DCM. The DCM approval allows you to be a market but only trade in approved commodities. This is a relatively straightforward process that tries to ensure that the company is viable and has resources to run a legitimate DCM.

And that's basically where we are now (as of April 20, 2010). Both Veriana Networks and the Cantor Exchange can be a contract market . . . but not for movie futures.

The second approval allows movie futures to be traded as a commodity (or futures contract).This is where the CFTC looks at the commodity contracts and, among other things, is making sure that movie futures are a legitimate hedging vehicle.

"Why does being a 'legitimiate hedging vehicle' matter?", you ask. It's because that's what makes a commodities market and that's what movie futures need to prove. Recall that in traditional commodities lingo, the market is composed of speculators and hedgers. This is necessary because a commodity contract is an agreement between two parties. The hedger is the person holding the commodity (in this case, the person making the movie) and the speculator is the investor (you and me) that is willing to take the other side of the contract, whether it's a long position or short position.

If you don't have the speculators and hedgers in place then you just have speculators making contracts against other speculators and that's just plain old gambling . . . and the government won't stand for that.

On April 20, 2010, the CFTC commissioner, Jill Sommers, issued a statement essentially approving the DCM for the Cantor Exchange. However, in that same statement, she expressed the desire to look at movie futures in the bigger context of, "event, prediction, or information markets" and is less favorable to looking at movie futures as an isolated commodity.

Unfortunately, it is of my opinion that this only indicates more delays ahead for the movie futures markets. There is a congressional committee meetng scheduled for April 22, 2010 and Veriana Networks has announced that June 7, 2010 is the earliest possible date for any trading. Both of those will be key dates and they're certainly in flux.

It will be an interesting next couple of months for movie futures markets and, along with you, we'll be watching closely.

Statement: Concurrence Of CFTC Commissioner Jill E. Sommers On Cantor Futures Exchange L.P., Order Of Designation As A Contract Market

2010-04-21T08:20:00.001-07:00

April 20, 2010 -- I concur with the staff recommendation that Cantor Futures Exchange L.P. has satisfied the criteria in the Commodity Exchange Act for designation as a contract market. This approval is separate from Commission approval of any media related contracts that may be traded on the Cantor Futures Exchange.

The CFTC published a concept release on May 7, 2008, (73 FR 25669) regarding the appropriate regulatory treatment of financial agreements offered by markets commonly referred to as event, prediction, or information markets. In that Concept Release, the Commission recognized that since 2005, the Commission's staff has received a substantial number of requests for guidance on the propriety of offering and trading financial agreements that may primarily function as information aggregation vehicles.

In the last week, the Commission has approved the designation of two Designated Contract Markets (DCMs) that intend to list for trading contracts relating to motion picture box office receipts and other media-related contracts. The broad policy issues discussed in the Concept Release may be raised by the types of contracts these two DCMs intend to list for trading. I believe it preferable for the Commission to address the broad policy issues raised in the Concept Release, and establish some framework for responding to those issues, in lieu of merely responding to individual petitions for market designation or contract approval as they happen to be submitted.

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To learn more about movie futures trading, visit www.moviexschool.com

CFTC approves exchange, movie futures request next

2010-04-20T15:57:00.001-07:00

As reported by Reuters

The Commodity Futures Trading Commission on Tuesday approved an exchange to trade options and futures, but whether it will be allowed to offer movie futures contracts as it has requested is far from certain.

The CFTC approved Cantor Fitzgerald, a broker dealer, to operate a futures exchange. The ruling under the Commodity Exchange Act is the first hurdle the firm needed to begin trading options on futures contracts.

The CFTC said it is still considering whether to allow the firm to offer a contract tied to the box office receipts of a movie, but commissioners so far do not appear convinced the contracts will pass muster.

Last week, the CFTC also approved a new market request by Media Derivatives Inc that could one day be used to trade box office receipts.

"At this point in time, I have not heard any arguments to persuade me that 'movie futures' generally can overcome some fundamental design flaws," CFTC Commissioner Bart Chilton said of Media Derivatives' application.

There is no timetable for when the CFTC will make a decision on whether either exchange will be allowed to trade movie futures contracts.

The Motion Picture Association of America contends trading movie futures would damage the reputation and integrity of the industry and make the box office susceptible to potential market manipulation.

A form of betting on the success and failure of box office flicks has been around for more than a decade. In 1996, a website called The Hollywood Stock Exchange was started where participants could invest fake dollars on box office outcomes. A division of Cantor Fitzgerald bought the site in 2001.

