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Weekly Market Pulse: Opposite George

It all became very clear to me sitting out there today, that every decision I’ve ever made, in my entire life, has been wrong. My life is the complete…



It all became very clear to me sitting out there today, that every decision I’ve ever made, in my entire life, has been wrong. My life is the complete opposite of everything I want it to be. Every instinct I have, in every aspect of life, be it something to wear, something to eat… It’s all been wrong. Every one.

George Constanza

If every instinct you have is wrong, then the opposite would have to be right.

Jerry Seinfeld

From the Seinfeld episode The Opposite

I was talking with a friend last week about the markets and the economy and she said she didn’t understand why the market went up after the GDP report. After all, it was the second quarter in a row of GDP contraction and that’s a recession. Shouldn’t I be selling stocks? I explained that markets are forward looking and that stocks bottom well before the end of a recession (about 4 months on average). So, I said, if you want to buy stocks near their recession lows you have to buy before the recession is over. She looked at me and said, Opposite George! As a devoted Seinfeld fan I immediately got the reference and thought, what a wonderful way to think about investing. We may not be as hapless as George Constanza when it comes to most of our life but investing? Our instincts about investing are horrendous, almost always wrong. Last year when stocks were booming and all the talk was about another Roarin’ Twenties, it was hard to resist the urge to buy. This year, when stocks are falling and we’re arguing about whether inflation or recession is the worse of the two evils we face, it is hard to resist the urge to sell.

The GDP report for the 2nd quarter was indeed negative (-0.9%) and there is now an argument about whether this constitutes a recession since Q1 was negative as well. It is mostly a political Rorschach test where Republicans are certain that it is and Democrats are just as certain that it isn’t. Mostly. For the record, I don’t know and don’t much care. The economy has certainly slowed since last year but what you call that is irrelevant. Q1 GDP fell by 1.6%, mostly due to trade which reduced it by 3.2%. That was reversed in Q2 as trade added 1.43%, pretty close to my back of the envelope calculation last week. What changed in Q2 was inventory, which subtracted 0.35% in Q1 but a full 2% in Q2. What does that tell you? Not much if you ask me. The trade figures were distorted in Q1 by, among other things, the China shutdown. The inventory figures for the first half of this year are just a correction of the large inventor build up in Q4 2021. It is just the economy trying to adjust to the end of COVID – maybe – and it isn’t easy since no one has any experience with recovering from a pandemic.

Inventories have risen recently and there has been a lot of commentary about how this will negatively impact the economy. If you follow these things you’ve probably seen a chart that looks something like this:

It certainly looks scary with inventories rising much faster than sales and there are plenty of macro gurus who are willing to tell you that production will have to be cut until inventories come back down. That means layoffs and all the other things we normally associate with recessions. Things are about to get a lot worse, right?

Here’s another chart that represents the same data. It’s a ratio called inventory/sales:

Not nearly as dramatic as that first one, huh? The ratio is about average for the data back to the early ’90s. I would also note that we entered recession in 2008 with the ratio falling and we avoided recession in 2016 despite a ratio much higher than the current one. Inventory and production decisions are not simple and they are especially difficult today. Do you really think companies are going to lay off a bunch of their workers to address a – likely – temporary inventory problem? In an economy where workers are so hard to find? What is an acceptable level of inventory in the post-COVID economy with supply chains still not back to normal? Maybe we are in recession but it isn’t because of inventories.

My outlook for the economy hasn’t changed. We came into COVID growing at an average of 2.1% over the prior decade. During COVID we didn’t do anything to improve the potential growth rate of the economy. And I don’t think we did anything that significantly reduces that potential either. What that means is that we are ultimately headed back to whence we came, a 2% growth trend. What we’re doing right now is removing the COVID distortions – from the lockdowns and the stimmie checks and the easy money policies of the Fed. What those distortions did was drive goods consumption well above trend and services consumption well below trend. As they move back to trend, the goods side of the economy will slow and the services side will rise. Forget the noise of trade and inventories everyone else is arguing about. When you look at the report, what you find is that goods consumption has subtracted from GDP and services have added to GDP over the last two quarters. And, just to be clear, services added more than goods subtracted (+1.78% vs -1.08%).

If you shift to the investment part of the GDP equation (again, ignoring inventory) we see something that is also acting just as one might expect with the Fed raising interest rates. Gross Private Domestic Investment subtracted 2.73% from Q2 GDP but we know that 2% of that was inventory. Of the -0.73% left over, -0.71% of that was residential investment – housing. Even in the non-residential side, the biggest detractor was “structures” which sounds a lot like real estate. I don’t know about you, but I’m not exactly shocked that real estate activity has slowed with higher interest rates.

