Man in the Arena...No More?

Yesterday evening ESPN reported that after 22 seasons, 7 Super Bowl wins (10 appearances)  and over 86,000 passing yards, Thomas Edward Brady Jr ("Tommy"), was retiring. As the tributes poured in the news was seemingly confirmed by Brady's company, TB12...

...or was it? Because not long after the company deleted the Tweet and there were reports that Brady has, in fact, not made a decision. Brady has stated he didn't want his retirement plans to divert attention from the playoffs. And yet, here we are. The biggest NFL news of he day is whether or not Brady comes back for a 23rd season and not about the divisional championship games today. And why not? He's has literally had the careers of three Hall of Famers as this graphic shows:

Remarkably, this season was one of his best as led the NFL in both passing yards and touchdown passes. So, yeah...we'd love a 23rd season, but if not...thanks for all that you did for the game! He was the quintessential "Man in the Arena."

What is Bangladesh?

That's a question Amy Schneider will likely not forget anytime soon. The 42-year-old engineering manager's 40-game winning streak, second only to Ken Jennings' 74-wins way back in 2004, came to a dramatic end after she couldn't correctly guess the game's "Final Jeopardy." Librarian Rhone Talsma, however, did know what was the only country whose name ends with an "H", and overtook her to become the new champion. The popular Schneider had "rocketed to TV fame over the past two months...and even led to a bump in ratings for the long-running game show; earlier this month, “Jeopardy!” was the most-watched non-football program on TV." But don't feel too bad for her, she leaves "with $1,382,800, the fourth-highest regular season winnings ever behind Jennings ($2.5 million), James Holzhauer ($2.4 million in 32 games) and Matt Amodio ($1.5 million in 38 games)."

For those still curious about Bangladesh, here's a few key factoids:

                                Source: Leading Edge

How the U.S. Economy Works

Deficits, stimulus, bubbles...confused about how our economic system works? Let comedian Mo Amer explain it:

Pandemic Stocks See Red

Global equities are having a very difficult start to 2022 as inflation crashes the decade-plus liquidity party. Investors fearing the Fed will not only take away punch bowl but also turn off the lights are fleeing stocks. Nowhere is this sentiment more evident than among growth companies that flourished during the COVID-19 pandemic. The Visual Capitalist has great chart showing the state of some popular pandemic and tech-centric stocks in January:

                                        Source: The Visual Capitalist

NASDAQ: Then and Now

The Tech sector has had a great dozen years, propelled by ultra-low interest rates and investors' growing appetite for risk. The NASDAQ Composite (QQQQ) has thrived in the anemic post-GFC economic environment, gaining nearly 21% per year since 2009. However, inflation is now a real threat to the economy, which means potentially tighter monetary conditions in the near future. Many Tech stocks, with expected profits far into the future, are long duration assets that are particularly sensitive to interest rate movements, akin to bonds. Since hitting a peak in mid-November, the QQQQ has fallen over 14%. But that's the whole index; underneath some erstwhile high-flying themes are getting hit harder. Cybersecurity stocks (represented by the HACK ETF) are down over 19%, software/ SaaS companies (SKYY ETF) are down about 25%, and worst of all, fintech stocks (FINX ETF) are down over 33%.  

Source: Yahoo Finance, Mantabye

When the "dotcom" bubble burst in 2000, the NASDAQ ultimately fell 80% over more than 2 years. We are nowhere near that, but how does the current pace of Tech decline compare to 2000? Much better, (for now) as shown below.

Source: Yahoo Finance, Mantabye

That's not surprising, given that today AAPL, MSFT, GOOG, AMZN, TSLA, and FB make up 42% of the QQQQ (as of 12/31/2021). With exception of Tesla, the other five companies are among the most profitable in the world. What is comparable to the 2000 NASDAQ's rate of fall is the drawdown in Bitcoin, which has fallen ~40% in almost as many (business) days. Makes sense. 

Biden To the Fed: Do Your Job!

The post-Global Financial Crisis ("GFC") environment has long been plagued by low growth and deflationary pressures. Supported by by ultra-low interest rates, growth hungry investors have for years piled into risky assets like cryptocurrency and companies with questionable "growth-at-all costs" business model. Profits? What's that?...Investors merrily did so because of the justified belief that the Federal Reserve had their backs. The stock market is, of course, not a part of the Fed's dual mandate of stable prices and maximum employment. However, successive Fed regimes have been wary of any negative feedback loop a declining stock market might have on the real economy and typically responded to market volatility with injections of liquidity. The Fed's obsession with the so-called "wealth effect" has contributed to growing economic inequality, even by the Fed's own admission. But suddenly, some would say predictably, inflation is back after four decades (admittedly, this blog was firmly in the transitory camp). The Consumer Price Index rose to a 39-year high of 7.1% in December, well above the 3.2% average over the past 42 years and the 1.8% per annum since the GFC. 

Source: The St. Louis Fed, Mantabye

Now the Fed has to choose between its Congressional duty and Wall Street. Quite the quandary! President Joe Biden, for one, has no confusion about where the Fed's focus should be as inflation becomes voters' biggest concern. He helpfully reminded Fed Chair Jay Powell of his duties this week:

And Wall Street may be starting to feel that the Fed might actually listen to him:

Source: Yahoo Finance, Mantabye

How Much Sport is There in Professional Sports?

The long MLK weekend had six NFL wildcard matchups under the expanded play-off format. Sure, five of the six of the game were uncompetitive (though the Cowboys vs 49ers game made up for some of that). But that's not the point. While there were six games of 60 minutes each, how much football did we actually see? Well, according to a study from the WSJ from a decade ago, the average amount of time the ball is in play on the field during an NFL game is about 11 minutes! Where does the rest of the time go? Here's a helpful graphic from the Journal:

If there's so little actual football in a football game, what do the networks do with the other 190 minutes in a typical broadcast? Not surprisingly, "commercials take up about an hour. As many as 75 minutes, or about 60% of the total airtime, excluding commercials, is spent on shots of players huddling, standing at the line of scrimmage or just generally milling about between snaps." All this is facilitated by the fact that in American football the clock is allowed to "run for long periods of time while nothing is happening. After a routine play is whistled dead, the clock will continue to run, even as the players are peeling themselves off the turf and limping back to their huddles. The team on offense has a maximum of 40 seconds after one play ends to snap the ball again."

But what about the other major sports? Are the dynamics the same in basketball, baseball, soccer, etc.? Well, as this well-sourced post from the National Arms Race shows, things are not quite as bad in the other sports:

                                    Source: nationalsarmrace.com, Mantabye

In American football there's only 5.8% of action time in a 3-hours plus broadcast. Commercials take up about 75 minutes of the 190 minutes. Cha-ching! Football is truly the quintessential capitalist sport. Baseball, America's official pastime, comes close to football in its lack of playing time, with 18 minutes of actual baseball in a typical 176-minutes broadcast. By contrast, soccer is action-packed. In a typical 115-minutes broadcast there is 58 minutes of action! That's 50% of action time. It also means there is comparatively little time for the all-important ads. While 40% of a football game's coverage is devoted to commercials, only 16% of time is devoted to ads in soccer. Socialist sport!

                                    Source: nationalsarmrace.com, Mantabye