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Can Hollywood Rewrite Recession Ending?

Friday, 31 Oct 2008 | 6:51 PM ET

With investors bracing for a nasty recession many are wondering if the entertainment industry could be recession-resistant?

Of course the first images that rush to mind are those of Americans flocking to theaters in the 1930’s, seeking to escape their gritty Depression-era reality. In your mind’s eye you can almost see Fred and Ginger masterfully gliding around the silver screen, dancing the night away to the delight of millions.

We know that movie ticket sales climb during economic slumps, but this isn’t the 1930’s and the media business is changing very rapidly. With Viacom, TimeWarner and Disney all due to report earnings next week, what should you expect?

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MEGAHIT MOVIES IN HARD TIMES

1933- King Kong
1974- Blazing Saddles
1982- E.T.
2002- Spider-Man
2008- The Dark Knight

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“The media companies are pretty deep in the weeds,” says Anthony Diclemente, Barclays Capital entertainment and broadcasting analyst. “Ad dollars are way down and consumer confidence is weak.”

Hollywood & Recessions
The box office does well during tough times, with Anthony DiClemente, Barclays Capital entertainment & broadcasting analyst and the Fast Money team.

But the bigger issue in media is that there’s no real way for an investor to put money into just one area of show business.

“All the media companies have valuable content but they’re mostly huge conglomerates so it’s very difficult to break out and invest in only the part that might perform,” says Diclemente. “As a result I’m bearish.”

If you’re looking for a trade, there could be play based on sheer decline in stock price.

“Perhaps Viacom and Discovery are worth a look on valuation,” says Diclemente, “but I wouldn’t buy just yet.”

Doesn't seem like this story has a happy ending here. Best to stick with Fred and Ginger.

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Trader disclosure: On Oct. 31, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (AAPL), (F), (MER), (EEV); Seygem Asset Management Owns (PBR), (VIP), (CX), (EEM); Karabell Owns (AAPL), (CAT), (CSCO), (GOOG), (JPM), (MS), (VIP), (UTF), (AGU); Terranova Owns (AAPL), (EXM), (FCX), (VLO), (X), (POT), (NOV), (MA), (FTO)

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CNW), (OFC), (DLM), (DRH), (DLR), (EPR), (EXR), (FL), (SLB), (LNET), (MAC), (DBC), (DBV), (SKT), (UA), (BLV), (VV), (CLB), (GWX), (IGE), (FSMXX); Virtus Investment Partners Owns Seagate Tax Refund Rights; Virtus Investment Partners Owns Seagate Technology Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Incitec Pivot Ltd.; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.

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