Connect with us

Spread & Containment

Apple’s Market Cap Over 3X That Of Entire Precious Metals Mining Sector

Apple’s Market Cap Over 3X That Of Entire Precious Metals Mining Sector

Published

4 years ago

on

precious metals mining

Crescat Capital Q2 2020 letter to investors discussing the attractive valuations in the precious metals mining sector.

Dear Investors:

A New Bull Market for Precious Metals

Central banks are facing a serious predicament. After decades of ongoing accommodative monetary policy, the world is now sitting at record levels of debt relative to global GDP. In our view, there has never been a bigger gulf between underlying economic fundamentals and security prices. We are in a global recession, but equity and credit markets still trading at outrageous valuations. Markets are trading on a perverse combination of Fed life support and rabid speculative mania.

Meanwhile, demand for gold and silver, which is fundamentally cheap, is starting to take off as central banks are engaged in new record easy monetary policies. Ongoing easy monetary policies in the face of today’s asset bubbles in stocks and fixed income securities has a high probability of leading to a self-reinforcing cycle that drives investors out of these over-valued asset classes and into under-valued precious metals and mining stocks. Here are just some of the reasons Crescat is selling richly valued stocks at large and buying undervalued gold and silver including mining companies today:

  • The economy is now reaching credit exhaustion with record amounts of government and corporate debt relative to GDP worldwide.
  • The debt burden ensures weak future real economic growth.
  • Monetary debasement is the only way to reduce the debt burden. Fiat currencies are now engaged in a race to the bottom.
  • Global monetary base expansion to suppress interest rates creates a supercharged environment for gold and silver.
  • The global economy is in a severe recession with structural underpinnings beyond Covid-19.
  • Unemployment has spiked an historic 6.7% in just five months from 3.5% to 10.2% even after settling back from temporary 14.7% Covid-19 lockdown levels.
  • US equities today trade at truly record valuations, a full-blown mania. Ongoing policy rescue has perverted both free market accountability and price discovery creating a simultaneous zombie economy and stock market bubble which is unsustainable. Speculative asset bubbles are ripe for bursting.
  • During the 1970s precious metals bull market, 10-year real yields got as low as -4.9%. We strongly believe we are headed in that direction and again with a long runway, especially with Jay Powell’s new signaling from Jackson Hole.
  • A colossal $8.5 trillion of US Treasuries will mature by the end of 2021 and will need to be refinanced. Our government’s own central bank, the Fed, is the only entity capable of swallowing its debt guaranteeing new record levels of money printing to top today’s already historic levels.
  • Precious metals and miners have became a forgotten class among large allocators of capital in the extended expansion phase of the last business cycle.
  • With $15 trillion of negative yielding bonds, equities’ earnings real yields at a decade low, and corporate bonds near record prices, gold and silver are being rediscovered for their tactical as well as strategic risk reducing and return generating properties in prudently balanced portfolios.
  • The precious metals mining industry is the one clear industry to directly benefit from this monetary and fiscal indulgence. The aggregate market value of this industry still is almost 3 times smaller than Apple’s market cap.
  • Precious metals are now trading at historically depressed levels relative to money supply; overall stocks, on the other hand, are the complete opposite.
  • After a decade-long bear market, precious metals miners have been reluctant to spend capital. Now, they have historically low equity dilution, clean balance sheets, and record free cash flow growth.
  • The lack of investment in exploration and new gold and silver discoveries is setting up an incredibly bullish scenario for metals as supply is likely to remain constrained for an extended period at the same time while demand is poised to explode.
  • The year-over-year change in gold prices just broke out from a decade-long resistance. Last time we saw such strong appreciation was at the early stages of the 1970s gold bull market.

Financial markets simply cannot withstand higher interest rates. We believe the Fed has been forced into a new mandate, to suppress yields at all cost. This dynamic of expanding the monetary base to purchase assets and manipulate rates lower is an explosive mix for precious metals and mining stocks.

The break of the gold standard in 1971 was just as impactful as the Fed’s recent unlimited QE policy. Back then, it marked a period of lack of financial and fiscal discipline that triggered a frenetic 10-year bull market for gold. This time, we have arguably even stronger macro drivers for precious metals. As we show in the chart below, we have been in a clear trend of structurally increasing government deficits.

