Posted by: Daryl & Wendy Ashby | October 12, 2011

You Ought to Be In Movies

According to Benjamin Tal, deputy chief economist with CIBC World Markets, spending the day in a dark, air-conditioned movie theatre is always a great option for those seeking a respite from the heat and humidity of the summer months, but as it turns out, it’s a popular option for beleaguered consumers hiding from a recession too.

And with world economies headed for at least a slowdown if not worse in the next few months, a timely investment into movie theatres and related companies in the sector may also rescue your portfolio.

“It’s comfort food. People looking for cheap escape,” Benjamin Tal said in an interview. “If you look in the past, this sector outperformed during the economic slowdown. It doesn’t need to be a full recession, you will see this with a slowdown in the economy and increasing uncertainty.”

In a recession, consumers tend to cut out very expensive, big-ticket spending items, such as a fancy dinner at a restaurant. But just as families still hankering for a meal out will instead settle for a spin through the drive-thru, consumers putting a clampdown on their finances may forego the hockey tickets yet find enough room in their budgets for a night out at the movies.

“It’s counter-intuitive, counter-cyclical,” Mr. Tal said. “You would think in a recession people would cut this expenditure more than anything else because it’s not a necessity, but we haven’t seen this in the past.”

Believe it or not, the stock values for Cineplex or D-Box tend to be leading indicators as to our economic recovery, they tend to recover on the Toronto Stock Exchange either before or in conjunction with Canada’s overall economic market recovery. Unusual as it may seem, once people get comfortable, you tend to see unemployment go down.


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