Are Sports Bubblicious?

Market Update
Written By Jared Kline

Following the positive response to the Social Security video links in my last article, I’m sharing two more videos. The first is a foray into personal finance and tackles the fact that many businesses are now charging a % for using a credit card. In fact, while most businesses charge 1-3%, we recently received a notice in the mail that our daughter parked illegally in downtown Cincinnati. The parking fine was $45. If we paid by credit card, they were going to charge us $49.95, almost 10%!!!!! We dug the checks out of the drawer to avoid the fee. This first video then, is intended to get you thinking about watching out for expensive credit card fees:

The second video explores a potential solution to the challenging housing market and high interest rates. Specifically, it discusses how intrafamily loans can assist adult children in purchasing a home:

For those of you who are active on social media, you may have noticed we are posting videos like the ones above on Facebook, Instagram and LinkedIn. Follow us on those social networks for videos involving financial planning, personal finance, and other topics. You can friend me on Facebook, follow me on Instagram, or connect with me on LinkedIn.

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With the stock market closing the month of May almost flat on the year - technically it closed up 1% year to date - I thought I would give you some food for thought on something bubblicious outside the traditional market examples. Those of us in the financial arena love to talk about whether stocks are in a bubble, and I personally have compared the AI stock boom to the Internet stocks of the late 90’s that went kaboom in the early 2000’s. Many who remember the housing crisis of 2007-2008 are determined to compare today’s housing prices to that era as a sign that the bubble is about to burst.

Shifting gears to a personal interest, let’s consider the sports industry. Is it experiencing a bubble? To illustrate, George Steinbrenner bought the New York Yankees franchise in 1973 for $10 million. Today the franchise is valued at $8.2 billion. That’s an annualized return of 13.6%, beating the S&P 500 (including dividends) by over 1.5% annually. My boyhood hero Larry Bird earned $1.8 million in the 1984-85 NBA season, a significant raise right after he won his first MVP. Nikola Jokic, last year’s MVP, earned $55 million in 2024. Sean Miller recently left Xavier University for Texas where he will earn $4.8 million + 20 hours of private jet usage + a $250,000 relocation allowance + more. While Miller’s salary in his early years at Xavier from 2004-2009 aren’t public, he likely made in the neighborhood of $300,000 to $500,000. College quarterbacks are earning multiple millions per year. CNBC recently published an article suggesting sports franchise valuations have nearly doubled between 2022 and 2025.

Is sports in a bubble? Is this a sign of the “everything bubble” which has been talked about ad nauseum? It’s really hard to say. Sports has a way of capturing our competitive desire, and the world’s greatest athletes captivate us with their skill and grace. Consequently, we aren’t afraid to pay to spectate, driving salaries and valuations higher.

I went far afield with the sports example. Coming back to more traditional areas that are often scrutinized, the housing market is often held up as an example. But the data currently shows a map with significant regional variation. Markets that exploded higher during Covid but which have large amounts of new homes and extreme weather risks like Texas and Florida are experiencing higher inventory and lower prices (see the red states in the graphic below). On the other hand, areas where new housing stock is less plentiful continue to have lower inventory and a tight housing market (see the green states in the graphic below).

For this reason, housing continues to remain steady. As I mentioned in last month’s article, there are many recession indicators. But arguably the best indicator is employment, and specifically employment related to cyclical sectors like home building. If we get to a point where orders for new homes slow ➞ which leads to less homes being built ➞ which leads to layoffs in construction and manufacturing, then we will most likely to see the long-forecast recession.

From a market perspective, for now the risks from tariffs, bond market volatility and deficit spending  are offset by optimism for a renewal of the tax cuts of 2017 and the continued strength of technology as AI grows quickly. The S&P is up 1% for the year through May 30th. Interestingly, the market internals are almost a polar opposite of the past ten years. The so-called “Magnificent 7” (Nvidia, Apple, Amazon, Tesla, Meta, Microsoft, and Google) are struggling, collectively down 2.5% year to date while large cap stocks ex-Mag 7 are collectively up 3.4%.

We remain fully invested and have moved up exposure to international stocks that have strong earnings and dividends as a way to mute the effects that uncertainty in the US might have on market returns.

The search for the next bubble continues: sports, housing, AI stocks - which will be the signal of a market peak? The answer remains elusive. Chew on that. :)

Jared

What’s Your Financial Story?

 

** Wharton School of Business article: https://budgetmodel.wharton.upenn.edu/issues/2023/10/6/when-does-federal-debt-reach-unsustainable-levels

All other YCharts graphs are created by me, Jared Kline.

Kellett Wealth Advisors LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Kellett Wealth Advisors LLC and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Kellett Wealth Advisors LLC unless a client service agreement is in place.

Jared Kline
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