The S&P 500 real earnings yield is at its lowest level in a decade. Prior lows were also times that gold outperformed equities. In the early 2000s, for instance, the gold-to-S&P 500 ratio went up by 120% over 3 years. Even in 2010, a bull market for stocks, gold outperformed by 50%. The difference this time is that stocks have never been so overvalued at the same time as the economic growth outlook has been so challenged. We believe strongly this is the perfect time to buy gold and sell stocks. And when we say “buy gold”, we also include silver and precious metals mining stocks where there is even more upside exposure (both alpha and beta) to a macro move up in gold.

The debt quandary the US government faces also adds tremendously to our views on precious metals. From a funding perspective, 71% of all Treasuries issued in the past year matures in less than 12 months, resulting on Treasury Bills outstanding to surge to $5 trillion! The US Treasury is hoarding a record of $1.79 trillion of this cash.

A similar buildup happened back in 2008-9. A major difference this time is the fact that Treasury Bills outstanding are almost $3.3 trillion higher than their cash balance. In such scenario, average maturity of government debt has dramatically declined to 64 months. As a result, there is a tsunami of $8.5 trillion of Treasuries that will be maturing by the end of 2021 ensuring astronomic levels of money printing in the near term.

Skeptics of Crescat’s long gold thesis often say real yields can’t move any lower. This is often because this are looking at the TIPS market which only dates back to 1997 and real yields are already at their lows for this time frame. Therefore, some investors assume interest rates when adjusted for inflation expectations have never been lower. That, unfortunately, fails to include one of the most important analogs to today’s set up, the decade of the 1970s. Back then, 10-year yields less inflation measured by CPI twice reach as low as about -4.9%.

Those moments of large and declining negative real interest rates drove two of the US most significant surges in gold, silver, and precious metals mining stocks in US history. In today’s conundrum, corporations and governments are historically indebted and can’t take higher nominal yields, ensuring that strong monetary stimulus is here to stay to drive real yields lower, just like Jay Powell has promised.

A major narrative shift is underway. The old times of precious metals being perceived just as haven assets are probably over. With $15 trillion worth of negative yielding bonds, record overvalued stocks and a historically leveraged global economy, investors will likely begin to look at gold and silver, especially mining companies, with a fresh pair of eyes: growth and value.

Precious metals miners are the only industry where we are seeing strong and sustainable growth in revenues and future free cash flow at still incredibly low valuations today. Investors are starting to take note. Silver mining stocks, for instance, have already started to outperform even the market darlings, tech stocks. We believe this is only the beginning of a new era for precious metals.

The mining industry built a reputation of being capital destroyers since it peaked in 2011. But today this skepticism is no longer warranted. It is mind blowing that gold prices have just hit record highs and the larger mining companies have barely engaged in share dilution. In aggregate, the top fifty gold and silver miners by market cap that trade in Canadian and US exchanges have only issued close to $266 million in equity in the last twelve months. That was the second lowest amount of 12-month equity issuance in the last 3 decades. These companies have also just paid down $200 million of debt in the last quarter.

We have also noticed extremely conservative capital spending by miners. Throughout history, the CAPEX cycle for the industry tends to follow gold and silver prices incredibly close. Logically, this makes sense. As metal prices move higher, these businesses become more optimist and therefore focus on advancing their projects. This time, however, even though gold and silver prices have moved significantly higher, companies remain reluctant to spend capital. This level of divergence never happened in prior bull markets for precious metals. This is fundamentally bullish for entire asset class as we expect the supply of gold and silver to stay constrained for longer. It is also fundamentally bullish for Crescat’s activist investment strategy in the industry where we we can deploy capital into undervalued companies with big, highly economic projects that are ripe to move forward in current macro environment.

Precious metals miners have never looked so financially strong. If the industry were a sector, it would have the cleanest balance sheet among all sectors in the S&P 500. The median company in the S&P 500 today has historically high total debt to assets of 35%. Top miners, on the other hand, have only 12%. For such capital-intensive businesses, today’s healthy industry-wide capital structure is nice set-up to kick off a new secular bull market in precious metals mining.

