Making Sense of the Public Markets
4 minute read · Issue Number 130 · July 22nd, 2022
Many people who enter the investing world soon realize that many things in the public markets make no sense.
Employees on Wall Street get huge bonuses and handsome salaries to make sense of these markets, understand what is going on, and ultimately generate profits from that knowledge.
Some signs and indicators are meant to give us an idea of how things will play out.
Economic data shows how well consumption, production, employment, and the GDP growth of a country/economy have been performing.
Quarterly earnings reports from companies provide a glimpse into their performance and their expectations moving forward.
Statistical models and complex calculations take millions of data points to predict future performance.
Yet, no one has figured out how to beat the market and make profits every single time. We all know this, but somehow we try to convince ourselves that we will be right. That we will know what is going on. That we have the winning strategy.
See– the thing about public markets is that they’re not rational. They’re irrational – based on emotions.
Bernard Baruch – the famous Wall Street investor of the beginning of the 20th century, wrote in his book, “the stock market is the product of collective emotion.” This was over one hundred years ago, and things haven’t changed much since then.
It’s the reason why companies will beat all earnings expectations and drop 10-15% the next day. It’s why war can be going on, and somehow its country’s currency strengthens. It’s the reason why Netflix lost ~1 million subscribers in a quarter and gained 5% in value that next day.
It’s why inflation is at a 40-year high, but markets are feeling confident again with stocks going up, erasing some of the losses from earlier this year.
The stock market is a fascinating place that represents collective emotion.
Netflix jumped because they expected to lose 2 million subscribers this quarter BUT ONLY LOST ONE MILLION.
Woohoo! We only lost a million; let’s celebrate!
WHAT?
Again– it’s all about expectations and results.
Quoting from one of my all-time favorite movies, The Dark Knight – where the Joker (played by Heath Ledger RIP) delivers some world-class wisdom by saying;
“Nobody panics when everything goes according to plan, even if the plan is horrifying. But when one wrong thing happens that’s not according to plan; everyone loses their minds.”
Hell – I’ll even plug the video here, so stop reading and go watch it:
Expectations and results.
That’s the mantra – expectations and results.
Memorize it – expectations and results.
What can you do?
Fear and greed – products of people’s emotions – are the only two things driving the markets.
No one can accurately tell what is going on. This comic from 1981 nails it perfectly:
Knowing this, ask yourself; what is the collective expectation of things?
How have things performed so far– did things happen according to plan? Are the new economic reports in line with expectations? Was the ‘plan’ an accurate representation of the latest earnings reports? What are the latest reports saying about future expectations?
Staying up-to-date with Sports Stocks Earnings
Plenty of sports companies are publicly traded—Nike, Peloton, Draftkings, and the WWE, amongst others.
As an investor, knowing when companies report earnings is key to adjusting expectations on time.
Staying up to date with earnings dates could be a hassle (I know this from experience),
So I thought – what if I could have all the earnings in my calendar – the same as scheduled meetings/appointments on my iPhone?
I couldn't find any tool online for it, so I coded it. The script fetches the dates of the upcoming earnings reports for companies in sports from Yahoo Finance.
It updates monthly, and whether you're using iCal or Google Calendar – you can add it to your cal and track these earnings for free. Here’s the link for iOS and Google Calendar.
Closing Thoughts
In the 1930s, famous economist John Keynes said: “Markets can stay irrational longer than you can stay solvent.” If you like to bet, try sports betting instead.
Instead, aim to understand collective emotion; by learning about this so-called ‘plan,’ you’ll be able to adjust your expectations accordingly.
🎙 Halftime Snacks Podcast
Data-Focused Sports Marketing
Adam was one of the executives that built Harris Blitzer Sports and Entertainment (HBSE) and also worked for the NY Yankees, The Madison Square Garden Company, Prudential Center, and the New Jersey Devils.
Today, he’s the Managing Director in North America for Two Circles – a data-focused sports marketing firm that helps sports leagues, teams, and governing bodies monetize their data.
They work with world-class organizations worldwide, such as the IOC, UEFA, Formula One, English Premier League, Learfield, and the NFL.
We talked about:
Adam's work at Two Circles
Data as a business model and its value in understanding sports fans/consumers
The strategy for Two Circles, the 'why' behind their business verticals, and how Adam thinks about community.
Listen on here:
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