Times sure are tough in baseball

PUBLISHED : Sunday, 08 April, 2012, 12:00am
UPDATED : Sunday, 08 April, 2012, 12:00am


Times are tough all over. You know it and so do I. We get a whiff of an economic recovery in the United States only to have the head of the International Monetary Fund tell us the burden of household debt in that country will hold back any meaningful recovery. I turn the TV on and hear a couple of candidates who want to run for president of the US tell me they will rescue the country from its financial apocalypse. So I shake my head one more time and acknowledge the obvious. It must be true: times are tough all over.

Now believe me when I say I really am trying to write about sports here. But these days the only way you can do that, it seems, is to moonlight as an economist. Look at what has happened in baseball over the past few months during such dire economic times. Albert Pujols signs a contract for US$240 million with the Anaheim Angels and shortly afterwards Prince Fielder inks one with the Detroit Tigers for US$214 million.

This week the Cincinnati Reds locked up Joey Votto for 12 years on a US$251 million deal, while the San Francisco Giants inked pitcher Matt Cain to a meagre US$141 million, six-year contract. That's close to a billion dollars on four players and while none of them will probably have to worry about the burden of household debt, imagine how much these guys could make if the economy was healthy.

Yeah, it's tough all over, but nowhere more so than in the ownership of baseball teams. As the 2012 season officially opened in the US this week, after a dress rehearsal in Tokyo a week earlier, these poor owners were trying to figure out how to pay their players. I mean, you would have to be an idiot to want into this ownership thing. Nobody has money to go to baseball games anymore and that's why the Los Angeles Dodgers were sold last week for a mere US$2.15 billion, basically the price of nine or 10 front-line players.

A group fronted by former Los Angeles Lakers superstar Magic Johnson bought the club from the genuinely reviled Frank McCourt. But don't be fooled here. Magic is not writing the cheque for a couple of billion because his net worth is only US$500 million. Oh sure, Magic had to ante up a bit just so he could officially say he had some skin in the game. But he is merely the megawatt smile behind this whole thing.

The real money guy is a gentleman named Mark Walter, who is the CEO of a group called Guggenheim Partners, a privately held financial services firm. Guggenheim claims to have more than US$125 billion under management and I know what you are thinking Dodger fans, now you have to worry all over again about the team meeting payroll on time. Hopefully, though, those days ended with the departure of McCourt.

This new group not only has a friendly and familiar face in Magic, it has a far more benign attitude towards its business relationships. 'We put our clients and our relationships first, ahead of the firm's interests,' Walter claims on their website. The uninitiated among us might think at first blush that those same clients whose relationship comes before the firm's interests may be a bit steamed about this transaction. They might be asking: How can you use 2.5 per cent of the fund to pay for a baseball team when you paid US$1.2 billion more than any other team have ever been sold for?

They would know the previous record high for a team was the Chicago Cubs, who fetched US$900 million three years ago. But you and I are not financial wizards. More than likely the Guggenheim clients looked at this transaction and thought, wow, what a deal. In a couple of years' time when the economy is better, we can flip this thing for four or five billion and then we really might be on to something.

And just in case you are wondering, Guggenheim Partners does have an office here in Hong Kong in Exchange Square. So if you are heading out LA way in the near future and want tickets for a Dodger game, you should probably drop by and pick up a couple of freebies because, you know, times are tough all over.

When you do travel to LA, you will undoubtedly find the town is not only remarkably resilient, but still very much full of itself. It's a place that just loves its own reflection, and why not? It's home to Hollywood and all the stars will soon be coming out to Dodgers games again. They're trying to get by on a mere US$30 million a movie these days and are curious to see how the Guggenheim boys could score such a terrific bargain on the team. They may be movie stars but they are no different than you and I. They know the truth. Times are tough all over.