Full disclosure: Dammit, Jim, I’m a baseball writer, not an economist. I’m pretty sure I don’t have a working definition of “dividends,” which I’m led to believe are important economic thingamabobs. But I’ll relay this the best I can.
New York Times: Dodgers Sale Riskier Than You Thought
Frank McCourt bought the Los Angeles Dodgers with all sorts of leveraged money. He didn't have $500 million in cash lying around, so he arranged all sorts of financing that convinced Major League Baseball to approve the sale. In retrospect, that ... wasn't the best idea.
So a lot was made of the fact that the new Dodgers owners were buying the team with cash. Sweet, sweet cash. Like, not stacks of bills in a duffel bag, but money that wasn’t leveraged or borrowed against something else. It was a welcome counterpoint to the McCourt purchase.
The New York Times isn’t quite as impressed:
In addition to their own cash, Mr. Walter plans to use money from Guggenheim subsidiaries that are insurance companies — some state-regulated — to pay for a big chunk of his purchase of the Dodgers. Guggenheim controls Guggenheim Life, a life insurer, and Security Benefit, which manages some $30 billion, among others.Using insurance money — which is typically supposed to be invested in simple, safe assets — to buy a baseball team, the ultimate toy for the ultrarich, seems like a lawsuit waiting to happen.
If I had to pick an investment, and I wanted to pick something with an almost infallible history of increasing in value, I’d pick a baseball franchise. So maybe the point is overstated, but, again, I’m a financial moron. The article sure makes it seem like this is questionable, if not shady.
The transaction seems even more questionable when considering Mr. Walter’s own words to The New York Times two weeks ago: “I don’t want to realize a return on investment on buying the Dodgers. I want to have a multigenerational relationship that changes my life, Magic’s life, Magic’s grandchildren’s lives and all of our lives.“Yeah, probably not the best quote if you’re using the money of people who are absolutely expecting a return on their investment. There’s a chance that none of this will change anything, and that Magic Johnson and Stan Kasten will shake babies and kiss hands at Dodger Stadium for the next couple of decades. But if you trust the Gray Lady, there could be complications.
See More:
