Category: Finance

Article about how a third-party ticket vending company fails to honour its agreements to sell tickets to a World Cup game to its customers: (StubHub cancels thousands of World Cup tickets, leaving fans furious and heartbroken)

He paid $11,380 Cdn months ago for a pair of premium seats to watch Canada play Qatar in a World Cup match in Vancouver last Thursday. They were to be a Christmas gift for family members.

…

“They said, ‘Everything’s fine. Your tickets are 100 per cent guaranteed. We will get back to you in two to three hours.’ That never happened.”

StubHub cancelled his order while he was stuck outside the stadium. There was no explanation, no replacement and no refund, he said.

Let’s assume the article at face value and assume its representations are true.

From a financial perspective it sounds like the business model is StubHub buying put options on tickets for free, with the full benefit of capital usage of exercising said option for free.

For example, in the above transaction, StubHub received $11,380 for 2 tickets “months ago”. As they were a Christmas Gift, assume this was done in December 2025.

StubHub thus received an interest-free loan for at least six months, coupled with a put option for the tickets – essentially they had a six month window of opportunity to purchase “premium seat” tickets for less than $11,380 and pocket the differential.

If they could not do this, then they can just say “Oops” and cancel the transaction the day of the event. Presumably this person will receive the $11,380 they originally paid.

So StubHub, financially, is realizing a value of the six month put option they purchased for free on the ticket transaction. What is the implied volatility of a world cup ticket? An interesting modelling exercise, no doubt.

Doing a paper napkin calculation, a put option expiring six months out with an implied volatility of 40%, roughly yields 10.4% of strike price.

Say StubHub’s cost of capital is 8% – when adding the option value and the free usage of capital for half a year means they netted about $1,640 for the pair of tickets without any risk whatsoever. If the tickets on the open market went “into the money”, the realized profits would be locked in, instead of theoretical. Not a bad business model, noting the other winner here is going to be Visa or Mastercard for the interchange fees.

In a world where the headline article is the USA publishing an annualized CPI for May of +4.2%, you would think that precious metals would be the recipient of capital inflows – supposedly a great hedge on inflation – as governments run higher and higher deficits and the supply of money expands to infinity, precious metals will flourish, correct?

Apparently not:

Gold and silver have been trading down, especially since the precious metals price spike last January. Somebody buying Silver at that $120 spike is sitting just under a 50% loss at present.

What do we make of these conflicting narratives?

Prices are set at the margins. It takes one trade for a price to drop from $100 to $10 – if somebody is willing to sell it at 10 dollars and nobody is willing to buy it between $10.01 to $100.

What triggers the sale? The need for liquidity – converting an asset class into cash, and this need is more than the desire of the purchasing party to pay up for it.

The advantage of owning an ounce of gold or silver is that it sits there. It doesn’t depreciate. It will be there forever, irrespective of whatever happens to the entire monetary system. The disadvantage is that it sits there. It doesn’t earn a yield. To convert this asset into something useful, you need to find somebody willing to take it and give you something in return for it that you want – typically cash. If too many people want cash, you’re less likely to receive more for it.

It is very difficult to predict the eddies and currents of when you will see demand for precious metals or seeing people needing liquidity and selling their gold and silver instead of US Treasuries or Bitcoin or shares of NVidia.

“Sell in May and Go Away” is a popular cliche in the markets – perhaps this year it is especially true. I continue to remain very defensively positioned despite the pain of seeing a USA CPI print of 4.2% and the best low-risk short duration ETF I can find on cash equivalents gives out a net of 2.6%. What will break first, the purchasing power of cash or the stock market?

The bipolar market continues – we have companies like Rocket Lab (RKLB) shooting up into the stars, presumptuously in anticipation of the SpaceX IPO, and companies like Sandisk rising by a factor of 20x over the past year.

Conversely, I am looking at most of the usual suspects in software being down for the day – ADBE, CSU, etc.

The war in the Middle East still continues and a good chunk of the world’s crude supply is still out of circulation. Every day that this continues is another layer of embedded cost in the real economy, which will take months for the ripple effects to show themselves. When the ripple effects show up in financial statements, many reactive algorithms will make adjustments accordingly.

I do note that many “traditional” names are fading away – Nike (NKE), Whirlpool (WHR), and LuluLemon (LULU) are depressed far below their traditional norms – are these brands going to be the Kodaks of this decade, where the foundation of the companies has essentially been hollowed out over time and not maintained? The only difference is that Kodak was a technology adaptation failure, while the three aforementioned companies are marketing brands, where shoes, washing machines and lifestyle clothing are less susceptible to wholesale technology changes rendering companies obsolete.

Conversely, from a broad market perspective, perhaps this is the market’s way of saying that the “death of money” is occurring – and claims on companies that produce goods and services is what is driving demand and not necessarily the quantity of earnings they derive from fulfilling such demand.

Despite having a huge cash fraction in the portfolio, my YTD is still better than the primary indexes. It’s a very odd situation in that I do not feel particularly satisfied with the performance even though objectively things from a risk-adjusted perspective can be considered borderline perfect. It’s difficult looking at these things that are going up 20x in a year like Sandisk and wondering why you don’t have one in your own portfolio. Even if you took a 2% position in the stock at the beginning, if it goes up 20x, it would balloon to 29%.