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Sports Betting Is Not a Financial Plan · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
1:06
Speaker 1: and Mike Armstrong.
1:10
Speaker 2: Chuck Mike an Tucker with you here. We've got a
1:12
Speaker 2: nice little rally taking place. We had a couple of indices.
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Speaker 2: The Dow is just chilling today. It's up thirty six points,
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Speaker 2: hanging out. S and P's up fifty points, about two
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Speaker 2: thirds of a percent, nasdak Can Positi up two twenty.
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Speaker 3: Three, a little more than three quarters of a percent.
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Speaker 2: Interest rates falling today as well, Tenure Treasury down six
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Speaker 2: point five basis points, back down to four point six
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Speaker 2: to seven percent, this on the back of a cooler
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Speaker 2: that anticipated producer price index reading that we got at
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Speaker 2: eight thirty this morning. Dollar index coming in with that
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Speaker 2: as well, down point one seven percent to ninety nine
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Speaker 2: to seventy three. Gold falling just a touch after a
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Speaker 2: big run in the last couple of weeks, down twenty
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Speaker 2: five to forty and outs at forty four to forty two,
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Speaker 2: so still about a ten percent run for gold in
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Speaker 2: the last week or two. And we got crude oil
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Speaker 2: down two eleven a barrel on West Text Intermediate to
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Speaker 2: eighty one sixteen, triple a national average for gas prices,
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Speaker 2: though pushing up another three point five cents overnight this
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Speaker 2: because it's factoring in that, hey, oil still rose over
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Speaker 2: the past week, and so you've got triple a national
2:18
Speaker 2: average for gas at four oh seven diesel, which is
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Speaker 2: where the problem really is right now.
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Speaker 3: Distillate inventories remain.
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Speaker 2: Low worldwide, diesel up five cents a gallon to five
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Speaker 2: forty and four tenths. All time high on diesel is
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Speaker 2: five eighty one, So we are back within ten percent
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Speaker 2: of that all time high that was originally hit back
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Speaker 2: on June nineteenth of twenty twenty two.
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Speaker 3: Yeah, and remember we are nearing the end of.
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Speaker 4: Really heavy electricity usage season across much of the globe
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Speaker 4: heading into the fall, where usage does come down a
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Speaker 4: little bit. Test to your gas both come down a
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Speaker 4: little bit this time of year before kicking back in
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Speaker 4: around that November time frame.
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Speaker 3: And so that's the area to be concerned about it, right.
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Speaker 4: If we have an especially mild winter this year globally,
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Speaker 4: then helps things out quite a bit. But in the
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Speaker 4: other hand, if you have a cold winter or just
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Speaker 4: more of these supply constraints, then you could have some
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Speaker 4: pretty serious price fluctuations, especially once those inventories start running dry.
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Speaker 2: And I don't know if you've been following, but I have,
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Speaker 2: but we've got this super el Nino that's been building.
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Speaker 3: Yeah.
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Speaker 2: And if you want to know what typically happens with
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Speaker 2: the super el Nino, if you're listening to us from
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Speaker 2: the southern United States.
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Speaker 3: I am Elino.
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Speaker 2: Yes, you get Chris Farley coming to hang out. No,
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Speaker 2: what you get is you typically get like wetter stormier
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Speaker 2: winters in the southern part of the US, the northern
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Speaker 2: US and into Canada tends.
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Speaker 3: To be warmer and drier on average.
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Speaker 2: South America, the western part gets dumped on by all
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Speaker 2: the excess moisture coming out of the Pacific. The eastern part,
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Speaker 2: like Brazil, tends to be drowdier, which is the technical
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Speaker 2: term I believe. The if you go over to Asia again,
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Speaker 2: the place that you really want to focus on is
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Speaker 2: what happens in Europe. And Europe by and large doesn't
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Speaker 2: have as much impact from a super al Nino simply because,
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Speaker 2: like just think about it, geographically, Europe doesn't come close
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Speaker 2: to touching the Pacific in any way, shape or form.
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Speaker 2: But in Asia what you end up with tends to
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Speaker 2: be a little bit drier there as well. Throughout kind
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Speaker 2: of you know, Philippines, Indonesia, Malaysia, India tends to be
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Speaker 2: the case there. So we'll see what we get now
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Speaker 2: that we've for the day piece and barons the hidden
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Speaker 2: red flag in Wall Streets price targets. Okay, I'm intrigued.
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Speaker 2: What's what's the hidden red flag in Wall streets price targets?
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Speaker 4: That the averages aren't indicating what the underlying data tells you,
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Speaker 4: and nobody looks at anything other than.
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Speaker 3: The averages, I suppose, but I guess I have what
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Speaker 3: does that mean? All right, So.
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Speaker 4: You have a big company, there's a bunch of analysts
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Speaker 4: all across Wall Street who set a price target.
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Speaker 3: For those companies.
