Of Bookies and Brokers

Is investing just gambling?

On the face of it, there are a lot of similarities. People have money left over after buying all the goods and services they need or want, and they use that money to express an opinion. In the investing world, they buy stocks or bonds—or some derivative, like ETFs or mutual funds. In the gambling world, they go to a casino or buy a ticket at the racetrack or take a position on a sports team.

Now, most sports betting is just recreation—ways for fans to show their support and have a little fun. And the Super Bowl turns America into a giant sports book. Last year Nevada bookies registered almost $100 million in Super Bowl bets—and kept over $7 million for themselves. And bookies describe their job similarly to that of brokers: a little math, a lot of gut, and a premium on customer service.

But the Nevada sports book is a zero-sum game: for every winner, there’s a loser—minus the bookies’ 10% “juice.” No expansion franchise ever raised capital by setting up an offering-line at Wynn Las Vegas. For all its hype, the $400 billion sports-betting business is just part of a global entertainment industry that has grown as leisure time has grown.

By contrast, capital markets are a positive economic force. When new businesses go public they raise money for expansion, and a public stock price allows them to offer long-term incentives to thousands of key employees. Also, a public market for stocks and bonds allows investors to get their money out of their investments if they need it for any reason. There’s a reason why healthy financial markets are crucial to a healthy economy.

Still, the thrill from a winning an NCAA bracket or a Super Bowl bet can feel like a “two-fer” in the stock market. In both cases “you pays your money and you takes your chances.”

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2014-01-30T11:26:30+00:00 January 30th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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