Paper Chase: The Sound of Money
With the direction of the economy upwards, tapering has been a hot topic in bond market. When will the fed raise rates is the question. While rates may rise sooner than the market expects, the ten year may not rise to more than 3%. Short term bonds could rise faster, but what we do know is that the economy is improving and rates will soon rise.
Earnings
Analysts expectations have lowered, and companies are beating that lowered guidance making earnings announcements of exceeded expectations hollow victories. Earnings growth for the year should be around 8%. Stock valuations are expensive but not stretched, and stocks are the place to be relative to bonds. The economy is growing at a healthy clip, and if it really heats up, rising interest rates may not be well received by equity markets as it could signal the tailwinds from central bank policy are starting to abate.
What I’m Doing
Froth, a fear in this equity market, is actually a reality in the bond market when looking at high yield bonds and bank loans. The bond market is complacent now with little room for error. Earnings growth looks solid, and in the short term, the market has been orderly with no volatility. People are anticipating a pullback. I suggest hedging long positions with put options if you feel the market is overbought in the short term.
The Sound of Money
In a Wall Street Journal op-ed, Taylor Swift claims there are still profits to be made from albums in spite of piracy, file sharing and streaming. Is she serious?
I don’t think she is naive but maybe a little myopic. Well… a lot myopic. Swift is an enormous star with an enormous set of relationships and a huge fan base who is willing to pay her for things. Taylor Swift is valuable. She can release anything and it will be bought. New artists don’t get that kind of attention. They certainly don’t sell albums as album sales are plummeting everywhere. There is a plethora of music. Albums as high priced works of art only works if you are Taylor Swift.
The bottom line is relationships between artists and fans have changed. Hot songs don’t mean platinum albums and sold out concerts. Fans will pay for physical objects or “stuff”, but not necessarily albums. Albums need to be souvenirs. For example, Frozen’s album sales are through the roof because kids want to retain the relationship with the movie through the singing of the songs.
Stuff is physically scarce; therefore, it follows the laws of supply and demand. The internet is infinite and people don’t want to pay for it. Artists must create experiences, spectacles, and always surprise now. This happened because the iPod decoupled media from its physical form. Now, the value is all in the physical form, while the price of music has fallen to zero.
Unless you have a scarce product, the price people are willing to pay will fall to zero. It is happening everywhere. Music has to be turned into concert tickets, merchandise, and extension of the artist.
Streaming is up 40% while album sales are down. The writing is on the wall. The “shuffle generation” is coming of age, country and hip hop are fusing if you don’t believe me. Kids have grown up listening to lots of different things in lots of different contexts.
What’s on Tap?
Craft beer manufacturers are usually small with annual production of six million barrels or less, independent with less than 25% owned by a larger alcohol industry member, and traditional with flavor deriving from established brewing ingredients. Craft beer is booming. The last ten years has seen an incredible spike in sales with double digit growth in the entire segment.
Brooklyn Brewery is one of the largest as it is available in 26 states. They release a new Belgian style beer quarterly and have a beer with Grownyc made from grain from New York state in an ode to the farm to table movement. The hallmark of craftbrewing is innovation.
Travel Tips
Flexibility is always key for better airfare. Adioso.com allows travelers to use human language (say Europe sometime in the fall for two weeks) instead of just dates and destinations. Hoteltonight.com is for the business traveler. They can find 50 to 60% off because hotel rooms are scared off loss revenue on rooms. My personal favorite is the priceline.com “Name Your Own Price” …wait for it…..for rental cars where you can save up to 60%. The down side is that there are no refunds once you accept the offer.
Tuesday, Wednesday and Saturday are when you can save money flying. Business travelers come in on Monday and are out on Thursday. Leisure travelers fly out on Friday and return on Sunday.
Competition is a traveler’s best friend. Look for airports that have the most airlines and therefore the most flights. Look for cities that have the most hotels and therefore the most hotel rooms. Los Angeles, Las Vegas, Chicago, New York, Orlando, and Atlanta are great places to travel domestically as they have the best airfare and hotel deals rolled up into one.
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The information should only be a starting point for doing additional independent research in order to allow you to form your own opinion regarding trading decisions. You should ask the firm with which you deal about the terms and conditions of the specific securities which you are trading and associated obligations. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