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Speaker 4: Okay, they are paid to do so, and uh, some
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Speaker 4: people pay attention to those targets. What the office pointing
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Speaker 4: out right now is that there has been a pretty
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Speaker 4: wide divergence of where people think those price targets should
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Speaker 4: be on major companies like in Video. And so while
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Speaker 4: you might get an average that is about forty three
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Speaker 4: percent above the recent pricing on a company like in Video,
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Speaker 4: the divergent is huge and growing compared to just a
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Speaker 4: few years ago. I guess my question is, does this
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Speaker 4: indicate any of any degree of a red flag. Is
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Speaker 4: there any you know, any data that would support that. Hey,
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Speaker 4: when price targets diverge substantially, there is more volatility, for
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Speaker 4: example in markets.
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Speaker 3: I don't know of any.
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Speaker 4: And then third, does the average investor pay any attention
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Speaker 4: to price targets?
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Speaker 3: I guess would be my third question.
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Speaker 2: So here's the here's my read on this basically, So, yeah,
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Speaker 2: this is talking about how analysts have wildly divergent price targets.
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Speaker 2: There are three ways that this can resolve. Number One,
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Speaker 2: the analysts that set the low price targets are right.
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Speaker 2: That would be bad or at least worse. Number Two,
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Speaker 2: the average price target could turn out to be right
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Speaker 2: because no one really has any idea, and when you
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Speaker 2: throw it all into the blender, okay, it comes out
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Speaker 2: of the average, and that's fine. I'll come Number Three,
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Speaker 2: the ones who are the most optimistic could be right.
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Speaker 3: That would be great. Do I know, like which one
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Speaker 3: of those paths we're going to follow?
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Speaker 1: No?
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Speaker 3: Like, I really don't. It's it's not something that I think.
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Speaker 2: Look if if the analysts that are actually following these
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Speaker 2: stocks and are paid to follow them don't agree on
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Speaker 2: where it's going to be, you think I'm going to
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Speaker 2: have any idea which path it's.
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Speaker 4: Going to follow, right, which, which is why I go
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Speaker 4: back to it'd be nice if that, I mean, there
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Speaker 4: was something we never agree to begin with, right But
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Speaker 4: at twenty twenty four study by some researchers at Yale
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Speaker 4: and IU found that consensus price targets become less.
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Speaker 3: Reliable when analysts strongly disagree.
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Speaker 2: Well, yeah, that's the nature. That's so, that's circular logic.
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Speaker 2: You don't need a study to do that.
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Speaker 4: So I think the point in time, the point in
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Speaker 4: that we are in right now, I suppose, would indicate
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Speaker 4: to you that if you are using a price target
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Speaker 4: or an average price target as part of your investment
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Speaker 4: strategy for buying or selling a stock or investing as
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Speaker 4: an ordinary American, and these things get reported everywhere, including
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Speaker 4: Bloomberg and CNBC and morning Star and all sorts of
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Speaker 4: different data tools that you can use, beware because right
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Speaker 4: now they are diverging pretty substantially, especially even with some
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Speaker 4: of the most followed companies in the world, like the
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Speaker 4: top ten companies in the S and P five hundred,
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Speaker 4: for example.
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Speaker 3: But I don't know that that leads me to believe.
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Speaker 4: That there's going to be more volatility in stock prices
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Speaker 4: and than there otherwise would be, although I've kind of
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Speaker 4: got my hackles up to that given what we saw
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Speaker 4: from major tech companies in their earnings reports over the
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Speaker 4: last three weeks.
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Speaker 2: Yeah, I don't This is not just like the just
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Speaker 2: like the divergence in price targets is not tradable information. Like,
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Speaker 2: I don't think there's anything in here that's useful that
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Speaker 2: you can do with it. Either it's not like this
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Speaker 2: is panic or I or do like No, But then again, Chuck,
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Speaker 2: I don't think you or I pay particularly close attention
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Speaker 2: to individual company price targets. I mean, here's the thing,
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Speaker 2: and this is a quote from Uh there's a an
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Speaker 2: old hedge fund manager that that I follow by the
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Speaker 2: name of Ben Hunt, and he'll tell you, look, you know,
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Speaker 2: sell side price sell side.
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Speaker 3: You know, price targets are useless.
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Speaker 2: In a good market, and they'll absolutely kill you in
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Speaker 2: a bear market like that. That's basically how I feel like.
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Speaker 2: Sell side analysts are here to do one thing. They're
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Speaker 2: to get you to.
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Speaker 3: Buy the stock.
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Speaker 2: Yeah, and so in a good market you don't need
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Speaker 2: them because the market's good. In a bad one, they're
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Speaker 2: gonna kill you because they'll keep telling you to buy
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Speaker 2: the stock like it's it's just kind of what it is.
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Speaker 3: Let's take a quick break.
9:49
Speaker 2: When we come back, let's talk a little bit about
9:52
Speaker 2: Anthropic and the latest on their potential i PO.
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12:02
Speaker 2: Anthropic investors bet on a two trillion dollar valuation and
12:05
Speaker 2: record IPO. So Anthropics still trying to move forward with
12:09
Speaker 2: in October IPO and apparently targeting a two trillion dollar valuation,
12:18
Speaker 2: which would be more than double what they were talking
12:21
Speaker 2: about a month ago.
12:22
Speaker 4: I was going to say, it felt like weeks ago
12:24
Speaker 4: that they were talking about this, and I am correct
12:26
Speaker 4: that it was a trillion dollars a few weeks ago,
12:30
Speaker 4: and now they are talking about two which really makes
12:34
Speaker 4: me wonder just what open Ai might be leaving on
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Speaker 4: the table here by delaying. There is even further because
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Speaker 4: I don't know that Anthropic, I don't know, would be
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Speaker 4: able to pull this two trillion dollar valuation if open
12:48
Speaker 4: Ai was appearing right next to them.