We think it is important to get a sense of the both the value and growth opportunity today to see the incredible appreciation potential ahead of us. When we look at the ratio of gold and silver miners to global equities, it is still is near all-time lows and appearing to form a very bullish base, similar to what we saw back in early 2000s. Mining stocks meanwhile are about to become free cash flow growth machines. Juniors with a large scale, high grade new deposits, carry mind-blowing NPVs and IRRs. It is far and away the industry with the strongest combination of deep value and high growth opportunity for today’s macro environment.

In contrast to the value and growth prospects for miners, it is shocking to see Apple’s market cap still about 3.5 times the size of the entire precious metals industry. If anything, this reflects the level of skewness to the upside for gold and silver stocks in the near and medium term. This is the only industry to truly benefit from today’s world of unlimited QE and deficits.

Market cap of precious metals mining vs Apple

As we show below, Apple’s stock price appreciated at a much faster growth rate than its underlying free cash flow on a rolling twelve-month, forward-looking basis. The stock price is way ahead of its fundamentals. Apple is just one the many poster children for the manic speculation and excess in today stock market at large. Stocks like Microsoft, Tesla, and Netflix show similar looking disconnect.

With stock market indices making new highs, the narrowing breadth is ominous, especially in the tech-laden NASDAQ Composite.

The valuation of US stocks at large based a combination of eight factors compiled by Crescat is the most over-valued ever. We believe that the stock market is more over-valued than in it was in 1929 and higher than 2000.

To think that the stock market does not have any downside risk because the Fed has its back is absurd. False hope in the Fed’s ability to sustain these market valuations is perhaps the sole remaining illusion holding this market up. If your are in the crowded investor camp that believes easy monetary policy can prevent a market crash this time around because the Fed is engaged in easy monetary policy unlike the Great Depression, do yourself a favor and look up what happened to stock prices and multiples during the 1973-1974 bear market.

Silver and precious metals and mining

Easy monetary policies, as we have shown herein, are much more likely to drive investors out over-valued stocks and into under-valued precious metals. One precious metal that we are most excited about today is silver. Throughout history silver has played an important role in the monetary system. Its recent price surge made a lot of investors question the sustainability of this move, but in the grand scheme of things, silver remains near all-time lows relative to size of the US M2 money supply. The chart below is analytically important as it zooms out the still-early stages of what could be an incredible upsurge.

We have also recently noted that gold prices on a year over year basis just broke out from an over decade-long resistance. This is an important validation of our precious metals’ thesis. In our view, this looks a lot like the beginning of a late 70’s bull market.

Even after the largest liquidity infusion seen in history, equity markets are not only overvalued relative to their fundamentals but also relative to money supply. On the chart below, the S&P 500-to-M2 money supply ratio recently formed a double top from the insane tech bubble levels. It also still it well above peak of the housing bubble. For investors looking for bargains, it is not in the stock market at large. In our view, precious metals are almost solely the place to be today.

How does it all end? Colossal monetary dilution. None of us own enough gold. It is not just the US dollar that will be challenged. It is all the global fiat currencies of highly indebted countries. The Chinese yuan for instance is in an even worse predicament than the US dollar.

Chinese and Hong Kong banks are the most levered financial institutions in the global markets today. Chinese banks hold close to $43 trillion worth of highly inflated assets compared to China’s $14 trillion nominal GDP, an imbalance significantly greater than US and European banking imbalances that precipitated the Global Financial Crisis in 2008. Chronically troubled, the top four Chinese banks have been under pressure for years now and have significantly been diverging to the downside relative to the Chinese stock market at large, similar to US banks in 2007. We believe that China, formerly the growth engine of the global economy responsible for 60% of global GDP from 2009 to 2019, has finally reached credit exhaustion.

All fiat currencies are in a race to the bottom versus gold today. The macro environment is one of global synchronized monetary debasement.

Crescat’s Hedge Funds Top Bloomberg’s Performance Table for July

We are pleased to announce that Crescat’s hedge funds made the top of Bloomberg’s US hedge fund performance table for the second month in a row in July and the third month this year. The table below is from the Bloomberg Weekly Hedge Fund Brief, August 25, 2020, Melissa Karsh, Editor.