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If you want to learn more about movie futures investing, visit www.moviexschool.com

CFTC OKs more boxoffice trading

2010-04-20T14:47:00.001-07:00

As Reported by Carl DiOrio for THR

Strike two!

Despite Hollywood attempts to bat down the proposals, a second exchange proposing boxoffice-based commodity trading has won preliminary approval by the Commodity Futures Trading Commission. The CFTC on Tuesday said the proposed Cantor Exchange has passed muster in a review of its online technology.

The commission previously approved similar technical underpinnings of the proposed Trend Exchange.

The CFTC also must rule on product details of the exchanges, which the major film studios stridently oppose. So though the first two decisions have gone against Hollywood, the MPAA and other industry groups continue to press their fight against the proposals.

Both Cantor Exchange and Trend Exchange had planned to begin trading by this week, but their launches have been delayed pending final regulatory review.

Cantor Exchange proposes to allow direct access to its online exchange, where users would buy contracts selling boxoffice projections, long or short, from six months prior to films' wide releases through the first four weeks pics play in theaters. Trend Exchange would use brokered trades and halt trading once movies hit theaters.

In addition to lobbying the CFTC, Hollywood has opened a second front in its fight against the proposed exchanges in Congress.

A Hollywood-backed amendment recently was added to the Wall Street Transparency and Accountability Act -- a financial-reform Senate bill -- to prohibit boxoffice commodity exchanges. The amendment is set for discussion Wednesday by the Senate Agriculture Committee.

On Thursday, a House subcommittee on farm commodities that oversees the CFTC also will review the two exchange proposals.

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If you want to learn more about movie futures trading, visit www.moviexschool.com

Can We Bet on the Box Office Already?

2010-04-20T08:27:00.000-07:00

As Reported by John Lopez in Vanity Fair

While we've been following the Cantor Exchange's long struggle to bring betting on the box office to the masses, Hollywood had a heart attack last Friday when the other exchange designed for betting on the box office—the MDEX, created by Veriana and intended for professional and institutional investors—came one step closer to reality after receiving its approval from the Commodities and Futures Trading Commission. Cantor awaits its approval today, but the question for cine-geeks/degenerate gamblers everywhere is, "So can I bet on box-office grosses yet?" The answer: no. The exchange itself, as a marketplace where people can buy and sell contracts guessing at box-office performances, is approved, but the contracts themselves have yet to be. Further, a ragtag Rebel Alliance composed of major studios, Hollywood guilds, and national theater owners is doing everything they can to blow up what they see as a potential Derivatives Death Star designed to decimate Planet Hollywood.

This scrappy little resistance led by that hero of underdogs everywhere, the M.P.A.A., is employing everything in its power—mostly angry letters from Galactic U.S. Senators Orrin Hatch and Patrick Leahy, and even possible legislation from the U.S. Congress—to outlaw betting on the box office. Also on their side appear to be some members of the Commodities and Futures Trading Commission who actually approved the MDEX. Apparently, Veriana (and presumably Cantor) did all their homework, followed the rules, and satisfied all the technical requirements to be designated as a marketplace, so there was very little the Commissioners could do but approve the exchanges. The question, however, is whether they will also approve the actual contracts (box-offices futures) to be traded on those exchanges. In fact, one Commissioner of the C.F.T.C., Bart Chilton, even sent out a hold-your-horses memo in which he said that although the C.F.T.C. had little legal basis to deny the MDEX market status, he was yet to be convinced that "'movie futures' can overcome some fundamental design flaws."

The underlying concern is whether the proposed exchanges, and the contracts they'd trade, are Hollywood's saviors or the industry's death knell. Put in wonky money terms: is all the betting to be had on these exchanges pure speculation, or a way to provide liquidity to Hollywood's notoriously illiquid market? The argument that Veriana C.E.O. Robert Swagger put forth in a conference call to confused entertainment reporters everywhere was that the exchange will in fact create liquidity because investors will feel free to pump more money into a movie's production when they have a way to "hedge" their risk.

If the above is true, then it would seem that the movie studios opposing the exchange might be doing so because it presents a threat to their monopolistic control of the film distribution market. Swagger, however, claimed that resistance to new market exchanges typically gives way to broad acceptance in an industry when its key players understand how to use them to their own advantage. Although the idea is far-fetched at the moment, Swagger seemed to imagine a world where studios might eventually get on board and use the exchange themselves. (Though how and why a studio would do so without running into massive conflicts of interests remains unclear, especially to the M.P.A.A. and the others opposing the exchanges.)