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Speaker 3: I don't know if they'll be able to do it
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Speaker 3: in the first place.
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Speaker 4: But yeah, like you know, when you have two companies
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Speaker 4: that are almost exact replicas of each other in terms
12:59
Speaker 4: of their design and funk, I know from other practical
13:01
Speaker 4: standpoints they are not, but for all intents and purposes,
13:04
Speaker 4: these are two model design companies that are trying to
13:06
Speaker 4: do the exact same thing, and open Ai did not
13:11
Speaker 4: feel that they were in the position to be able
13:12
Speaker 4: to go public Anthropic apparently still does, and they may
13:15
Speaker 4: reap the benefit.
13:17
Speaker 2: I want to talk about this piece from Bloomberg. This
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Speaker 2: one is just honestly messed up. Gen Z is moving
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Speaker 2: money from stocks to sports betting in wealth plans.
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Speaker 4: This is exactly what I've been concerned about when it
13:32
Speaker 4: comes to sports betting. I am not shocked and go ahead.
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Speaker 2: More than a quarter of gen Z investors say they
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Speaker 2: see sports betting as part of their long term financial strategy. Okay,
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Speaker 2: hard stop. When I was twenty two, I went down
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Speaker 2: to Foxwoods in Connecticut for the first time, and I
13:52
Speaker 2: got to the point where I had to use a
13:56
Speaker 2: credit card cash advance to take out extra one hundred
13:58
Speaker 2: dollars because I'd run out of money and basically, if
14:02
Speaker 2: that cash advance had gone badly, I wouldn't have been
14:04
Speaker 2: able to pay my rent.
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Speaker 3: It was not good now.
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Speaker 2: I then went on just a wicked heater for like
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Speaker 2: two hours and made a good chunk of money that night,
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Speaker 2: And on the way home the next day, I had
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Speaker 2: all the thoughts of like, well, if I do this
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Speaker 2: every weekend for the rest of you know, the year, gosh,
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Speaker 2: I wouldn't even need a job.
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Speaker 3: I could just like this a gambler.
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Speaker 2: Yeah, And sure enough I went back the next weekend
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Speaker 2: and lost a bunch of money and was quickly reminded, like, Chuck,
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Speaker 2: don't be an idiot. Like the house, there's like two
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Speaker 2: percent of people that can actually do this, and most
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Speaker 2: people can't, and the house always wins. So here here's
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Speaker 2: the thing, Mike, would you agree Like a lot of
14:44
Speaker 2: people when they talk about the stock market, they like
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Speaker 2: to say that the market is rigged?
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Speaker 3: Yeah, do you agree with that statement? Do you agree?
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Speaker 3: I don't agree with that it is. I would agree
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Speaker 3: that a lot of people say it.
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Speaker 2: I would agree that the stock market is rigged. Would
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Speaker 2: you Yes, it's rigged in favor of capital, Okay, capital
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Speaker 2: has That is not what most people mean when they
15:02
Speaker 2: say it's no. Most people mean that they it's like
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Speaker 2: rigged against them.
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Speaker 1: Yeah.
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Speaker 2: What I mean is that if you look at how
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Speaker 2: a lot of the financial laws are craft in the country,
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Speaker 2: they're crafted to the benefit of capital. All of this
15:12
Speaker 2: stuff about you know, like additional investment tax breaks and this,
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Speaker 2: and that capital gains taxes at preferable rates and things
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Speaker 2: like that capital is incentive to produce better returns than labor.
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Speaker 3: Yes.
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Speaker 2: My view then is, look, if capital is the house,
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Speaker 2: don't you want to play on the side of the house.
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Speaker 3: Yep.
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Speaker 2: And the way that you do that is typically by
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Speaker 2: investing in companies. Hence, like you invest on the side
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Speaker 2: of capital. When you are betting on sports, you are
15:39
Speaker 2: playing against the house. And it is very much something
15:44
Speaker 2: where if you look at the math sports, betting on
15:48
Speaker 2: a net basis loses investors money because the house takes
15:53
Speaker 2: its cut, and there is it is a zero sum
15:55
Speaker 2: game like it's that, It's how it works by its
15:58
Speaker 2: very nature.
15:59
Speaker 4: I'm gonna ask you to not describe them as investors
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Speaker 4: because I think that's part of the problem.
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Speaker 2: But did I say that, Yeah? Yeah, Gamblers yeah okay,
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Speaker 2: And look, don't get I've gone to casinos, I've made
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Speaker 2: sports bets and casinos. I've played blackjack, craps, roulette, poker
16:14
Speaker 2: like you name it. I've gambled. And I don't have
16:17
Speaker 2: a problem with gambling. I do have a problem with
16:19
Speaker 2: looking at gambling as something that could be the source
16:22
Speaker 2: of any type of long term edge, absent games such
16:28
Speaker 2: as poker where you can statistically actually prove out that
16:32
Speaker 2: you have a certain edge over other players and make
16:35
Speaker 2: a career out of it.
