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Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option.

Please understand I'm not suggesting professional sports isn't the greatest thing since sliced bread: I'm simply asking if attending pro sports games has become unaffordable to the average American.

Who cares as long as we can watch the games for free on television, right? That raises another issue: in the next recession, will advertisers still pay billions of dollars for broadcast TV ads on sports channels when ads on mobile devices distributed via Big Data analysis can directly target the (shrinking) populace who still has disposable income to spend?

Before we look at the money side of pro sports, let's note the glorious shared experience of "our team" winning and hated rivals losing. Sports is one of the few experiences that unites a remarkably diverse populace, and one of the few spheres of life that isn't politicized to ruination.

We all get to live vicariously through sports, and the stranger cheering beside us is suddenly a "friendly" in a largely hostile world.

With apologies to Dallas Cowboys fans: Joe Montana to Dwight Clark– The Catch in January 1982: (Cowboys fans have many memorable moments to savor, including a number in this game)

Montana to Clark – The Catch (2:24)

The problem is that attending a game is prohibitively expensive. A seat in the nosebleed section might only be $15, but there's parking (or train fare), and the $10 beer and the $10 hotdog. That's $40 – $50 for one fan or $80 for two people.

Given that the average wage is $44,000, $80 for "cheap seats at the game" is not inconsequential. Given that many clubs are now pricing tickets by demand, it's easy for two people to spend $200 to attend a game.

How many people can afford to attend games on a regular basis without maxing out a credit card or drawing on a home equity line of credit (assuming there's home equity to tap)?

Cities desperate to retain pro franchises are on the hook for hundreds of millions of dollars spent building $1+ billion stadiums. Many claim that they'll recoup the money from hotels and shopping malls built adjacent to the stadium, but this gargantuan cash flow has yet to actually materialize.

The winner take all dynamic of our pop culture has driven salaries and team overhead costs into the stratosphere. This pushes costs so high that teams literally can't afford a losing season. Alas, not every team can win the conference, much less the championship.

The assumption that TV ad revenues will continue to support the enormous costs of the system is rarely questioned. The ads have to work to make sense, and in an economy in which the average wage earner is making less money every year (measured by purchasing power rather than nominal dollars), and more and more of the dwindling income is devoted to healthcare, taxes, debt service and essentials, there are two questions here:

1. What good is an ad if the viewers have no disposable money to spend?

2. Rather than pay to broadcast an ad to every viewer, few of whom are in the market for whatever item you're selling, why not target the core audience directly with mobile ads?

If an advertiser is marketing beer that (in Mike Royko's memorable phrase) tastes like it's been strained through a horse, where's the most bang for the ad buck–a broadcast ad to sports fans who have seen hundreds of beer ads and are either already fans of the swill being advertised or consumers who will never buy the product, regardless of ads, pricing, etc.?

The typical ad-industry justification is that if Swill A can capture 1% of market share from SWill B, spending tens of millions of dollars on TV network ads is a wise investment.

But does this argument hold up when advertisers can target beer buyers with a history of buying Swill A and B directly via their mobile phones as they enter the supermarket? Which ad do you reckon has a higher probability of modifying consumer choice, another beer ad that viewers mute/ignore, or a coupon delivered to the beer buyer at the point of purchase?

In short, the mobile ad revolution has barely begun, and while broadcast ads on TV, radio and the Internet will all still attract advert money, it seems highly likely we've reached Peak Broadcast TV Advertising income.

Take a glance at this chart of household income: every sector from wealthy to low-income is bringing home less money. What does that tell you about the future of advertising?

Based on anecdotal evidence submitted by readers and correspondents, it seems that much of the discretionary spending on things like attending sports events and concerts is being funded with debt or drawdowns of savings/equity. In other words, people are charging big-bucks tickets on their credit card, not paying for them out of weekly earnings.

There may be a generational component as well. Most of the people in the top 10% of household income are Baby Boomers in their peak earning years. On the face of it, they can easily afford to pay for costly tickets, parking, beer, etc. at one of the sports industry's new secular cathedrals (i.e. stadiums).

But these same people are often also paying for kids' college and funding care for their aging parents. $200,000 a year looks great until you subtract taxes, college costs, assisted living costs for a parent, a big mortgage and rising costs for essentials.

My point is: going to games is now like going to concerts or a fancy restaurant: each consumes a major chunk of dwindling discretionary income. As credit and income tighten, it's getting easier to decide to forego the concert, game or high-end dining experience.

In other words, attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option.

I haven't found any studies on this question, but I also wonder if Gen Y is as committed to the idea of investing so much time and money in sports as their elders. If they are indeed less invested, this adds additional weight to the idea that we've reached Peak Pro Sports.