However, those in Hollywood opposing it—like the M.P.A.A. and its B.F.F. senators—argue that the exchanges show a faulty understanding of film financing and distribution, and that, as such, they are little more than glorified gambling dens. Senator Blanch Lincoln (D-Ark) has submitted a measure before the Senate Agriculture Committee to bar futures trading on box-office receipts. (The Agriculture Committee oversees "futures markets" like the MDEX because, historically, futures exchanges were created to hedge risk on and figure out the prices of tangible agricultural products like wheat or pork bellies.) Her rationale is that, after derivatives nearly destroyed America, creating new derivatives on movie grosses could destroy Hollywood.

(Though in fairness, those nasty derivatives destroyed America precisely because they were traded in secret between banks themselves, and not on an open, public exchange, which is what the MDEX is proposing.)

Veriana C.E.O. Robert Swagger says that even if futures contracts on box-office receipts were banned, the MDEX is designed to allow futures contracts on all sorts of as-yet-undreamed media-related prognostication, be it TV-ratings, American Idol winners, or how low this year's Oscar ratings will go.

Will this brave new world actually happen? That would depend on the actual structure of the movies futures contracts themselves. The burden appears to be on Cantor and Veriana to design something that doesn't appear to be just another excuse not to drive to Vegas—if they can. Right now, Hollywood is doing a great job of aligning Washington against the exchange. After all, when's the last time you heard of Orrin Hatch (R) and Patrick Leahy (D) agreeing on anything?

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If you want to learn more about movie futures visit www.moviexschool.com

Kudos to the CFTC for Approval of Movie Futures Exchanges

2010-04-16T13:16:00.001-07:00

As is being widely reported in the business media, the CFTC has approved the first movie futures exchange market that will not allow people to invest in movie futures. Kudos to the CFTC for sticking to their due process and approving the movie futures exchange application. The CFTC has established long-standing policies on how it works and approves applications and it has stuck by this process for both the Cantor Exchange and Veriana Networks. I'm sure there will be more discussion on this topic, but for now, the CFTC deserves kudos for moving forward.

Film Futures Market Gets U.S. Approval Over Hollywood Objection

2010-04-16T13:09:00.001-07:00

As Reported By Todd Shields for Bloomberg

U.S. regulators approved the first futures market based on movie box-office returns over the concern of lawmakers and Hollywood executives that the exchange may expose studios to speculative harm.

The Commodity Futures Trading Commission voted today to let Veriana Networks Inc.'s Media Derivatives Inc. unit open a market for professional traders. A plan by Cantor Fitzgerald LP to create a market that includes retail investors is pending before the commission.

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To learn more about movie futures trading, please visit www.moviexschool.com

Leahy, Hatch: Box-Office Exchange Risky

2010-04-16T12:33:00.001-07:00

As Reported By Sara Jerome of the National Journal

Senate Judiciary Chairman Patrick Leahy and panel member Sen. Orrin Hatch, R-Utah, have asked the Commodity Futures Trading Commission to raise concern over the proposed establishment of an exchange for financial instruments tied to box-office outcomes. In a letter Thursday, the two said the "unprecedented" prospect of trades based on successes and failures in the movie business could create perverse incentives that might "undermine the integrity of the industry."

Their entreaty follows separate applications by Cantor Futures Exchange and Media Derivatives to be designated as contract markets by the CFTC. The Motion Picture Association of American and a handful of other industry groups have spoken out forcefully against the requests. "Rather than providing a real and useful means for hedging risk or price discovery, these instruments will be harmful and burdensome to the motion picture," the groups said in a separate letter to the agency.

Leahy and Hatch referenced the recent financial crisis as a reason why the CFTC should proceed with caution, noting efforts to "manipulate our financial markets" contributed to the downturn. They also said employees with insider information might be tempted to use it to their benefit. "Movie futures contracts appear to constitute a platform for betting that is even more risky and manipulative than the typical financial product," the senators wrote.

The issue heated up earlier this year when Cantor Future Exchange's outreach efforts around the possible exchange caught the attention of industry stakeholders, who argue that no trading regime like this one has ever existed before. The CFTC is expected to announce today whether Media Derivatives will be designated as a contract market, while the decision on Cantor is expected later this month.

