Live Music's Turn

I came across a new live music venue yesterday. It is the size of a living room, has the acoustics of Carnegie Hall, and can be seen by million of viewers (if not more). This location, TRI Studios, has been debuted by Bob Weir from The Greatful Dead. I've been told by a family member that there are more studio's like TRI around and there will be to come, but either way, the model has serious potential.

Traditional live concerts with finite seating capacity and old cost structures rely on cheap energy that allow consumers to travel long distances to see their favorite performer or group. Now, for a fraction of the price, music patrons can watch these live events from the comfort of their own home or office. Home audio and visual technology creates an even better experience. Listening to music on a computer or TV with HDTV or 3-D technology makes the whole live feed concert equation viable.

From an investors point of view, TRI has unlimited operating leverage built into its model. It seems as though the costs involved with putting on the show (booking the talent, operating the location, studio rental, data feed, etc.) will be incurred whether there is one subscriber or ten-million. Those are the kind of business models and numbers we like: each additional dollar in revenue is extremely high margin. Think about it, as the studio operator, how does 5 million $5 tickets sound vs. 20,000 $80 tickets? This setup means money will flow into the sector, most likely from big media starving for growth.

Everyone I talk to says live concerts will never go away, people want to experience the music and the atmosphere. Those people are probably right. Still, I think these live studio concert feeds have a chance of being a major disruptor. It hits on a few key macro themes: high energy prices, proliferation of high quality (cheap) home entertainment, and the growth of online video consumption. In 5 years will we see some of the worlds biggest acts going this route?

The Individual Producer

Welcome back to Sensical Gibberish. I'm back with more gibberish and hope to post once a month going forward. To follow-up on my last post on the once quaint tradition of doling out gold Rolex's upon retirement, I'd like to develop the thought a little deeper: The Individual Producer.

Advances in technology along with the myriad of issues facing today's labor force are allowing (forcing) individuals to become productive. Quick example -- at one point in time if a journalist wanted to get their voice heard it entailed looking for a job at major newspaper and using that outlet to disseminate their work. Now, that same journalist can start blogging in a matter of minutes, distribute using social mediums, and generate income using advertising and subscriptions.

The theme: forget the days when individuals had to rely on large entities with deep pockets and technological know-how as portals to reach and acquire customers. The return to production is something I have been thinking about for a long time. Today someone passed this article on to me: How E-Books Are Changing the Economics of Writing. It demonstrates how technology is providing individuals amazing tools to harness their abilities.

The article quote from J. A. Konrath caught my attention:

"I have an acquaintance who is a New York Times bestseller," he notes. "She got a great advance. But I'm on track to earn $200,000 this year on e-books alone, and the e-book market is still in its infancy. If she'd kept the rights and self-published her e-book, I bet she would have earned more money in three years on her own than she will with her publisher."

There you have it. Technology is making it attractive for individuals to move away from big firm dependence and give it a shot on their own. As the article points out, there are some hurdles that face all individual producers (in this case self-published e-book authors) such as marketing and distribution to name a couple. Of course, when aren't there problems with a new business model?

I have faith in two things. One, entrepreneurs will continue to come along and enhance the individual producer ecosystem by providing individuals the tools to market, distribute, and solve any other future hurdles (think Etsy.com as a strong ecosystem for small artists and producers). Two, technology will continue to make it easier for individual producers to create and distribute whatever they are good at. I'm talking broad spectrum; from investing advice to farming -- harnessing any act using technology. It can only get more interesting and I'm excited to see whats next.

Gold Rolex?

The monthly US employment report was released yesterday (Friday May 7th) and two internals continue to catch my attention. The first, U-6 measure of unemployment. Some regard U-6 as the true rate of unemployment as it accounts for the unemployed looking for work, those working part-time that would accept at full-time position, and finally those unemployed whom are discouraged and no longer looking for work. This broad unemployment measure is stubbornly high at 17.1%, resisting to come down even though we have now seen four months of positive jobs gains. The second internal, duration of unemployment continues to suggest the long-term unemployed are not finding new jobs. The average duration in weeks rose from 31.2 in March 2010 to 33.0 in April 2010. Seasonally adjusted, those unemployed for 27 weeks or more is 46% of the total 15.3 million jobless Americans.