The first month that we stood out in the Bloomberg table this year was in March, a month in which the “sell stocks” side of our “buy gold and sell stocks” trade kicked in heavily. We continue to maintain a equity-hedged position in both our global macro and long short funds today: long precious metals mining stocks and pharmaceutical stocks combined with broad shorts of over-valued stocks across many industries and predominantly in the US. We have a substantial gross short-equity position in both of these funds still today to benefit from the re-ignition of the equity bear market that we foresee. It is important to note, that while we are still significantly gross short in both of these funds, but we are no longer “net short” like we were earlier this year because we deliberately became more aggressive on the long precious metals side of the portfolio in March and have allowed that side to grow.

Below see Crescat’s performance by theme for our flagship global macro fund in both the last quarter and last month.

Global Macro Fund Net Profit Attribution: Q2 2020 and July 2020

Note the strong performance of our global fiat debasement theme.

Crescat Firmwide Performance Since Strategy Inception

August Month-to-Date Performance

The Crescat Global Macro and Long/Short funds are up and estimated 5.6% and 6.7% net respectively in August month to date with short positions holding us back will our activist long precious metals and mining stock positions continue to perform. Our separately managed account strategies are roughly flat MTD.

Crescat Precious Metals Fund

Our new private precious metals focused activist fund that we launched in August is off to an incredibly strong start. The Crescat Precious Metals Fund is up 50%+ net on an estimated basis in its first month to date in August! We are encouraged that we were able to accomplish this in a flat-to-slightly-down overall market for gold and silver stocks in August, which endured a significant pullback mid-month. It is myth that there is no big and profitable new gold deposits to be found on this planet. In this new fund, we are helping to capitalize exciting growth companies with potentially large high grade gold and silver deposits in sound jurisdictions.

You can learn about some of these stocks in our Crescat Gets Activist videos on our YouTube page where we have profiled Condor Resources, Eloro Resources, Eskay Mining, White Rock Minerals, New Found Gold, Novo Resources, Cabral Gold, and NuLegacy Gold.

At Crescat, we are carefully building a diversified portfolio of the best mining properties on the planet with the help of Quinton Hennigh, PhD, a world-renowned exploration geologist who is Crescat’s geologic and technical advisor.

Gold and silver mining stocks have essentially been through a ten-year bear market since peaking in 2011. We believe that the bear market ended with the lows in March of this year, especially for smaller cap, exploration-focused mining companies. These stocks at large successfully held above their early 2016 lows in a double-bottom retest and still represent exceptional value today.

The new precious metals bull is now firmly off and running. Our analysis shows that it is still very early in the cycle as we have laid out herein. Future Fed and global central bank money printing should continue to take the world by storm to prod this bull now more than ever. We encourage you to get positioned now. Just like at the end of last month, we have a handful of new deals already on deck for funding and more coming our way soon. We would appreciate your commitment of capital now to help us seize these outstanding opportunities. We believe that the early investors in this space are the ones who will reap the big rewards.

 

Download PDF Version

 

Sincerely,

Kevin C. Smith, CFA

Founder & CIO

Tavi Costa

Partner & Portfolio Manager

The post Apple’s Market Cap Over 3X That Of Entire Precious Metals Mining Sector appeared first on ValueWalk.

Read More

Related Topics:
Continue Reading

Spread & Containment

The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…

Published

10 hours ago

on

March 9, 2024

By

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

Read More

Continue Reading

Spread & Containment

Another beloved brewery files Chapter 11 bankruptcy

The beer industry has been devastated by covid, changing tastes, and maybe fallout from the Bud Light scandal.

Published

16 hours ago

on

March 9, 2024

By

Before the covid pandemic, craft beer was having a moment. Most cities had multiple breweries and taprooms with some having so many that people put together the brewery version of a pub crawl.

It was a period where beer snobbery ruled the day and it was not uncommon to hear bar patrons discuss the makeup of the beer the beer they were drinking. This boom period always seemed destined for failure, or at least a retraction as many markets seemed to have more craft breweries than they could support.

