What you can learn about personal finances from the New York Mets?
I have been a New York Mets fan my entire life. I used to stay up late listening to games on WFAN. Meet the Mets still brings me back to wonderful trips to watch my Mets at Shea Stadium. Even sitting in the upper deck about 5 feet from the LaGuardia airplane traffic it was still a magical experience watching my boyhood sports heroes. My friends and I would then recreate the games in the backyard playing wiffleball.
I remember watching Doc Gooden and Darryl Strawberry lead the 86 Mets to a World Series as a 10 year old boy like it was yesterday. That team taught me a lot about perseverance and not giving up until the last out was made. It is amazing that almost 30 years later the Mets are teaching me another lesson that I want to share. It is not an obvious lesson to the naked eye about winning or losing. It is a lesson on overcoming financial adversity and how to bounce back stronger from it.
You may be laughing at the thought of a professional sports team dealing with financial adversity but give me a moment to explain. Unless you lived under a rock in 2008 you know who Bernie Madoff is. Madoff is the former NASDAQ chairman turned thief that defrauded investors out of over $20 billion dollars. So how does that criminal fraud relate to the 2015 Mets? The owners of the New York Mets Fred Wilpon and Saul Katz had invested with Bernie Madoff and had over 500 accounts with him.
How would supposedly successful businessman like Wilpon and Katz get caught up with a fraudster like Madoff?
That is a great question and one can only assume is that Madoff promised three things to the Mets owners that many investors want.
- High Returns – Madoff’s victims were getting fictious returns of 12 to 18% every year in their Madoff accounts.
- Consistent Returns – Madoff never failed to produce double digit returns even for a single year.Of course the consistent returns weren’t real but the victims didn’t know that.
- Liquidity – The Wilpon’s relationship with Madoff allowed them to invest their principal and reinvest their gains because they were able to get cash from their Madoff accounts whenever they needed to.
Here is the point where I stop and caution everyone that may come across someone touting all 3 of these things together to run the other way.
If it is too good to be true it probably is.
So now here comes the adversity part. Almost everyone has experienced a period of financial crisis or difficulty. How you respond to it determines your outcome after the event occurs. For the Mets the crisis was that they had used the Madoff accounts to collateralize a bunch of debt almost $900 million. These debts funded operations, a brand new Citi Field stadium, and a bunch of deferred payroll (I see you smilingBobby Bonilla). Wilpon and Katz were also sued by the trustee for Madoff victims trying to recover some of the “fake profits” the owners had taken out of their accounts over the years.
At the time of the fraud the Mets had one of the highest payrolls in baseball. They were spending over $140M a year in 2009. How did the Mets respond to the financial crisis they were faced with? They began to dramatically cut expenses. They traded a bunch of high priced contracts, and cut operational expenses so that they could survive. By 2014 the payroll was $85 million. The other interesting thing that the Mets did during this time was they invested in player development and stockpiling lots of young talent. This is paying off for the Mets during this unlikely run to the World Series. Now I am not asking anyone to feel sorry for a professional sports team owner I’m asking you to recognize that everyone faces a financial crisis at some point and how we respond shows your true character.
How does this relate to you? How do you respond to financial crises whether big or small? Did you repeat the same mistakes that got you into the mess or did you learn from it and change? Did you do everything you possibly could to survive and make small changes so you could thrive in the future?
As a Mets fan I have learned to deal with the fact that they were usually not going to win and I cherish every time they made the post season but this one is extra special. I get to share this run with my 10 year old son. Hopefully the Mets have learned from their mistakes and that you can to.
Let’s Go Mets!
Peter Huminski, AWMA
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.