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“I wouldn’t sell the Yankees for anything. Owning the Yankees is like owning the Mona Lisa. You don’t sell it.” – George Steinbrenner
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures are trading higher this morning, but based on the last few days of trading that hasn’t meant much as the S&P 500 has had trouble holding on to early gains. Since Christmas, the S&P 500 has traded down for five straight trading days. Losing streaks of five or more trading days straddling the new year are extremely uncommon. The only other time that the S&P 500 has had a five or more day losing streak that started in one year and went on to the next was in 2014/2015 when it also traded down five days in a row from 12/31/14 through 1/6/15. Two big events today that could determine whether the losing streak continues are the ISM Manufacturing report at 10 AM and the House Speaker vote. While the speaker vote is not necessarily a crucial event, if Johnson can get voted in, it could suggest that the GOP will act in a more unified front in the legislative season ahead.
Yesterday was a relatively volatile day for the S&P 500. The ETF that tracks the index (SPY) traded up about 0.90% early in the session before trading down as much as 0.95% later in the session and ultimately before finishing with a marginal decline of 0.22%. It was a noisy day with little to show for the bulls or bears by the end of the day!
As far as regular investments go, equities have provided among the best returns to investors over the long term. Let’s look at how the S&P 500 has performed during the last 51 years. Had you invested $10,000,000 in the S&P 500 at the start of 1973, you’d have $2.15 billion including dividends. Talk about the power of compounding!
Against at least one asset class, though, equity returns have been pedestrian. That asset class is professional sports and more specifically, the New York Yankees. 52 years ago today, an investor group led by George Steinbrenner bought the Yankees from CBS for $10 million. According to Forbes, the New York Yankees are currently worth $7.55 billion. By all accounts, $10 million turning to over $2 billion in just over 50 years is great, just not when you compare it to the Yankees. While we don’t have annual team values, when you overlay a point-to-point change in the valuation of the Yankees on the S&P 500, the move for equities doesn’t look quite as impressive.
Does this mean equities are a bad investment? Hardly. The increase in the value of professional sports teams over the last 50 years has been a unique situation that an average investor would have never had access to. Equities, meanwhile, are one of the most accessible and liquid investments available. Also, no matter how good the results of any investment turn out, the grass is always greener somewhere else. After all, while Steinbrenner and his heirs have had an annualized gain of just under 14% from their investment in the Yankees, since its IPO in the early 1980s, Apple (AAPL) has had a total annualized return of closer to 20%, and forget about Bitcoin! That’s why investors are always chasing shiny objects.