The GDP report last week was a non-event. The economy is doing exactly what one would expect given these conditions. The inventory and trade figures of the last 2 quarters are nothing more than distractions for investors and the commentary nothing more than calls to your inner George Constanza to follow your instincts.

Another non-event was the Federal Reserve’s FOMC meeting that kicked the stock market rally into high gear. That was so because Jerome Powell’s press conference was widely perceived to be a message from the Fed that they are now “data dependent”. One might think that should always be so, but the Fed is in the same boat as investors, trying to interpret data from the past to predict the future. What they ought to be doing is watching the market rather than the economic data but that seems a lost cause; the Fed is always behind the curve. If the market perceives that the economy is headed for recession, short term interest rates will fall rapidly as the market prices in future Fed rate cuts, no matter what the data says about yesterday. What the market is saying today about growth is that it is slowing but not precipitously. Inflation expectations have also fallen but the Fed’s perceived dovishness on rates did cause breakevens to tick higher last week.

Will stocks keep going up? Well, obviously I don’t know the answer to that question but I can offer some data about previous periods of negative GDP growth. What should you do if we have just had 2 consecutive negative GDP quarters? History says you probably ought to think about doing some buying:

Just to be clear, I’m not saying you should back up the truck and load up on stocks. We don’t even know yet whether we really had two negative quarters in a row. GDP data has been subject to some pretty big revisions in the past and the first 2 quarters were such small contractions that either or both could be revised away. And that is especially true of Q2 since it was mostly inventories and an estimate was used for June because the data isn’t yet available. Furthermore, there’s no where near enough data here to make this meaningful from a statistical standpoint. It is interesting because of the things listed under notes as people seem to think today’s conditions are somehow unprecedented. Russia’s regular threats today about nuclear weapons pales in comparison to the Cuban Missile Crisis. But this could just as easily be similar to 2008 (from a market standpoint not an economic one) as 1975 or 2020/21.

My brief overview of markets is that large growth stocks are still overvalued even as they led the recent rally. Large value stocks are cheaper and small and mid cap stocks are cheaper still. International is very cheap but the dollar is still in an uptrend – we may be seeing a peak there but it is very premature to call that – and as long as that is the case, it’s an uphill battle. There is also the small matter of the stranglehold Russia has on Europe’s largest economy via the energy markets. I do think the recent rally probably has more to go based on my reading of sentiment. Large specs are still holding sizable short positions in the futures markets and my sense is that most people think this is a bear market rally. Put/call ratios aren’t as high as I’d like but they aren’t so low that we need fret too much either.

Don’t waste your time thinking about whether this is a recession or not, it really doesn’t matter. What does matter is that the economy is slowing just as expected and most companies are, so far, finding ways to cope with it. I know you are worried about the economy right now and you should be. We don’t know if things will get worse before they get better (and they will get better). But for goodness sakes don’t make decisions based on your “instincts” or “your guts” or because some chart charlatan scared you. Remember Opposite George!

The rising dollar/rising rate environment remains intact although both are moderating. The 10 year Treasury yield is no no higher than it was in April but it is still in an obvious uptrend when viewed from a longer perspective. The overshoot in rates this year is quite similar to the overshoot in early 2021. Once it corrected the overshoot the uptrend resumed. That could happen again but I’ll wait, as always, for evidence of that. Right now, we are still in correction mode for the 10 year rate. The 2 year rates has not corrected as much as the 10 year so the 10/2 yield curve is still inverted. As I said above, if the market perceived that the economy was very weak and headed for a bigger slowdown, the 2 year yield would be falling rapidly and that just isn’t the case. Will it do that soon? Maybe but I don’t make guesses about the future. If it does, that will affect our outlook for the economy. But just be aware that both rates can still fall quite a bit and still be in long term uptrends.

The dollar uptrend has also started to correct, down about 3% from the recent high. To be clear though, the uptrend here is more intact than for rates. The dollar index hasn’t even traded below its 50 day MA on this move. If we break that level (about 104.75) I would expect further weakness down to 103. And for further clarity, the index could trade down to about 100 and still be in an uptrend. That’s how far and how fast the move up was and breaking that uptrend is not going to be easy.

