Unification, Sports Betting, and a Lesson in Stocks

Just because there is a new administration does not mean there is a shortage of news

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Politics

Unity is on the Menu

  • Amanda Gorman recited an amazing poem at the inauguration ceremony. - CNN

  • Hollywood is back in the White House with performances from Lady Gaga, Jennifer Lopez, and Garth Brooks at the inauguration and a host of more at the post-inauguration festivities. - Boston Herald

  • Bernie Sanders memes are all over the internet.

My Take:

  • Biden ran on a unity ticket. A common phrase during the debates and his inauguration speech, "I will fight as hard for those who did not support me as for those who did." - CNN

  • How he fulfills, this promise will define his presidency.

  • "Unity looks a lot like "sign onto our agenda, or be lumped in with the Capitol rioters," said Ben Shapiro in his January 14th appearance writing the Politico Playbook - Politico

  • If Biden can stand up to the fraction of his party that is actively making those claims, his campaign slogans will show to be more than just empty words, but something he truly meant. 

Keystone Pipeline Cancelled

  • Biden is making good on his campaign promise to be serious about climate change by making one of his first acts as president to revoke a permit that would have allowed TC Energy Corp. to build the Keystone XL pipeline. - WSJ

  • Canada's Prime Minister, Justin Trudeau, was "disappointed" by the news and mentioned "the important economic and energy security benefits of our bilateral energy relationship as well as his support for energy workers" in his call with President Biden on Friday. - Axios

  • It will cost about 11,000 American Jobs in 2021, generating more than $1.6 billion in wages. Most of these jobs would have been temporary work, not permanent. - Politifact

My Take:

  • I don't think this decision was as simple as Biden hates oil.

  • American oil companies have been getting crushed because of lower demand in a COVID world. Canceling the pipeline will decrease the amount of cheap Canadian oil in the market, which will help oil companies make more money because of the reduced supply, think Chevron (NYSE - CVX). 

  • Another part to consider is the ramifications in the Middle East. Biden was apart of the Obama administration that brokered the Iran Nuclear Deal. The Trump administration team pulled out of that deal and put sanctions on the Iranian economy. If the Biden administration decides not to rejoin that deal, this move could ease tensions in the region by giving the Iranians this olive branch. Removing the low-cost Canadian oil from global markets will make Iranian oil more attractive on international markets.

  • All of that is speculation. I am not a foreign policy expert.

Sports

The Super Bowl Match-Up is Set

  • Tampa Bay Buccaneer vs. Kansas City Chiefs

  • Tom Brady's 10th Super Bowl Appearance.

  • Patrick Mahomes and the Chiefs are appearing in back to back Super Bowls

  • Super Bowl is on February 7 in Tampa Bay

  • The first time the Super Bowl will be a home game for one of the teams.

Will American Soccer Begin to Rebound?

  • I was scrolling through Apple News on my iPad, and I came across this article about Christian Pulisic and talking about if he will be the one to bring Male American Soccer to the limelight - GQ

  • If you don't know, Christian Pulisic is probably the best American soccer player ever. He currently plays on Chelsea, one of the best teams in the Barclays Premier League (UK), and he isn't just on the team but is one of their leading contributors.

My Take:

  • Honestly, I don't think any player will bring excitement around soccer in the US. I think it will be the nationwide legalization of online sports betting to raise it out of the ashes.

  • What makes soccer betting so fun is that the scores are so low, and the game can change in a second. Those are considered negatives for other popular American sports. The NFL and NBA change rules to allow more scoring. But in soccer, the low scoring makes the betting and the fans so much more attuned with the game.

  • I got my first experience with sports betting this week when online sports betting became legal in Michigan. It adds a little extra juice to what else would be considered a throwaway NBA game.

Markets

Netflix Is Doing Really Well

  • Netflix (NASDAQ: NFLX) reported earnings this week, and just like Queen's Gambit, they did not disappoint.

  • 200 million paid subscribers. 37 million new subscribers in 2020, up 31% compared to 2019. - PC Mag

  • They are also showing no signs of slowing down with 500 titles in post-production or ready to release, and they are launching a new movie every week in 2021 - Fast Company

My Take:

  • The stock is up over 500% over the last five years.

  • It will be interesting to see how it fares as it sees increased competition from Disney, Apple, Peacock, and other streaming services. 

  • If they can fend off all this new competition, I think the book No Rules Rules by CEO & Founder Reed Hastings and Erin Meyer will become required reading for any business school student.

What I Wish They Would Teach in High School

Low Stock Prices does not mean it is a cheap stock

  • I read two articles this week, one from the Wall Street Journal and another from Forbes, saying that the best predictor of stock performance in 2021 was the share price. The lower the price, the more growth it had. 

  • They are crediting this to stimulus check investors, who don't have a real knowledge of how stocks get their price but are generally accustomed to assuming lower prices mean something is cheaper than something with a higher price. 

  • Whenever I talk stocks with friends, I generally run into this thought process, so I will quickly go over a simple way to test how "cheap" or "expensive" a stock is.

Valuing a stock based on its Earnings (Profits)

  • Probably the simplest and most common way to measure how cheap a stock is based on its Price to Earnings Ratio (PER).

  • This metric tells you how much you are paying today for $1 of a company's profits.

  • For example, one share of Amazon (AMZN) costs $3,292 today for $1 of profit versus one dollar of Tesla's (TSLA) profit costing $846.64. Most would assume Amazon is the expensive stock look at that price tag. But once you look at the PE, it begins to tell a different story.

  • Amazon has a PE of 96 versus Tesla's 1,618. According to this valuation metric, Tesla's shares are 1500% more expensive than Amazon even though the share price is 288% lower.

  • WARNING: There are many ways to calculate the value of a stock. I am just using PE as an introductory example. 

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