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To learn more about movie futures trading, visit www.moviexschool.com

Movie Futures Trading: A Word on Market Mainpulation

2010-04-16T08:58:00.001-07:00

As of this writing, we are on the verge of seeing the first movie futures exchange be approved by the CFTC. Today, the MPAA released a copy of a letter that it gave to the chairman of the CFTC outlining some more arguments against the approval of movie futures trading.

The MPAA seems highly concerned about market manipulation and the fact that the exchanges do not have a valid method of detection against manipulation.

However, I am not a fan of this argument because it ignores one of the basic benefits of a free and open market. A true movie futures exchange market would be self-correcting because of the shear size of it (i.e. the large number of participants in the market). Think back to your high school economics classes and the charts with supply and demand curves. What is the significance of the point where those two lines meet? That's right, its price. The market is self correcting because it will always balance out to a price that the market will support, nothing more, nothing less.

Take the next step with your thinking. What if you wanted to manipulate the price of another commodity, like gold, and move the price up by one dollar. You, alone, would have to drive up demand by buying up gold. But gold is so widely traded and held that you would have to buy billions, and billions and billions(!) of gold contracts. It would, literally, be an impossible task.

I envision the day when there will be so many participants in the movie futures exchange markets, actively trading these contracts, that the fact that we ever worried about market manipulation will seem like a silly thing.

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To learn more about movie futures investing, please visit: www.moviexschool.com

Introducing BOSS: Box Office Scoring System

2010-04-14T16:45:00.001-07:00

Today is the debut of the Box Office Scoring System, or BOSS, and it is the first trading system created specifically for the movie futures exchange market. It is the first system of its kind and it's freely available.

When using BOSS, you should try to avoid reading the current exchange prices and use BOSS to create your own prices. Once you have a price, you are able to determine whether a stock is overvalued or undervalued and can establish a position accordingly. Another great benefit of BOSS is that you can include as many, or as little, components that you need to make a movie futures investment decision. It's a flexible system that can adapt to your investment style.

You can find out more about BOSS at www.moviexschool.com

'Iron Man' Bets Loom as CFTC Staff Backs Film Futures

2010-04-14T14:37:00.001-07:00

As Reported by Bloomberg News

April 14 (Bloomberg) -- The Commodity Futures Trading Commission staff, bucking Hollywood opposition, is recommending approval of a market for box-office contracts on films such as "Iron Man 2," two people with knowledge of the situation said.

The staff recommends the CFTC on April 16 approve Media Derivatives Inc.'s request to create a market for professional traders, the first of two applications, said the people, who asked not to be identified because the information isn't public.

The Motion Picture Association of America, representing the studios, says plans by Media Derivatives and Cantor Fitzgerald LP to open markets based on movie-ticket forecasts will lead to manipulation and hurt the industry. At least one commissioner, Democrat Bart Chilton, is "leery" of the idea. Democrats hold three of the five seats.

"There would be conflicts of interest," Chilton said in an interview. "It wouldn't serve as a legitimate hedging vehicle."

After putting off a decision last week, the panel is scheduled to vote on the initial request by Media Derivatives, a Scottsdale, Arizona-based unit of Veriana Networks Inc. A specific contract requires a second vote.

Cantor Fitzgerald, based in New York, wants to create a market and contracts for individuals and professionals. A hearing is set for April 22.

Business Purpose

"One of the things the commission is likely to look at very carefully is whether the new contract being proposed will have a business purpose," said Dan Waldman, a former CFTC general counsel who is now Washington-based head of the derivatives practice at Arnold & Porter LLP.

Commissioners have the latitude to reject the staff recommendation if they believe the contract would be "susceptible to manipulation," Waldman said.

Scott Schneider, a CFTC spokesman, declined to comment.

The MPAA and its top officer, Bob Pisano, are leading the opposition. The National Association of Theatre Owners, representing U.S. cinemas, also is against the idea.

"This has a large potential to hurt this very important American industry," Pisano, interim chief executive officer of the Washington-based association, said in an interview. "The existence of a short position could become a self-fulfilling prophecy as the Twitter world picks it up."

Contract Terms

Media Derivatives plans futures based on the domestic box- office sales in a film's opening weekend, according to a filing. Movies would be required to have an MPAA rating and be showing on at least 600 U.S. screens. Contracts wouldn't be listed more than 30 days before a release. Trading would end the day before the opening.

The exchange would bring professional traders into movie financing mix and mitigate risk for studios, talent agents and others, Robert Swagger, chief executive officer of Media Derivatives, said in an interview.

The MPAA view suggests Hollywood doesn't understand futures, which "tell you what the product is worth," Cantor Exchange President Rich Jaycobs said in an interview.

