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FTX Failure Leaves Big-Money Venue Sponsorship Voids

It may be difficult to replace FTX, according to one expert.
The post FTX Failure Leaves Big-Money Venue Sponsorship Voids appeared first on Front Office…



The failures of Enron and Adelphia left franchises scrambling two decades ago, not unlike the situation for the Miami Heat — along with county officials — and UC Berkeley in the wake of FTX’s bankruptcy filing on Friday. 

One expert who has negotiated naming rights deals laid out why it may not be as easy to replace FTX, at least for the amount the failed crypto exchange agreed to pay. 

“This is a really challenging time to go out into the marketplace and try to find somebody who’s willing to make the level of investment as FTX, especially for that length of time,” sports marketing consultant Eric Fernandez told Front Office Sports. “

FTX negotiated two major venue naming rights deals in 2021.

Miami-Dade, which owns the Heat’s home arena, and FTX agreed to a 19-year, $135 million deal for FTX to replace American Airlines as the venue’s sponsor. Miami-Dade County and the Heat said in a joint statement Friday night that they terminated their relationship, and Mayor Daniella Levine Cava told WPLG-TV on Sunday that the county had taken in $20 million before FTX’s bankruptcy. 

FTX, Once a High-Profile Sports Sponsor, Files for Bankruptcy

Binance recently backed out of a deal to acquire FTX.
November 11, 2022

FTX entered into a 10-year deal worth a reported $17.5 million for UC Berkeley’s football stadium. In a statement to FOS on Friday, UC Berkeley’s athletic department said they were “monitoring the evolving business situation with FTX and will determine any next steps.”

“You do due diligence on these companies because it’s kind of like a marriage,”  Fernandez said. “You are looking at this from a reputation and a chemistry standpoint.

“To have both these deals within 18 months fall apart, there are going to be questions coming from within, and they are going to be gun shy about what kind of brand or partner to go after next.”

John J. Ray III, who helped Enron creditors recoup billions, was tapped as FTX’s CEO to replace disgraced founder Sam Bankman-Fried. 

Crypto companies’ once-deep pockets were an attractive option for teams and athletes for a world that took a hit early in the COVID pandemic, Fernandez said.

Beyond FTX, also inked a 20-year, $700 million deal to take over Staples as the naming rights sponsor of the downtown Los Angeles arena where the Lakers, Clippers, and Kings play. 

“Is the whole financial technology sector going to be impacted?” Fernandez asked rhetorically. “There are a ton of deals being done now with fintechs for naming rights and jersey patches. There’s a level of diligence that’s going to be done on these kinds of companies to pressure test them to make sure that they’re financially sound.”

Crypto’s massive nosedive in value this year sets it apart from the bankruptcies that left franchises scrambling in years past.

Illegal accounting practices led to Enron’s demise in 2001. That forced the Houston Astros to find ways through bankruptcy court to get out of that deal. There was plenty of interest to replace Enron before Minute Maid agreed to a 30-year, $100 million deal in 2002. 

Adelphia founder and executives became embroiled in a financial scandal that led to the cable company’s bankruptcy, and, in turn, the Tennessee Titans’ need for a new sponsor of their football stadium. The Nashville stadium went purely as “The Coliseum” for four years before Louisiana-Pacific became the naming rights sponsor in 2006. Nissan acquired those rights in 2015. 

Commercial internet company PSI Net didn’t have a scandal but went bankrupt in 2001, a couple years into being the naming rights sponsor for the Baltimore Ravens’ stadium. After the stadium went without a sponsor for the 2002 season, its current sponsor — M&T Bank — took over. In 2014, M&T Bank agreed to a 10-year extension that pays around $6 million annually.

The post FTX Failure Leaves Big-Money Venue Sponsorship Voids appeared first on Front Office Sports.

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The Decline & Fall Of Luxury Goods

The Decline & Fall Of Luxury Goods

Authored by Jeffrey Tucker via The Epoch Times,

For years now, luxury goods have thrived. It’s not…



The Decline & Fall Of Luxury Goods

Authored by Jeffrey Tucker via The Epoch Times,

For years now, luxury goods have thrived. It’s not surprising. There has been relative peace, seeming prosperity for the few, and a “Hunger Games” sense of “Let them eat cake” alive in the world. You see it in the lavish and widely advertised events of the Met Gala or the World Economic Forum in Davos. The well-to-do have been living it up with very conspicuous consumption.

This was especially true with zero-percent interest rates, which lasted more or less from 2008 to 2021. This policy was a huge subsidy to the largest businesses and the peddlers of every conceivable absurdity, from crazy theories like DEI and ESG to decadence in goods and services.

Just as it took away the reward for thrift, it was a boon to every extravagance.

It made the cost of borrowed capital essentially free, while punishing savers.

