Welcome to Episode #18 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is joined by Eric Dutram, Zacks ETF strategist and editor of the Surprise Trader and ETF Investor.
Tracey and Eric are big fans of the various financial "indicators” and curses. In this episode they discuss 3 of the best known indicators: the Super Bowl Indicator, the Skyscraper Index and the Stadium Curse.
The Super Bowl indicator may seem like a fun indicator to look at, but it’s actually been pretty accurate at determining the stock market direction, with an 80% accuracy rate.
So what does it mean that Denver won? Is this good or bad for stocks? Eric covers all the details.
The Skyscraper Index looks at the construction of the world's tallest buildings and uses it as a sign of overheating in the global economy. The theory goes, that when a country, or an economy, is on top of the world, it literally tries to build to the top of the world as it gets over confident about the future.
New York's Chrysler Building and the Empire State Building were both begun, and then completed, after Black Friday in 1929 and during the Great Depression. At that time, they were the tallest buildings in the world.
Many of the other world's tallest buildings, for their time, were also started just before an economic downturn.
What does today's construction say about the global economy? Is it signaling that doom is coming?
Finally, there's the Stadium Curse. The theory is that once companies sponsor a stadium, by buying the naming rights, they get into financial trouble. This plays into the overconfidence theme which is similar to the Skyscraper Index.
The poster child for the Stadium Curse has to be Enron. It bought naming rights in Houston in 1999 for $3.3 million a year. Just 2 years later it declared bankruptcy.
But it wasn't the only one. United Airlines (UAL - Analyst Report) and American Airlines both have stadium sponsorship deals and both have gone bankrupt.
Citigroup (C - Analyst Report) never went bankrupt but it did take a government bailout during the Great Recession. It was heavily criticized for spending $20 million a year, with a 20-year deal, for the naming rights at the new Mets stadium, now named Citi Field.
Wondering if any energy companies have stadium sponsorships?
Chesapeake Energy (CHK - Analyst Report) entered into a $3 million a year, 12-year sponsorship in Oklahoma City where the NBA Thunder play. What do shareholders think of the deal now that energy prices have plunged?
Many companies do stadium sponsorship because it's in their hometowns like United at Chicago's United Center, home of the Blackhawks and Bulls, and Bojangles (BOJA - Snapshot Report), at Bojangles Coliseum, in Charlotte.
What about companies that aren't hometown sponsors? Should they be spending money on stadium sponsorships? Or is it a waste?
Overstock.com (OSTK) signed a 6-year deal at $1.2 million in 2011 at the Oakland Coliseum, but it's headquartered in Utah. What's the point?
Tracey and Eric discuss which of these indicators and curses are their favorites. Are they signaling gloomy things to come for the stock market and global economy?
Listen to the podcast to find out if you should be worried that the Japanese may build a new high rise that will be twice as tall as Dubai's Burj Khalifa.