"You have an industry that has no exposure to futures markets and at the 11th hour is spinning in very colorful terms," Jaycobs said.

Members of Congress have asked the commission to delay its decisions, and the House Agriculture Committee that oversees the agency has set a hearing for April 22.

Political Support

They include both U.S. senators from California, Democrats Barbara Boxer and Dianne Feinstein, who asked the CFTC in an April 1 letter to "consider the film industry's views thoroughly." U.S. Representative Lamar Smith, a Texas Republican, said in a March 31 letter the exchanges might constitute an illegal platform for "betting and wagering" rather than "a legitimate market."

Because studios could buy positions and then influence a film's prospects, they shouldn't participate, Chilton said.

"If the studios are excluded, to me it doesn't serve the original purpose -- it's just a speculative venture," Chilton said.

Swagger said his company's proposed market, called Trend Exchange, includes "appropriate firewalls" designed in talks with studios he declined to name.

"The studios don't have information the public doesn't have," Swagger said. Before a movie opens, "they have a bit more information. But there's a tremendous amount of information out there for the trading community as well."

Box-Office Reports

Cantor Exchange also plans to offer contracts on future releases. Each $1 million in sales would represent $1 in contract value, according to the company. The contracts would be tied to ticket receipts reported by Rentrak Corp., the Portland, Oregon-based information services company.

The company plans an initial contract on Paramount Pictures' "Iron Man 2," according to its Web site.

The company tested its concept through the Hollywood Stock Exchange, a Web site where players use play money to invest. Cantor acquired the site in 2001.

HSX.com was founded in 1996 by investment bankers Max Keiser and Michael Burns, now vice chairman of Lions Gate Entertainment Corp., distributor of the "Saw" horror films.

"If the studios have a chance to have an equity position in the actual exchange, if Cantor offers that, I think that's a giant win-win," said Burns, whose Vancouver-based studio isn't part of the MPAA. "I think it will ultimately become a terrific hedging vehicle for the studios. You can buy corn futures, orange juice futures, it makes no sense you can't buy movie futures."

Swagger said his company's proposed market, called Trend Exchange, includes "appropriate firewalls" designed in talks with studios he declined to name.

Box-Office Reports

The company plans an initial contract on Paramount Pictures' "Iron Man 2," according to its Web site.

The company tested its concept through the Hollywood Stock Exchange, a Web site where players use play money to invest. Cantor acquired the site in 2001.

HSX.com was founded in 1996 by investment bankers Max Keiser and Michael Burns, now vice chairman of Lions Gate Entertainment Corp., distributor of the "Saw" horror films.

The film industry isn't the first to oppose futures, Craig Pirrong, a finance professor at the University of Houston, said in an interview. The aluminum industry fought futures in the 1980s and steelmakers are fighting iron ore futures, he said.

Hollywood may fear "a new price discovery mechanism" that threatens its insider knowledge of potential receipts, he said.

"They're trying to tap into the antagonism towards derivatives markets right now and the longstanding Puritan animus against gambling to derail this," Pirrong said.

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To learn more about movie futures investing, please visit www.moviexschool.com

Movie Futures Trading Delayed by Congressional Hearings

2010-04-10T08:29:00.000-07:00

It's been widely reported that the CFTC will be delaying their decision on approving the first exchange for movie futures contracts. The stated date is April 16, 2010 but it's also being reported that a congressional hearing is being called for April 22, 2010. So, the CFTC is unlikely to make any more comments or rulings until after that date.

Here's two things that make this all interesting. First, the CFTC is mostly used to dealing with commodities such as cattle, wheat and soy, etc. Which means that they are governed by the House Committee on Agriculture. It puts the movie futures exchange industry at a slight disadvantage because they will have to extract their market into a statement and hearing that will correlate with these other commodity markets. Not an easy thing to do.

Second, the delays that are currently happening are completely unnecessary and are coming at the 11th hour. The CFTC has already had an open period for comments on these movie future exchange proposals. Concerns and letter should have been voiced at that time and in due process. A lot of the discussion that is occurring now is only due to political and, to a lesser degree, public pressure being driven in the media.

It will be interesting to see how this all plays out. But the only thing certain for now is that April 22, 2010 will be an important date.