I confess I'm jaded. I don't have the time or emotional surplus to invest in following sports, and I tend to see the sports industry as just another bloated cartel that rips off its customers because it can, enriching a handful of super-wealthy owners who bask in the reflected glory of a secular religion.

Put the trends together and it certainly looks like the sports cartel has already sucked up all the oxygen in the room. In the next recession, we may find that pro sports will no longer be able to support the sky-high costs of its overhead and secular cathedrals.

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We noted 2 days after the Japanese earthquake that radiation from Fukushima could end up on the West Coast of North America. And see this.

We started tracking the radioactive cesium released by Fukushima within weeks of the accident.

In fact, U.S. nuclear authorities were extremely worried about the west Coast getting hit by Fukushima radiation … but publicly said it was safe.

We reported that Fukushima radiation spread worldwide.

And we’ve documented for years that the failure to test the potentially high levels of radiation hitting North America is a scandal.

Sadly, we were right to be worried …

The Journal Environmental Science & Technology – published by the American Chemical Society – reported last year that airborne levels of radioactive cesium were raised by 100 to 1,000 times (what scientists describe as two to three “orders of magnitude“):

Before the FDNPP accident, average 137Cs levels were typically of 1 ?Bq m−3 in Central Europe and lower average values (<0.3 ?Bq m−3) were characteristic of northern, western and southern Europe.

 

***

 

During the passage of contaminated air masses from Fukushima, airborne 137Cs levels were globally enhanced by 2 to 3 orders of magnitude.

Indeed, even hot particles and nuclear core fragments from Fukushima were found to have traveled all the way to Europe.

The French government radiation agency – IRSN – released a video of Fukushima cesium hitting the West Coast of North America.  EneNews displays a screenshot from the IRSN video, and quantifies the extreme cesium spikes:

• Cesium-137 levels in 2010: 0.000001 mBq/m³ of Cs-137 (blue writing)
• Cesium-137 levels in Mar. 2011: 1 to 10 mBq/m³ in Western U.S. (orange plume)
• Cs-137 levels increased 1,000,000 – 10,000,000 times after Fukushima

Levels on the West Coast were up to 500 times higher than estimated.  Cesium levels from Fukushima were higher than expected worldwide, including in the arctic region of Europe:

Radioactive cesium bioaccumulates in large fish and animals.

The radioactive half life of cesium 137 is usually 30 years. But scientists at the Savannah River National Laboratory say that the cesium at Chernobyl will persist in the environment between 5 and 10 times longer – between 180 and 320 years.

And the Fukushima accident has pumped out some entirely new forms of radioactive materials … in “glassy spheres“, buckyballs, ball-like spheres, and bound to organic matter.  Scientists don’t really know how long these new forms will last …

The Day Tokyo Got Blasted by Fukushima Radiation

On March 15, 2011, the winds shifted …

The Fukushima radiation which had been blowing out to sea suddenly turned and hit Tokyo:

The image is a screenshot we took from a video released by the French government radiation agency, IRSN.

As we’ve reported for over 3 years, Tokyo got nailed by radiation. For example:

• Radiation Levels In Some Parts of Tokyo Are Higher than In the Chernobyl Exclusion Zone

• Tokyo Hit With Fukushima Radiation

• Tokyo Soil – Blanketed With Fukushima Radiation – Would Be Considered “Radioactive Waste” In the United States

• Radioactive “Dirt” Hits Tokyo

• Over 20 Radioactive Hotspots Found in Tokyo … Despite Government and Media Attempt to Cover Up Spread of Radiation

• Tokyo Almost As Irradiated As Fukushima

We knew what happened.  Now we know when …

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Shortly after it was revealed by Politico that NBC had stooped to new lows in favoritist nepotism, having paid Chelsea Clinton an annual salary of $600,000 for “occasional” reporting work, in effect making her one of the highest paid if not the highest paid “reporter” in the world, the former first daughter quickly stunned everyone when, in the aftermath of her mother’s just as stunning commentary on personal wealth and what being “broke” in the New Normal apparently means, she stated rhetorically that “I was curious if I could care about money and I couldn’t.”

So, moments ago, to prove that she really no longer cares about such earthly things as money, since between her hedge fund husband and her parents, she has more than she can possibly spend in one lifetime, AP reported that Chelsea Clinton is finally quitting her job as a reporter at NBC News.

From AP:

Bill and Hillary Clinton’s daughter has been working at the network since 2011, sporadically doing feature stories on people or organizations doing public-spirited work. Politico magazine reported earlier this year that NBC was paying her $600,000 a year.

 

The network announced her exit on Friday. She was initially hired to do stories for Brian Williams’ “Rock Center” newsmagazine, but that program was canceled. Her work occasionally appeared on NBC’s “Nightly News.”