16:37
Speaker 4: So this has been my concern for the last several
16:41
Speaker 4: years now, which has been that many companies have seen
16:46
Speaker 4: a big surge in users and revenue by co mingling
16:56
Speaker 4: and mixing together. I know I'm using the same words
17:01
Speaker 4: over and over again, investing and gambling. And I do
17:05
Speaker 4: not blame the twenty five year olds who are falling
17:08
Speaker 4: victim to this, because I think they are falling victim
17:10
Speaker 4: to it. But I think it is becoming more difficult
17:13
Speaker 4: to differentiate between what is an investment and what is
17:17
Speaker 4: a gambling product. And even this goes beyond sports betting.
17:20
Speaker 4: I think this is critically bad. But we've talked about
17:24
Speaker 4: single day expiration options. For example, You're gonna have a
17:28
Speaker 4: tough time convincing me that you are investing in that case,
17:31
Speaker 4: legally you might be investing, but practically speaking, you are gambling.
17:36
Speaker 4: And we have all of these different new financialized products
17:39
Speaker 4: that disguise themselves as investing. In fact, there are a
17:43
Speaker 4: few brokerage trading platforms that are working on getting futures
17:47
Speaker 4: contracts on things like sports betting into their portfolios.
17:50
Speaker 2: I think some of them might already be there, and
17:53
Speaker 2: a big part of the problem is people don't understand
17:55
Speaker 2: what's called variance. And here's the deal with variance. If
17:59
Speaker 2: you have a coin that you flip, okay, statistically, it's
18:04
Speaker 2: gonna land heads fifty percent of the time, and it's
18:06
Speaker 2: gonna land tails fifty percent of the time. Sure, Mike,
18:08
Speaker 2: What are the odds if you flip that coin once
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Speaker 2: a day for a whole year of trading days, two
18:14
Speaker 2: hundred and fifty two days, each day you give it
18:17
Speaker 2: a flip. What are the odds that you have a
18:19
Speaker 2: five days streak where it's all heads are all tails?
18:23
Speaker 2: Pretty decent ninety nine percent because of variance, like it
18:27
Speaker 2: just it happens sometimes. What are the odds that you
18:29
Speaker 2: have a six day streak? Ninety five eighty seven percent.
18:33
Speaker 2: What are the odds that you have a twelve day
18:35
Speaker 2: streak twelve days in a row where you get it
18:37
Speaker 2: right like the same thing?
18:39
Speaker 3: Twenty two three percent? Chance? Okay, Okay.
18:42
Speaker 2: So this guy in here, Robert, let's call him Robert
18:47
Speaker 2: Robert uh Like, no one cares, ye, Robert Robert says
18:55
Speaker 2: that he made twenty five hundred dollars on bets this year,
18:58
Speaker 2: betting one hundred dollars at a time, and he probably
19:01
Speaker 2: thinks he's good at betting. But Robert's not good at betting.
19:04
Speaker 2: Robert just has luck that has masqueraded as good skill.
19:11
Speaker 2: If he can actually do that over and over repeatedly,
19:14
Speaker 2: then you can say it's skill. But to be able
19:17
Speaker 2: to look at oh I've made I've made these hundred
19:19
Speaker 2: dollars bets and I'm up like twenty five hundred dollars
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Speaker 2: for the year, I know that the sample size isn't
19:25
Speaker 2: big enough to be able to prove anything there. And
19:28
Speaker 2: he thinks it is because he's misinterpreting variants as skill.
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Speaker 2: We'll talk more about this in a minute. Quick break.
19:34
Speaker 2: Wall Street Watches next.
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Speaker 1: Tell you out for whoa Street Watch treking the stocks,
19:52
Speaker 1: the dato and the headlines driving markets so far today
19:55
Speaker 1: right here on the Financial Exchange Radio Network, markets.
19:58
Speaker 5: Now mix and off their intra day highs following more
20:01
Speaker 5: inflation data this morning, where the producer Price index was
20:05
Speaker 5: unchanged in July, better than estimates of a zero point
20:08
Speaker 5: two percent increase in wholesale prices. Right now, the Dow
20:13
Speaker 5: is down over a tenth percent or eighty three points lower,
20:16
Speaker 5: SMP five hundred up four tenths of one percent or
20:21
Speaker 5: thirty three points higher, Nasdaq up six tenths of one
20:24
Speaker 5: percent to one hundred and fifty eight points higher, RUSS
20:27
Speaker 5: two thousands up three tenths of one percent, and Your
20:30
Speaker 5: Treasure reeled down four basis points at four point sixty
20:33
Speaker 5: four percent. In Oil down one percent, trading at eighty
20:38
Speaker 5: two dollars a barrel. Cisco reported a jump in net
20:41
Speaker 5: income in the previous quarter as the tech firm continued
20:45
Speaker 5: to receive billions in orders from AI hyper scalers. However,
20:48
Speaker 5: investors were disappointed by its AI sales guidance, sending shares
20:53
Speaker 5: down by eight percent. Meanwhile in its second earnings reports
20:57
Speaker 5: since its IPO, shares in Sarabra Systems are now down
21:01
Speaker 5: by thirteen percent after the chip designer and cloud computing
21:06
Speaker 5: provider projected slower growth and some investors anticipated elsewhere. A
21:11
Speaker 5: StubHub now down by fifteen percent after the company failed
21:15
Speaker 5: to turn a profit in the second quarter due to
21:17
Speaker 5: climbing costs despite surging revenue from the World Cup, and
21:21
Speaker 5: after today's closing bell Chip Giant Applied Materials will report
21:26
Speaker 5: its second quarter results. I'm Tucker Silva, and that is
21:30
Speaker 5: Wall Street Watch.
