See no *EBIT, hear no EBIT, definitely speak no EBIT

Why would local government officials testify in a trial [or deposition] under oath and say things which no one believes? An article by Sarah Talalay from the Sun-Sentinel, describes testimony in the Braman trial yesterday:

Miami-Dade County Manager George Burgess admitted in Miami-Dade Circuit Court on Wednesday he has never asked for or seen the Florida Marlins' financial statements or any proof the team can meet its obligations to finance a $515 million ballpark.

It follows a similar admission by Miami-Dade County Mayor Carlos Alvarez during an earlier deposition. An article by Paul Brinkman from the South Florida Business Journal, describes his testimony:

Alvarez's taped statements said he never saw financial statements for the Marlins before approving public funding for the stadium, and that he had no guarantees the Marlins could pay for cost overruns, as required. Alvarez also said in the recording that he never asked why the county couldn't keep naming rights for the stadium, which were assigned to the Marlins, or why the county couldn't retain scheduling at the stadium when the Marlins' season ends.

The questions and answers are designed to lead the casual observer [jury and readers] to conclude that the respondent is either lying or incompetent. How could they not inform themselves of such basic information?

Braman's lawyers know that MLB's veil of secrecy would prohibit the sharing of financial statements exactly for this reason - lawsuits against any one of their 30 franchises could open the door to reveal financial data which involves all of MLB. For example, if the Marlins financials were made public, the amount of Central revenues which is derived from external sources and distributed evenly among all the teams [currently estimated at $40 million annually] would be disclosed etc.

Now there are many other documents and testing which could satisfy the County's concerns about the Marlins financial viability, not the least of which is the credibility of the MLB brand in wanting to avoid one of it's franchises leaving a local community holding their debt. The ultimate guarantee in these cases is the potential sale of all or a part of the franchise to raise funds, as Huizinga did recently with the Dolphins.

Braman lawyers question the Marlins financial viability, but would oppose the stadium irrespective of the Marlins finances. In fact, a case can be made that their opposition would be even more strenuous if the Marlins admitted to their profitability. On the Marlins side, they have been very profitable in the past 3 yeras, but have pretended otherwise to solicit public funds for the stadium. Nothing is what it appears.

I recently saw parts [Demi Moore] of the movie Disclosure, directed by the great Barry Levinson. I wonder if the County manger is getting anonymous emails late at night which say, 'nothing is what it appears, solve the problem.' The main problem with the stadium deal is the coming cost overruns in the construction, which the Marlins are supposed to pay, but with which there is much [earned] concern that the Marlins will avoid doing so at all costs - based on legalities, not financial solvency.

Braman and the local governments may be sitting at different tables at this trial, but their incentives - getting a better deal for taxpayers - are more aligned with each other than with the Marlins ownership & MLB. I hope the leverage this trial is granting them will allow the government to get stronger and more concrete language in the agreement regarding the likely construction costs overruns.

*EBIT = Earnings before interest and taxes. Also called operating profits.

Braman, Petards and Hoisting

Turns out a petard is a small bomb.

During Braman's testimony in the trial yesterday, there was the following exchange as reported by Charles Rabin in the Miami Herald:

Auto dealer Norman Braman opened his lawsuit against Miami's megaplan Monday by sparking a short, but fiery, debate over the financial well-being of one of the project's prime recipients: the Florida Marlins.

Braman lost the skirmish, but his opening salvo gave a glimpse of what will likely be a bitter fight over the plan that would bring a new stadium to the Marlins and reshape Miami's urban core.

The judge had already ruled the ball club's money issues had no bearing on whether the use of $395 million in public money to help build a stadium served the public good.

That didn't stop Braman from going to the heart of his argument -- which brought a string of objections and triggered something of a disjointed appearance by the wealthy businessman in the crowded, stately Miami courtroom.

''I know as a matter of fact that the Marlins do not have the financial capacity,'' was all the 75-year-old former owner of the Philadelphia Eagles could utter before he was cut off by Marlins attorney Sandy Bohrer, who also represents The Miami Herald in unrelated matters.

''Has he seen their financials?'' Bohrer asked Circuit Court Judge Jeri Beth Cohen.

Cohen sided with Bohrer, not allowing a document Braman said he received during a 2003 visit from Marlins President David Samson that he claims shows the team was more than $150 million in debt. Braman also said Marlins owner Jeffrey Loria tried to persuade him to take on partial ownership at the time.

In my dream movie version, when Braman was asked if he had seen their financials, he would have produced a copy of the 2008 Forbes Business of Baseball magazine and David Samson would have suddenly appeared, snatched it from him and thrown himself through the nearest window - invoking Law #11 of Cartoon Thermodynamics - no real injuries would have ensued.