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To learn more about movie futures trading, please visit www.moviexschool.com

Movie Futures Plan Gets Longer Review From Commodities Agency

2010-04-09T14:13:00.001-07:00

As Reported By Todd Shields for Businessweek

April 9 (Bloomberg) -- The U.S. Commodity Futures Trading Commission extended by one week a review of a box-office futures market after the motion-picture trade association said betting on movie revenue may harm the industry.

The agency won't act before April 16 on the request from Media Derivatives Inc., a subsidiary of closely held Veriana Networks Inc., to establish a market based on forecasts for movie-ticket sales, agency spokesman R. David Gary said in an interview.

The Motion Picture Association of America led film industry groups in telling the commission in a letter that the market would create "wagers that are susceptible to manipulation." Members of Congress including both Democratic U.S. senators from California, Barbara Boxer and Diane Feinstein, in letters asked the commission to delay approval.

Media Derivatives told the commission its proposed market could transfer financial risk from producers, studios and theaters to "a community of speculators willing to assume these risks" in return for being paid a premium.

The Cantor Futures Exchange, a unit of New York-based Cantor Fitzgerald LP, also is seeking permission for a box- office futures market.

The Futures Industry Association challenged Hollywood's view that a box-office contract would be harmful, according to a statement yesterday.

"Nothing could be further than the truth," the FIA said. "Futures markets have proven to be vitally important mechanisms for risk management. We encourage the CFTC to evaluate these applications on their merits."

Groups representing theater owners, movie directors and independent producers joined the Motion Picture Association in signing yesterday's letter.

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To learn more on how to invest in movie futures and on the movie futures exchanges, visit: movieXschool.com

Twitter used to predict box office hits

2010-04-09T12:31:00.001-07:00

As written by Jonathan Fildes of the BBC

The computer scientists studied 3 million messages - known as tweets - about 25 movies, including Avatar.

They found the rate at which messages were produced could be used to accurately predict the box office takings before the film opened.

Further analysis of the content of the messages could predict ongoing success.

"Our predictions were incredibly close," Bernardo Huberman, head of the social computing lab at HP, told BBC News.

For example, he said, the system predicted that zombie film The Crazies would take $16.8m in its first weekend in the US. It actually took $16.06m.

The team forecast that romantic drama Dear John would take $30.71m in its first US weekend. It took $30.46m.

The unpublished research has been posted on the Arxiv website.

The team were able to make their predictions by analysing the torrent of tweets about a particular film in the run up to its release.

"We developed algorithms to analyse these tweets and measure the rate at which they were produced, said Dr Huberman.

"Our intuition was that the faster people tweet, the more likely they are to go and see it."

The teams were then able to forecast the ongoing success of a film, including its second weekend revenues, by doing what is known as sentiment analysis.

This analyses the content of tweets and decides whether it is positive, negative or neutral.

"It's tapping into collective intelligence," said Dr Huberman, who carried out the work with Sitaram Asur, also of HP.

The team trained their system using Amazon's Mechanical Turk, an online tool that pays people to perform small tasks that computers would struggle to complete.

"We got people to classify tweets and we used that to calibrate the sentiment analysis," explained Dr Huberman.

Again, the system tracked the fortunes of movies and outperformed other predictive systems such as the Hollywood Stock Exchange, he said.

For example, analysis showed a boom in positive sentiment about the Oscar-nominated The Blind Side after it was released, but showed the opposite affect for New Moon, which initially sold well but rapidly lost viewers.

"Word of mouth builds audience," said Jan Saxton, vice president and senior films analyst at Adams Media Research.

She highlighted the film My Big fat Greek Wedding, which she said was built into the

"film of the year" in 2002 by word of mouth.

"If word of mouth becomes a faster, more effective marketing tool, then the effect on the movie business could be profound."

Both Dr Huberman and Ms Saxton said that the demographic of Twitter - which tends to be young, tech-savvy and reasonably affluent - may limit the utility of the system for more general analysis.

However, Dr Huberman believes it could be of use in forecasting how well a product will sell, for example.

Elements such as sentiment analysis are also being used elsewhere.

For example, it is being used by an organisation called Tweetminster to monitor the UK general election to work out whether online buzz correlates with the winners.

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If you want to learn more about investing in movie futures contracts, please visit movieXschool.com

Stock lessons from George Costanza

2010-04-09T10:11:00.001-07:00

As Reported by Joshua Brown in the Christian Science Monitor

George Costanza: "My life is the opposite of everything I want it to be. Every instinct I have, in every part of life, be it something to wear, something to eat ... It's all been wrong."

In a classic episode of Seinfeld called The Opposite, perma-loser George Costanza comes to the realization that if he would just act completely contrarily to his own instincts, things would begin to go his way.