Related: Fast-food chain closes more stores after Chapter 11 bankruptcy

The pandemic, however, hastened that downfall. Many of these local and regional craft breweries counted on in-person sales to drive their business. 

And while many had local and regional distribution, selling through a third party comes with much lower margins. Direct sales drove their business and the pandemic forced many breweries to shut down their taprooms during the period where social distancing rules were in effect.

During those months the breweries still had rent and employees to pay while little money was coming in. That led to a number of popular beermakers including San Francisco's nationally-known Anchor Brewing as well as many regional favorites including Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks, and Cleveland’s Terrestrial Brewing filing bankruptcy.

Some of these brands hope to survive, but others, including Anchor Brewing, fell into Chapter 7 liquidation. Now, another domino has fallen as a popular regional brewery has filed for Chapter 11 bankruptcy protection.

Overall beer sales have fallen.

Image source: Shutterstock

Covid is not the only reason for brewery bankruptcies

While covid deserves some of the blame for brewery failures, it's not the only reason why so many have filed for bankruptcy protection. Overall beer sales have fallen driven by younger people embracing non-alcoholic cocktails, and the rise in popularity of non-beer alcoholic offerings,

Beer sales have fallen to their lowest levels since 1999 and some industry analysts

"Sales declined by more than 5% in the first nine months of the year, dragged down not only by the backlash and boycotts against Anheuser-Busch-owned Bud Light but the changing habits of younger drinkers," according to data from Beer Marketer’s Insights published by the New York Post.

Bud Light parent Anheuser Busch InBev (BUD) faced massive boycotts after it partnered with transgender social media influencer Dylan Mulvaney. It was a very small partnership but it led to a right-wing backlash spurred on by Kid Rock, who posted a video on social media where he chastised the company before shooting up cases of Bud Light with an automatic weapon.

Another brewery files Chapter 11 bankruptcy

Gizmo Brew Works, which does business under the name Roth Brewing Company LLC, filed for Chapter 11 bankruptcy protection on March 8. In its filing, the company checked the box that indicates that its debts are less than $7.5 million and it chooses to proceed under Subchapter V of Chapter 11. 

"Both small business and subchapter V cases are treated differently than a traditional chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed," USCourts.gov explained. 

Roth Brewing/Gizmo Brew Works shared that it has 50-99 creditors and assets $100,000 and $500,000. The filing noted that the company does expect to have funds available for unsecured creditors. 

The popular brewery operates three taprooms and sells its beer to go at those locations.

"Join us at Gizmo Brew Works Craft Brewery and Taprooms located in Raleigh, Durham, and Chapel Hill, North Carolina. Find us for entertainment, live music, food trucks, beer specials, and most importantly, great-tasting craft beer by Gizmo Brew Works," the company shared on its website.

The company estimates that it has between $1 and $10 million in liabilities (a broad range as the bankruptcy form does not provide a space to be more specific).

Gizmo Brew Works/Roth Brewing did not share a reorganization or funding plan in its bankruptcy filing. An email request for comment sent through the company's contact page was not immediately returned.

 

Read More

Continue Reading

Spread & Containment

Revving up tourism: Formula One and other big events look set to drive growth in the hospitality industry

With big events drawing a growing share of of tourism dollars, F1 offers a potential glimpse of the travel industry’s future.

Published

2 days ago

on

March 8, 2024

By

Sergio Perez of Oracle Red Bull Racing, right, and Charles Leclerc of the Scuderia Ferrari team compete in the Las Vegas Grand Prix on Nov. 19, 2023. Tayfun Coskun/Anadolu via Getty Images

In late 2023, I embarked on my first Formula One race experience, attending the first-ever Las Vegas Grand Prix. I had never been to an F1 race; my interest was sparked during the pandemic, largely through the Netflix series “Formula 1: Drive to Survive.”

But I wasn’t just attending as a fan. As the inaugural chair of the University of Florida’s department of tourism, hospitality and event management, I saw this as an opportunity. Big events and festivals represent a growing share of the tourism market – as an educator, I want to prepare future leaders to manage them.

And what better place to learn how to do that than in the stands of the Las Vegas Grand Prix?