21:33
Speaker 2: I want to talk a little bit more just about
21:35
Speaker 2: this idea of variants and thinking that you're good at
21:38
Speaker 2: sports betting when when you're not, Mike, you're not a
21:41
Speaker 2: a basketball player. No, would you say that you're a
21:45
Speaker 2: hockey player or at least you.
21:48
Speaker 3: Know you're Yeah, I could. I let's ess I would
21:52
Speaker 3: go that, Mike.
21:52
Speaker 4: You would if I'm going to identify any as any
21:55
Speaker 4: sports player, yes, to be hockey, you.
21:56
Speaker 2: Would probably roast like ninety seven percent of Americans and hockey.
22:01
Speaker 3: Yeah maybe, okay, like, like.
22:03
Speaker 2: Let's be honest here, so you would then get toasted
22:07
Speaker 2: by the other three percent. Correct, Yes, Uh so here's
22:10
Speaker 2: the deal. Have you ever had a game where.
22:13
Speaker 3: You've scored more than one goal? Yeah?
22:16
Speaker 2: And how many shots does it take you to score
22:19
Speaker 2: that more than one goal? Like you might have two
22:21
Speaker 2: goals on what like four or five shots?
22:23
Speaker 3: Yeah, you know, the around of fifty to fifty and.
22:25
Speaker 2: You have that game, and like if someone watchs just
22:27
Speaker 2: that game, they'd be like, Mike is the best hockey player.
22:31
Speaker 3: Of all time?
22:32
Speaker 2: Probably not, but yeah, sure, you would then have other
22:34
Speaker 2: games where you might like still get a ton of shots,
22:37
Speaker 2: like you might end up getting like six seven shots
22:38
Speaker 2: on net no goals, but no goals, no assist, like
22:41
Speaker 2: you don't factor in scoring at all.
22:43
Speaker 3: Trip over the blue line.
22:44
Speaker 2: Yeah, Mike is the worst hockey player of all time. Yes,
22:48
Speaker 2: the truth is you're somewhere in between. But variants on
22:51
Speaker 2: your shooting percentage makes you look great one game and
22:54
Speaker 2: not great the other. Likewise, if anyone here is a
22:57
Speaker 2: baseball fan, if you ever see someone get four hits
23:00
Speaker 2: in the game, you're like, oh, that guy's great. But
23:02
Speaker 2: no one's ever hit eight hundred for a Major League
23:05
Speaker 2: baseball season. No one has ever. Despite you know, you
23:09
Speaker 2: go and watch NBA players in warm ups and they'll
23:12
Speaker 2: make like ten straight three pointers, but no one shoots
23:16
Speaker 2: a thousand percent from three point because it's just not possible.
23:19
Speaker 2: It's the same thing with sports betting. You can go
23:22
Speaker 2: on a hot streak, it's not because of any skill
23:27
Speaker 2: that you have. By the way, this is the same
23:29
Speaker 2: with trading stocks. You can go on hot streak with stocks. Again,
23:33
Speaker 2: variance plays into this too. If you are a fifty
23:36
Speaker 2: percent you know, hit rate on trading stocks and when
23:40
Speaker 2: whether it works for you, you can have the same
23:43
Speaker 2: numbers that I laid out before. If you're a sixty percent,
23:47
Speaker 2: if you have a sixty percent hit rate, okay, you
23:50
Speaker 2: can end up having then you do have like almost
23:53
Speaker 2: a twenty percent chance of having twelve straight trades that
23:56
Speaker 2: go in your direction, not because you're a genius, but
24:01
Speaker 2: just because of the variance in it. And so this
24:05
Speaker 2: is the stuff that you need to think about when
24:06
Speaker 2: you're separating investing from gambling from trading. And the fact
24:12
Speaker 2: that gen zers are saying, oh, I'm gonna make sports
24:15
Speaker 2: bedding like part of my long term financial plan. I'm sorry,
24:19
Speaker 2: but that's variance, not skill.
24:23
Speaker 3: Yeah, and again I just from the.
24:26
Speaker 4: Capital market structure standpoint. What concerns me about this is,
24:31
Speaker 4: again it's becoming cloudier the difference between investing in gambling.
24:38
Speaker 3: When you can do it all in one account, it's
24:39
Speaker 3: not good. It's not good.
24:41
Speaker 4: And the problem with that is that if then the
24:45
Speaker 4: variance results in that same person losing a whole boatload
24:48
Speaker 4: of money because they are confused about the difference between
24:51
Speaker 4: investing and gambling, they might lose confidence in both and
24:54
Speaker 4: therefore lose confidence in capital markets, and that is bad
24:56
Speaker 4: for our system because those capital markets pretty much fund
25:00
Speaker 4: your retirement if you're listening right now. So yeah, I
25:04
Speaker 4: see a big problem with this. And I just personally
25:08
Speaker 4: believe that futures contracts on the stuff that we're seeing
25:14
Speaker 4: right now have absolutely no business being in an investment
25:18
Speaker 4: account next to a position in a stock.