Jerry Seinfeld: "If every instinct you have is wrong, then the opposite would have to be right."

One cannot help but see the parallels between George's epiphany and the paradox of the high beta market rally that has left even the most experienced players in utter disbelief.

Think about how rewarding it's been for traders who have completely violated any sense of prudence or market savvy:

*AIG ($AIG) barely avoids liquidation - buy it and enjoy percentage gains in the thousands!

*Unemployment remains at around 10%, inital jobless claims are still climbing - so buy some specialty or even luxury retailers!

*Mortgage rates are inching higher and housing has not truly bottomed - so snag some Hovnanian ($HOV), some lumber names and why not a little Home Depot ($HD).

*Oil breaks out above $85 - and the airlines go wild!

*Congress passes a de facto takeover of Healthcare - OMG! Healthcare stocks are rallying on the news of their newly subjugated status!

*Commercial RE is a time bomb - REITs! I gotta have more REITs!

We can document dozens of these types of paradoxical setups. Investors are taking almost any opportunity to do the opposite of what they'd normally be expected to do. If everyone in the market is a contrarian, is the true contrarian the non-contrarian? Heh - "Whaaaaat is the deeeeaal with contrarians?" Thanks, Jerry.

If Georgie was running a hedge fund right now and abiding by his counterintuitive life strategy, he'd be absolutely killing it.

George Costanza: "I tell you this, something is happening in my life. it's all happening because I'm completely ignoring every urge towards common sense and good judgment I've ever had. This is no longer just some crazy notion. Jerry, this is my religion!"

Tinseltown up in arms over box-office bets

2010-04-09T08:16:00.001-07:00

As Reported By Christine Seib of The Australian

HOLLYWOOD has launched a last-minute campaign to stop traders betting on the hits and misses from Tinseltown.

The Motion Picture Association of America (MPAA) has joined bodies representing directors, theatre owners, stage workers and others to stop two companies from setting up markets for contracts on box-office receipts.

The Commodity Futures Trading Commission (CFTC) will decide today whether to grant the first of four approvals needed by Veriana Networks and Cantor Fitzgerald to set up their markets.

If the companies win approval, traders will be able to buy or sell contracts speculating on how much cash a film will make in its opening weeks in cinemas. For example, contracts could be valued at $1 for every $1 million that a film earns.

If a trader is confident a film will gross more than $100m, they could buy a contract for $100.

If the film grossed $120m, the trader would make $20.

However, film buffs might find that betting on the box-office is far from easy money.

Avatar was expected to tank at cinemas, and had a slow first few weeks before going on to become the highest-grossing film. Veriana, a technology company, plans to cater to institutions, while Cantor wants a retail market. Veriana chief executive Robert Swagger said the film financing industry could use his market to hedge the risk of having backed a flop.

Cutting financing risks would benefit the film industry by attracting more investors, he said.

But Hollywood is worried about market manipulation, which it fears would be unusually easy in the gossipy film industry, and the possibility that cinema owners may refuse to screen heavily shorted films.

The MPAA, which represents the major film studios such as Universal and Paramount, and other groups said that the new markets would "create a risk of rampant speculation and financial irresponsibility".

The CFTC is expected to decide today on Veriana's application and on Cantor's on April 20.

A Vote FOR the Movie Futures Exchanges

2010-04-06T17:47:00.001-07:00

Today there has been a lot of discussion, on the federal government level, about the merits of a futures exchange that will allow the general public to invest in the movie futures contracts. That's right, pretty soon you will be able to invest in a market that speculates on future box office receipts for movie releases.

This blog supports the efforts of companies like the Cantor Exchange for providing this new market and believes that there is a high chance of success with this new type of futures investing. The majority of the arguments against these exchanges is the presumption that they will be riddled with fraud and "insider trading".

This is not an argument I agree with. The best way to look at this is to look at the Forex market. That market is similar because it was (1) recently opened to the general public and (2) trades in commodities in which insider trading can occur. However, it is mostly agreed that the Forex market is safe from manipulation. Why? The shear size of the market makes insider trading quite difficult to achieve. The scale of the "insider" trading would have to be so large that it would be, literally, impossible. So, I believe that the growth of the movie futures market will also drive the safety of the market.

Part of the success of this market will also depend on the participation of financial institutions and this support is growing. In fact, there is already a commodity pool fund, the LIG Stars Fund, that will specialize in movie futures exchanges. It's the first one of its kind and allows investors to have their investment professionally managed.

