Comments on: The Dodgers sale is being financed by people’s insurance money. Is this a problem?

By: jkaflagg

jkaflagg — Thu, 12 Apr 2012 01:10:07 +0000

Good stuff…..as you point out, a reasonable investment for an insurance company; I guess it’s just a little strange to hear Walter talk about it as though the investment was made for his granddaughter to enjoy in the future, as opposed to a great investment for the company…..

The other great point was the consistent increase of value in sports franchises, even before TV rights exploded in the last few years……Where were all the rich guys back in 2004, when everyone was swimming in money from the Bush tax cuts ? How did the team virtually get forced onto a guy with no cash ? Still don’t understand that…..

By: Jeff M.

Jeff M. — Wed, 11 Apr 2012 00:52:25 +0000

Nope. You really don’t. That was 50 years ago, man. They’ve been the LA Dodgers for longer than they were ever the Brooklyn Dodgers. The dream is over. Let it go.

By: buffalomafia

buffalomafia — Tue, 10 Apr 2012 20:00:02 +0000

Do I hear Brooklyn Dodgers?

By: cup0pizza

cup0pizza — Tue, 10 Apr 2012 18:18:16 +0000

Worst. Nightmare. Ever. Thanks, Bud Selig. Destroyed a flagship MLB franchise.

By: stex52

stex52 — Tue, 10 Apr 2012 17:43:20 +0000

I commented last week (two weeks?) that the amount seemed to be a pretty serious overpay vs. the Forbes estimate of a value of 1.4 B$. At the time we were then directed to an informal analysis that said that the cash flow from the broadcast contract would be so spectacularly ginormous (just had to use that word) that the Dodgers would be swimming in oceans of money and could buy any player in the MLB if they wanted to.

I am not really interested enough to do an in-depth analysis, but if you assume Forbes has any idea of what they are talking about then it will take a while for the capital value to catch up. But that may not matter if the huge cash flows are really there. The insurance business lives on liquidity and looks for long term investment. It would seem to me a large-market baseball team is exactly what one consider as prudent investment if those are the criteria. If they structure the investment (debt vs. equity) so a steady money transfusion comes out, then they probably have what they were looking for.

By: lanflfan

lanflfan — Tue, 10 Apr 2012 17:21:23 +0000

I’m not sure I understand why this has any relevance. Other companies own sports teams, and presumably they also have a duty to their stockholders. While the rules governing insurance investments may be different, stockholders can be a demanding group. Guggenheim appears to have solid financial and baseball minds in the Partnership, far more than I can say of the soon to be former Dodger owner, or current Mets ownership (and also hopefully soon to be former).

Would Mr. Sorkin prefer an owner who treats his team like a personal ATM, then declares bankruptcy and cashes in big time? Or perhaps ownership that invested with a scumbag who defrauded people and left them penniless in illegal Ponzi schemes? Both cases are 20/20 hindsight, but both teams need to move on for the good of MLB and their respective fans. Clean up your mess $elig.

By: sportsdrenched.com

sportsdrenched.com — Tue, 10 Apr 2012 16:53:31 +0000

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.

Craig eventually got to this in his comments, but upon reading this the first time my first thought was “What is more safe than a baseball team right now?”

I also like this little snub:

Guggenheim subsidiaries that are insurance companies — some state-regulated

Like getting through several states regulatory agencies is easier than getting through ONE federal one.

This just screams of “no one has written about this angle yet, so I will even though it doesn’t really exist.”

By: dowhatifeellike

dowhatifeellike — Tue, 10 Apr 2012 16:37:43 +0000

Buffett made his billions by investing the float from his insurance operations. As long as it’s done responsibly, I don’t see a problem.

By: badmamainphilliesjamas

badmamainphilliesjamas — Tue, 10 Apr 2012 16:31:09 +0000

This makes for a great headline, but is probably much ado about nothing.

It’s unclear from the article just how much of the revenue from the insurance business is even being used to fund the purchase. The insurance companies must meet the reserve requirements set by state regulators. Beyond that, companies routinely finance large-scale real estate developments, arguably more speculative than major sports franchises.

By: yankeesfanlen

yankeesfanlen — Tue, 10 Apr 2012 16:30:51 +0000

Varies by state standards but reserves for policyholders must be done by actuarial formulas. They’re risking P&L part of the premiums and the rest is just the same as any other investment. No harm done- or allowed to be- here.

By: Marty

Marty — Tue, 10 Apr 2012 16:27:12 +0000

While I appreciate that there is a bubble element to [home] values in any given short period of time, [real estate has] proven to be a safer investment than just about anything over the past, well, forever. It’s like a license to print money.

There, corrected that for you. Feel better about the veracity of that statement?

By: Gordon

Gordon — Tue, 10 Apr 2012 16:25:14 +0000

Is the team being bought by Mark Walter or by Guggenheim Partners? If its the firm, then I could see how this would be allowed. If it’s Walter, then it sounds like commingling personal & company assets, which might arise in a lawsuit.

By: b7p19

b7p19 — Tue, 10 Apr 2012 16:13:18 +0000

I don’t care if it’s being financed by the Devil himself! Just finish this damn sale!