Tag Archive for Netflix

Q3: Judment Day or Rise of the Machines?


Over the holiday weekend, I have been going back over my trades and posts to see what worked and where I have made mistakes. Over the past year, investors who didn’t jump onto the “disruptive technology” theme have gotten crushed. I know it seems hard to believe, but just watching Cramer and buying his picks has worked much better than actually working (hard to believe because Cramer reminds a bit too much of Damon Killian, the host of the Running Man game show: http://www.youtube.com/watch?v=tiIFgtfl2rE )

Seems pretty ironic that the running man was about a military chopper pilot who wouldn’t fire on a crowd of people involved in a “food riot” let alone that it takes place in 2017….

I have to give credit where credit is due, and Cramer has been spot on so a Booyah is in order here even though as a value investor I wouldn’t buy most of these names if you put a gun to my head. Shares of Netflix, Chipotle, Green Mountain, Amazon, Lululemon, Under Armor, Travelzoo, Salesforece, VM Ware, Riverbed, and Acme Packet have soared while the blue chip value stocks like Microsoft, Berkshire, Goldman, Johnson and Johnson, Gilead, Cisco, and others have badly underperformed.

Growth investing is all that investors seem to care about at present with an eye toward new media and disruptive business models. This “Rise of the Machines” mentality has been quite swift and with new HFT program trading algorithms, an earnings beat and raise has trumped all else in the current investment climate. Robotics, Cloud Servers, new technologies, and first mover advantages are that have driven the “recovery” thus far.

Are the disruptive technologies driving the stock market recovery and benefiting from stimulus actually making the problems worse? I think so and this is why I am very skeptical of the recovery and also of the major stock averages at present. Companies involved in disruptive business models often require no employees, meaning that even though Wall Street is booming, Main Street is actually suffering as new technologies allow corporations to drive profits without actually creating any jobs. This “productivity” is not coming from workers putting in more hours as much as it is from automation and computing advances which help businesses earn money without having to employ a labor force. If indeed we are involved in a “jobless recovery” disruptive technology is at least partially to blame. IE, the same stocks driving investor profits on Wall Street are crushing jobs on main street.

Without regulation or taxation based on employment levels, the machines are going to defeat the humanoids both on Wall Street and on Main Street. Handing our data to servers on the Cloud and creating robots capable of warfare and intelligent decision making is putting us on par for some type of “T2 Judgment Day” type of society at some point.

While this all sounds a little bit too much like the Matrix, I assure you I am not wearing a tin foil hat — more U.S. citizens are on food stamps than ever before with some 44MM of us receiving financial assistance at the grocery store. While the stock market is up some 30% since August, unemployment is roughly flat over the same period of time as the Fed’s balance sheet expansion has helped the machines and their masters far more than the “Humanoid Ca ca.”

While I am not saying that there is some type of conspiracy out there against the humanoids, I should say that D.A.R.P.A.’s announcement on Friday that they are developing “super-soldiers” which are part man and part machine is a bit disturbing. I loved Robocop the movie but a real life Robocop is just creepy. Darpa’s new soldiers can fly a plane using their mind, run upp building walls, sprint for 200 miles at 20 miles per hour, and they can even fly. The new technologies can stop soldiers from feeling pain for a month and gives them a heightened ability to see and hear things. I can’t decide if they borrowed this technology from the Matrix, Predator 2, Robocop, Transformers, or Terminator but in any case it appears that companies and the governments of the world possess technologies that are far more advanced than any of us humanoids have previously fathomed.

All in all valuations here are at nosebleed levels, as this uneven recovery sputters forward. Innovation is actually hurting the main stream economy while benefiting the elite class and the thinking robots out there, so make sure to have some tech longs to hedge your short positions on the IWM and QQQ against. Q3 will either be a continued Rise of the Machines or it will be Judgment Day for the stock market, as stocks and the economy at some point intersect and we are at CAPE and Tobin’s Q ratios that are found at market tops.

Sony Tells Netflix: Adios, Amigo

It’s pretty amazing that it took Sony, which is the maker of the Blu Ray disc, this long to stop doing business with Netflix which is the biggest enemy of the home media market (arguably besides Coinstar )

.

Finally, the studio executives might be figuring it out that handing their enemies free money is a bad corporate strategy. I expect to see much more of this type of realization among studios who are starting to figure out that the “disruptive” models of Netflix and Coinstar are really only disruptive for the studios! The fears behind “the death of brick and mortar rentailers” after the stupid debt moves of Blockbuster and Movie Gallery have led the studios to cut off their hands to spite their feet.

By working with Netflix, Coinstar, Hulu, Amazon, Apple, etc… and not the brick and mortar retail community the studios have ensured their own demise…. I will be anxious to see more developments such as these in the home entertainment market and hopefully a Blu Ray based rental market that includes mom and pop video stores and not just kiosks which provide no jobs and no profits for Movie producers.

Disclosure: I’m short NFLX call options

From Home Media Magazine:

Sony Pictures Home Entertainment quietly has pulled its movies from Netflix’s streaming queue due to contract issues with aggregator Starz Entertainment. In a post on Netflix’s blog (blog.netflix.com), Pauline Fischer, VP of content acquisition with Netflix, confirmed the situation between two “valued” content providers without elaboration. Indeed, Sony’s top-grossing films since 1984, which include Spider-Man, Spider-Man 2, Spider-Man 3, Men in Black, Ghostbusters, Hancock, The Da Vinci Code, Terminator 2: Judgment Day, Men in Black 2 and Hitch, are available on Netflix only via DVD and/or Blu-ray Disc. Starz, which distributes Sony and Disney movies, among others, to multichannel video distributors such as cable and satellite TV, sub-licensed content to Netflix streaming several years ago for $30 million annually. That agreement — now widely panned by media executives as a give-away to Netflix — expires early next year. Renewal is expected to fetch Starz a tenfold increase in license fees from Netflix. Richard Greenfield, analyst with BTIG Research in New York, said the pullback by Sony appears to be due to a clause in the original output deal as it relates to digital rights and the number of third-party (Netflix) digital streaming subscribers created. Netflix’s burgeoning subscriber growth (and stock valuation) throughout the past few years has been due to its market-leading streaming service. “We suspect Starz wants to have a sense of what its new Netflix deal looks like, before it renegotiates with Sony in terms of how much of the dollar upside goes to Sony versus [them],” Greenfield wrote in a June 17 post.