We should know very shortly if we will be able to invest in movie futures contracts; the CFTC and NFA are scheduled to give final approval by April 20, 2010. Stay tuned.

A Very Easy Way to Give

2009-12-04T15:48:00.001-08:00

In spite of a recent, rough economy, this is still the season of giving for many of us and I wanted to share a great experience with you. I used to just hate the amount of travel that I had to do as a consultant. The road makes you feel so isolated and sitting around in hotel rooms is boring. Anyone who tells you that they enjoy business travel is lying to you.

So, I imagine how hard it would be to be deployed overseas, for months and months (and years and years!) at a time. That must be such a high level of isolation without the comforts of a Sheraton. The USO has a great program where you can order a care package for a deployed (or about to be deployed) member of the Armed Forces for a mere $25. They leverage your donation along with (what I assume to be) corporate sponsorships and send a random member of military your care package. I just had to fill out one form with my credit card info, selected the number of packages I wanted to send (I bought one on behalf of myself and one on my wife's behalf), and I received a tax-deductible receipt in my e-mail box within the hour.

For your consideration, the link to the care packages is at: https://www.uso.org/donate/custom.aspx?id=565&

Weekly Stock Watch List for Investment Ideas

2009-11-04T10:39:00.001-08:00

We realize that investors are always looking for different ideas on stocks to add to their portfolios. Starting next Friday, LIG Investment Advisers will start to publish a weekly "watch list" of NYSE, NASDAQ and AMES stocks that we are keeping an eye on and that have a potential for growth. These watch lists will not serve as official recommendations for stocks, but rather a list to broaden your current portfolio view and generate some new ideas. If you would like to be a part of this distribution list, please e-mail info@ligadvisers.com and you will receive the weekly watch list.

Search the White House Visitor's List

2009-11-01T08:55:00.001-08:00

There is a new web site, White House Visitor Records, that gives you the ability to search the recently released White House visitor records. This database is completely independent of any political party, PAC or government agency. It simply provides US citizens simple access to search this data and it will be updated on a continual basis. If you're interested in searching this data, independently, feel free to check out http://www.whitehousevisitorrecords.com

The Fall of the British Pound

2009-10-13T13:26:00.001-07:00

Today's Wall Street Journal includes a very interesting piece on the recent fall of the British Pound (GBP) against the US Dollar (USD). Indeed, as the article states, the GBP has hit a 4 month low against the USD and there are no signs of it stopping soon; the WSJ feels that this is a decline that could continue for the next few years. The article went on to talk about the different fundamental factors that have caused the fall, including things like the carry trade and other economic strategies.

What the article failed to mention, however, is that the fall of the GBP has been further exacerbated by the technical factors of trading. As you may already know, there are people that focus on the fundamental factors while others focus on the technicals (mostly price charts and price action). The key part that the article didn't mention is that 3 weeks ago, the GBPUSD hit a technical level that indicated that the price of the GBPUSD was due for a fall. This could be seen by strictly looking at charts and ignoring all other factors. These levels serve somewhat as both support & resistance and the current price level has definitely been a point of resistance for the GBPUSD.

In effect, we have reached a time when both the fundamental and technical traders have become bearish on the GBPUSD. Recall that within 2009, the GBPUSD has traded as low as the 1.4400 range which is a far cry from the current level. While I am not convinced that this will contnue for the rest of the year, it is unlikely that the current levels in the 1.5890 range are sustainable.

The Quiet Rise of the Australian Dollar

2009-09-30T10:53:00.001-07:00

It's no secret that the last few weeks have not been kind to the US Dollar (USD). Quite frankly, the value of the USD has taken a beating against most of the other major currencies in the forex market, However, the USD has staged the ocassional rally to show some strength and where it will ultimately land is still to be determined.

But, in spite of these rallies, the USD has remained consistently weak against the Australian Dollar (AUD). The AUD has been slowly, but surely, strengthening against the USD since early 2009 and it is currently at levels not seen since mid 2008. The USD has been unsuccessful in daily rallies against the AUD and it is possible that this trend will continue.

The greater question is about the drivers behind this trend. There isn't a great deal of import/export business to speak of between the two countries and tourism, as a whole, is down worldwide. Neither government is an active participant in the Forex market and relations between the two countries are fine. So, you could draw a conclusion that this rise is purely the result of speculators against the USD. Whether that speculation is enough to keep the trend moving will be an interesting question to monitor in the last part of 2009.