Magnificent 7 earnings week, election betting, and the latest from Robinhood

Welcome to Cautious Optimism, a newsletter on tech, business, and power.

• 📈 Trending Up: Biden’s stock market … Remote + Carta … getting caught … protectionism … Filigran … Read AI … OSAID … the EU? …

  • Good luck to the TechCrunch crew at Disrupt this week. May the event go smoothly, no one fall ill, and all speakers arrive on time.

• 📉 Trending Down: China’s industrial profits … oil prices … sanctions (BBG) …

• Economic Calendar: It’s an insanely busy week for earnings, including:

  • Monday: ON Semiconductor, F5.

  • Tuesday: Alphabet, Visa, AMD, Stryker, PayPal, Spotify, EA, Check Point Software, Reddit, SoFi, Crocs (really!), Udemy, Shutterstock, NerdWallet, Talkspace.

  • Wednesday: Microsoft, Meta, ADP, Starbucks, DoorDash, Coinbase, Carvana, Ebay, CDW, Robinhood, GoDaddy, United Microelectronics Corporation, Twilio, Roku, Procore, Informatica, Confluent, Etsy, Tenable, Blackbaud, Riot Platforms, Compass, Extreme Networks, Lemonade, Fiverr.

  • Thursday: Apple, Amazon, Mastercard, Uber, Comcast, Intel, Atlassian, Li Auto, Juniper Networks, VinFast Auto, Peloton, SolarWinds, Mobileye.

  • Friday: Berkshire Hathaway, fuboTV.

  • Economic data to watch: US consumer confidence, job openings on Tuesday, GDP Wednesday, PCE and initial jobless claims Thursday, and employment (jobs) data on Friday.

• IPO Watch: After WeRide started to trade, we’re waiting for Pony.AI’s IPO to move forward. At the same time, Horizon Robotics’ listing in Hong Kong seemed to go well.

All of life is a wager

This is the busiest week for Q3 earnings here in the States, with a sizable fraction of the Magnificent 7 reporting and inflation and jobs data on deck to boot. If you are an investor, you can take all sorts of positions on those events.

Wagering on earnings is easy enough. If you think that a company is going to outperform expectations and trade higher, you can purchase shares in advance of its earnings report. Or, if you think that a company is about to whiff, you can short its equity.

You can also take out positions on economic data. Not merely by buying or shorting assets that you expect to reprice in the wake of say, a strong or weak jobs report later this week.

Or, you could bet directly on the jobs data over on PolyMarket, where I could — as of the time of writing — take out a bet of $1,000 that the United States will report between 150,000 and 200,000 net new jobs in its Friday report, earning me a potential $355 if I am reading the payout correctly.

Surprised that people needed another way to bet on economic data? Don’t be. Betting is in vogue today. That fact should evoke a wave of deja vu. After all, didn’t we just see a speculative wave in 2021 and 2022 when crypto went vertical, and everyone wanted to invest in companies that facilitated shoe reselling?

Yes, but today is different. Digital sports betting was turned back to the states in 2018, and today more than half of states in the nation allow for online sports wagers.

The sums that legal online sports betting has put into play are huge. Here’s how Ohio discussed its first full year of online sports gambling (2023), for example:

Ohio sports betting handle came in at $829.9 million in December. The numbers make December the third-best month in the short history of Ohio sports betting, behind only November’s $864.2 million and the 10-figure launch in January 2023.

The release of December’s numbers marks Ohio’s first full year with legal sports betting. Over the course of 2023, Ohio bettors wagered more than $7.6 billion between the state’s retail and online options. As a result, the state collected $133.1 million in new tax revenue.

Seeing your local population lose billions to collect $133 million in tax revenue seems inefficient, but what do I know.

Ohio is not an outlier. Online sports betting revenue rose from under $1 billion in 2018 to nearly $5 billion in 2021 to over $11 billion last year. A separate data source indicates that it took nearly $120 billion worth (+27.5% YoY) of bets to kick off that much revenue, for reference.

Americans like to wager. Online sports betting data — and anecdata from my friend group, frankly — make that fact plain. But what happens when we extend the surface area available for betting? Say, on elections?

Kalshi, a PolyMarket competitor, beat the government earlier this year, gaining the ability to offer Americans bets on their own elections. So far, its Trump-Harris contract has seen more than $84 million worth of total bets. PolyMarket’s same market has seen billions.

And today, Robinhood got into the game.

I am in favor of more price discovery. I prefer a more liquid market over a less liquid market. And, once certain betting markets reach larger scale, I can imagine that they will — in time — generate useful data.

Having been raised amongst a sexist, moralizing crew, I am very loathe to say ‘Thou Shalt Not” do any particular thing, so long as it only hurts or helps yourself. But I do wonder what we’re uncorking by allowing more systematic betting on elections.

More accessible sports betting is not helping regular folk’s finances, and when you allow for more betting on certain events, the weight of wagers can impact the underlying game or event itself. There’s a history of fuckery when it comes to people wanting to see their bets pay off, regardless of what might have happened otherwise.

Introducing that into elections feels like a gamble.

That said, we’re doing this.

Amidst the rest of the noise that the next few weeks will bring, and there is a lot of it, we’re running an interesting national experiment on betting on our votes. More than hoping that our custom will help one candidate more than another. In fact, you could argue that election betting is really just a way to allow people to hedge. To say, I hope Candidate X wins, but if they lose, I’ll win Y dollars that I’ll bet on Candidate Z. Heads your candidate wins and you lose some money, tails your candidate loses and you get free beer money.

Election betting is still new enough that small bets can move markets, so I would cautious us against reading too much into the data thus far. Unless you think that pro-Trump market-bending means that Harris contracts are underpriced, then you might want to get out your checkbook.

Just don’t try to fix the outcome, yeah?