A plan to create a “stock exchange” where investors can speculate on the success of upcoming movies could have the perverse effect of making bad or unpopular movies profitable, critics of the plan say.
Since 1998, investment firm Cantor Fitzgerald has been running the Hollywood Stock Exchange, a place where bets can be placed on how successful a movie will be. Thus far, the HSX has been principally for entertainment, since bettors use fake money to predict which movies will be hits and which will bomb.
But Cantor Fitzgerald now wants to set up a new Hollywood exchange that would use real money. To critics of the idea, the move represents a risk to the quality of Hollywood movies, as well as a new risk to the economy as a whole.
“This is such a bad idea on so many levels,” UCLA derivatives expert Lynn Stout told Mother Jones‘ Nick Baumann. “What they want to do is basically open up a casino for people who want to make money for predicting the next blockbuster.”
Stout and others argue that such an exchange could harm the quality of Hollywood movies. For instance, film producers or distributors may realize the movie they’re working on will be a flop. The filmmakers can then “short” the movie on the exchange, meaning they bet against it. Then, when the movie fails at the box office, the filmmakers make money off the bet. This way, the exchange could make it profitable to make bad movies that no one wants to see.
Supporters of the exchange argue that what it would do is reduce the risk to studios of making unsuccessful movies — they could recoup their losses through the market if the movie fails. But that assumes only people involved in the movie industry could participate — and that’s not the case, Baumann reports. Any and all investors would be allowed to participate in the Hollywood exchange.
While the Hollywood movie industry made some $10.6 billion last year, a futures-trading market on Hollywood movies could be many times larger than that, because there is no limit on how many bets can be placed on movies. Thus, the risk exposure to the economy as a whole could be many times larger than the value of Hollywood itself. Baumann reports:
If that sounds familiar, it should. One of the catalysts for the financial crisis was the spread of risky derivatives like credit default swaps, which allowed investors to bet on whether subprime mortgages would default. Because those investors had no stake in the underlying product—in this case, the original mortgage—they took far greater risks. In that context, Cantor’s plan could be “incredibly dangerous,” Stout says. “Until we fix this legal problem that you can make purely speculative derivative bets, we have to worry that any newly created form of derivative can add risk to the system.”ADVERTISEMENT
The Commodity Futures Trading Commission will make a decision on whether to allow the Hollywood exchange to go forward within the next few months, according to the Hollywood Reporter. The paper notes that Cantor Fitzgerald had originally started talking about a real-money Hollywood exchange in 2001, but the plans were put on hold when its offices in the World Trade Center were destroyed on 9/11, in which a devastating one-third of its employees lost their lives.
If the CFTC approves the exchange, it will likely become a major part of the Hollywood movie-making process quickly. The current fake-money HSX boasts that its “investors” predicted this year’s Oscar nominations with 88.6% accuracy.
“With nine out of 10 films correctly picked for Best Picture including Avatar, An Education and A Serious Man and across the board accuracy in predicting the Acting and Directing nominees, HSX traders once again displayed their keen industry knowledge,” HSX managing director Alex Costakis said.
Former Chinese premier Li Peng, the ‘Butcher of Beijing’, dies aged 90
Former Chinese premier Li Peng -- known as the "Butcher of Beijing" for his role in the Tiananmen Square crackdown -- has died at the age of 90, state media said Tuesday.
Li died of an unspecified illness in Beijing after he failed to respond to medical treatment late Monday, the official Xinhua news agency said. The ex-premier had previously battled bladder cancer.
Li gained notoriety worldwide as one of the key architects of the brutal breakup of mass pro-democracy demonstrations in the capital on June 4, 1989, and stayed at the top of the Communist regime for more than a decade, while remaining a hated symbol of the repression until his death.
Black couple’s marriage proposal party interrupted multiple times by white security guards accusing them of theft
According to a report at WHEC, a black couple who drove to a park where the man intended to propose were interrupted and harassed three times by security guards who accused them of stealing a T-shirt at a gift shop.
In a Facebook post, Cathy-Marie Hamlet explained that she and her fiancé, Clyde Jackson, were sitting at a table outside the Angry Orchard gift shop when a female security guard approached them and accused Jackson of stealing the shirt and asked to check his pockets.
Prime Minister Imran Khan claims Pakistani intelligence led CIA to bin Laden
Pakistan's main spy agency provided the US with a lead that helped them find and kill Al-Qaeda leader Osama bin Laden, Prime Minister Imran Khan said Monday.
Pakistan has until now officially denied having any knowledge of the terror chief until he was shot dead in a night time raid by US special forces on May 2, 2011, an incident that was a major national embarrassment and caused ties between the two countries to plummet.
Khan, who is visiting Washington on his first official trip, made his claim in an interview with Fox News when he was asked whether his country would release a jailed doctor whose fake immunization drive helped the US track and kill bin Laden in 2011.