The Olympic Games have become such a unique and special Global event. It’s a time when Planet Earth can hit the pause button on political and social disagreements and come together. It doesn’t always happen, but that’s the idea. Pure competition and the spirit of togetherness is the binding theme. It’s a really good theme. We can never get enough of that.
The Summer Games have provided lasting images over the decades. I think of 23 Gold Medals for Michael Phelps, the most decorated Olympic athlete in American history. I think of Kerri Strug being carried off after spraining her ankle only to come back and land a Gold. I think of the dominance of Carl Lewis in the 1980s. I think of the Dream Team in 1992. I think of Muhammad Ali, who won Gold in 1960 and 3 decades later lit the torch in Atlanta. There are so many memories over the decades. You no doubt have some of your own.
Let’s hope Olympic greatness will help captivate this year’s Olympic Games, because it will almost certainly be known for Covid. Japan is the host country. Tokyo previously hosted the Summer Olympics in 1964, when Japan was still trying to restore its tarnished image from World War II. It went well. The Japanese were hoping the 2020 games would go just as well. It’s almost certain, they won’t.
The Japanese Prime Minister has already declared a state of emergency over Covid in Tokyo. The declaration put restrictions in place from July 12 through August 22.
The Olympic Games are set to begin in earnest this weekend, with the Opening Ceremony Friday, and run through August 8. Some events have already taken place, including a shocking USA Women Soccer defeat. Over 11,000 athletes arrived in Japan this week to compete. On top of that are thousands of officials and staff in place to make the Games happen. This will be the largest international gathering since the pandemic began. But it won’t be anywhere near as big as it was supposed to be.
There will be no spectators at the 2020 Games. Olympic Organizers had already banned international visitors from attending. A few months ago, they set a cap on domestic crowds at 50% capacity, or up to 10,000 people per facility, whichever is less. Now it’s set for next to nobody at all.
Keep in mind, Japan won the Olympic bid in 2013 with huge expectations to showcase the nation on the Global Stage. The world has since changed. This is definitely not going to be an economic boom for Japan, which is always the aspiration when bids to host are submitted a decade in advance.
These were supposed to be the 2020 Games. The pandemic changed all of that, with the first-ever Olympic delay. The Games have only been canceled due to World Wars. The year delay has been devastating to Japan’s economic goals. The Olympic budget has jumped to over $15 Billion, but total spending reportedly cleared $20 Billion. Ticket revenue of about $815 Million is now headed toward zero. As the Wall Street Journal framed it: “the Olympics are setting up to be a $20 Billion bust.”
The Olympic Games taking place without fans is expected to result in a total loss of $23 Billion for Japan. Over $7 Billion was spent on new facilities and renovations in what will now have empty seats. Limiting spectators is also a blow to Japan’s tourism industry, resulting in fewer opportunities for businesses. Hotels and Restaurants were counting on big crowds when the Games were announced, well ahead of the pandemic. Toyota just announced it wouldn’t even be advertising on Japanese television. Toyota is Japan’s most valuable company. That one hurts.
4.5 Million tickets had been sold prior to the decision to eliminate spectators. That’s money that evaporated. For perspective, the 6 Million tickets sold for 2016 Rio Games generated $1.2 Billion in revenue. Japan is the 3rd largest global economy, behind just the US and China. Its engine is no longer getting the spark it wanted.
Delta is the problem. The Delta variant is spreading wide and fast. The Japanese public have become very fearful of the Olympics. Over half the population wanted them canceled. No surprise, the Prime Minister and the Olympic Committee are not popular with the Japanese people.
The concern is an outbreak will spill into the rest of the country. The Olympics could be the ultimate Global Super Spreader event. It’s out there. Japan has fully vaccinated less than 10% of its people, according to the World Health Organization.
Japan’s low vaccine rate has been attributed to a slow rollout, a severe shortage of doctors and nurses, and the fact that it has to import all its vaccines. Apparently, under Japanese law, only doctors and registered nurses are allowed to legally give injections. But its relatively low case and death rate have been credited to severe restrictions and mandatory quarantines for foreign visitors. The Japanese government has also been successful in getting its people to embrace masks and practice social distancing since the pandemic began.
Interest in watching the Games might slide. NBC will face the challenges of keeping American viewers engaged in watching the broadcasts without spectators, particularly when the results will already be known by the time its Primetime coverage takes place. Advertisers are nervous that the American people have lost interest in the Games before they even started.
The Olympic athletes will be tested for Covid each day. They certainly won’t be sightseeing or socializing after their events, which is the typical experience. All athletes are required to leave the Olympic Village 48 hours after their event ends. It’s been reported that over 80% of athletes are fully vaccinated.
The Market has been reacting to the rising numbers of Covid cases. There was a substantial sell-off Monday. It was quickly erased by an even bigger recovery rally the rest of the week. The Stock Market reached fresh, all-time highs. The S&P cleared 4400 for the first time. The Dow cleared 35K.
The rise of the rapidly spreading Delta variant is a serious threat to derail a full economic reopening, in America and around the Globe. But vaccines are proving effective in the fight. The thing is, we won’t really know the full extent of the Delta impact until September, after kids go back to school and more people start making their way back to the office.
Back to the Market: The Tech Titans report earnings next week. They’re going to be impressive. It will no doubt be Market moving. A lot of good is already priced in. Tech has been carrying the load of late. Get those belts buckled. It’s going to be a bumpy ride for the rest of the Summer.
In closing, before the Olympic Games began in Tokyo, the Junior Olympics of Water Polo started their clocks in Southern California. My daughters, Sammy and Nikki, and their Lamorinda 14 and Under team have been competing their hearts out with great success thus far. There’s a full weekend of more games ahead. The Olympic Spirit is alive in SoCal with healthy competition. It’s so inspiring to see what a group of individuals can accomplish when they come together with a shared goal; And have fun doing it. That’s what it’s all about.
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
