all my friends that are Mets fans are disgusted by it.
Read the article I posted. Read the tweets pjcas posted. There are far higher deferred compensation plans, and far worse contracts, in baseball. Yet Bonilla gets singled out. It's ignorant.
Plenty of athletes go bankrupt after they are done playing their sport. I have no issues. That is what the Mets contracted for. It enabled them to stay within their desired budget, get Mike Hampton, make the World Series with Hampton, and turn the comp pick into David Wright. It enabled Bonilla to get paid beyond his playing years. Both sides got what they wanted.
RE: RE: The Mets could have bought him out for $5.9 mil
but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
all my friends that are Mets fans are disgusted by it.
Read the article I posted. Read the tweets pjcas posted. There are far higher deferred compensation plans, and far worse contracts, in baseball. Yet Bonilla gets singled out. It's ignorant.
Plenty of athletes go bankrupt after they are done playing their sport. I have no issues. That is what the Mets contracted for. It enabled them to stay within their desired budget, get Mike Hampton, make the World Series with Hampton, and turn the comp pick into David Wright. It enabled Bonilla to get paid beyond his playing years. Both sides got what they wanted.
That's the issue. It was a self imposed budget. This wasn't trying to get under the cap like the NFL. And as I stated in my last post, the Wilpons are in worse shape now hence the backlash. If they were making "smart decisions" with their money would they be in the situation they are in? I'm not hear to argue about this. I just dont know why people are defending this franchise. All my Mets fans are so done with this team because of ownership and cannot wait for them to sell (assuming the Wilpons don't hang around in any deal).
RE: RE: RE: The Mets could have bought him out for $5.9 mil
but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
It wasn't a great deal for the Mets - mostly because they crafted it expecting to continue to get 10%+ returns like they were with Madoff, no debating that, it's just not quite the punchline people make it out to be.
RE: RE: RE: The Mets could have bought him out for $5.9 mil
but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
all my friends that are Mets fans are disgusted by it.
Read the article I posted. Read the tweets pjcas posted. There are far higher deferred compensation plans, and far worse contracts, in baseball. Yet Bonilla gets singled out. It's ignorant.
Plenty of athletes go bankrupt after they are done playing their sport. I have no issues. That is what the Mets contracted for. It enabled them to stay within their desired budget, get Mike Hampton, make the World Series with Hampton, and turn the comp pick into David Wright. It enabled Bonilla to get paid beyond his playing years. Both sides got what they wanted.
That's the issue. It was a self imposed budget. This wasn't trying to get under the cap like the NFL. And as I stated in my last post, the Wilpons are in worse shape now hence the backlash. If they were making "smart decisions" with their money would they be in the situation they are in? I'm not hear to argue about this. I just dont know why people are defending this franchise. All my Mets fans are so done with this team because of ownership and cannot wait for them to sell (assuming the Wilpons don't hang around in any deal).
I want the Wilpons gone as well. Not understanding the reasoning behind the deal and disliking the Wilpons are not the same thing.
that's my point. Guaranteeing 8% is crazy. Just my two cents. And I agree there are other teams that can be criticized for similar deals. I am just pointing out when you are in the NY market and you make a deal like that you expect it to go back to your team and it hasn't. EVERY Mets fans I know is so done with them. The money truly hasn't made it back to the team. And I feel like when the Mets sign a big name player or pay a player a lot it doesn't work out (Mo Vaughn and Lowrie come to mind). I know shit happens but I feel the pain because I am a Knicks fan. I know how frustrating it is but the Mets shouldn't be talked in the same breath with the Knicks. The sooner they sell the better.
Man, this thread really became a self-fulfilling prophecy.
Every year this thread turns into a referendum on deferral . And yes some other teams have opted for the same approach.
The funny part everyone gets a kick out of is in the intervening time the Mets lost a fortune in fraudulent investments, settled another 150M in lawsuits, and then snubbed their nose at an offer to sale the team for a fortune only for the world to fall apart and the value of the team now a complete question mark.
It’s like a millionaire financing a TV at Best Buy when he’s got the cash in his pocket. Only to then drop the cash on the floor on the way out. Then getting sued for littering.
RE: RE: RE: RE: The Mets could have bought him out for $5.9 mil
but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
Every year this thread turns into a referendum on deferral . And yes some other teams have opted for the same approach.
The funny part everyone gets a kick out of is in the intervening time the Mets lost a fortune in fraudulent investments, settled another 150M in lawsuits, and then snubbed their nose at an offer to sale the team for a fortune only for the world to fall apart and the value of the team now a complete question mark.
It’s like a millionaire financing a TV at Best Buy when he’s got the cash in his pocket. Only to then drop the cash on the floor on the way out. Then getting sued for littering.
Millionaire would be smart to finance the tv at best buy at an interest rate lower than what he expects to earn... thats probably why he's a millionaire...
Everyone here should always be taking advantage of 0% interest financing whenever it's available.
That said, your middle point is spot on... many many other things to rip on them for
that's my point. Guaranteeing 8% is crazy. Just my two cents. And I agree there are other teams that can be criticized for similar deals. I am just pointing out when you are in the NY market and you make a deal like that you expect it to go back to your team and it hasn't. EVERY Mets fans I know is so done with them. The money truly hasn't made it back to the team. And I feel like when the Mets sign a big name player or pay a player a lot it doesn't work out (Mo Vaughn and Lowrie come to mind). I know shit happens but I feel the pain because I am a Knicks fan. I know how frustrating it is but the Mets shouldn't be talked in the same breath with the Knicks. The sooner they sell the better.
