Welcome to The WC — your weekly shot of awesome.
Today, we’ve got:
- Why aren’t there enough cows?
- Shohei’s gamble
- Not so hip
- You’ve never heard of the eleventh-biggest country in the world
- What’s the best banned book?
- Bonus links
Table of Contents
Why aren’t there enough cows?
There’s been a lot of talk about replacing beef with lab-grown meat, and I’m all for it. If I can get a burger without dumping resources into raising and slaughtering a cow — and if we can avoid slaughtering animals in general — that’s great.
But, record scratch narrative violation, it turns out there’s actually a shortage of cows at the minute.
And that’s sent the prices of cattle futures mooning.
The futures are slightly off their peak this autumn, but they topped out at nearly 2x 2020 prices.
Why?
Drought and high input prices have limited supply.
Specifically:
Drought drives cow slaughter and limits herd expansion. Feed costs have been high as CBOT corn and soybean prices were elevated for much of the year. Pasture and range conditions remain lackluster, so ranchers are supplementing with hay, adding to expenses.
Higher interest rates, which add up to $125 per head, have also limited investment into “herd expansion,” which is a factor.
In fact, “cow supplies [note: weird phrase?] are at the lowest level since 1962, at 28.9 million head.”
Because it takes time for cows to grow, this is a problem that will persist until at least 2026 and probably 2027.
If companies like Beyond Meat are ever going to make a run for it, this is their time.
Shohei’s Gamble
A few days ago, dual-threat baseball star Shohei Ohtani signed a ten-year, $70 million per year deal with the Dodgers. At $700m, it’s thought to be the largest sporting contract ever.
But more than being huge, it’s a weird contract.
He’s only taking $2 million per year, deferring 97% of his salary until the end of the contract, which expires in 2033.
A lot of people are talking about the contract from an inflation and time-value of money point of view.
$680 million in 2033 is worth a lot less than $680 million today.
So he’s making a big sacrifice so Dodgers part-owner Todd Boehy can continue spending on players between now and when the bill comes due.
Shohei is taking a huge risk no one is talking about. This is why:
You may not know that Boehy is also Chairman of Chelsea Football Club in London, where he’s also known for giving players…innovative…contracts.
Over the last 18 months, Chelsea has spent over $1 billion acquiring new players with contracts spread over 8+ years, which is very unusual in football.
Four to five years is normal, but Boehy extended the agreements to amortize the costs over a longer period to skirt the league’s Financial Fairplay rules.
(the league has since changed the rules)
Chelsea are awful this year, and his plan is clearly not working. In football, revenue is very much tied to on-field performance, and Chelsea is a financial time bomb.
What’s the going concern risk for the Dodgers over the next ten years? What are the chances Boehy messes things up so badly that the club declares bankruptcy?
It’s not zero.
And if that happens, what happens to Shohei’s $680 million?
Not so hip
You may remember Hipgnosis.
According to their site, “Hipgnosis is responsible for the Management of over 150 of the most successful and culturally relevant Song catalogues of all time with a Net Asset Value over $3 billion.”
In total, the fund raised £1.052 billion ($1.3+ billion) to buy Beyonce, Neil Young, and a bunch of other musicians’ back catalogs. Of the initial 5,000 songs they acquired the rights to, 2,000 had been number-one hits somewhere, and 4,000 had hit the top ten.
Blue chip stuff.
Eventually, the catalog reached 65,000 songs worth $2.55 billion by early 2023.
Things haven’t gone to plan since then.
In October of this year, the CEO was accused of sexual assault and battery.
Also in October, Hipgnoisis said there would be a revenue shortfall and killed its dividend. Shares tanked.
Last month, shareholders voted overwhelmingly against continuing the business in its current form.
Now, the company sold 20,000 songs at a steep discount.
The company reports earnings next week.
I like music royalties (I bought a bit of Shrek on public.com), so I hope they do well. Some people saw this coming, though.
I got some pushback when I claimed that this big fund buying up songs was overpaying, and that this story would have an unhappy ending. And now in today’s news… pic.twitter.com/zho6gpGgE4
— Ted Gioia (@tedgioia) December 12, 2023
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