In This Era of "Casino Capitalism," Our "Casino" Stock Is Already Winning

I’ve been writing about stocks, analyzing companies, covering the financial markets and the global economy and helping investors for 40 years.

And I spent the first 20 years of that span as a nationally known, award-winning business reporter — meaning I got to work through the halcyon days of financial journalism. In other words, I was perfecting my craft as Warren Buffett, Bill Gates, Jack Welch and Gordon Gekko were achieving “celebrity” status. As the “Go-Go 80s” really got rolling. As mutual funds helped investing shift from Wall Street to Main Street.

I also wrote about leveraged buyouts, the junk-bond boom, America’s shift from a manufacturing superpower to being a “marketer of hamburger and financial services to the world” and the Crash of ’87.

In short, I was there for the birth of “Casino Capitalism.”

And that’s one birthday that’s not worth celebrating. Not if you’re a retail investor. Not if you’re susceptible to stock trading, speculative options and fads.

Of course, if you’re a Wealth Builder — like us — you can take the “other side” of those terrible trades.

And you can win — with our Stock Picker’s Corner (SPC) strategies.

And with stocks like CBOE Global Markets Inc. $CBOE ( ▲ 0.43% ).

And you know what I’ve been telling you: If Wall Street is playing “Casino Capitalism,” you can win by buying the casino.

PLACE YOUR BETS …

The 1980s were the starting line of the “Era of Speculative Excess.” If you want to see what that was like – you want to immerse yourself in it — go back and watch Wall Street with Charlie Sheen as wannabe Bud Fox and Michael Douglas as Gordon “Greed is Good” Gekko.

Everyone remembers that line … and this movie scene.

This greed-infused, anything-goes mindset launched America’s “Casino Capitalism” economy.

Although the concept was alluded to by the great John Maynard Keynes way back in 1936, it didn’t take hold until British Economist Susan Thomas wrote about it in her 1986 book Casino Capitalism.

It’s a pejorative term, one that exemplifies the run-and-gun, take-no-prisoners approach to investing and trading. It prioritizes short-term gains over long-term vision, stability and wealth.

And ethics be damned.

For the Big Money speculators, the end game is all about sticking the Main Street retail investor with the bad end of the trade.

That’s where us Wealth Builders outsmart them all: We refuse to play their game … and we play ours – by owning the casino itself.

And that casino is CBOE, an operator of financial exchanges, which includes the Chicago Board Options Exchange. It provides data analytics, trading tools and the technology for trading options, futures and other financial products. And it’s one of the largest clearinghouses for options trading.

It’s a long-term asset for Wealth Builders. And it’s delivering a short-term bonus.

Let’s talk about both.

And I’ll start by doing a bit of “scene-setting.”

WELCOME TO THE WHIPSAW MARKET

Immerse yourself in what I’m saying here …

U.S. stocks are getting whipsawed. Bitcoin is $20,000 off its peak. U.S. President Donald Trump is dismissing business-owner pleas for “more clarity” on his tariff strategy. The turmoil over the Elon Musk-led Department of Government Efficiency (DOGE) — and Musk himself — is continuing. The recessionary drumbeat is stoking consumer fears as companies cut jobs.

That all leads to the “U-Word” — uncertainty — one of the single-biggest enemies of high stock prices.

Uncertainty breeds worry … worry breeds panic … which eventually turns into fear — all of which ignites volatility.

And one of the few “real” companies that can take everyone else’s panic and into your profits is CBOE Global Markets.

That’s been great for CBOE here in the near-term: The stock had risen in all 10 of the biggest down days for the Standard & Poor’s 500 since last July, Barron’s reported last week.

The CBOE story gets even better: You see, for patient investors — and especially Wealth Builders like us — CBOE is a rare “Two-Fer” stock.

There’s that short-term windfall: In the face of all that uncertainty-fueled volatility, CBOE shares are up about 11.54% so far this year and nearly 20.97% over the last 12 months. The Standard & Poor’s 500 is off 2% this year and the Nasdaq Composite is down 7%.

But, with stocks, it’s the “what comes next” that matters — especially in the long haul.

And that long-term outlook is equally promising — thanks to the “next chapter” in America’s Casino Capitalism storyline.

And that “next chapter” will be fueled by two things:

• A dangerous new investor sentiment — heck, an actual “infection” — that I’ve nicknamed the “DraftKings Mindset.”

• And an explosion in the number, type and easy availability of speculative stock options.

Let’s talk about this infection …

HOT — AND GETTING HOTTER

With nearly 1.2 billion contracts changing hands, options-trading hit a new monthly record in January — meaning we’re off to the races for 2025 to set a record for the sixth year in a row, CBOE says.

In fact, as many as 14 billion contracts could trade this year — up from nearly 12.3 billion in 2024.

"We saw record options activity in January as retail and institutional investors adjusted positions and managed volatility into the new presidential regime and dealt with concerns over AI dominance related to DeepSeek," Henry Schwartz, CBOE’s vice president of market intelligence, told reporters.

Indeed, options trading has more than doubled since 2019 – thanks to investment pros stepping up their game and retail investors succumbing to that “DraftKings Mindset.”

Besides those new players, new “products” like options ETFs have fueled trading demand, Danny Kirsch, head of options trading at Piper Sandler, told MarketWatch. 

"Bottom line: There's more potential volatility, more headline risk and more participants entering the market," Kirsch told the financial news site.

Main Street investors — the proverbial retail crowd — have been massive catalyzers.

They’re bigger players … and bigger losers.

The Intercontinental Exchange $ICE ( ▲ 0.15% )  reported a 26% year-over-year surge in average daily options volume in 2023 — thanks to the easy access to trading platforms and zero-commission trading. Retail investors accounted for 45% of options trading volume — and researchers say regular investors are increasingly trading speculative options, as opposed to speculative hedging.

Not that those folks are doing all that well: An MIT Sloan study found that retail investors lost more than $2 billion in options premiums from 2019 to 2021 — the result of inexperience, lousy timing and high-risk (or no real) strategies.

WHY CBOE HAS LEGS …

CBOE really is that casino.

Through the fees it collects, it effectively takes a slice of every wager.

And if trading will keep growing, those fees will grow, too.

Over the next five years, the securities-exchanges market — so companies like ICE, Nasdaq Inc. $NDAQ ( ▲ 0.83% ), CME Group Inc. $CME ( ▲ 1.15% )   and CBOE — are projected to grow at a compound-annual growth rate (CAGR) of 12.1%, reaching $49.6 billion, says researcher Technavio.

During that same period, CBOE is projected to grow earnings at an even faster CAGR of 13.4%. At that rate, CBOE’s earnings would double in about 5.4 years. And since stock prices tend to follow earnings, CBOE could be a double-your-money stock play in a fairly short time frame.

Other catalysts — we call them “Triggers” here at SPC — could accelerate that. Those catalysts include:

• Expanding its reach globally, across asset classes and technologies.

• Looking to benefit from round-the-clock trading.

• Has boosted its dividend for 13 straight years — meaning its $2.52-a-share payout (1.18%) is likely to grow.

• Will keep buying back shares — including the $680 million left under a current repurchase program.

• And could benefit from consolidation — either by purchasing a rival, or as a takeover play itself. (I actually hope the latter doesn’t come true: This is a stock we want to accumulate for years.)

Be a Wealth Builder.

And CBOE is a stock that can get you started.

WEALTH BUILDERS (US), WEALTH KILLERS (THEM)

There are really three parts to the SPC belief system.

Part One: As an investor, you’re either a Wealth Builder, or a Wealth Killer — and there’s no in-between.

Wealth Builders invest. Wealth Killers speculate.

Wealth Builders buy stocks and other assets. Wealth Killers trade options — and “take flyers” on penny stocks and other risky assets.

Wealth Builders play the long game — and understand that, over that long haul, stocks make higher highs. Wealth Killers worry about today — and fear tomorrow.

Wealth Builders are independent thinkers: They have a plan — and they have the courage to stick with it. Wealth Killers are pack animals: They feel better losing as a group than they do winning independently.

Wealth Builders employ logic, analysis and a personal vision — and resist emotional, knee-jerk moves. Wealth Killers succumb to emotion: They chase stocks, buy high and sell low — and give in to “FOMO” … “Fear Of Missing Out.”

Part Two: There’s another piece of the strategy — an important one — where we believe that: “If you find the best storylines, you’ll find the best stocks.”

As part of our “long-game” approach, we identify powerful narratives — storylines that offer substantive growth and that’ll last for years — and then find the companies (and stocks) that are best-poised to benefit.

That creates wealth.

Part Three: As Wealth Builders, we “Accumulate” our way to victory. After we find storylines we like — and identify the companies and assets best-positioned to win — we take a unique approach to wealth creation. Knowing that we’re playing the long game, we establish a “foundational” (starter) position — and then add to that stake on pullbacks or as we get more cash. Since we’re looking to hold most of our investments for three, five, seven years or longer, this “Accumulate” strategy makes for the best fit.

Here's another reason this gives you an advantage. Investors have a “binary” view of the market. Stocks are either a “Buy” … or a “Sell” — with nothing in between. That’s a view that’s driven by emotion. It’s wrongheaded. And it usually means “The Crowd” is out of step — buying high and selling low, instead of the other (correct) way around.

The Accumulate strategy puts you on an independent path..

There’s your blueprint for navigating this stock-market mess:

• Be a Wealth Builder, not a Wealth Killer: Invest, don’t trade. Look long-term.

• Find the Best Storylines – and the Best Stocks: We do that here for you.

• While Others Panic, We “Accumulate:” Be an independent thinker, and use pullbacks, corrections or crashes to buy stocks you like for the long haul, or to add to positions you already hold.

• And ID “Special Situations:” Market pullbacks hand these to you “on sale.”

By joining us here at Stock Picker’s Corner, you’ve already one very smart choice. And because you did that, we’ll continue to follow CBOE Global Markets for you …

See you next time;