Paper Chase: Soccer Is Here To Stay
GDP shrank at 2.93% last quarter. Analysts blame it on the bad weather and expect a rebound in the 2nd quarter. That news has not stopped equity markets.
New home sales rose 18% in may which is a positive sign from a year long slowdown. This news is encouraging for both the industry and the economy.
Barnes & Noble and Nook are splitting with the former staying in retail. Nook has struggled as an alternative to the Amazon Kindle with revenue decreasing by 22%
Bad News, Good news
The trend for the market long term is steady, moderate growth. While the market may not hit 3% this year, it certainly won’t be negative. 2% growth is better than nothing as the economy seems to be in reasonably good shape
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If you have a long term horizon, stocks are a better investment. For people looking towards retirement, it’s very risky to invest in long term fixed income for when rates increase, they will do so quickly. Earning 3.5% on fixed income is fantastic in this market. Investors should not try to make it 5% by going to risky investments.
When rates move (they have been predicted for a couple of years), those in long term bonds will lose principle quickly. Shorter or midterm duration is preferred, but again don’t stretch with riskier bonds (junk bonds and high risk corporate debt) searching for yield.
Multiples indicate the market is fully valued, but looking at predicted growth in the economy, and alternatives for capital, where are investors going to go? It’s doubtful the Fed raises rates anytime soon. There is cash on balance sheets, cash in private equity firms and, while investors have less cash than the historical moving average, cash has to go somewhere. I believe this influx of cash and capital will keep the market going and corporate earnings growing.
While firms are seeing client growth, more people are getting concerns over the stock market. Still, portfolios have risen as clients move to equity with dividends as a source of income. Historially, investors get in the market late and leave it early. It still looks as if, though we are getting there, retail investors are not still fully in though we are getting there.
Soccer
Soccer is here to stay in the U.S. and its success, like the patriots at Lexington and Concord or the VietCong in Ho Chi Minh City, is due to guerilla warfare. Soccer does not have to takeover major American sports. It just has to become a large niche sport. The recent 720 million dollar television contract (ESPN, Fox and Univision Deportes will pay a combined $90 million dollars annually in a contract that will run from 2015-2022) means more than 125 MLS matches will be televised annually. The league currently receives on average of 28 million dollars a year from tv deals. Remember, the MLS was started on the heels of World Cup 1994.
Soccer has gotten to the next basic level as interest is stoked and players are more well known. Soccer is actually doing well now. Though they play fewer games, MLS has higher attendance than both the NBA and NHL. The league is expanding (Atlanta is getting a team), and the networks are betting on it.
Also, the kids of the original “soccer moms” are now in their 20s and have expendable income. Demographic changes within the country are fueling soccer’s growth as well. While soccer was mocked widely 10 years ago, now those who do look like idiots. Nike and McDonalds have been the first to capitalize off of the growth in this country while Adidas is an official sponsor. We see with soccer regional advertising targeted at specific countries or teams playing.
Rainy Day
More than a quarter of Americans have no emergency savings. Approximately 1/4 of Americans have less than 3 months’ expenses saved. Only a quarter of Americans have enough for 6 months’ expenses or more which is recommended by most financial advisors. These numbers have stayed steady through recession even though economy has improved and stick market is at record highs.
This can be difficult for paychecks are staying the same while prices and costs increase. There is not a lot of room to save. Remember to always pay yourself first, automate your savings strategy (direct deposit), put money in a designated account getting a higher return than a savings account. (not too much higher for you want to minimize risk)
The ideal amount to save depends on your living expenses. It’s important to consider how long it would take to find a new job. A good rule of thumb is for every 10,000 dollars you make in salary, it will take you that long in months to find a job. Try to save atleast $1000 every 3 months as it is a better alternative than credit cards.
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The information should only be a starting point for doing additional independent research in order to allow you to form your own opinion regarding trading decisions. You should ask the firm with which you deal about the terms and conditions of the specific securities which you are trading and associated obligations. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