 

Clinton and her husband, Marc Mezvinsky, announced this spring that she is pregnant with her first child.

And now we await as NBC replaces Clinton with some random Columbia journalism school graduate who will do the same amount of work and will, naturally, be paid the same money.

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Having flip-flopped from forecasting EUR strength for the next 12 months in April (target 1.40), Goldman has rapidly ratcheted down its expectations for the flailing currency to 1.30 previously and now forecasts EURUSD at 1.20 in 12 months. As Goldman notes, “because we believe the dynamics of the Euro have fundamentally changed and because we expect cyclical outperformance of the US, a prolonged period of Euro undervaluation can be expected and this is reflected in our longer-term forecasts.” Trade accordingly…

 

Via Goldman Sachs,

1. We are revising down our EUR/$ forecast to 1.29, 1.25 and 1.20 in 3, 6 and 12 months (from 1.35, 1.34 and 1.30 previously). We are also revising our longer-term forecasts lower, bringing the end-2015 number down to 1.15 (from 1.27), that for end-2016 to 1.05 (from 1.23) and that for end-2017 to 1.00 (from 1.20). We switched from forecasting Euro strength to weakness in April, when we revised our 12-month forecast from 1.40 to 1.30, and the decline since then has been faster than we anticipated. Our latest forecast change aims to signal that the current move lower in EUR/$ has staying power and, in our view, is the beginning of a trend.

2. This forecast change is very much a restatement of our bullish Dollar view. Indeed, because we are keeping our EUR/CHF, EUR/GBP, EUR/NOK and EUR/SEK forecasts unchanged, this change is disproportionately important for our trade-weighted Dollar forecast. When we first switched to forecasting Euro weakness in April, this implied a 6% appreciation of the trade-weighted Dollar against the G10 on a 12-month horizon. Since then the Dollar has appreciated about 3%, i.e., about half that, thanks in large part to the drop in EUR/$. Revising our 12-month EUR/$ forecast to 1.20 implies a trade-weighted appreciation of the Dollar against its G10 peers of a further 6%. We think the USD still has room to catch up with the 2-year rate differential, which is currently the most Dollar-supportive since mid-2009 (Exhibit 1). In addition, changes to the Fed’s forward guidance in coming months have the potential to move the rate differential further in support of the Dollar (Exhibit 2), especially if US data continue their cyclical outperformance versus the rest of the G10.

3. We also believe that the dynamics of the Euro have fundamentally changed. Prior to the ECB’s latest round of easing in June, the foreign exchange market was very sceptical that additional monetary stimulus could be Euro-negative, since it would attract foreign inflows that would buoy the single currency. That thinking has changed fundamentally, in our view, not because foreign portfolio flows into the Euro area have abated (Exhibit 3), but because domestics are increasingly sending portfolio flows out of the Euro area, as ongoing ECB easing encourages a hunt for yield elsewhere (Exhibit 4). Our view is that these portfolio outflows have much greater potential to grow than foreign flows into the Euro area, given that periphery risk premia are already so compressed. Key pushbacks to our view are that: (i) speculative short Euro positioning is already very stretched, with the CFTC’s CoT report for example putting positioning now on a par with 2011/12, when concerns about a potential Euro area break-up were very real; and (ii) the view that the ECB is de facto on hold, as it implements easing measures announced in June. As we have argued in a recent FX Views, the large size of foreign portfolio inflows into the Euro area over the last two years likely means that the CoT report overstates speculative Euro shorts, which we see as moderate in the scheme of things. As far as ECB policy goes, we think there is – counter to market consensus – plenty of room for President Draghi to ‘talk’ the currency lower, which he notably started to do in the August press conference when he said that “fundamentals for a weaker exchange rate are today much better than they were two or three months ago”. Reinforcing his comment, we estimate that the fair value for EUR/$ is around 1.19. Therefore, even with the depreciation of the Euro in recent months, it is still expensive. Because we believe the dynamics of the Euro have fundamentally changed and because we expect cyclical outperformance of the US, a prolonged period of Euro undervaluation can be expected and this is reflected in our longer-term forecasts.

4. Our 12-month EUR/$ forecast of 1.20 implies a 5% weakening of the Euro on a trade-weighted basis versus the G10. With our 12-month forecast for EUR/GBP unchanged at 0.75, this amounts to a downgrade to our GBP/$ view, with the 12-month forecast now 1.60 (from 1.73 previously). As a result, we are now expecting somewhat less appreciation of Sterling, with the trade-weighted index rising well below 5% on a one-year horizon, down from 6% earlier this year.