Most markets were higher last week with Asia (China) the lone exception. We are now facing a conundrum with our portfolios. Should we continue to maintain our cash cushion or get fully invested? As one of our clients has put it to us repeatedly, you’ve done well on the downside but how will you do when things turn higher? I am always reluctant to chase big short term moves but that sentiment is still negative after a big up move may be telling us something. I want to see how the markets trade after last week but I am leaning toward adding some risk here. That doesn’t necessarily mean stocks and it certainly doesn’t mean large growth stocks. But commodities are acting well technically and real rates dropped pretty good last week. The 10 year TIPS yield is down from 89 basis points to just 20 since July 8th. That’s why gold is finding a bid and if growth holds up it will likely mean higher commodity prices as well. That’s also why I’m still a little tentative about adding stocks by the way. The market may think the Fed is pivoting to a less aggressive policy but that will only be true if inflation really does come down, something that it hasn’t done yet. Real estate is also attractive if inflation persists but it is also rate sensitive. Midcap stocks are cheap though and I think we can probably add some high quality exposure there with less risk than large caps.

There wasn’t much difference in performance between growth and value last week but growth has led this rally off the bottom. That’s another reason to be a little skeptical of the overall stock market rally. The large growth stocks are not cheap by any measure and they are mostly rallying on the back of lower rates. If rates turn up that will come undone in rapid fashion. Be careful out there if you’re trading that part of the market.

Energy stocks led the way last week and it may be that crude is done on the downside. I had thought we’d see the mid to high 80s and that is still possible but it’s looking less likely. We don’t usually buy energy stocks anyway because we have direct commodity exposure which we are busy rebalancing after the correction (we’re buying to bring our exposure back up to our target). Defensives and health care stocks were down as the market chased beta but utilities had a great week with lower rates. Cyclicals also had a good week. I guess if the Fed is slowing down investors think the odds of recession faded. I don’t give the Fed that much credit or blame but as I’ve said many times, my opinion doesn’t really matter.

Credit spreads have narrowed by a little over 100 basis points since the July 5th peak. That is a significant positive move in spreads that indicates a lessening of recession fears. Indeed, it isn’t just junk bonds rallying but high grade corporates as well. The high grade corporate bond ETF (LQD) is up over 7% since its June low. Shorter term corporates are also higher. Muni bonds have also rallied, up about 3.5% since mid-June.

One indicator going in the wrong direction is the CFNAI, the 3 month average of which fell to -0.04 last week. With 0 as trend growth, we are now just slightly below trend. But the trend is also down so we’re not out of the woods. A reading of -0.75 means we are likely in recession.

The sentiment about the economy is still quite negative but there is still little evidence of actual recession in the real world – or almost any economic statistics that aren’t sentiment surveys. The Dallas Fed Manufacturing survey from last week is a good example. The comments are the most interesting part of the report in my opinion. Here’s a sample from the July version released last week:

  • The concerns of a looming recession have increased over the last month. With supply-chain issues continuing, the cost of raw materials remaining high and significant interest rate hikes, overall business activity has to slow. It is just a matter of when—which I believe is soon.
  • We are experiencing a temporary increase in business but have a pipeline that is beginning to decline due to inflation’s impact on interest rates and slowing construction starts.
  • We cannot find the qualified people to expand our output.
  • President Biden going overseas to beg for more oil supply instead of working with the domestic producers really adds uncertainty to the domestic producers and their budgets. This will affect our plans dramatically for expanding our business.
  • About 20 percent of our backlog was not taken by customers as ordered, but we were able find homes for that product and, therefore, continued to sell almost everything we produced. With incremental capacity coming online, we were able to grow finished-goods inventories a bit. We did see weakness in handsets and personal computers consistent with general commentary with the broader industry. Other markets are mixed; industrial markets continue to have pockets of strength, while others are beginning to show signs of weakness. We are expecting that weakness to begin to spread as we move into the second half of the year.
  • Broad-based inflation, together with difficulties in recruiting while our customers’ activity is strong, creates a puzzling and uncertain environment.
  • The economy is in shambles. There’s no way out that isn’t bad.

And my favorite comment of all:

November can’t get here fast enough.

What we see with these comments is an economy that is probably slowing – although not in all industries – but mostly expectations/concerns that things will get worse. That appears – certainly based on the last comment – to be more a political belief than one based on reality. Media bias has always existed but not to the degree we see today and not when information or disinformation could be spread so easily and quickly as it is today. What that means to me is that most survey data can be safely ignored or heavily discounted. Politics ends where the income statement starts for most businesspeople. Watch what they do, not what they say. And whatever else you do, don’t let your politics dictate your investment strategy.

