Market Overview

Is the Struggling Economy Wrecking NASCAR? Stocks To Watch


According to an article on Tuesday from the Weekly Standard's Michael Warren, the National Association for Stock Car Auto Racing (NASCAR) is having a difficult time dealing with the Obama-era economy. Citing a study from pro-market think tank Public Notice and Race Fans 4 Freedom, Warren wrote that "the economic downturn of the last several years has directly affected how NASCAR fans watch and enjoy their sport."

According to Race Fans 4 Freedom's website, the study found that "[a]s the unemployment rate has increased, track attendance has decreased." A second key finding is that NASCAR "[s]ponsorships are down since 2007 as companies cut back on their advertising budgets." The study also found that "[s]tock prices for major track ownerships declined as well, bottoming out in 2009." In addition, "Lower budget teams have disproportionately suffered as sponsors opt to stay with higher profile teams." Lastly, "When inflation and prices rise, putting a race team together gets more expensive."

An infographic from Race Fans 4 Freedom accompanying the study stated, "Let's face it -- times are tough. And you don't have to look past the racetrack to see the impact it's having on fans and drivers alike. Each empty seat is just one more fan who couldn't make it to the race -- not for lack of interest, but because money is tight, jobs are few, and we're all having to cut back." In light of unemployment and a struggling economy, "it is no wonder race fans have been unable to make it to the track."

According to Race Fans 4 Freedom's founder Elizabeth Dyar, "At the end of the day, these numbers really hit NASCAR fans' quality of life." Dyar: "High gas prices, a high unemployment rate and uncertainty over their future has limited the fans' ability to enjoy and participate in one of our country's most popular sports." Per Warren's analysis, "the NASCAR nation is a 'great snapshot' of the country as a whole" -- suggesting that there may be electoral implications of NASCAR fans' struggles in a weak economy. The prospect of intense voter backlash to economic troubles presents an interesting dimension to the connection between finance, politics, and sports that I recently explored.

In light of evidence that suggests that the Obama-era economy is negatively affecting NASCAR, traders may want to check out International Speedway Corporation (NASDAQ: ISCA) and Speedway Motorsports, Inc. (NYSE: TRK). International Speedway Corporation is down 15.8 percent over the past year while currently trading at $24.82 per share. Speedway Motorsports, Inc. is up 8.94 percent over the past year while currently trading at $16.25 per share.

Traders who believe that the economy's negative effect on NASCAR will impact the November presidential election can also check out the predictions market Intrade, where the closing price for Pres. Obama's chance for getting re-elected has slightly declined in May thus far. Obama's current chance of being re-elected is currently at 58.2 percent. Comparatively, Mitt Romney's chance of being elected president in 2012 is currently 38.3 percent.

I have previously discussed that a sport's monetary cost may affect the sport's popularity. In August 2011 I wrote, "Added costs deter potential new players from wanting to play the sport; it also may understandably deter parents from supporting their children in the sport." Whereas different sports carry different price tags because of equipment, time, league fees, tickets, and various other items, it will be interesting to see how sports in the US evolve if the economy remains weak. Per my previous analysis, "a parent may prefer to purchase a $10 soccer ball for his children rather than trying to suit them all up in protective gear [and equipment] costing hundreds of dollars." In this way, parents may encourage their children to play sports like soccer or basketball over other sports like hockey, baseball, lacrosse, or football.

From this perspective, are problems for NASCAR an ominous sign of things to come? Might other professional sports fall prey to a weak US economy? How might this play into American politics going forward? Such thoughts are enough to make one ask: Does a struggling Obama-era economy plus NASCAR, Major League Baseball, and the National Football League equal an increase in popularity for Major League Soccer and the National Basketball Association? Only time will tell.

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