It turned out bad, but at the time not considered crazy. Some of the other deferrals are more in the 3 - 4% range, so grand scheme it's not a debilitating deal.
It's worse for PR than reality.
When the Mets sell, the new owners would be smart to just buy Bonilla out to end the stigma - or they can leave it as a way to show just how clownish the Wilpons were.
RE: RE: RE: RE: RE: The Mets could have bought him out for $5.9 mil
but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
Who is guaranteeing 8% or any number? I was just using that as an example. I don't know what projections the Wilpons used. The Wilpons were projecting numbers, and I do think Madoff was guaranteeing them a certain percentage based on their investment. The mistake the Wilpons made was trusting Madoff. Not making the Bonilla deal under the context of what they thought they were getting with Madoff.
But ripping on them for this deal is silly. Standard business practice.
Many, many other things to have an actual issue with. Complaining about this dilutes the rest.
Agreed but this is just another piece to add to the other issues with the Wilpons. I'm not here ripping Mets fans. I hope the Mets do well outside of playing the Yankees. It's great for the area. I used to watch a lot of Mets games when I was younger. I remember Ron Darling hitting a HR. I remember watching Kiner's Corner. It's fun when they are good. I just don't get the defending of the deal either. I don't think it is bad as most make it out to be and people celebrating Bobby Bonilla day. I still don't think it was a smart deal. If you ask who you'd rather be in the deal nobody would side with the Mets over Bonilla. It is what kt is. It isn't a crippling deal. It's just that of you are "saving" money you'd hope it was going back in to your team and that doesn't seem to be the case.
that's my point. Guaranteeing 8% is crazy. Just my two cents. And I agree there are other teams that can be criticized for similar deals. I am just pointing out when you are in the NY market and you make a deal like that you expect it to go back to your team and it hasn't. EVERY Mets fans I know is so done with them. The money truly hasn't made it back to the team. And I feel like when the Mets sign a big name player or pay a player a lot it doesn't work out (Mo Vaughn and Lowrie come to mind). I know shit happens but I feel the pain because I am a Knicks fan. I know how frustrating it is but the Mets shouldn't be talked in the same breath with the Knicks. The sooner they sell the better.
It turned out bad, but at the time not considered crazy. Some of the other deferrals are more in the 3 - 4% range, so grand scheme it's not a debilitating deal.
It's worse for PR than reality.
When the Mets sell, the new owners would be smart to just buy Bonilla out to end the stigma - or they can leave it as a way to show just how clownish the Wilpons were.
That's a good idea. Having this linger year after year makings them a joke (right or wrong, just reading how this is a celebrated day). Gotta move on from it.
RE: RE: RE: RE: RE: RE: The Mets could have bought him out for $5.9 mil
but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
Who is guaranteeing 8% or any number? I was just using that as an example. I don't know what projections the Wilpons used. The Wilpons were projecting numbers, and I do think Madoff was guaranteeing them a certain percentage based on their investment. The mistake the Wilpons made was trusting Madoff. Not making the Bonilla deal under the context of what they thought they were getting with Madoff.
The Mets guaranteed 8% to get the ~1.2 mil per year for 25 years. When you do the math you get $35+ mil because of the guaranteed 8%.
person and I'd tip my cap to Bonilla for negotiating a great deal for himself - Even though it's not THAT bad of a deal for the Mets. It's clearly better for Bonilla.
But Bonilla turning into such a POS makes it hard to even root for him turning this into the annual spectacle it is.
The reality is though if Bonilla put $5.9M in a different investment vehicle in 2000 and didn't touch it until 2011, and then only withdrew a portion of it each year for 25 years he may have wound up doing better.
RE: RE: RE: RE: RE: The Mets could have bought him out for $5.9 mil
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
What on earth are you talking about? The Mets were borrowing money from Bonilla. And 8% was a very reasonable interest rate at that time. The bond yield on the top rated corporate rates in 2000 was in the mid 7% range (it varied over the year, I don't know exactly when this deal went down). So the Mets were borrowing at (or near) market rates. Obviously rates have fallen significantly since then, and it's become a much more costly deal for them than it was at the time (I wonder if they've ever tried to buy him out). But the notion that a rate of that level is never guaranteed is absurd. That's what interest is. Most debt is non-adjustable, and the borrower GUARANTEES the interest to the creditor. And the interest rate the Mets paid was wholly consistent with prevailing rates at the time.
is 10-11%, 8% since the index went to 500 stocks in 1957.
Don't know what agreement the Wilpons had with Madoff, but it would not be surprising for Madoff to guarantee 10% annual return or whatever to the Wilpons, especially with the amount of capital they gave to Madoff (I think they lost $700 million). Viewing it in that context, it is not at all crazy that the Wilpons would expect an 8% average return on the $5.9 million. Link - ( New Window )
RE: RE: RE: RE: RE: RE: The Mets could have bought him out for $5.9 mil
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
What on earth are you talking about? The Mets were borrowing money from Bonilla. And 8% was a very reasonable interest rate at that time. The bond yield on the top rated corporate rates in 2000 was in the mid 7% range (it varied over the year, I don't know exactly when this deal went down). So the Mets were borrowing at (or near) market rates. Obviously rates have fallen significantly since then, and it's become a much more costly deal for them than it was at the time (I wonder if they've ever tried to buy him out). But the notion that a rate of that level is never guaranteed is absurd. That's what interest is. Most debt is non-adjustable, and the borrower GUARANTEES the interest to the creditor. And the interest rate the Mets paid was wholly consistent with prevailing rates at the time.
That's when the economy was booming. That 8% doesn't look so good down the road. You are correct that back in 2000 I don't know what the interest rates were but if you are in that field people have to realize that that wasn't sustainable. That was during the .com bubble where everybody was making money. That had to be a unique time. Again, this isn't ripping the Mets. Read my other posts. I don't want to rewrite everything.
is 10-11%, 8% since the index went to 500 stocks in 1957.
Don't know what agreement the Wilpons had with Madoff, but it would not be surprising for Madoff to guarantee 10% annual return or whatever to the Wilpons, especially with the amount of capital they gave to Madoff (I think they lost $700 million). Viewing it in that context, it is not at all crazy that the Wilpons would expect an 8% average return on the $5.9 million. Link - ( New Window )
I am not fully aware of the whole Madoff situation so not sure if that played into it. But, yeah, they were probably making at least 10% on their money and thought it was a deal but there has to be some wiggle room if rates drop. That's all I am saying.
It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
RE: It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
You summed it up better than me. The key is if the team benefited or even just won. If they were winning few would be discussing it. But lately it gets magnified. I like pj's idea of the new owners just paying out the rest of the contract and not have it be a story every year.
Every year this thread turns into a referendum on deferral . And yes some other teams have opted for the same approach.
The funny part everyone gets a kick out of is in the intervening time the Mets lost a fortune in fraudulent investments, settled another 150M in lawsuits, and then snubbed their nose at an offer to sale the team for a fortune only for the world to fall apart and the value of the team now a complete question mark.
It’s like a millionaire financing a TV at Best Buy when he’s got the cash in his pocket. Only to then drop the cash on the floor on the way out. Then getting sued for littering.
Millionaire would be smart to finance the tv at best buy at an interest rate lower than what he expects to earn... thats probably why he's a millionaire...
Everyone here should always be taking advantage of 0% interest financing whenever it's available.
That said, your middle point is spot on... many many other things to rip on them for
The rub is the Mets brass was terrible at investing and finances, and this is a small but representative example of how bad Wilpon has been at all of this the last 25 years.
The Mets effectively borrowed money from Bonilla, trusting their return would be higher. Smart move. The tragic part is one of the primary instruments they used did guarantee higher than 10% returns. Unfortunately that instrument was massive fraud. A fraud the courts were seemingly about to show Wilpon was aware of and he settled.
RE: It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
The Wilpons had the $5.9 million making money for over a decade. It was projected to double by that time, and most decent investments would in 11 years. Even if they didn't get the full 8% every year, if they had to cut into the principal a bit, they would still have expected to come out well on top.
In fact they were below market averages. What he was providing was CONSISTENT returns. Rather than being up 25% one year and down 10% the next, Madoff’s fund provided a consistently positive annual return. (On paper obviously)
And the same point that comes out every year on this thread. It's not so much the deferred $5.9M, it's the fact that the Wilpon's always cry poverty when it comes to the payroll and dead money and why the Mets can't go after prized free agents.
As another poster alluded to above, when the new owner comes in, it would make sense to just by Bonilla out so the negative PR goes away.
RE: It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
RE: RE: It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
RE: RE: The Mets could have bought him out for $5.9 mil
but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Spot on. That's the stupid part of the deal. Has nothing at all to do with a lack of baseball knowledge, or whether the Bonilla signing was a bad decision... it's about finance.
RE: RE: RE: It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
If they just invested the 5.9 mil and didn't touch it then they would need ~4.75% to match the money they are paying Bonilla. However, after 10 years they would start making payments of 1.19 mil so we'd have to subtract that every year. I don't want to do all that work so if I had to guess they'd need about 6% on that money over that time to break even.
RE: RE: RE: It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
It's not true because it doesn't match up with your rough estimates? LOL, try doing the actual math before arguing that other posters aren't posting the truth.
$5.9 million starting in 2000 with compounded 8% interest doesn't double in 8 years. It would take until some time in 2010 to double.
In 2011, the year they start paying him, it's #13.76 million. Subtract the $1.19 million and in 2011 the Mets have $12.56 million left. 8% on that per year, minus the $1.19 million per year payment, and the Mets have $237,463 left in 2035.
And that's at a steady 8% per year for 35 years, which again is stupid.
RE: RE: RE: RE: It amuses me how many people defend this to the death every summer
not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
It's not true because it doesn't match up with your rough estimates? LOL, try doing the actual math before arguing that other posters aren't posting the truth.
$5.9 million starting in 2000 with compounded 8% interest doesn't double in 8 years. It would take until some time in 2010 to double.
In 2011, the year they start paying him, it's #13.76 million. Subtract the $1.19 million and in 2011 the Mets have $12.56 million left. 8% on that per year, minus the $1.19 million per year payment, and the Mets have $237,463 left in 2035.
And that's at a steady 8% per year for 35 years, which again is stupid.
I got closer to the 6% that Robbie did. Regardless if it is 6% or 8%, that is lower than what the Wilpons were making on their money. And it allowed them to stay within the budget they wanted (of course it is stupid for a NY team to have that tight a budget), get Hampton, make the WS, and use the comp pick for David Wright.
Quick, do the math on all the other deferred compensation deals posted by pjcas
but I started with 5.9 mil. I used 2000 as the starting date. I used 8% interest. Then I started subtracting out 1.19 mil starting in 2011 for 25 years up until 2035. If all those numbers are accurate then the only question is when to start counting the interest. I may be off by a couple of months with things but with all of that information with the payments out the Wilpons netted $256,460, in theory. I'm also sure these numbers are rounded and become near zero over that time period.
I think we understand that 8% from 2000 to 2035 is not realistic but if it were then that $5.9 mil would have turned into $94,212,214 after 35 years. That would never happen.
If Bobby Bonilla got his money right away and invested it to get the same $29,750,000 (1.19 x 25), that would be the equivalent of him getting his money right away from 2000 and getting a return of just shy of 4.6% interest which is still solid.
and to the post above that one, its pretty arrogant to say anyone that doesnt agree with you "doesnt understand finance." I dunno, i'm not perfect, but Ive had a decent career so far in it.
Paying someone 8% interest rate for 35 years for what is essentially a senior unsecured bond seems pretty foolish to me. The long-term historical BBB bond rate is 5.5%.
I don't care who else was promising the Wilpons what... in 2000 its not like the world didnt already know "past performance is not a promise of future results" -- they had to know the risks.
Robbieballs- The discount rate assumed on the Bonilla deal is 8% annual. Not sure what math you were doing above, but there is time value of getting 1.19 mil in 2011 vs 1.19 mil in 2035 as well and you need to account for that reinvestment opportunity. I'll save you the time- the answer is 8%
Oh and 8% interest per year x 35 years compounded = 87.2 million
years though is it? The Mets in theory had the $5.9M in 2000 and didn't pay a cent back until 2011 and then annually for 25 years. But it's mostly irrelevant. no one cares about the actual finances of it, the optics of paying Bonilla $1.2M when he's 72 years old is funny.
And yes, the Mets should have paid Bonilla the $5.9M in 2000 and been done with him and still signed Hampton.
but, they're the Mets they don't operate like a NYC team should operate.
So, as a fan, if my choice was live with Bonilla Day for 25 years and have the team sign Hampton, make it to a WS, let Hampton go and sign Wright with the comp pick (a lot of serendipity to make this happen) it's a no-brainer I'd do it every time if my choice is binary.
Doesn't mean it was the right thing to do, but I'm ok with it.
And as I brought up earlier if I'm buying the Mets, one of the first things I do to change public perception is to get rid of Bonilla day even at an overpay.
No reason for the Mets to be a laughingstock in 2020 or beyond. Not because of the on-field team at least. Most billionaires have egos too big to live with something like this - at least that's what I'm counting on.
and to the post above that one, its pretty arrogant to say anyone that doesnt agree with you "doesnt understand finance." I dunno, i'm not perfect, but Ive had a decent career so far in it.
Paying someone 8% interest rate for 35 years for what is essentially a senior unsecured bond seems pretty foolish to me. The long-term historical BBB bond rate is 5.5%.
I don't care who else was promising the Wilpons what... in 2000 its not like the world didnt already know "past performance is not a promise of future results" -- they had to know the risks.
Robbieballs- The discount rate assumed on the Bonilla deal is 8% annual. Not sure what math you were doing above, but there is time value of getting 1.19 mil in 2011 vs 1.19 mil in 2035 as well and you need to account for that reinvestment opportunity. I'll save you the time- the answer is 8%
Oh and 8% interest per year x 35 years compounded = 87.2 million
I did 36 years. 2000 to 2035.
nobody will care if the Mets are spending on the field product
With interest rates at 0% right now, what would Bonilla even accept relative to the 8% coupon he's currently guaranteed for another 15 years? That bond is seriously in the money. He may want the full $18 mil (assumes 0% discount rate) he's still owed.
Regardless as you even said above PJ... there are plenty of these deferred contracts out there, if the Wilpons sell and the team starts spending like a big market franchise again... no one will care. No one cares the Yankees still pay Johnny Damon.
there would be no interest applied in year 0 (2000)
With interest rates at 0% right now, what would Bonilla even accept relative to the 8% coupon he's currently guaranteed for another 15 years? That bond is seriously in the money. He may want the full $18 mil (assumes 0% discount rate) he's still owed.
Regardless as you even said above PJ... there are plenty of these deferred contracts out there, if the Wilpons sell and the team starts spending like a big market franchise again... no one will care. No one cares the Yankees still pay Johnny Damon.
I'd give him $25M one time offer or I'd have it written in to the sale the Wilpons still own Bonilla's deferment.
lol.
Just to remove the stigma.
I'm paying $2B for a sports franchise I don't want to have to hear about a $1.2M annual payment with 15 years left and answer for it. every year.
