The future of TV

Currently, most people watch TV through either Cable or Satellite. It gives these distribution companies lots of power and stable cash flow. But the time has arrived for a big change. The future TV will most likely through streaming, either directly from the content provider (such as sports franchise) or a content distributor (such as netflix). You can choose your own news and sports provider through its own streaming. If you are a New York sports fan, you can sing up with MSG and get live streaming directly from MSG. If you like CNN, you should be able to get streaming from CNN. For movies and shows, most likely they will go through a distributor. The power will shift to content provider, that's no question about it.

Disney, MSG, Lionsgate and etc will benefit from the trend. The margin for distributor like netflix will be thin because of the competition and very low barrier for entry. Currently, my favorite picks are MSG and Lionsgate (LGF). I will write about LGF in another blog.

unrealistic number for Apple

I read a report today and the analyst is predicting that Apple is going to sell close to 150 million Ipad in 2012 and 2013 and will continue to grow 20% afterwards. It is just unrealistic. The world population is about 6 billion. There are over 4 billion live under $5/day and they are not going to buy an Ipad. It is basically one Ipad for every 10 people if the prediction is correct. （After 20 years growth, the total PC shipments in 2011 is 85 million units). Even if it is achievable, then in 2014, another 110 million units have to be sold to maintain 20% growth. That's a 70% replacement rate (assuming a new Ipad come out). in 2015, it will be 135 million units. This is just impossible. The best reference is ipod. During its best year, it sold 55 million units but it only last for one year. It went back to 40 million units. The total ipod sold in 10 years is about 300 million. And the growth is negative right now. The only way for Apple to maintain its growth rate is have new break though products. Over the last 10 years, it is ipod, iphone and ipad.

The failure of electronic car bodes well for crude oil

The recent spike in oil price is probably more to do with the situation in Iran. However, over long term, the failure of e-car to catch fire is a more serious issue. If we can not curtail demand, the supply will not meet demand over long term. The world is consuming 80-90 million barrel a day right now. The new supplies come on lines are all unconventional fields, such as oil sand, deep sea drilling and fraction. All these have serious environment consequences. Even if all these methods are safe, they may give us another 30 years supply. Unless we are serious about e-car, oil price will continue to be high.

Dow 13000

If you original stocks in dow and hold on to them？ how much return you will get? Most people will say more than 1000% and it is the proof of buy and hold strategy. Really? I checked 30 companies in dow 30 in 1928. Most companies are gone. Some remaining companies like GM, Chryser, U.S. Steel and etc. had experienced at least one bankruptcy. There is only one company still in dow that is GE. So if you spent $100 each on original 30 companies, you probably did not break even by now. No company can live forever.

MSG is trading @all time high around 33.45. I will take some chips off the table when it goes to 34. I still believe the market is underestimating the impact of Lin.

Jeremy Lin's impact on MSG part 2

If you listened to my blog last Thursday, congratulation! you are up 7% already. After I did a more careful analysis, I believe the impact on MSG bottom line from Lin will be 30 million this year
1. the increased average price for ticket. The price increse is about 26% already. Which translate to 800,000 to one million dollar per game. For the remailing of the season, it will be about 20 million.
2. Merchandise sales. Total earning impacts will be at least 5 million. Assume MSG get net $1-3 for every t-shirt or other stuff sold.
3. Increased ticket sale. Assume 2000 more tickets sold every game @the average price of 180, that's another 7 million
4. TV rights to Asia countries. That's at least 3 million dollar.
5. Advertisement on the Madison Square Garden, minimum increase by 2 million.
6. Deeper into the playoff, easily 3 million.
Some intangibles. Put pressure on Time Warner to reach cable deal.

For next season, the impact on earning will be double minus his salary, assuming 15 million. Jeremy is 23, if he can do this until he is 30. The total financial impact will be at least 350 million on MSG bottom line. The total share outstanding is 77 million, so the stock should increase by 5 dollars from his impact. I increased my target to $35.

Jeremy Lin's impact on MSG

If you have not heard about Jeremy Lin, then this is not for you. Lin's impact on MSG stock should be significant. It will bring 2 to 3 thousand more fans each game to Madison Square Garden, which is about $100,000 additional revenue per game. The TV rights to Taiwan and China will generate $5 million per season at least. The advertisements will increase by 1-2 million (given Yao Ming's Houston Rocket experience). You are looking at least 10 million dollar net revenue. 90% of this revenue will translate into net income It is 10% of current NI of MSG. My guess the impact will be much more than 10 million a year. MSG should go up at least 10% to $33 because of Lin

The implication of change of growth in China

China is experiencing a cool down in property and investment-led growth. The government is trying hard to boost consumer consumptions. The drop in housing price will help consumption too. The implications for this change is huge. The demand for base metals will slow, but oil demand will go up. Computers, smart phones and electronics sales will see big jump and so does farming equipments. Luxury cars will see strong growth as well. Firms like Apple, BMW and Starbucks will benefit.