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Super Bowl, or Super Bubble? Thumbnail

Super Bowl, or Super Bubble?


Warren Buffett’s mentor reminds us to focus on things within our control to help temper the emotion of the day. “Investing is a unique kind of casino—one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor”—Benjamin Graham.

Note: This article was first published in January of 2018. It has been updated to reflect current market prices. The original can be found here.

Super Bubble LVII is upon us, and fans are going crazy over tickets. Did I say, “Super Bubble”? I meant Super Bowl. We’ll get to the Super Bubble in a minute. A StubHub search reveals ticket prices beginning around $5,000 for nose-bleed seats to watch Philadelphia take on Kansas City1. Is this price justified? Absolutely.

I was born in 1981. Tickets to watch the Oakland Raiders win their second Super Bowl brought a $40 face value. The increase to $5,000 for upper deck seats is almost a 12% annual increase over that time period. The only conclusion with prices at an all-time high is that we must be in a ticket bubble ready to burst. Shouldn’t prices correct to a more rational level? Not so!

The ticket market appears inflated. Why in the world would prices increase to such drastic levels during this time? Here’s why. The ticket market functions much like any other: supply, demand, and the sentiment of market participants, buyers, and sellers determine price. This information influences the market to arrive at a fair approximation of price.

Looking deeper, market sentiment might include a strong emotional attachment to share in your team’s ultimate achievement. The perceived value of sharing this experience justifies paying these prices for some market participants.

Let’s turn to another market. The U.S. stock market has experienced similar growth to Super Bowl ticket prices during the same time period. The S&P 5002 index is up over 11% annually during that time. Clearly including a lot of bumps along the way.

It’s understandable that investors might see this record-setting metric as a bubble ready to burst. Rapid price changes in the stock market appear erratic or even irrational on the surface. Just like ticket prices, supply, demand, and market sentiment help determine stock prices. What appears to be a bubble is really a thriving market continuously incorporating information from buyers and sellers. Prices adjust accordingly as a result. As investors well know, prices can also adjust down.

While the S&P 500 is still roughly 14%3 from its high, we as investors shouldn’t let record prices in the future deter us.

I signed up long ago to honor my annual tradition of watching the game from the reasonably priced comfort of my living room as a Commanders fan. Plus, concession prices are more reasonable.

Enjoy the game!

1Similar tickets were $4,000 in 2018

2The S&P 500 Index, or Standard & Poor's 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies. The time period measured is from January 1, 1981 through December 31, 2022

3The S&P 500 last reached its high on December 31, 2021

Past performance is not indicative of future performance. The projections or other information generated by Buttonwood Wealth regarding the likelihood of various investment outcomes are hypothetical in nature and are not guarantees of future results. The return assumptions in herein are not reflective of any specific product, and do not include any fees or expenses that may be incurred by investing in specific products. The actual returns of a specific product may be more or less than the returns used by Buttonwood Wealth. It is not possible to directly invest in an index. They should not be considered a guarantee of future performance or a guarantee of achieving overall financial objectives. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment.