The Capitalist Investor - Episode 115

We’re here to take everything that is happening all around the world every day and discuss and analyze how it’s affecting the economy, the market, different sectors, and your money. Is this not why you’re here? Politics is all around us and it’s part of what we do everyday when we make financial decisions. This week, Mark, Derek, and Luke critically analyze and entertain as they sit down and talk about the evolution and effectiveness of Super Bowl commercials, the Heritage Foundation’s freedom index rating, and all the complexities that come with IRS refund checks. Episode 115 of “The Capitalist Investor” will leave you thinking about the last time you saw an effective Super Bowl commercial, why people are so attracted to anecdotal messages, and where the money in your IRS refund check really comes from.

Outline of this Episode:

  • [4:15] Super Bowl commercials over the years
  • [13:05] The political rhetoric in the halftime show
  • [19:40] An index that measures how free we are
  • [26:30] What to do with an IRS refund check

The most expensive 30 seconds are $7 million

In between 2017 and 2021 Super Bowl ad times for a 30-second commercial were sitting at $5 million. They didn’t increase in a four-year time frame. But suddenly in 2022, the prices jumped to $7 million –– over a 30 percent increase in cost. $7 million for 30 seconds of time seems like a steep price to pay, not to mention paying $14 million for a whole minute.

But the reality is, the companies that have large amounts of cash –– those large cap companies like we see in the S&P 500 –– have that money to spend especially if that is their most feasible way to guarantee consumers’ time and attention. But why the sudden change in price after such a stagnant period of time?

The answer can be summed up by a few elements. There’s no doubt that inflation was a catalyst for increased ad costs. Everything we pay for in our daily lives –– gas, groceries, and goods –– have all gotten more expensive. It’s practical that inflation trickled itself into the ad space as well.

It’s possible that companies like Pepsi, Coinbase and other crypto companies were able to overtake the Super Bowl commercial space because they had the means to spend and were willing to pay more for the marketing. It’s also possible that these companies relied on one of the largest spaces to attract more people to their businesses. It’s a calculated risk to spend all that money on a 30 second advertisement but if it means more exposure and customers, then it’s a qualified risk.

20 percent of Super Bowl viewers visited Coinbase’s website after scanning the QR code that danced on their television screens –– that was about 20 million people. 10 percent of those people actually signed up for Coinbase. 30 seconds of a dancing QR code, flashing in different colors may not seem like the most creative idea for the ad industry, but it was interactive and personalized for the current world we are living in today –– the one that has become more technologically advanced. But what does that mean for the future?

These days, people are leaning away from cable TV and are signing up for all the streaming services. We’re surprised we haven’t gotten to that point where cable commercials fully personalize and optimize for the individual viewer. With how quick data efficiency and technology is transforming, will commercials be able to keep up and advance with the desire for personalization? How will cable be able to evolve for the type of personalization that consumers want these days?

The Heritage Freedom Index makes us ask: how free are we?

The Heritage Foundation’s Index of Economic Freedom determined that the U.S. economy is at an all-time low in terms of how free the free markets are and how lucrative the economy is performing.

The index was launched in 1995 and evaluates different countries based on their laws, the government’s size, regulations, and how open the free markets are; it also assesses property rights, government integrity and tax burdens.

Under Biden’s administration, America’s score fell to a record-low at 72.1, putting it in its lowest ranking it has ever earned globally; in 2021 it was ranked 20th, we now stand at 25th.

Oftentimes, people say that our economic performance and what’s happening in our economy isn’t political or has nothing to do with whoever is in charge of our country. But we can’t wrap our minds around how it’s not political.

Our job is to take everything that is happening all over our country, in our government, and around the world and analyze how it’s all affecting the economy. Everyone is going to have a political opinion, and ours is merely based on how politics can hurt or help the economy, the market, and your money. Politics is all around us –– it’s an essential element to the market’s performance.

Although our economy is open again, it makes sense that our Economic Freedom Index score is the lowest it’s ever been. The last two years weren’t overfilling with “free market freedom.” We’re currently in one of the most volatile times, experiencing a decades high amount of inflation and amid it all, recovering from a major supply-chain disaster. Taxes will continue to rise as the government expands and more government regulations come to be –– it’s a recipe for a defeated economic score.

Economics lesson #1 is that every single economic policy affects everybody –– the winners, the losers –– over all periods of time. Each policy inserts itself in the most tangible position, until it eventually touches and has its grip on every component.

We have to clear up the misconceptions about IRS refund checks

If you’re looking for answers on ways to spend your refund check from the IRS, it’s important to understand why you’re getting a refund check in the first place.

People often believe refund checks are free money from the government, as if the government is paying you. Erase that idea because it is a wide misconception.

Refund checks are your money that you overpaid the government with. It’s the government’s way of paying you back after you settled your taxes with the IRS. They shouldn’t be perceived as random checks or a bonus venture; you have to view them as your own money.

If you received a refund check from the IRS, you didn’t do anything wrong or make a mistake anywhere –– we only want you to see your money as your money. And we’re here to help explore your options on how you want to spend your money, like usual.

If you plan to spend your refund, one option is to max out on your Roth IRA, assuming your income is in those perimeters. Another option is to use that money and invest it in an ETF like SPY –– there, it’s diversified and assuming you’re a long-term investor with years before retirement, you can set it and let it go.

Another feasible method of spending your IRS refund is to pay off your debt. But before you do so, make sure to calculate the spread in interest rates. Using your refund to prepay your mortgage may not be the best decision if you can expect to earn more in the stock market. When you can earn more than money is costing you, then let it ride. But if you’re earning less than what the debt is costing you, pay off that debt.

What you shouldn’t do with your refund check: put it down in your Robinhood account and buy fractional shares of stocks that you think are going to be the next big thing.

Currently, the market is highly a stock pickers’ market; over the last few years the people who are putting in the research and studying valuations are not having much of an advantage. Those who are currently winning are the people who are picking stocks casually without regard to their valuation. But that can all change this year –– the people who are putting in the research are going to start winning again.

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Keep Listening to The Capitalist Investor:
Episode 15:
Spending Strategies in a Bear Market, Ep #15
Episode 31:
Handicapping the 2020 Election, Ep #31
Episode 47:
11 Investments in Your Home That Pay Off, Ep #47
Episode 63:
Jeff Bezos and Amazon: Past, Present, and Future Ep #63
Episode 79:
7 Ways Biden Plans to Tax American Families (Part II), Ep #79
Episode 95:
5 Beaten Down Stocks to Buy on the Dip, Ep #95
Episode 111:
Special Episode – Talking Energy with Daniel Turner, Ep. #111
Episode 127:
Retail Earnings Tank & What The Heck is Greenflation? Ep. #127