I personally know one billionaire (casually - he was my old CEO and sold our company for ~$4B and then became a principal with one of the largest VC's in the world and is now maybe on his own, but I feel like he'd pay to make this go away.
set to get paid $18 mil total over the next 15 years... would demand more than getting that $18 mil today.
It'd be like a mega-lotto that is set to pay you $150 mil over 30 years... offering to pay you more than that in lump sum. Doesnt make much sense. If you have that amount now, any positive return on investment over a lenthy period (15-30 years) makes you incremental income.
If Im buying the Mets, I dont give a crap about that stigma either. I didnt make that deal - and its either coming off the top (sale value) or the Wilpons continue to pay it moving forward.
Sign me up for that...
Read the article I posted. Read the tweets pjcas posted. There are far higher deferred compensation plans, and far worse contracts, in baseball. Yet Bonilla gets singled out. It's ignorant.
Plenty of athletes go bankrupt after they are done playing their sport. I have no issues. That is what the Mets contracted for. It enabled them to stay within their desired budget, get Mike Hampton, make the World Series with Hampton, and turn the comp pick into David Wright. It enabled Bonilla to get paid beyond his playing years. Both sides got what they wanted.
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but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
8% is the standard long term return of the market... sooo... $5.9M indeed does turn into $37M over 25 years..
Thats exactly the point and why its a non-issue
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all my friends that are Mets fans are disgusted by it.
Read the article I posted. Read the tweets pjcas posted. There are far higher deferred compensation plans, and far worse contracts, in baseball. Yet Bonilla gets singled out. It's ignorant.
Plenty of athletes go bankrupt after they are done playing their sport. I have no issues. That is what the Mets contracted for. It enabled them to stay within their desired budget, get Mike Hampton, make the World Series with Hampton, and turn the comp pick into David Wright. It enabled Bonilla to get paid beyond his playing years. Both sides got what they wanted.
That's the issue. It was a self imposed budget. This wasn't trying to get under the cap like the NFL. And as I stated in my last post, the Wilpons are in worse shape now hence the backlash. If they were making "smart decisions" with their money would they be in the situation they are in? I'm not hear to argue about this. I just dont know why people are defending this franchise. All my Mets fans are so done with this team because of ownership and cannot wait for them to sell (assuming the Wilpons don't hang around in any deal).
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In comment 14927179 robbieballs2003 said:
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but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
It wasn't a great deal for the Mets - mostly because they crafted it expecting to continue to get 10%+ returns like they were with Madoff, no debating that, it's just not quite the punchline people make it out to be.
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In comment 14927179 robbieballs2003 said:
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but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
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In comment 14927187 robbieballs2003 said:
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all my friends that are Mets fans are disgusted by it.
Read the article I posted. Read the tweets pjcas posted. There are far higher deferred compensation plans, and far worse contracts, in baseball. Yet Bonilla gets singled out. It's ignorant.
Plenty of athletes go bankrupt after they are done playing their sport. I have no issues. That is what the Mets contracted for. It enabled them to stay within their desired budget, get Mike Hampton, make the World Series with Hampton, and turn the comp pick into David Wright. It enabled Bonilla to get paid beyond his playing years. Both sides got what they wanted.
That's the issue. It was a self imposed budget. This wasn't trying to get under the cap like the NFL. And as I stated in my last post, the Wilpons are in worse shape now hence the backlash. If they were making "smart decisions" with their money would they be in the situation they are in? I'm not hear to argue about this. I just dont know why people are defending this franchise. All my Mets fans are so done with this team because of ownership and cannot wait for them to sell (assuming the Wilpons don't hang around in any deal).
I want the Wilpons gone as well. Not understanding the reasoning behind the deal and disliking the Wilpons are not the same thing.
The funny part everyone gets a kick out of is in the intervening time the Mets lost a fortune in fraudulent investments, settled another 150M in lawsuits, and then snubbed their nose at an offer to sale the team for a fortune only for the world to fall apart and the value of the team now a complete question mark.
It’s like a millionaire financing a TV at Best Buy when he’s got the cash in his pocket. Only to then drop the cash on the floor on the way out. Then getting sued for littering.
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In comment 14927189 pjcas18 said:
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In comment 14927179 robbieballs2003 said:
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but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
But ripping on them for this deal is silly. Standard business practice.
Many, many other things to have an actual issue with. Complaining about this dilutes the rest.
The funny part everyone gets a kick out of is in the intervening time the Mets lost a fortune in fraudulent investments, settled another 150M in lawsuits, and then snubbed their nose at an offer to sale the team for a fortune only for the world to fall apart and the value of the team now a complete question mark.
It’s like a millionaire financing a TV at Best Buy when he’s got the cash in his pocket. Only to then drop the cash on the floor on the way out. Then getting sued for littering.
Millionaire would be smart to finance the tv at best buy at an interest rate lower than what he expects to earn... thats probably why he's a millionaire...
Everyone here should always be taking advantage of 0% interest financing whenever it's available.
That said, your middle point is spot on... many many other things to rip on them for
It turned out bad, but at the time not considered crazy. Some of the other deferrals are more in the 3 - 4% range, so grand scheme it's not a debilitating deal.
It's worse for PR than reality.
When the Mets sell, the new owners would be smart to just buy Bonilla out to end the stigma - or they can leave it as a way to show just how clownish the Wilpons were.
