For those of you who would prefer to listen:
Summer is coming to a close. Well, unofficially that is. Labor Day marks the unofficial end of Summer in America as the calendar turns to September. Kids are mostly back at school. Vacations have concluded. People start returning to the office. Reality sets back in. Of course, Summer officially ends with the Autumnal equinox on September 22nd.
But this weekend is that last chance trip to the beach, the mountains or the lake. The sizzling record Summer travel is concluding. Nearly 50 Million Americans are expected to hit the roads for the Labor Day weekend. 17 Million are expected to pass through airport security, according to the TSA. Both United and American Airlines said they are anticipating their busiest Labor Day operations on record. It’s going to be busy. Traffic will be bad.
You know what else Labor Day weekend means? It’s football season again. Stating the obvious: Sports are huge in America. Coming off a stellar Olympics, attention turns to the NFL. When it comes to sports, there’s pro football, and then there’s everything else. The National Football League is big business. It keeps getting bigger and bigger. Opening week includes a game in Brazil for the first time. The game has definitely gone global.
The NFL earns the vast majority of its money from TV. Silicon Valley’s involvement has sent pricing skyward. Other revenue streams include ticket sales, merchandising/licensing rights, and corporate sponsorships. National TV revenue is shared equally amongst the teams. The NFL currently has TV deals in place with Amazon, CBS, ESPN/ABC, Fox, and NBC running through the 2033 season. Google is in it too. Alphabet’s YouTube TV and YouTube Primetime Channels took over the DirecTV package last year, possessing the exclusive rights to distribute every game on “NFL Sunday Ticket.”
Local revenue, consisting of ticket sales, concessions, and local corporate sponsors, is earned and kept by the individual teams. So those $6 dogs, $5 Cokes and $17 beers at Levi’s go to the Niners. On average, NFL stadiums seat roughly 70,000 people. All games usually sell out, with the average NFL ticket estimated to cost about $151. That’s $10.5 Million right there. No surprise, it’s over $200 for a Niners game.
The NFL does not share its finances with the public. However, it was estimated to have made about $12 Billion in 2022. Commissioner Roger Goodell has targeted a whopping $25 Billion in revenue by 2027. Pro football is really big business. The Green Bay Packers are the only team that operates as a non-profit. The rest are privately owned and most are all about profits.
Advertisers pay big bucks for NFL games. Live sports draw the most eyeballs at any given time in this Digital Age. And the NFL attracts the largest audiences. 123.4 Million Americans watched the Super Bowl last year. The game that saw the Kansas City Chiefs beat the San Francisco 49ers was the most-watched event in history. Over 200 Million watched it globally. In fact, 27 of the Top 30 most-watched TV events have been Super Bowls.
The highest-rated television viewing continues to be the Apollo 11 Moon landing in 1969, with nearly 150 Million viewers, but it is considered a news event. Keep in mind, America’s population was 202 Million then, compared to 335 Million today. The OJ Simpson verdict in 1995 is #2 (also considered a news event). The final MASH episode in 1983 is still the most-watched television show with 105 Million viewers. The rest of the best have been football.
A relatively new revenue stream has permeated sports: Gambling. The NFL currently takes in $132 Million in gambling-related sponsorships. Since the Supreme Court ruled that sports betting was legal in 2018, revenue from betting exploded from $441 Million to nearly $6 Billion. It’s estimated that 73 Million Americans bet on NFL games last year. A study done by Northwestern University’s Kellogg School of Management found that household bets increased $1,100 per year in states that legalized online sports betting. It comes with a cost. The study also found a nearly 14% decrease in net investments in households since online sports betting was legalized. Restaurants and sports bars have definitely benefitted from this trend.
The short-term thrill sends a long-term chill. According to the Kellogg Professor, the increase in gambling and consumption are stealing from longer-term investments and are putting more pressure and strain on household budgets. A study out of UCLA showed a decrease in credit scores in states that allow sports gambling. The study also found increased rates of bankruptcy, debt collections, and car loan delinquencies following legalization. It’s not a good trend.
Outliving savings is a major risk for Americans. There’s simply not enough long-term planning. The sooner you start, the higher the probability of success. It’s a simple concept that so few embrace. Albert Einstein called compound interest the 8th wonder of the world. To paraphrase him: Those that understand it, earn it. Those who don’t, pay it. Einstein was a genius. But we don’t have to be a genius to benefit from compounded interest.
Another genius was visible this week. Jensen Huang, Nvidia’s Founder, CEO and AI-King was in focus as his revolutionary company reported its quarterly results. No surprise, it was another blowout quarter. Nvidia generated $30 Billion in revenue. It wasn’t enough. The Street expected $28.5 Billion. But the whisper number was $2 Billion. The soaring stock had already priced in those expectations, up 150% on the year. I am always reluctant to compare investing with gambling, but the whisper number is kind of like the point spread in a football game. Nvidia won the game, but they didn’t beat the $2 Billion spread in revenue expectations. So, after a big run, the stock sold-off on the news.
Nvidia is a victim of its own success. The bar keeps getting higher and harder to clear. Wall Street loves it and champions it. There are 100 analysts that cover Nvidia. Here are the ratings: 92 Buys. 8 Holds. No sells. You can see it’s a pretty crowded trade. The Market is all about expectations. It isn’t about good versus bad. The Market moves on better versus worse.
The winds have certainly changed for the Stock Market. The first half was dominated by the Tech Titans as measured by the NASDAQ 100. This 3rd Qtr has seen a large reversal as leadership rotated out of Tech and into more defensive sectors like Utilities, Consumer Staples and Health Care. They were all up 5% in August, while Tech was basically flat on the month.
The broadening out of the rally is a really good thing. We always like to see wide participation for underlying strength. But the defensive nature of leadership does suggest to us that the slowdown is real and the Summer correction is incomplete. What’s more, it’s actually been Gold, which has been the standout performer all year.
Now we transition to September and the Autumn Wind. September is by far the worst month on the year for the Stock Market. So far, in this 21st century, September has brought an average decline of 1.7%. In just the last five years, S&P has averaged a 4.2% decline. The second half of the month is generally the worst. But September sell-offs do tend to set up year-end rallies. The good news, Q4 has been a bright spot, averaging +4.2% this century and +9.8% over last five years.
You Raider fans know about the Autumn Wind:
“The Autumn Wind is a pirate.
Blustering in from sea,
With a rollicking song, he sweeps along,
Swaggering boisterously.
His face is weather beaten.
He wears a hooded sash,
With a silver hat about his head,
And a bristling black mustache.
He growls as he storms the country,
A villain big and bold.
And the trees all shake and quiver and quake,
As he robs them of their gold.
The Autumn Wind is a Raider,
Pillaging just for fun.
He’ll knock you ’round and upside down,
And laugh when he’s conquered and won.”
August definitely ended with a bang. A late-stage rally Friday sent the Dow into the Labor Day weekend at a new record high. The S&P 500 closed just short. Whatever September brings, it sure is nice to see all the green heading into the long weekend. We are geared up and ready for whatever comes our way.
Have a nice weekend. Enjoy Labor Day. We’ll be back, dark and early on Tuesday.
Mike
