Coping: Soccer as a Social or Market Marker?

An interesting investment indicator to kick around this morning…The economic idea?  Reader Bill has it:


A theory being batted around by myself and some armchair economist friends is that Soccer, a sport that has entrenched itself in most of the world, really gained foothold in 3rd World nations, and war torn continents.

In the United States, soccer fandom was historically limited to those who had played the sport growing up, and eventually blossomed into a trope of the hipster left (the folks who look down on anything American, but like the romance of the exoticism of soccer).

In recent years, in the United States, the MLS (Major League Soccer) has vaunted itself as one of the “major” sports leagues (allegedly shoulder to shoulder with MLB, NFL, NBA and NHL) with stadiums filled with fan bases (who have co-opted the traditions of fans in traditional soccer hotspots such as singing incessantly, and riling themselves into almost hooligan enthusiasm).

Some have asserted that there is a corollary between the devaluation of the U.S. dollar and the popularity of soccer. That as we attenuate, slowly and mercilessly into 3rd World status, soccer becomes a more pronounced national obsession.

I’s an interesting concept, but one that doesn’t really hold water when studied from the longwave economics view, at least insofar as the valuation of the US dollar.

When you plot the value of the dollar over time (from the setting up of the Federal Reserve and the Internal Revenue Service in 1912/1913, you notice that the majority of the US dollar decline happened once we got into the 1960s and 1970s.

If “soccer marker” theory were really to hold, we should have seen a major increase in soccer interest much earlier than we did.

So I’d offer a counterpoint:  Soccer may be a sport that is limited to the back-side of economic growth, so the observation may be valid, but from a longwave perspective we need to look deeper.

In the 1970’s, we had a soccer team, the Seattle Sounders of the NASL – North American Soccer League.  First games were in 1974 and it was coming at the tail end of a major housing boom because of the baby boomers who were soaking up cheap homes (4 bedrooms, 3 bath, 2 fireplaces, brand new neighborhood for $43,950 – I know because I bought one).

The peaking process of the US economy was then underway.  There was a run-up in long term rates and these peaked (looking at the 10 year rate) around summer of 1981.  See the 10-year yield maximum range over here.

Obviously, the Seattle Sounders of the NASL peaked across the top of the interest rates.

Similarly now, we see soccer becoming more popular than it was previously in much of the world, including here in the US.

Step back with me to the long 54-year economic cycle, and what do we see?

I can make the argument (to be validated going forward) that soccer is once again ascendant, but that this time, it’s across the bottom of an economic cycle.

Thus, an alternative concept is that soccer, like war and recession, may be a peak and trough phenomena.

We know from history that World War II was an economic trough war.  Thus, we can sense that Vietnam might be considered a peak war.  WW I would have been a peak war, too.  And the “gay 90’s” referring to the mood of the 1890’s shows (along with the Roaring Twenties, how social euphoria comes along at predictable cycles in the economy.

Another way to look at cyclicity in sports is to consider that soccer may be a “preparatory game” for real conflict on the battlefields.  Many others have done work on “sports as a substitution for war” and this may explain some of the growth in sports.

A couple of readings, if you’d like?  Try “ Infrastructure Investments and Mega-Sports Events: Comparing the Experience of Developing and Industrialized Countries” by Bauman and Matheson (2013):

Countries vigorously compete for sports mega-events in hopes of generating an economic impact during the event but also long-term growth induced by the hallmark event. It is well understood that the economic legacy depends on the infrastructure that not only facilitates the games but also has far broader implications for sustainable economic activity in the host city’s economy. The purpose of this paper is to analyze the extent to which developing and developed countries adopt different strategies as it related
to the composition of infrastructure enhancements that have implications for the generation of an economy legacy from the mega-sports event.

Also instructive is “The Socio-Economic determinants of International Soccer Performance” by Hoffman, Ging, and Ramasamy (2002):

Abstract: This paper reports regression results identifying the variables influencing a country’s performance in international soccer games. The results reveal that economic, demographic,cultural and climatic factors are important. In particular, inverted U-shape relationships are identified with respect to temperature and per-capita wealth. We also find a significant interaction between Latin cultural origin and population size, while both variables are individually insignificant. Explanations for our results are offered.

Like so many other economic theories, however, the difficulty is in determining whether understand the drivers of the phenomena can actually make us some money.  Otherwise, what’s the point?

To be sure, sports is often itself a great indicator of an investment opportunity (as with Brunswick with the automatic pin-setters coming to bowling, with Model A coming to market in 1955).

If you had invested in Brunswick stock (or better: options) and ridden its rise over the years, you would have likely made a large pile of dough.  (which is always the point, at some level)..

Again, though, we need to keep our “tech glasses”: on when looking at investments related to sports.

Brunswick was an exceptional case in the development of a non-team sports company.  They branched out into all kinds of other products, and that’s when you find things like Brunswick pool tables and the like – that got a lift from the pinsetter marketing and public acceptance.

In soccer, however, there isn’t as much profit potential because there is virtually no barrier to entry.  A kid with bare feet and an old ball can have just as much fun and someone “geared-up” with the latest Nike, New Balance, or whatever.

But again, even though there are in some sports almost no barriers to entry, that doesn’t mean that a new entrant who creates a specialized niche in sports can’t do well: Adidas, Nike, you can go fill in the name list yourself.

If you’re gong to find the next breakout investment opportunity, it will likely pay to keep your eyes on the upscale kids and the semi-pros.  That seems to be where the branding battles are taking place – a sort of ‘center of the battlefield” area where a product can go to the young demo or the older demographics.

OK, off to real work this morning… write when you break even …


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