25:20
Speaker 2: The other thing I said earlier, I said, look, I
25:23
Speaker 2: do think if you want to use the word rigged,
25:25
Speaker 2: like markets are rigged in favor of capital, like they
25:28
Speaker 2: are the way that most people use market markets are
25:30
Speaker 2: rigged in that terminology is like, oh, like I lost
25:34
Speaker 2: this trade because like the big boys, are you know
25:37
Speaker 2: able to squeeze in me?
25:38
Speaker 3: Yeah?
25:39
Speaker 2: And to that, I say, look that that's not rigged either.
25:42
Speaker 2: Like let's let's start with an assumption. Let's say the
25:44
Speaker 2: big boys are squeezing you. Okay, Mike, again, you're a
25:49
Speaker 2: hockey guy. If you played one on one with Wayne
25:54
Speaker 2: Gretzky and he roasted you over and over and.
25:59
Speaker 4: Over, which would still happen even today, as he's right, even.
26:02
Speaker 2: When he's seventy years old, he still would. He's he
26:04
Speaker 2: would absolutely take you to school. Yes, you wouldn't walk
26:07
Speaker 2: off the ice and say that game's rigged. You'd say, no,
26:12
Speaker 2: that he has invested more time, money and effort in
26:15
Speaker 2: it than I am, and has a natural level of
26:17
Speaker 2: skill higher than me, and he beat me.
26:19
Speaker 3: Wayne's only sixty five, by the way, sure.
26:23
Speaker 2: Yeah he definitely beat you then, yeah, definitely at sixty five. Likewise,
26:28
Speaker 2: if you are trading stocks, you are going up against
26:32
Speaker 2: people who have committed billions of dollars of capital and
26:36
Speaker 2: spent millions of dollars building out trading strategies and this
26:41
Speaker 2: and that and everything. They should beat you most of
26:45
Speaker 2: the time.
26:46
Speaker 4: And by the way, sometimes they are lawmakers who have
26:49
Speaker 4: inside information and that should be banned.
26:51
Speaker 2: Right that part, Yes, like that that stuff should not
26:55
Speaker 2: be legal. But like if you got into a basketball
26:59
Speaker 2: like game of horse with Lebron James, you don't walk
27:03
Speaker 2: out being like, well, like that game was no, like
27:07
Speaker 2: you played Lebron James. Like when you're when you're investing
27:11
Speaker 2: in the same markets as Warren Buffett and Stanley Drunken
27:17
Speaker 2: Miller and you know all like all the legends of
27:20
Speaker 2: investing who still trade today and stuff, you don't get
27:23
Speaker 2: to walk away from that and be like, well it's rigged.
27:25
Speaker 2: Like no, they're just better than you. And I'm not
27:28
Speaker 2: saying this like you like they're better than me too,
27:30
Speaker 2: Like this is how it is. Like, So don't play
27:34
Speaker 2: the game right if if you no one makes you
27:36
Speaker 2: play basketball against Lebron James. You know, like you you
27:41
Speaker 2: can choose which you don't have to dance every dance
27:44
Speaker 2: is the point I come back to. Uh, let's see,
27:48
Speaker 2: let's take a quick break and when we come back,
27:51
Speaker 2: we'll do a little bit of stack roulette.
27:53
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29:00
Speaker 2: Am I gonna start off with this piece from Wall
29:03
Speaker 2: Street Journal? Do investors deserve to know the details of
29:06
Speaker 2: a CEO's medical leave? So Home Deepot disclosed yesterday that
29:10
Speaker 2: Ted Decker, who is the chair president and CEO of
29:13
Speaker 2: the company, will take a temporary medical leave of absence.
29:17
Speaker 3: This is not uncommon. We see this with CEOs pretty regularly. Yeah.
29:21
Speaker 4: In fact, CEOs are really old, so it happens pretty often.
29:23
Speaker 3: It does.
29:25
Speaker 2: The company did not, however, give the reason for the
29:30
Speaker 2: medical leave, which is out of character for other similar announcements,
29:34
Speaker 2: and so it raises the question mentioned in the title,
29:37
Speaker 2: do investors deserve to know the details of a CEO's
29:40
Speaker 2: medical leave? And I've gone back and forth on this
29:43
Speaker 2: even in the last five minutes, like thinking about it, because.
29:47
Speaker 3: Deserve is an interesting word.
29:50
Speaker 2: It really should be do investors need to know the
29:53
Speaker 2: details of a CEO's medical leave? And I think where
29:57
Speaker 2: I end up landing is on no, the reason being
30:02
Speaker 2: as long as you are saying this person is not
30:05
Speaker 2: going to be acting in these roles for this period
30:08
Speaker 2: of time, then I don't think.
30:11
Speaker 3: You need to Investors don't need to know the reason.
30:16
Speaker 2: If it becomes apparent that that length of time is
30:20
Speaker 2: going to change, then the company needs to disclose it
30:23
Speaker 2: to investors as soon as possible, immediately after.
