The Winter Olympics are less than a month away. For most of us, it’s a chance to feel true national pride while cheering our athletes on. For the host country, the Olympic Games are big business.
Having the world descend on your soil tends to generate revenue. Visitors from around the globe pay a hefty sum for tickets, hotel rooms and local sightseeing. Restaurants and bars thrive, tourist attractions make a killing, and the construction companies contracted to build everything from new arenas to ski jumps make a pretty penny.
And you can’t put a price on the publicity generated by hosting the Olympic Games.
For 17 days, the eyes of the world are on one country. It’s a chance for the host nation to showcase the best of itself, to convince tourists from around the globe to come and visit.
Despite all of its appeal, however, hosting an Olympic Games is not a moneymaking venture – at least not for the host nation. The infrastructure required to host an Olympics these days has become too expensive. On average, the host nation ends up spending 180% more than it had budgeted. In 2008, China spent a then-record $40 billion to host the Summer Games.
No amount of tourism can offset such a lavish expense. China’s economy – on the fast track to becoming the world’s largest five years ago – received no tangible boost from hosting the ’08 Games. In the five years prior to hosting, China’s GDP nearly tripled. In the five years since, it has doubled. A doubling GDP is nothing to sneeze at. But the Olympic Games didn’t exactly accelerate China’s growth.
So investors looking to put their money in the next host nation should take caution.
Russia, a fellow “BRIC” nation to China, is this year’s host nation. This is Prime Minister Vladimir Putin’s baby. And the glorification of Putin’s massive ego doesn’t come cheap.
Russia is on pace to shatter China’s Olympic spending record. These Games will cost the host nation an estimated $51 billion – 500% more than the original $10.3 billion price tag. Russia is spending $9 billion alone on a new road that connects host city Sochi’s seaside with its mountain regions. Yikes.
Like many emerging markets these days, Russia is full of enticing investment opportunities. When my colleague Ian Wyatt and I attended the Value Investing Congress in the fall, we heard a fascinating presentation from Harvey Sawikin of Firebird Management plugging a Russian shale oil company called Gazprom Neft (OTC: GZPFY).
Even without the Olympic Games, there’s a lot to like about Russia. GDP has doubled since 1998, making Russia the eighth-largest economy in the world. It also has the second-largest foreign currency reserves after China.
Those are good reasons to invest in Russian companies. Sustained growth is a reason to invest in an emerging market. But don’t expect the Olympics to fuel an overnight economic boom in Russia.
The same goes for Brazil, which has the distinct (and improbable) privilege of hosting this year’s World Cup and the 2016 Summer Olympics. Like Russia, Brazil is growing fast. Its GDP has nearly tripled since 2005.
That kind of growth enabled Brazil to bid on and win both the Olympics and the World Cup. Those events will undoubtedly help showcase Brazil’s rich and burgeoning economy and infrastructure. But considering the price tag of both events, they probably won’t make the emerging market any money.
There are plenty of reasons to invest in both Russia and Brazil. Hosting the Olympic Games isn’t one of them.
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Some smart Americans have begun collecting checks from a little-known government-guaranteed program. It allows them to receive regular rebates for gasoline from the oil industry. (In some cases, people are filling up their tanks at no cost!) These rebates arrive in the form of U.S. government-backed checks. And they are available to any American, regardless of income or employment status. In fact, you can collect a Gas Rebate check of up to $310 as early as January 31st. Click here for all the details.