But declining economic fortunes come for everyone in the end, even those who imagine themselves insulated. This week we’ve seen the luxury brand stocks take a heavy hit.

“LVMH Moët Hennessy Louis Vuitton posted sales below analysts’ expectations for the third quarter,” writes the Wall Street Journal, “as the luxury industry grapples with inflation and high interest rates that are squeezing consumer spending.”

“The owner of Louis Vuitton and Dior brands has struggled to lure big-spending Chinese consumers back as Chinese tourism has been slow to pick up again since the pandemic. China was the world’s largest luxury market before Covid-19 hit.”

Indeed, the stock has been utterly slammed, hitting a low for the year after a very long and hugely lucrative run-up.

US luxury goods stocks are basically flat now from the start of COVID (having diverged dramatically since mid 2022 from Europe)...

Not all is well in the world economy, not even in China, and so now we see luxury brands taking it on the chin. Inflation and high interest rates are the culprit. Borrowed capital is finally experiencing a positive cost for the first time in a decade and a half. This has imposed a slow but relentless squeeze on all bank accounts, even the most well-endowed ones.

You have surely encountered these brands in the past. Walking through the best airports, you see jewelers, handbag sellers, and fashion designers with fancy things on sale. You get interested, and then your eye catches the price. It’s astonishing and you almost cannot believe that anyone buys them. But they do. The question is why.

Luxury goods like this have long fascinated economists because they stress the normal laws of demand. Usually with a single good, all other conditions remaining the same, the lower the price, the greater the intensity of demand for the same good. But sometimes, the opposite happens. The higher the price, the more people are convinced of the merit of the purchase.

These are divided between two classes: so-called Veblen goods and Giffen goods.

  • The Veblen good is one that obtains higher demand due to the way in which its status triggers a sense that it should be more valuable.

  • The Giffen good is one in which the price rise itself signals a great broad demand regardless of social status.

French wines might be Veblen goods whereas Bitcoin might be Giffen goods, bought for fear of missing out.

Regardless, both run contrary to conventional wisdom about the relationship between demand and price. I have often wondered why in the world someone would spend $3,000 for a handbag whereas you can obtain something very close to it from eBay for 1/100th the price. The reason has to do with consumer confidence in the product. If even one person asks the question “Where did you get it?” you can answer with confidence and feel great about that.

For some people, that is worth a lot of money.

I’ve felt this way about many wines too. Yes, I can taste the difference between a $12 wine and a $120 wine (I think?) but it doesn’t matter to me. But for some people, sky-high prices signal quality (“You get what you pay for”) and so spending extra comes with great benefits.

But all of this is provided that you can afford it.

We can indulge in all such personal and cultural scrupulosity over brands and status provided that they fit within the family budget. It’s the same on the supply side. When borrowed capital comes at zero price, there seems to be no limit to what is possible.

For years, companies were tempted by the idea that so long as there was some revenue stream, it simply did not matter how leveraged the company could become. So long as there were lenders, there were borrowers. So long as there were consumers, there were companies ready to leverage up.

The dreams of infinite prosperity under a central bank willing to bear the cost forever, if only to keep the financial sector afloat, all seem well. It went on long enough to tempt the entire financial culture to believe it would last forever.

But when times are tough, these luxury goods tend to be the first things to go. You figure out how to be happy with the used handbag from eBay or the lower-priced wine. When the cutting begins, this is the first place you cut.

It was inevitable in these tough economic times—and despite the Biden administration’s pronouncements, these times are increasingly grim—that luxury goods of all types would end up on the chopping block. The stock prices of the luxury brands are a telling predictor of what is to come. If present trends continue, we could see a widespread selloff, together with a closing of high-end retail outlets that have long relied on splurging consumers to provide the cash flow.

We might consider what other luxury goods we as a country consume. A huge welfare state, bases in countries all over the world, bailouts for anyone and everyone, free medical care for anyone in need, and medical experiments on the whole population just to try out fancy new drugs and disease mitigation strategies. This is just for starters. These are the luxuries of prosperity.

It’s time we prepare, and this includes the very rich. The closet full of Louis Vuitton bling doesn’t put food on the table or pay the mortgage. It sure was good while it lasted.

Tyler Durden Mon, 10/16/2023 - 03:30

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Ferrari Embraces Crypto: Accepting Bitcoin For Supercars

Ferrari Embraces Crypto: Accepting Bitcoin For Supercars

The cryptocurrency ecosystem continues to mature, and industry growth is fueled…



Ferrari Embraces Crypto: Accepting Bitcoin For Supercars

The cryptocurrency ecosystem continues to mature, and industry growth is fueled by increased utility and accessibility. In recent years, merchants have embraced digital currency payments as once-wary consumers open up their crypto wallets, paying for anything from staple items at supermarkets to restaurant dinners. Even Elon Musk's Tesla Motors accepts Dogecoin for certain products sold on the automaker's website. 

Merchants are becoming more receptive to their customer's needs and expectations and growing demand for digital currency payments. The latest is the automaker Ferrari, which has started to accept crypto payments for luxury supercars in the US and will extend digital payments to Europe, according to Reuters

Ferrari's decision to accept crypto indicates the company's views on infrastructure, security, and regulatory framework around digital payments are enough to begin receiving Bitcoin from wealthy customers. 

Ferrari's Chief Marketing and Commercial Officer Enrico Galliera said the decision to begin offering digital payment solutions came in response to dealers with wealthy clients who had built crypto fortunes. 

"Some are young investors who have built their fortunes around cryptocurrencies," Galliera said, adding, "Some others are more traditional investors, who want to diversify their portfolios."

Galliera did not reveal how many supercars the Italian luxury sports car manufacturer plans to sell via a crypto transaction. In the first half of this year, the automaker shipped 1,800 cars to the Americas. He noted the company's order book was "fully booked well into 2025". Still, he wanted to explore alternate forms of payment: "This will help us connect to people who are not necessarily our clients but might afford a Ferrari." 

Reuters said, "Ferrari has turned to one of the biggest cryptocurrency payment processors, BitPay, for the initial phase in the US, and will allow transactions in bitcoin, ether and USDC, one of the largest so-called stablecoins." 

"Prices will not change, no fees, no surcharges if you pay through cryptocurrencies," Galliera said.

To protect Ferrari from volatility in crypto markets, Bitpay will immediately turn Bitcoin into traditional currency. 

"This was one of our main goals: avoiding, both our dealers and us, to directly handle cryptocurrencies and being shielded from their wide fluctuations," Galliera said.

Even though Ferrari's order book is full through 2025, a global luxury slowdown has spread worldwide as recession risks are elevated in 2024. Perhaps Ferrari's push into crypto is a move to stoke new demand as it sees trouble ahead. 



Tyler Durden Mon, 10/16/2023 - 04:15

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VIX surges while SPX remains steady: What’s behind the anomaly?

The financial world relies heavily on indicators to gauge market sentiment and predict future trends. Among these, the Volatility Index, commonly known…



The financial world relies heavily on indicators to gauge market sentiment and predict future trends. Among these, the Volatility Index, commonly known as the VIX, stands out as a prominent measure of market anxiety.

Originating from the Chicago Board Options Exchange, the VIX is an index that represents the market’s expectation of 30-day forward-looking volatility. Calculated from the implied volatilities of a wide range of S&P 500 index options, a high VIX typically signals heightened investor fears, while a low reading suggests a calm market.

On the other hand, the S&P 500 Index, or SPX, serves as a beacon for the overall health of the U.S. stock market. Comprising 500 of the largest U.S. companies by market capitalization, its movements are watched closely by traders, analysts, and institutional investors alike. Historically, the VIX and the SPX have shared an inverse relationship: as the SPX rises, indicating bullish sentiment, the VIX usually decreases, suggesting reduced market anxiety, and vice versa.

Yet, recent market data paints an unusual picture. Over 3 months, the SPX witnessed a decline of 3.37%, a clear indication of some bearish sentiment. However, the VIX skyrocketed during the same period, increasing 38.41%.

Graph showing the divergence between VIX and SPX from Jul. 12 to Oct. 13, 2023 (Source: TradingView)

This divergence is also observed in a narrower 1-month window: the SPX declined by 3%, while the VIX surged by 32.8%.

Graph showing the divergence between VIX and SPX from Sep. 12 to Oct. 13, 2023 (Source: TradingView)

The discrepancy on Oct. 13 was even more pronounced — in just a single trading day, the VIX jumped by an alarming 13.54%. Meanwhile, the SPX, rather than reflecting this spike in volatility, remained almost unchanged, registering a mere 0.82% dip.

vix spx 1-day increase
Graph showing the divergence between VIX and SPX between Oct. 12 and Oct. 13, 2023 (Source: TradingView)

This stark divergence prompts questions. Several factors could be contributing to this anomaly. Firstly, the market might be anticipating significant future movements in the SPX that aren’t yet reflected in its current value. Secondly, external events or geopolitical tensions could impact market derivatives more than the cash market, leading to an exaggerated VIX. Lastly, structural changes or shifts in market dynamics and participants could alter the traditional relationship between the two indices.

For investors and market participants, such discrepancies are cause for vigilance. While the VIX’s primary role is to measure market sentiment, its current dislocation from the SPX may indicate underlying market stresses or potential forthcoming volatility. Traders might interpret this as a sign to hedge their positions or prepare for potential market swings.

The post VIX surges while SPX remains steady: What’s behind the anomaly? appeared first on CryptoSlate.

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