With the NFL season about to kick off, Las Vegas sportsbooks are about to get a nice revenue bump. Just like the situation with the English Premier League in the UK though, trades or long term positions should not be made based solely on seasonal trends that the entire market is already aware of. If we may hark back to a 1995 episode of The Simpsons when Homer invests in pumpkins in October and singes a one dollar bill to light a cheap cigar in celebration of his notional gains, markets don’t really work that way. The question really is whether the bump that sportsbooks will get due to the NFL season will be more or less than what the market expects.
My hunch is that it will be more, and here’s why. Though some Las Vegas firms have shown some tentative signs of weakness, particularly MGM in its last quarterly report on shrinking volumes, it is likely that this is only a temporary downturn due to seasonally shrinking dollar supply growth that generally happens around July and August, as those who read CalvinAyre are well aware of by now. That downturn is now over and done with, and the quarterly trough this year was about 3 times higher than the quarterly trough last year, which ended up causing the August 24th, 2015 market crash. There is very little chance of that happening now, barring some kind of political or natural disaster in the US like an Earthquake in Las Vegas or something, or a financial disaster in Europe that could come at any time. Assuming none of that will happen until after this year’s Super Bowl, we have a green light to go back in to Las Vegas stocks, particularly ones with sportsbook revenues.
The NFL season is fortuitously blessed to be in synch with seasonal money supply expansion trends. It starts in September and ends in early February, precisely when dollars are multiplying at their fastest seasonal rate. This year, given that the trough in dollar supply expansion was much higher than in 2015, we have a considerable head start to this year’s trek back up. We could even get to double digit expansion by January in the thick of the playoffs, which would really fuel stock prices much higher. People will have more money in their pockets that they will use to bet on games, among other things. The US remains at full employment and will probably stay there by the end of the NFL season, consumer spending keeps going higher, and “everything is awesome” for now, as they say. It won’t be awesome perpetually, but for now it is.
Buy at a high?