30:27
Speaker 3: So here's the good news on this. My opinions know
30:30
Speaker 3: as well.
30:31
Speaker 4: I think the CEO is entitled to his privacy and
30:33
Speaker 4: whatever he has going on, he doesn't need to tell anybody.
30:39
Speaker 3: But if you disagree, then sell your shares.
30:43
Speaker 2: Right If you're not tell markets with that, then you
30:46
Speaker 2: don't have to own the company.
30:48
Speaker 4: There you go, and the CEO here made a decision
30:51
Speaker 4: that he didn't need to share it.
30:52
Speaker 3: I would imagine.
30:55
Speaker 4: Given that he decided not to share it, he has
30:57
Speaker 4: a lot of confidence in his management team that they
31:00
Speaker 4: are going to be able to run the company in
31:01
Speaker 4: his absence with zero disruption. But if you feel that
31:06
Speaker 4: you only bought the shares because of the you know,
31:09
Speaker 4: the tenure and management of the CEO, then by all
31:12
Speaker 4: means sell the shares. I would also be willing to
31:15
Speaker 4: say personally that I think I would be hesitant to
31:19
Speaker 4: invest in a company that I'm only investing in because
31:21
Speaker 4: of the CEO.
31:22
Speaker 3: I think that's the sign of a poorly run company.
31:25
Speaker 2: Sure, And you know there's the counter to this is
31:29
Speaker 2: there's a Who's the person quoted in here, Charles Elson,
31:35
Speaker 2: who is the founding director of the Weinberg Center for
31:38
Speaker 2: Corporate Governance at the University of Delaware. So Elson makes
31:42
Speaker 2: the point people are investing in you depending on you,
31:45
Speaker 2: relying on your leadership, and if your leadership is going
31:47
Speaker 2: to be compromised in some way, you need to explain it.
31:49
Speaker 3: Sure.
31:51
Speaker 2: I understand that view to a certain extent, but ultimately
31:54
Speaker 2: investors just need to know are you going to be
31:57
Speaker 2: acting in those roles or not. So I would differentiate
31:59
Speaker 2: it tow a few things. One, no one is forcing
32:02
Speaker 2: anyone to own home depost stock. Nope, no one's forcing
32:05
Speaker 2: you to work at home, depot anything like that. Sure,
32:08
Speaker 2: I feel differently, for instance, about an elected official. You're
32:13
Speaker 2: going to represent my needs in Congress or in town
32:16
Speaker 2: meeting or any of those things, and you need a
32:18
Speaker 2: leave of absence, I'd like to know why, and I'd
32:21
Speaker 2: like to know how long it's going to be, because
32:22
Speaker 2: it affects my representation in government, and so sure, I'm
32:26
Speaker 2: kind of going off the cuff on this one, but
32:28
Speaker 2: I feel very differently. If my elected official is going
32:33
Speaker 2: to go on a medical leave of absence for three months,
32:35
Speaker 2: I want to know why.
32:36
Speaker 3: I want to know a choice. I correct don't. I
32:39
Speaker 3: can't say.
32:40
Speaker 4: I can't easily say, Okay, well, my elected official isn't
32:43
Speaker 4: appeering and Senate and voting, and so therefore I'm going
32:46
Speaker 4: to sell my home, relocate my family to another area
32:48
Speaker 4: because I want an elect official who's there. It's a
32:51
Speaker 4: little different. So I don't think this is a universal thing. Sure,
32:54
Speaker 4: and I think that different roles of leadership require different thresholds.
32:59
Speaker 4: But for me, yeah, a private citizen who's acting in
33:05
Speaker 4: a certain role for a company shouldn't need to explain
33:08
Speaker 4: what is going on in their personal lives.
33:10
Speaker 2: Elson also mentions, look, if you leave, you know, there's
33:12
Speaker 2: open to you know, speculation, then the rumor mill takes
33:15
Speaker 2: over and people start speculating.
33:16
Speaker 3: And that's that's true. It does.
33:20
Speaker 2: But again, if the stock is moving because of the
33:22
Speaker 2: rumor mill.
33:23
Speaker 3: About the CEO, probably a bad sign for.
33:26
Speaker 2: Then it's then that the stock isn't dependent on the
33:29
Speaker 2: underlying business for its growth.
33:31
Speaker 3: It's dependent on the name of the CEO.
33:34
Speaker 4: Yeah, what else we got? No, I don't know enough
33:39
Speaker 4: about this story, So I'm going to turn to club
33:41
Speaker 4: sports teams. I was going to talk about Americans love
33:46
Speaker 4: for their V eight engines and how loud they are,
33:48
Speaker 4: but honestly, I've never owned a car with a vight engine,
33:51
Speaker 4: and I don't really intend to, so I.
33:53
Speaker 3: Don't know anything about it.
33:54
Speaker 4: Sure, parents are crying foul over pricey club sports teams,
33:58
Speaker 4: which if you do not have kids in club sports,
34:01
Speaker 4: you and I might not be terribly familiar with, but
34:06
Speaker 4: I do.
34:07
Speaker 3: They do not play on club sports teams.