These two statistics signal that the US unemployment situation is structural by nature. By defining unemployment as a structural issue, this means who lost jobs in the financial, insurance and real estate industries are now without the proper skills or opportunities to find new work. This will keep the unemployment rate stubbornly high.

What I would like to focus on is that new trends will be born out of such a structural problem, not the problem itself. Will work be redefined in such a way that Americans will be forced to occupy multiple jobs? Maybe these jobs will target productivity as opposed to the paper shifting industries which have become so prevalent over the last 30 years. At the same time, inadvertently such a shift would, in my mind, target the psychological multitasking nature of our society.

At one point in America's corporate history, employees with a certain duration of service to one company received a gold Rolex upon retirement, now they may receive a more productive fulfilling lifestyle.

Where does all the dough go?

As the US bond market struggles to find a bid, it's time to ask where does all that money go once it has fled from the risk free asset known as US Treasuries. Conventional thought would say yield chasers find their way into various other bonds (i.e safer sovereign debt or US corporates) and/or dividend yielding equities.

But, what if unconventional is the way to go? What if that income producing capital finds its way into assets that do not produce any income, assets necessary for daily life such as oil and foods? Oh, and lets not forget gold and silver.

TV's and Automobiles

Post World War II a seismic shift within the American economy was taking hold. Two innovations forced this shift from what we knew as the industrial economy to a new vibrant economy based on the consumer. Televisions and automobiles made it possible for consumers (a new term at the time for the American population) to live a life of prosperity coupled with convenience.

The growth of the personal television took strength away from the manufacturers and placed the power in the hands of the Madison Avenue's of the world focusing on advertising and marketing products to consumers.

The implications of the automobile led to shifts in geography as suburbs in new parts the country became widely populated as convenient, cheap, and viable places to live. The quality of life for American's was booming unlike ever before. The television created a desire to buy goods and the automobile led to a means of transportation to buy those goods, thus the rise of malls and shopping centers.

Now it seems like the foundations of these two great innovations have peaked along with the economy they built. Cars are not as cheap as they once were and neither are the products we see on television. What future innovations and themes will spark the next growth phase in the American economy, as cars and TVs once achieved in the post WWII period?

2010 -- The Year of the Tiger

According to the Chinese Zodiac, the Year of 2010 is the Year of the Tiger. I see two things occurring:

1. The correlation of equity markets and the bond market will break. When equities fall, bonds will not be bought as flight to safety trade.

2. Gold stocks will, for the first time in 9 years, trade with the metal on the upside and less so with the overall market.

Call me crazy, but I am not sure we want to see upside economic growth (relative growth vs. expectations on global basis) here in the US. Excess money floating around coupled with real demand overseas will spike the prices of the things we need and rely on (energy, food, and interest rates). Add those to the structurally high unemployment and the deficits we currently face both of which resulting in the goods we own (dollars, houses, and cars) continuing to depreciate. Not something to cheer for.

Goldmember

I try to refrain from using the term "bubble" but since its so widely excepted, I decided to use it just this one time to convey my point.

Gold, contrary to popular opinion, has many uses such as jewelery, medicine, electronics, and as a form of money. Today I would like to focus on the topic of gold in its monetary form. It is hard to ignore the price action of gold over the past 9 years, rising from around $300 to over $1000 an ounce. Although the price appreciation has been steady and consistent, there are constant calls for a gold "top" or identifying it as a "bubble." I am on the other side of the aisle in that gold, in its current state is not a bubble, but in a secular bull market that has a lot of room to run.



Bull markets are very difficult to ride in their entirety because the percentage gain from start to finish is sickening, but the best method is to be part of the bull market and walk away, looking from time to time. By "walk away", I mean to the point you forget you own gold.



I do actually think gold will become a bubble or mania, but again I believe that is far off. I don't have a price in mind, but sentiment will guide me. During the technology mania peak of 1999 and 2000, respectable businesspeople were quitting their jobs to become day traders. They believed this was the future. I believe we will know when gold is in the process of topping when, again these same respectable people will quit their day jobs to be gold dealers or brokers. That will be my sign, but until then the fundamental and technical picture remains in tact. Will you become a Goldmember?