A smiling professor is illuminated by bright lights in a nighttime photo taken at a Formula 1 event in Nevada.
The author at the Las Vegas Grand Prix. Katherine Fu

The future of tourism is in events and experiences

Tourism is fun, but it’s also big business: In the U.S. alone, it’s a US$2.6 trillion industry employing 15 million people. And with travelers increasingly planning their trips around events rather than places, both industry leaders and academics are paying attention.

Event tourism is also key to many cities’ economic development strategies – think Chicago and its annual Lollapalooza music festival, which has been hosted in Grant Park since 2005. In 2023, Lollapalooza generated an estimated $422 million for the local economy and drew record-breaking crowds to the city’s hotels.

That’s why when Formula One announced it would be making a 10-year commitment to host races in Las Vegas, the region’s tourism agency was eager to spread the news. The 2023 grand prix eventually generated $100 million in tax revenue, the head of that agency later announced.

Why Formula One?

Formula One offers a prime example of the economic importance of event tourism. In 2022, Formula One generated about $2.6 billion in total revenues, according to the latest full-year data from its parent company. That’s up 20% from 2021 and 27% from 2019, the last pre-COVID year. A record 5.7 million fans attended Formula One races in 2022, up 36% from 2019.

This surge in interest can be attributed to expanded broadcasting rights, sponsorship deals and a growing global fan base. And, of course, the in-person events make a lot of money – the cheapest tickets to the Las Vegas Grand Prix were $500.

Two brightly colored race cars are seen speeding down a track in a blur.
Turn 1 at the first Las Vegas Grand Prix. Rachel Fu, CC BY

That’s why I think of Formula One as more than just a pastime: It’s emblematic of a major shift in the tourism industry that offers substantial job opportunities. And it takes more than drivers and pit crews to make Formula One run – it takes a diverse range of professionals in fields such as event management, marketing, engineering and beyond.

This rapid industry growth indicates an opportune moment for universities to adapt their hospitality and business curricula and prepare students for careers in this profitable field.

How hospitality and business programs should prepare students

To align with the evolving landscape of mega-events like Formula One races, hospitality schools should, I believe, integrate specialized training in event management, luxury hospitality and international business. Courses focusing on large-scale event planning, VIP client management and cross-cultural communication are essential.

Another area for curriculum enhancement is sustainability and innovation in hospitality. Formula One, like many other companies, has increased its emphasis on environmental responsibility in recent years. While some critics have been skeptical of this push, I think it makes sense. After all, the event tourism industry both contributes to climate change and is threatened by it. So, programs may consider incorporating courses in sustainable event management, eco-friendly hospitality practices and innovations in sustainable event and tourism.

Additionally, business programs may consider emphasizing strategic marketing, brand management and digital media strategies for F1 and for the larger event-tourism space. As both continue to evolve, understanding how to leverage digital platforms, engage global audiences and create compelling brand narratives becomes increasingly important.

Beyond hospitality and business, other disciplines such as material sciences, engineering and data analytics can also integrate F1 into their curricula. Given the younger generation’s growing interest in motor sports, embedding F1 case studies and projects in these programs can enhance student engagement and provide practical applications of theoretical concepts.

Racing into the future: Formula One today and tomorrow

F1 has boosted its outreach to younger audiences in recent years and has also acted to strengthen its presence in the U.S., a market with major potential for the sport. The 2023 Las Vegas race was a strategic move in this direction. These decisions, along with the continued growth of the sport’s fan base and sponsorship deals, underscore F1’s economic significance and future potential.

Looking ahead in 2024, Formula One seems ripe for further expansion. New races, continued advancements in broadcasting technology and evolving sponsorship models are expected to drive revenue growth. And Season 6 of “Drive to Survive” will be released on Feb. 23, 2024. We already know that was effective marketing – after all, it inspired me to check out the Las Vegas Grand Prix.

I’m more sure than ever that big events like this will play a major role in the future of tourism – a message I’ll be imparting to my students. And in my free time, I’m planning to enhance my quality of life in 2024 by synchronizing my vacations with the F1 calendar. After all, nothing says “relaxing getaway” quite like the roar of engines and excitement of the racetrack.

Rachel J.C. Fu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Read More

Continue Reading

Trending