Joe Calhoun

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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…



The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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Another beloved brewery files Chapter 11 bankruptcy

The beer industry has been devastated by covid, changing tastes, and maybe fallout from the Bud Light scandal.



Before the covid pandemic, craft beer was having a moment. Most cities had multiple breweries and taprooms with some having so many that people put together the brewery version of a pub crawl.

It was a period where beer snobbery ruled the day and it was not uncommon to hear bar patrons discuss the makeup of the beer the beer they were drinking. This boom period always seemed destined for failure, or at least a retraction as many markets seemed to have more craft breweries than they could support.

Related: Fast-food chain closes more stores after Chapter 11 bankruptcy

The pandemic, however, hastened that downfall. Many of these local and regional craft breweries counted on in-person sales to drive their business. 

And while many had local and regional distribution, selling through a third party comes with much lower margins. Direct sales drove their business and the pandemic forced many breweries to shut down their taprooms during the period where social distancing rules were in effect.

During those months the breweries still had rent and employees to pay while little money was coming in. That led to a number of popular beermakers including San Francisco's nationally-known Anchor Brewing as well as many regional favorites including Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks, and Cleveland’s Terrestrial Brewing filing bankruptcy.

Some of these brands hope to survive, but others, including Anchor Brewing, fell into Chapter 7 liquidation. Now, another domino has fallen as a popular regional brewery has filed for Chapter 11 bankruptcy protection.

Overall beer sales have fallen.

Image source: Shutterstock

Covid is not the only reason for brewery bankruptcies

While covid deserves some of the blame for brewery failures, it's not the only reason why so many have filed for bankruptcy protection. Overall beer sales have fallen driven by younger people embracing non-alcoholic cocktails, and the rise in popularity of non-beer alcoholic offerings,

Beer sales have fallen to their lowest levels since 1999 and some industry analysts

"Sales declined by more than 5% in the first nine months of the year, dragged down not only by the backlash and boycotts against Anheuser-Busch-owned Bud Light but the changing habits of younger drinkers," according to data from Beer Marketer’s Insights published by the New York Post.

Bud Light parent Anheuser Busch InBev (BUD) faced massive boycotts after it partnered with transgender social media influencer Dylan Mulvaney. It was a very small partnership but it led to a right-wing backlash spurred on by Kid Rock, who posted a video on social media where he chastised the company before shooting up cases of Bud Light with an automatic weapon.

Another brewery files Chapter 11 bankruptcy

Gizmo Brew Works, which does business under the name Roth Brewing Company LLC, filed for Chapter 11 bankruptcy protection on March 8. In its filing, the company checked the box that indicates that its debts are less than $7.5 million and it chooses to proceed under Subchapter V of Chapter 11. 

"Both small business and subchapter V cases are treated differently than a traditional chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed," explained. 

Roth Brewing/Gizmo Brew Works shared that it has 50-99 creditors and assets $100,000 and $500,000. The filing noted that the company does expect to have funds available for unsecured creditors. 

The popular brewery operates three taprooms and sells its beer to go at those locations.

"Join us at Gizmo Brew Works Craft Brewery and Taprooms located in Raleigh, Durham, and Chapel Hill, North Carolina. Find us for entertainment, live music, food trucks, beer specials, and most importantly, great-tasting craft beer by Gizmo Brew Works," the company shared on its website.

The company estimates that it has between $1 and $10 million in liabilities (a broad range as the bankruptcy form does not provide a space to be more specific).

Gizmo Brew Works/Roth Brewing did not share a reorganization or funding plan in its bankruptcy filing. An email request for comment sent through the company's contact page was not immediately returned.


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Revving up tourism: Formula One and other big events look set to drive growth in the hospitality industry

With big events drawing a growing share of of tourism dollars, F1 offers a potential glimpse of the travel industry’s future.




Sergio Perez of Oracle Red Bull Racing, right, and Charles Leclerc of the Scuderia Ferrari team compete in the Las Vegas Grand Prix on Nov. 19, 2023. Tayfun Coskun/Anadolu via Getty Images

In late 2023, I embarked on my first Formula One race experience, attending the first-ever Las Vegas Grand Prix. I had never been to an F1 race; my interest was sparked during the pandemic, largely through the Netflix series “Formula 1: Drive to Survive.”

But I wasn’t just attending as a fan. As the inaugural chair of the University of Florida’s department of tourism, hospitality and event management, I saw this as an opportunity. Big events and festivals represent a growing share of the tourism market – as an educator, I want to prepare future leaders to manage them.

And what better place to learn how to do that than in the stands of the Las Vegas Grand Prix?

A smiling professor is illuminated by bright lights in a nighttime photo taken at a Formula 1 event in Nevada.
The author at the Las Vegas Grand Prix. Katherine Fu

The future of tourism is in events and experiences

Tourism is fun, but it’s also big business: In the U.S. alone, it’s a US$2.6 trillion industry employing 15 million people. And with travelers increasingly planning their trips around events rather than places, both industry leaders and academics are paying attention.

Event tourism is also key to many cities’ economic development strategies – think Chicago and its annual Lollapalooza music festival, which has been hosted in Grant Park since 2005. In 2023, Lollapalooza generated an estimated $422 million for the local economy and drew record-breaking crowds to the city’s hotels.

That’s why when Formula One announced it would be making a 10-year commitment to host races in Las Vegas, the region’s tourism agency was eager to spread the news. The 2023 grand prix eventually generated $100 million in tax revenue, the head of that agency later announced.

Why Formula One?

Formula One offers a prime example of the economic importance of event tourism. In 2022, Formula One generated about $2.6 billion in total revenues, according to the latest full-year data from its parent company. That’s up 20% from 2021 and 27% from 2019, the last pre-COVID year. A record 5.7 million fans attended Formula One races in 2022, up 36% from 2019.

This surge in interest can be attributed to expanded broadcasting rights, sponsorship deals and a growing global fan base. And, of course, the in-person events make a lot of money – the cheapest tickets to the Las Vegas Grand Prix were $500.

Two brightly colored race cars are seen speeding down a track in a blur.
Turn 1 at the first Las Vegas Grand Prix. Rachel Fu, CC BY

That’s why I think of Formula One as more than just a pastime: It’s emblematic of a major shift in the tourism industry that offers substantial job opportunities. And it takes more than drivers and pit crews to make Formula One run – it takes a diverse range of professionals in fields such as event management, marketing, engineering and beyond.

This rapid industry growth indicates an opportune moment for universities to adapt their hospitality and business curricula and prepare students for careers in this profitable field.

How hospitality and business programs should prepare students

To align with the evolving landscape of mega-events like Formula One races, hospitality schools should, I believe, integrate specialized training in event management, luxury hospitality and international business. Courses focusing on large-scale event planning, VIP client management and cross-cultural communication are essential.

Another area for curriculum enhancement is sustainability and innovation in hospitality. Formula One, like many other companies, has increased its emphasis on environmental responsibility in recent years. While some critics have been skeptical of this push, I think it makes sense. After all, the event tourism industry both contributes to climate change and is threatened by it. So, programs may consider incorporating courses in sustainable event management, eco-friendly hospitality practices and innovations in sustainable event and tourism.

Additionally, business programs may consider emphasizing strategic marketing, brand management and digital media strategies for F1 and for the larger event-tourism space. As both continue to evolve, understanding how to leverage digital platforms, engage global audiences and create compelling brand narratives becomes increasingly important.

Beyond hospitality and business, other disciplines such as material sciences, engineering and data analytics can also integrate F1 into their curricula. Given the younger generation’s growing interest in motor sports, embedding F1 case studies and projects in these programs can enhance student engagement and provide practical applications of theoretical concepts.

Racing into the future: Formula One today and tomorrow

F1 has boosted its outreach to younger audiences in recent years and has also acted to strengthen its presence in the U.S., a market with major potential for the sport. The 2023 Las Vegas race was a strategic move in this direction. These decisions, along with the continued growth of the sport’s fan base and sponsorship deals, underscore F1’s economic significance and future potential.

Looking ahead in 2024, Formula One seems ripe for further expansion. New races, continued advancements in broadcasting technology and evolving sponsorship models are expected to drive revenue growth. And Season 6 of “Drive to Survive” will be released on Feb. 23, 2024. We already know that was effective marketing – after all, it inspired me to check out the Las Vegas Grand Prix.

I’m more sure than ever that big events like this will play a major role in the future of tourism – a message I’ll be imparting to my students. And in my free time, I’m planning to enhance my quality of life in 2024 by synchronizing my vacations with the F1 calendar. After all, nothing says “relaxing getaway” quite like the roar of engines and excitement of the racetrack.

Rachel J.C. Fu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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