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Barron’s takes on gambling - in all forms

edited February 13 in Other Investing
Still wading through this lengthy feature piece. Good timing - the Barron’s cover story coinciding with the 2022 Super Bowl. Sources tell Barron’s that $7.6 Billion will be wagered on the game this year - an increase of 78% over last year. The increase is largely a result of the spread of online sports betting (and every other form of wagering) across the country as more and more states legalize it. Biggest players are DraftKings (DKNG), MGM Resorts (MGM), Flutter’s FanDuel (PDYPY) and Caesars Entertainment (CZR). Penn Gaming and Ballys are lesser players.

The article is a curious mix of statistics and psychology. It delves into the mind of gamblers as explained by psychiatrists. It cites a an addiction counselor telling of people in the U.S. betting on a tennis match somewhere in Eastern Europe in the wee-morning hours here - not because they cared about tennis, but because they needed the dopamine “fix” gained from having money on the line. But the article strongly makes a case that Americans are addicted to gambling in many different forms, citing trading in crypto, fungible tokens and stocks as other parts of the overall equation. And it hits hard at the cost to society.

There’s a lot said about Robinhood and how it has used targeted “cues” to spark risk taking by customers. Some of this has been toned down in the face of public criticism. The SEC is expected soon to unveil regulations to better prevent abuse - especially of inexperienced traders. One thing mentioned was the “herd mentality” of investors. So, here’s a parting quotation from the article on that point. Food for thought:

“About 35% of the stock bought by Robinhood users are concentrated in 10 companies, compared with 24% by retail investors overall, according to a forthcoming study in the Journal of Finance. Investors tend to congregate in stock “herding events” ….. The results don't look encouraging. Robinhood traders lose an average of 4.3% during each herding episode. After adjusting for market returns, losses hit 5.5%. Robinhood declined to comment to Barron's …”

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