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In comment 14927195 robbieballs2003 said:
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In comment 14927189 pjcas18 said:
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In comment 14927179 robbieballs2003 said:
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but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
Who is guaranteeing 8% or any number? I was just using that as an example. I don't know what projections the Wilpons used. The Wilpons were projecting numbers, and I do think Madoff was guaranteeing them a certain percentage based on their investment. The mistake the Wilpons made was trusting Madoff. Not making the Bonilla deal under the context of what they thought they were getting with Madoff.
But ripping on them for this deal is silly. Standard business practice.
Many, many other things to have an actual issue with. Complaining about this dilutes the rest.
Agreed but this is just another piece to add to the other issues with the Wilpons. I'm not here ripping Mets fans. I hope the Mets do well outside of playing the Yankees. It's great for the area. I used to watch a lot of Mets games when I was younger. I remember Ron Darling hitting a HR. I remember watching Kiner's Corner. It's fun when they are good. I just don't get the defending of the deal either. I don't think it is bad as most make it out to be and people celebrating Bobby Bonilla day. I still don't think it was a smart deal. If you ask who you'd rather be in the deal nobody would side with the Mets over Bonilla. It is what kt is. It isn't a crippling deal. It's just that of you are "saving" money you'd hope it was going back in to your team and that doesn't seem to be the case.
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that's my point. Guaranteeing 8% is crazy. Just my two cents. And I agree there are other teams that can be criticized for similar deals. I am just pointing out when you are in the NY market and you make a deal like that you expect it to go back to your team and it hasn't. EVERY Mets fans I know is so done with them. The money truly hasn't made it back to the team. And I feel like when the Mets sign a big name player or pay a player a lot it doesn't work out (Mo Vaughn and Lowrie come to mind). I know shit happens but I feel the pain because I am a Knicks fan. I know how frustrating it is but the Mets shouldn't be talked in the same breath with the Knicks. The sooner they sell the better.
It turned out bad, but at the time not considered crazy. Some of the other deferrals are more in the 3 - 4% range, so grand scheme it's not a debilitating deal.
It's worse for PR than reality.
When the Mets sell, the new owners would be smart to just buy Bonilla out to end the stigma - or they can leave it as a way to show just how clownish the Wilpons were.
That's a good idea. Having this linger year after year makings them a joke (right or wrong, just reading how this is a celebrated day). Gotta move on from it.
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In comment 14927202 KDavies said:
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In comment 14927195 robbieballs2003 said:
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In comment 14927189 pjcas18 said:
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In comment 14927179 robbieballs2003 said:
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but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Correct but where can you guarantee 8%? Even if it wasn't until 2011? And with the Mets in the situation they are currently in 8t isn't a good look for them. If they had money and weren't thinking about selling the team very few would care. But with not spending over the years in a market like NY and then when you do you spend on a guy like Lowrie the optics look awful.
Rule of 72. At 8%, the money would double in 9 years. So by 9 years, you have 12 million. Another 2 years, you have about a million a year. At 11 years, you are at $14 million. Bonilla gets $1.19 million, which is (doing off the top of my head) roughly 8% of $14 million. So, the plan was that instead of paying Bonilla $5.9 million off the bat, they pay him off the money that generates, and have $14 million or so at the end.
You say you understand finance, but I don't think you do.
Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
Who is guaranteeing 8% or any number? I was just using that as an example. I don't know what projections the Wilpons used. The Wilpons were projecting numbers, and I do think Madoff was guaranteeing them a certain percentage based on their investment. The mistake the Wilpons made was trusting Madoff. Not making the Bonilla deal under the context of what they thought they were getting with Madoff.
The Mets guaranteed 8% to get the ~1.2 mil per year for 25 years. When you do the math you get $35+ mil because of the guaranteed 8%.
But Bonilla turning into such a POS makes it hard to even root for him turning this into the annual spectacle it is.
The reality is though if Bonilla put $5.9M in a different investment vehicle in 2000 and didn't touch it until 2011, and then only withdrew a portion of it each year for 25 years he may have wound up doing better.
What on earth are you talking about? The Mets were borrowing money from Bonilla. And 8% was a very reasonable interest rate at that time. The bond yield on the top rated corporate rates in 2000 was in the mid 7% range (it varied over the year, I don't know exactly when this deal went down). So the Mets were borrowing at (or near) market rates. Obviously rates have fallen significantly since then, and it's become a much more costly deal for them than it was at the time (I wonder if they've ever tried to buy him out). But the notion that a rate of that level is never guaranteed is absurd. That's what interest is. Most debt is non-adjustable, and the borrower GUARANTEES the interest to the creditor. And the interest rate the Mets paid was wholly consistent with prevailing rates at the time.
It’s a great day. Seeing Mets fans get bent out of shape about the deal being made fun of is gold.
Most people know why the deal was made, some don’t. Either way it’s funny.
Don't know what agreement the Wilpons had with Madoff, but it would not be surprising for Madoff to guarantee 10% annual return or whatever to the Wilpons, especially with the amount of capital they gave to Madoff (I think they lost $700 million). Viewing it in that context, it is not at all crazy that the Wilpons would expect an 8% average return on the $5.9 million.
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Again, I do. And GUARANTEEING 8% is crazy. Show me one institution that guarantees 8% every year. I bet you cannot find one except for the Mets.
What on earth are you talking about? The Mets were borrowing money from Bonilla. And 8% was a very reasonable interest rate at that time. The bond yield on the top rated corporate rates in 2000 was in the mid 7% range (it varied over the year, I don't know exactly when this deal went down). So the Mets were borrowing at (or near) market rates. Obviously rates have fallen significantly since then, and it's become a much more costly deal for them than it was at the time (I wonder if they've ever tried to buy him out). But the notion that a rate of that level is never guaranteed is absurd. That's what interest is. Most debt is non-adjustable, and the borrower GUARANTEES the interest to the creditor. And the interest rate the Mets paid was wholly consistent with prevailing rates at the time.
That's when the economy was booming. That 8% doesn't look so good down the road. You are correct that back in 2000 I don't know what the interest rates were but if you are in that field people have to realize that that wasn't sustainable. That was during the .com bubble where everybody was making money. That had to be a unique time. Again, this isn't ripping the Mets. Read my other posts. I don't want to rewrite everything.
Don't know what agreement the Wilpons had with Madoff, but it would not be surprising for Madoff to guarantee 10% annual return or whatever to the Wilpons, especially with the amount of capital they gave to Madoff (I think they lost $700 million). Viewing it in that context, it is not at all crazy that the Wilpons would expect an 8% average return on the $5.9 million. Link - ( New Window )
I am not fully aware of the whole Madoff situation so not sure if that played into it. But, yeah, they were probably making at least 10% on their money and thought it was a deal but there has to be some wiggle room if rates drop. That's all I am saying.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
You summed it up better than me. The key is if the team benefited or even just won. If they were winning few would be discussing it. But lately it gets magnified. I like pj's idea of the new owners just paying out the rest of the contract and not have it be a story every year.
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Every year this thread turns into a referendum on deferral . And yes some other teams have opted for the same approach.
The funny part everyone gets a kick out of is in the intervening time the Mets lost a fortune in fraudulent investments, settled another 150M in lawsuits, and then snubbed their nose at an offer to sale the team for a fortune only for the world to fall apart and the value of the team now a complete question mark.
It’s like a millionaire financing a TV at Best Buy when he’s got the cash in his pocket. Only to then drop the cash on the floor on the way out. Then getting sued for littering.
Millionaire would be smart to finance the tv at best buy at an interest rate lower than what he expects to earn... thats probably why he's a millionaire...
Everyone here should always be taking advantage of 0% interest financing whenever it's available.
That said, your middle point is spot on... many many other things to rip on them for
The rub is the Mets brass was terrible at investing and finances, and this is a small but representative example of how bad Wilpon has been at all of this the last 25 years.
The Mets effectively borrowed money from Bonilla, trusting their return would be higher. Smart move. The tragic part is one of the primary instruments they used did guarantee higher than 10% returns. Unfortunately that instrument was massive fraud. A fraud the courts were seemingly about to show Wilpon was aware of and he settled.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
The Wilpons had the $5.9 million making money for over a decade. It was projected to double by that time, and most decent investments would in 11 years. Even if they didn't get the full 8% every year, if they had to cut into the principal a bit, they would still have expected to come out well on top.
As another poster alluded to above, when the new owner comes in, it would make sense to just by Bonilla out so the negative PR goes away.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
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not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
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but instead agreed to pay ~1.2 mil per year for 25 years including a negotiated 8% interest.
but they kept that $5.9M for 11 years before paying him a cent. Even forgetting that they based the decision on the Madoff returns, the S&P average return over the 20 years they've had Bonilla's money) has been better than 8% (on average over that time - not each year).
Spot on. That's the stupid part of the deal. Has nothing at all to do with a lack of baseball knowledge, or whether the Bonilla signing was a bad decision... it's about finance.
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In comment 14927241 MetsAreBack said:
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not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
If they just invested the 5.9 mil and didn't touch it then they would need ~4.75% to match the money they are paying Bonilla. However, after 10 years they would start making payments of 1.19 mil so we'd have to subtract that every year. I don't want to do all that work so if I had to guess they'd need about 6% on that money over that time to break even.
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In comment 14927241 MetsAreBack said:
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not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
It's not true because it doesn't match up with your rough estimates? LOL, try doing the actual math before arguing that other posters aren't posting the truth.
$5.9 million starting in 2000 with compounded 8% interest doesn't double in 8 years. It would take until some time in 2010 to double.
In 2011, the year they start paying him, it's #13.76 million. Subtract the $1.19 million and in 2011 the Mets have $12.56 million left. 8% on that per year, minus the $1.19 million per year payment, and the Mets have $237,463 left in 2035.
And that's at a steady 8% per year for 35 years, which again is stupid.
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In comment 14927270 sb from NYT Forum said:
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In comment 14927241 MetsAreBack said:
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not sure why you are comparing the interest rate on essentially a senior unsecured bond (if not higher), to average S&P returns. The former guarantees you continued payment deep into a liquidation scenario, while the latter is glorified gambling with no guarantee of principal return.
8% was even at that time, an outsized return to promise someone. Warren Buffett during the height of the financial crisis secured 6-10% interest rates from banks for preferred stock - at a time when banks needed to shore up capital incredibly fast, or become insolvent.
