05 May 2010By Ellen Brown
As if attacks from paparazzi and star-crazed fans
weren’t enough, Hollywood stars may soon have a
literal price put on their heads by investors in the
Cantor Exchange, a real-money trading platform where
people can bet on the gross profits of upcoming
movies. Sales of The Dark Knight skyrocketed after
Heath Ledger died unexpectedly, and so did sales after
the deaths of Michael Jackson, Elvis Presley and
Marilyn Monroe. Will greed-driven investors now be
laying in wait for the stars of movies they have bet
on?
The Cantor Exchange (CE) is based on a virtual trading
platform called the Hollywood Stock Exchange (HSX), a
web-based, multiplayer simulation in which players buy
and sell “shares” of actors, directors, upcoming
films, and film-related options. The difference is
that where the HSX uses virtual money, CE will turn
the game into a real casino using real dollars.
On April 21, Cantor Exchange reported that it had just
received regulatory approval from the Commodity
Futures Trading Commission (CFTC), which oversees
futures exchanges. “This is a significant step forward
in achieving our ultimate goal,” it said in a letter,
“which is to launch a market in Domestic Box Office
Receipt Contracts.”
Having “contracts” out on movies and movie stars,
however, has an ominous ring; and the Motion Picture
Association of America (MPAA) apparently doesn’t like
the sound of it. The Cantor letter said that its
tentative launch date of April 22 was being delayed
because the MPAA and others “raised concerns about the
economic purpose of this market and its usefulness as
a hedging vehicle.”
The legitimate hedgers, the moviemakers and equity
holders with a real financial interest to protect,
don’t want it. But Cantor is pushing forward, because
gambling is big business and there are vast sums of
money to be made.
Critics are worried that the new exchange will turn
Hollywood into another derivatives casino, vulnerable
to insider trading. Even if traders aren’t hiding
behind bushes waiting to trip up the stars, the
exchange could create bizarre incentives for
moviemakers to manipulate and distort the market for
their own products, perhaps intentionally sabotaging
movies they know are losers.
The Derivative Craze
A“derivative” market is one that is “derived” from an
underlying asset, but participants don’t have to own
the asset to play. Like gamblers at a race track, they
can bet without owning a horse. Derivatives have now
become a $605 trillion industry, about ten times the
gross domestic product of all the countries of the
world combined. This money is not contributing capital
to businesses, helping the economy to grow. Rather, it
is being diverted into wagers. Money is made by taking
it from someone else.
Worse, half the wagers are negative: the players want
the thing to fail. Warren Buffet called derivatives
“financial weapons of mass destruction.” By massively
short selling a stock or a currency, speculators can
actually force the price down. Derivatives can be used
to sabotage not only businesses but whole economies.
Derivatives have been blamed for such economic
disasters as the collapse of Japan’s stock market in
1987, the Asian crisis of 1998, and the recent
collapse of Greece.
Gaming the Hollywood Game
Max Keiser, who founded CE’s
virtual forerunner HSX in the 1990s, has firsthand
knowledge of how the Hollywood exchange can be abused.
When he was CEO of HSX, he says, he came under
pressure from fellow board members to give in to
studio heads who were offering cash and other
inducements to manipulate the prices of projects,
either up (to legitimize more marketing dollars) or
down (to sabotage competing projects). “These guys,
including my own board of directors,” he says, “could
not tell the difference between marketing and market
manipulation.”
Whether a movie’s stock price rises or falls is
considered to be a predictor of the movie’s future
success; but Keiser warns that today, the prediction
value of market pricing is largely a hoax. Traders
using sophisticated computer programs have learned how
to manipulate prices, and market rigging has become
institutionalized.
“The only difference between the new box office
futures contracts being manipulated and blowing up,”
he says, “and stocks in companies like Lehman Brothers
being manipulated and blowing up, is that people
losing their money can imagine getting screwed by
Scarlett Johansson instead of Dick Fuld.”
Keiser predicts that his altered HSX computer
technology, if approved by the CFTC for use in a
real-money exchange, will produce an insider trader’s
paradise, with Hollywood going the way of Enron and
Lehman Brothers in two years or less.
“But this is what rigged market capitalism is all
about,” he says. “It’s not economics really. It’s
arson. They bet against a company or a country and
then burn it down.”
Ellen Brown developed her research skills as an
attorney practicing civil litigation in Los Angeles.
In Web of Debt, her latest of eleven books, she turns
those skills to an analysis of the Federal Reserve and
“the money trust.” She shows how this private cartel
has usurped the power to create money from the people
themselves, and how we the people can get it back. Her
websites are www.webofdebt.com, www.ellenbrown.com,
and www.public-banking.com.
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