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.
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.
Quote:
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%.
Quote:
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.
Quote:
In comment 14927241 MetsAreBack said:
Quote:
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.
Quote:
In comment 14927241 MetsAreBack said:
Quote:
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.
Quote:
In comment 14927270 sb from NYT Forum said:
Quote:
In comment 14927241 MetsAreBack said:
Quote:
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
Quote:
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.