*  *  *

Bear in mind this is Goldman Macro not the FX team (ex Stolper)…

*  *  *

The herd chimes in:

• *JPM CUTS 1Q EUR/USD EST TO 1.28 VS 1.30; 2Q EST TO 1.26 VS 1.28

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The last time Poland 'spoke' it was to accuse Russia of invasion (and the time before that it was to accuse the government of giving the USA blow jobs), but this time actions speak louder than words:

• *POLAND BLOCKS FLIGHT OF RUSSIAN DEFENSE MINISTER'S PLANE: RIA

Defense Minister Soigu's plane was forced to U-turn and land back in Bratislava.

 

As RIA reports,

Poland has refused overflight rights to the plane of Russia’s defense minister, Sergey Shoigu, who was on his way from Slovakia, RIA Novosti’s correspondent reported. The plane has landed in Bratislava.

 

The minister was returning from the celebrations of the 70th anniversary of the Slovakian national uprising that took place in the town of Banská Bystrica.

 

However, Poland banned entrance into its airspace for the Tu-154 plane, according to a RIA Novosti correspondent who was on board, citing one of the crewmembers.

 

The plane had to take a U-turn and landed in Bratislava an hour later.

 

Negotiations are being held on the matter at the moment.

*  *  *

Retaliation for this?

 

Ponta is late for the cocktail reception http://t.co/OoBSZnrBlJ Russia Has Closed Its Air Space For Romanian Prime Minister's Plane

— Dmitry Rogozin (@DRogozin) August 28, 2014

 

*  *  *

Or perhaps it is for his EU colleagues…

Despite a long run of initial resistance, Prime Minister Donald Tusk is now giving "serious consideration" to taking the post of European Council President, members of Tusk's inner circle admitted Friday, but leaving ambiguity how the governing party would proceed without what has arguably been the most dominant figure in Polish politics of recent years.

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It appears a combination of Cameron scaremongery and weak-spending-driven GDP downgrades has sparked a realization in stocks (for now) that maybe bonds are on to something. As 30Y Yields drop closer to a 3.05% handle (and fresh 15-month lows), stocks have rolled over notably this morning… Of course, it is Friday though and all that pent-up de-escalation buying power on the sidelines is just itching for new new highs in stocks.

Even short-term the divergence remains large…

 

But it seems the Cameron news was more important that weak macro…

 

Charts: Bloomberg

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Following his nation’s elevated terror threat level, UK Prime Minister David Cameron went full scaremonger:

“We are in the middle of a generational struggle against a poisonous extremist ideology that I believe we will be fighting for years and probably decades.”

Warning that “ISIS represents a greater threat than anything before,” (even Hitler?) he plans to introduce new laws to “make it easier to take people’s passports away.”

We are reminded of Brandon Smith’s warnings of government commentary in coming weeks:

…the goal will be to terrify you and those around you into seeking out a more powerful, more centralized government authority to protect your security, to provide cover for the continued planned collapse of American society into third world status, and out of these ashes, the centralization of the political and financial foundations of our world into the hands of an elite few.

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Following the significantly weaker-than-expected spending data, the sell-side has begun its inglorious downgrades of the exuberant hockey-stick growth expectations they all extrapolated off Q1 lows… Goldman cut from +3.3% to +3.1% and Barclays slashed Q3 GDP expectations from +2.7% to a mere +2.2%.

 

Via Goldman,

BOTTOM LINE: The July personal spending numbers were softer than expected, while personal income and the PCE price index were close to expectations. We reduced our Q3 GDP tracking estimate by two-tenths to +3.1%.

 

MAIN POINTS:

 

1. Personal income rose 0.2% in July (vs. consensus +0.3%). The core wages and salaries component increased 0.2% as well. Personal spending was considerably weaker than expected, falling 0.1% (vs. consensus +0.2%). Real spending declined 0.2% on the month. Softness was fairly broad based, evident in durable goods (-0.6%), nondurable goods (-0.2%), and services (-0.1%). Real electricity and gas utilities spending fell 7%, subtracting about a tenth off of the headline, likely due to unseasonably cool summer weather. As a result of income growing more quickly than spending, the personal saving rate moved up three-tenths to 5.7%, the highest level since late 2012. Both the headline and core PCE price index rose 0.1% on a rounded basis, in line with consensus expectations. Over the past year, the headline PCE price index increased 1.6% and the core PCE price index increased 1.5%, a still-subdued pace relative to the Fed’s 2.0% target.

 

2. We reduced our Q3 GDP tracking estimate by two-tenths to +3.1%.

Via Barclays,

U.S. 3Q Tracking GDP Lowered to 2.2% From 2.7% at Barclays

 

Data on July consumer spending suggests “much softer start” to 3Q, Michael Gapen, economist at Barclays, writes in note.
Adjusted for inflation, spending last month below 2Q average

*  *  *

So much for 2% GDP growth this year…

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