It appears that short term sentiment was sharply negative immediately following the world cup, with a subsequent rally bringing the index back towards positive territory - only to see the index hover between 0% and -2% growth for the last couple weeks.
How can this be explained given that so much money was pumped in to the German economy in the form of capital spending (huge construction contracts to retrofit/build stadiums) and tourism dollars? What does the market know that the politicians did not?
Like any business venture, the world cup is all about managing expectations. When viewed for what it really is - a month long marketing campaign - the WC is subject to the same pitfalls that any business is, and seems especially prone to overspending while riding the massive wave of social excitement that comes along with it. Imagine the problem created by a retailer who overspends on inventory in hopes of future sales. Then picture every retailer within 30 minutes of any train station in the country doing the same and you get the picture. The WC would have to generate massive amounts of profits almost overnight to be viewed as a success and cheered by the market. Such expectations are almost impossible to live up to, and when expectations exceed results you get the graph depicted above.
A great illustration of this type of over-billing an event is the bicentennial celebration of Lewis & Clark's journeys. You might argue that you can't compare something that happened so long ago with such a recent event as the world cup, but this "celebration" was held this year, and yes, was an absolute flop. The Wall Street Journal ran an article about it on July 19:
Paging Sacagawea: Lewis and Clark have lost their way again.
When President Bush issued a proclamation in 2002 creating a Lewis and Clark Bicentennial celebration, tourism officials from Virginia to Oregon pounced on it as a potential blockbuster. But as the three-year celebration enters its homestretch, participating communities are still waiting for the Lewis and Clark gravy train to leave the station.
"It's the great Lewis and Clark letdown," says Dave Hunt, a wholesaler of bicentennial knickknacks, including commemorative spoons and refrigerator magnets, in Lewiston, Idaho.
And Great Falls, Mont., learned the hard way how many people were interested in its claim to Lewis and Clark fame. So few people turned out last summer to commemorate the pair's portage around the falls of the Missouri River that the city ended up $535,000 in debt. Ticket sales failed to cover the $1.6 million cost of staging events including river tours and a powwow. Says organizer George Horse Capture: "People acted like they would rather stay home and mow the lawn."
I'm not suggesting you can draw any valid comparisons between that event and something as huge as the world cup (an event that infatuates people to the degree that cease-fires are instituted just to tune in), but you get the idea.
This is not to say I would base any conclusions about the economic benefits of the WC based solely on the graph shown above, but I do think it contains some worhtwhile lessons. Another critical part of the picture would be to examine how the market performed during the build-up to the WC. If further examination revealed a pre-WC rally, then the post-WC hangover should not be surprising. That is another topic entirely, and I will have more on the timing and longer-term market effects of the WC tomorrow...
No comments:
Post a Comment