34:10
Speaker 4: They happen to do all of their stuff primarily through
34:13
Speaker 4: the town, except for gymnastics, which doesn't have a youth
34:17
Speaker 4: town league, so it's done through a private club. And
34:21
Speaker 4: the prices do seem absolutely I mean, the prices for
34:24
Speaker 4: town travel hockey seem ludicrous. To join a club seems
34:27
Speaker 4: even more so. And I fall into the same exact
34:33
Speaker 4: category here, which is, if you think this is ridiculous,
34:37
Speaker 4: then don't pay to do it.
34:39
Speaker 2: Yes, but I think the problem that is noted in
34:42
Speaker 2: here is that in a lot of areas. Once you
34:45
Speaker 2: get past a certain age, there aren't options that are
34:48
Speaker 2: cheaper for kids who just want to play sports but
34:51
Speaker 2: not compete at that high of a level or that
34:53
Speaker 2: intensity or at that price.
34:55
Speaker 4: Yeah, some of the problems that I do see with this.
34:58
Speaker 4: So I was speaking with a family member of mine
35:00
Speaker 4: in Colorado whose son plays ice hockey, and the options
35:05
Speaker 4: there are very much clubs only, sure, And the system
35:11
Speaker 4: there is you sign up, you commit to that club,
35:16
Speaker 4: you pay the fees upfront with no reimbursement, and then
35:19
Speaker 4: you go try out to figure out what team.
35:21
Speaker 3: You've made because they have levels for all players. Sure.
35:24
Speaker 4: That is problematic to me and I would avoid it,
35:29
Speaker 4: Like you know here in the systems around here, in
35:32
Speaker 4: a lot of the club sports generally you can try
35:34
Speaker 4: out for multiple teams, figure out if you are making
35:37
Speaker 4: that top elite team where they are genuinely trying to
35:39
Speaker 4: develop you into a very strong sports player in that
35:43
Speaker 4: specific sport. And again, even there a tiny fraction of
35:48
Speaker 4: them will even ever play in college. But that's clearly
35:51
Speaker 4: the objective of these kids who are putting a massive
35:54
Speaker 4: portion of their lives into it, and to say, hey,
35:57
Speaker 4: we need your money up front. And then we'll let
35:59
Speaker 4: you know team you're playing on. That would bother me
36:02
Speaker 4: quite a bit.
36:03
Speaker 2: Yeah, when you look at So here's the interesting thing
36:06
Speaker 2: about club sports is they're not exactly profit centers. And
36:13
Speaker 2: what I mean by that is, like, the costs are high,
36:15
Speaker 2: but you have to also understand where the money goes.
36:19
Speaker 2: The single biggest place that it goes to is acquiring
36:22
Speaker 2: time like field rink, whatever time it might be. And
36:27
Speaker 2: part of the reason for that is that over the
36:31
Speaker 2: last like forty years, despite the population growing significantly, there's
36:35
Speaker 2: basically been no municipal construction of new facilities for that
36:41
Speaker 2: kind of recreation. The stuff that gets built it's all
36:44
Speaker 2: private facilities, and so they do have, you know, investors
36:48
Speaker 2: that to demand a return on that investment, and so
36:51
Speaker 2: the prices go up because it's not Hey, the town
36:54
Speaker 2: built these fields for the use like No, those fields
36:57
Speaker 2: were built back in the sixties when the population was
36:59
Speaker 2: half as much as today, and now you've got more
37:01
Speaker 2: kids competing for the same space. Okay, the private sector
37:05
Speaker 2: is trying to deal with that, but they need to
37:06
Speaker 2: do at a higher cost.
37:07
Speaker 4: The problem, as I see it, there was a time
37:10
Speaker 4: when we were kids checked the club sports were kind
37:15
Speaker 4: of reserved for those elite players. Yes, you paid to
37:18
Speaker 4: be part of that, and the good thing is that's
37:20
Speaker 4: not the case anymore.
37:21
Speaker 3: If you want to play.
37:22
Speaker 4: Club sports, there's a level for you at pretty much
37:25
Speaker 4: every level. Sure, the downside to that is kind of
37:29
Speaker 4: cannibalize the rest of the ecosystem. Yeah, you end up
37:33
Speaker 4: paying a boatload of money, and it's not always terribly
37:36
Speaker 4: clear whether or not your kid is going to be
37:40
Speaker 4: making it to that next level, especially if you're not
37:42
Speaker 4: terribly familiar.
37:43
Speaker 3: With the sport.
37:44
Speaker 4: Like, hey, we're a club, We've got every level for you.
37:46
Speaker 4: That's great, a lot of access, also a lot more
37:49
Speaker 4: money that needs to go into it because of that.
37:51
Speaker 3: Yeah.
37:51
Speaker 2: Taking a look at markets, as we had towards the
37:53
Speaker 2: top of the hour, we've got still a bunch of
37:57
Speaker 2: green on the board, though the Dow has turned slightly negative,
38:01
Speaker 2: but the S and P and NASDAC remain in positive territory.
38:04
Speaker 2: Bond still catching a nice little bid today, and so
38:09
Speaker 2: again not a particularly eventful day in markets yet. Take
38:15
Speaker 2: a quick break here for the rest of the day.
38:16
Speaker 2: We're back at tomorrow to finish up the week.
38:19
Speaker 3: We'll see you then,