And most importantly, this wouldnt be a big deal if the Wilpons ran their team like a large market franchise - instead we get excuses every year such as this or David Wright's dead money... why they can't spend with the big boys. That's the issue.
Word. For the deal to even break even for the Mets it would have to be a guaranteed 8% return for over a third of a century. That's fucking stupid.
That is simply not true. At 8%, they would likely have around $14 million left as I did the rough calculations above. Not going to waste time and do the math, but to break even, the return would have had to be significantly less than 8%.
It's not true because it doesn't match up with your rough estimates? LOL, try doing the actual math before arguing that other posters aren't posting the truth.
$5.9 million starting in 2000 with compounded 8% interest doesn't double in 8 years. It would take until some time in 2010 to double.
In 2011, the year they start paying him, it's #13.76 million. Subtract the $1.19 million and in 2011 the Mets have $12.56 million left. 8% on that per year, minus the $1.19 million per year payment, and the Mets have $237,463 left in 2035.
And that's at a steady 8% per year for 35 years, which again is stupid.
I got closer to the 6% that Robbie did. Regardless if it is 6% or 8%, that is lower than what the Wilpons were making on their money. And it allowed them to stay within the budget they wanted (of course it is stupid for a NY team to have that tight a budget), get Hampton, make the WS, and use the comp pick for David Wright.
Quick, do the math on all the other deferred compensation deals posted by pjcas
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People ripping on what was a good decision because they don't understand the facts.
It cracks me up. It exposes ignorant baseball fans.
It also exposes people who don't understand how finance works.
I think we understand that 8% from 2000 to 2035 is not realistic but if it were then that $5.9 mil would have turned into $94,212,214 after 35 years. That would never happen.
If Bobby Bonilla got his money right away and invested it to get the same $29,750,000 (1.19 x 25), that would be the equivalent of him getting his money right away from 2000 and getting a return of just shy of 4.6% interest which is still solid.
Paying someone 8% interest rate for 35 years for what is essentially a senior unsecured bond seems pretty foolish to me. The long-term historical BBB bond rate is 5.5%.
I don't care who else was promising the Wilpons what... in 2000 its not like the world didnt already know "past performance is not a promise of future results" -- they had to know the risks.
Robbieballs- The discount rate assumed on the Bonilla deal is 8% annual. Not sure what math you were doing above, but there is time value of getting 1.19 mil in 2011 vs 1.19 mil in 2035 as well and you need to account for that reinvestment opportunity. I'll save you the time- the answer is 8%
Oh and 8% interest per year x 35 years compounded = 87.2 million
And yes, the Mets should have paid Bonilla the $5.9M in 2000 and been done with him and still signed Hampton.
but, they're the Mets they don't operate like a NYC team should operate.
So, as a fan, if my choice was live with Bonilla Day for 25 years and have the team sign Hampton, make it to a WS, let Hampton go and sign Wright with the comp pick (a lot of serendipity to make this happen) it's a no-brainer I'd do it every time if my choice is binary.
Doesn't mean it was the right thing to do, but I'm ok with it.
And as I brought up earlier if I'm buying the Mets, one of the first things I do to change public perception is to get rid of Bonilla day even at an overpay.
No reason for the Mets to be a laughingstock in 2020 or beyond. Not because of the on-field team at least. Most billionaires have egos too big to live with something like this - at least that's what I'm counting on.
Paying someone 8% interest rate for 35 years for what is essentially a senior unsecured bond seems pretty foolish to me. The long-term historical BBB bond rate is 5.5%.
I don't care who else was promising the Wilpons what... in 2000 its not like the world didnt already know "past performance is not a promise of future results" -- they had to know the risks.
Robbieballs- The discount rate assumed on the Bonilla deal is 8% annual. Not sure what math you were doing above, but there is time value of getting 1.19 mil in 2011 vs 1.19 mil in 2035 as well and you need to account for that reinvestment opportunity. I'll save you the time- the answer is 8%
Oh and 8% interest per year x 35 years compounded = 87.2 million
I did 36 years. 2000 to 2035.
Regardless as you even said above PJ... there are plenty of these deferred contracts out there, if the Wilpons sell and the team starts spending like a big market franchise again... no one will care. No one cares the Yankees still pay Johnny Damon.
Gotcha.
Regardless as you even said above PJ... there are plenty of these deferred contracts out there, if the Wilpons sell and the team starts spending like a big market franchise again... no one will care. No one cares the Yankees still pay Johnny Damon.
I'd give him $25M one time offer or I'd have it written in to the sale the Wilpons still own Bonilla's deferment.
lol.
Just to remove the stigma.
I'm paying $2B for a sports franchise I don't want to have to hear about a $1.2M annual payment with 15 years left and answer for it. every year.
I personally know one billionaire (casually - he was my old CEO and sold our company for ~$4B and then became a principal with one of the largest VC's in the world and is now maybe on his own, but I feel like he'd pay to make this go away.
It'd be like a mega-lotto that is set to pay you $150 mil over 30 years... offering to pay you more than that in lump sum. Doesnt make much sense. If you have that amount now, any positive return on investment over a lenthy period (15-30 years) makes you incremental income.
If Im buying the Mets, I dont give a crap about that stigma either. I didnt make that deal - and its either coming off the top (sale value) or the Wilpons continue to pay it moving forward.