The SportsFolio Jounal - July 2020
Sports are back; sort of. The NBA is resuming the season in a “bubble” in Orlando with 22 teams. Why 22? The idea is that the teams that were still in the playoff race before the season was put on hold, all deserve a shot. The MLB has agreed to a 60-game schedule. Meanwhile, many sports stars have tested positive: various NBA players, Jimmie Johnson and Djokovic. This created questions about whether sports should return at all. There are economic incentives, for sure, but we are concerned that the pursuit of the short term money means that the health of the athletes and other league personnel may be jeopardized. In fact, a hasty restart would likely result in an even bigger economic loss for the leagues in the long term. We hope that we will be wrong on this one.
Meanwhile, LeBron James crowned the cover of one of the issues of Bloomberg Businessweek with his $100 million media empire. He wants to tell stories. Also of note: a financial literacy partnership was created with JP Morgan Chase: Kneading Dough. There is a lot to be excited about here and we are looking forward to hearing more from the King and Mr. Carter, LeBron’s longtime friend and business partner.
There are two big debates happening in the money space.
First, the crypto debate. When Goldman Sachs made the case why Bitcoin is not an asset class (which we fully agree with), one of its archrivals took the other side. JP Morgan appears to be having a change of heart after its CEO, Jamie Dimon ridiculed Bitcoin three years ago and called it a fraud.
Whether the bullishness is on blockchain, or the world is warming up to the idea of a digital currency, significant uncertainty remains when it comes to Bitcoin. It is hard to see how this will resolve before there is consensus on what it is. What is Bitcoin, actually? One view is that it is a hedge against the existing financial infrastructure. On that point, we don’t necessarily disagree. Bitcoin is a currency, therefore to the extent you think there will be a fundamental political shift and Bitcoin will emerge as the category winner (the second condition is important as there are scenarios where crypto can win, but Bitcoin can still lose), then it might not hurt to have some if-I-lose-it-I-don’t-care amount in your wallet. It is, however, being promoted to Main Street as an investment and that is what we don’t agree with. Some believe Bitcoin can’t do wrong, and its price will just keep rising. This type of conversation tells us that Bitcoin is simply the latest example of conflating speculation and investment at mass scale and we are worried that it will not end well for people when they need the money most.
Second, the economy debate. Is it a V-shaped recovery? Or is the market still refusing to see the seriousness of the COVID-19 situation, perhaps aided by the gamblers infiltrating the markets? Whatever camp you are in, we believe the underlying issue is that people are given a false choice between saving jobs and saving lives. The real trade-off is between the financial well-being of people (not corporations) and their health. Is reopening the economy one way of potentially helping people by preserving jobs? We don’t think the difference is 18 million jobs as Wharton has predicted, but sure, directionally, the argument is correct. But is it the only way?
States that have partially reopened increasingly feel like the virus is playing whack-a-mole on them. A state tries to get out of the hole, only to slide right back in when there is a surge of new cases. We believe that we all need to rethink how people can manage their finances better. One way to do that would be to help people directly. Why not? This is a government of the people, by the people, for the people. Chamath Palipathiya, founder and CEO of Social Capital made the same point. Perhaps the corporate bailout mentality is ingrained into the country’s collective DNA with the memory of the Great Recession of 2008 still being fresh in people’s minds, but we should never forget that the ultimate goal is to help people. Trying to pick a side on a false choice, it increasingly seems like we are at risk of achieving neither; many lives will be lost unnecessarily and jobs will not recover.
Sports & Money
Beyond that, the biggest news in this cycle was something that deeply saddened us. A 20-year old committed suicide because he thought he had lost a lot of money in financial markets. We have long maintained that gamification of markets and the intentional conflation of betting and investing are big problems that have real consequences for real people. Unfortunately for one person who was supposed to have a long journey ahead of him, it was death.
Rest in peace, Alex. No life is worth losing over money and our only hope is we can educate people so this never happens again. Ever.