I love this stuff. I can't wait until Tom Wolfe or Carl Hiaasen writes about it. But for now, please note the following points:

• Braman must know that the Marlins operating results have vastly improved since 2003 [see the Marlins P&L since 2002], given their salary cutbacks, the increase in revenue sharing monies and MLB Central revenues, but since the Marlins are always crying poverty in order to get the stadium, they are in no position to counter his argument. Hence, Braman is the 'hoister' and the Marlins brought the 'petard' to this relationship.
• Whatever document Braman was presented to encourage his investment, could not have been Florida Marlins debt as of 2003, since Jeffrey Loria purchased the team for $158.5 million - $38.5 million of which was a conditional loan and the other $120 million was the value ascribed to the Expos franchise which was exchanged for the Marlins. So at the time of purchase, the Marlins under Loria had a debt of $38.5 million.
• According to Forbes, the Marlins had operating loses totaling for $26 million for 2002 & 2003 - let's say Forbes was off 10% and call it $28.5 million in loses for those two years. So the Marlins would have had debt totaling approximately $67 million in 2003. By the way, the Marlins operating profits since 2003 have totaled $70 million. Goodbye debt. Hello stadium fund.

Perhaps the document Braman saw also included monies which Loria had invested in the Montreal Expos franchise - estimated at $30 million. An excerpt from that article below documents how Loria got control of the Expos:

He then initiated capital calls on the other owners in 2000 and 2001 to fund rising operating expenses. When they chose not to meet those calls, Loria funded them himself with about $18 million. That triggered a clause in the partnership agreement that allowed him to dilute the interests of other owners down to 6%. Loria thus gained 94% of the Expos for roughly $30 million. He would soon sell the team for four times that amount [value given for Marlins - JC].

But even that $30 million, properly understood is not a debt to the Marlins, but rather represents Loria's investment in the Montreal franchise which he subsequently sold for $120 million. The resulting difference represented a taxable capital gains to Mr Loria. But MLB ownership is the gift which never ceases giving to Mr Loria. There is a special IRS provision which allows sports franchise owners to amortize 50% of their purchase price over the first five years after the purchase. So Mr Loria was the beneficiary of about a $78 million tax write off which served to offset the capital gains tax from the estimated $90 million dollar profit related to the sale [or exchange] of the Montreal franchise.

His initial investment in the Marlins for $158.5 million is now acknowledged [see pg 11] to have grown to $250 million. Further, any consideration of Loria's or the Marlins financial viability, should really factor in that the owner was able to donate $20 million to Yale University as of 2007. If someone donates $20 million, what would be a reasonable estimation of their net worth?

Bottom line, the Marlins and Mr Loria's investment in them are doing just fine. But in a reminder of Aesop's [not Hee-Seop's] boy who cried wolf classic, they cannot admit financial well being when they most need to.

Forbes Florida Marlins Valuation was 97.4% Accurate

I thought I had been following this issue closely, but in preparing a longer post regarding the stadium deal, I came across an amazing number in the Florida Marlins Ballpark Project Report issued on January 22, 2008 by Miami-Dade County Manager, George Burgess. In section 22 (i), Community Benefit Obligations, the Florida Marlins assumed team value is stated at $250 million.

Forbes estimated the team's value back in March of 2008 at $256 million. In doing so for every MLB team, Forbes estimates each team's operating profits, non-operating expenses [depreciation and the interest associated with their debt] and then applies its internally developed metrics [i.e. the hard part] to arrive at the team valuations. The point is that the revenues and expenses are the most straight forward aspects of the data they provide. The valuations themselves are subjective, short of a sale which would provide a benchmark. Or in the case of the 2008 Florida Marlins, a publicly issued document which was negotiated between local governments and the Florida Marlins in which the team ties itself to a reasonable valuation.

End of manufactured controversy. In being off just 2.4% [256/250], Forbes basically nailed the number on the head. Contrast that with Marlins President David Samson's comments to the Sun-Sentinel's Juan Rodriguez at the time the Forbes 2008 numbers were publicized:

'Every year I continue to be surprised at the absolute inaccuracy that a so-called reputable magazine is willing to print,' Marlins President David Samson said. 'We've never gotten called by them. We've never been asked to verify, deny, confirm, nothing. It's just a shame their readership is forced to read numbers that aren't true. 'I know the number they have for the Marlins is simply wrong. They have no information of any kind on which to base that article.'

I had earlier posts which delved into why the Forbes numbers are credible and how Mr Samson has the unenviable task of trying to debunk perceptions as to the Marlins recent profitability. No need to speculate now. The Marlins, through Samson, are purposely being misleading about their finances and the county manager's memo is the proof.

It would be too easy and counter-productive to conclude that Mr. Samson is a liar. In his role as Marlins President, it's basically his job to deny what some casual fans may think and what is obvious to people who have familiarized themselves with MLB finances. The 'why' the Marlins, and most other MLB teams, with the recent notable exception of the Pittsburgh Pirates, feel it's in their interests to mislead, even if it causes them to make absurd comments [e.g. Marlins have the highest marketing budget in MLB and (#2 on my fav 5) Forbes assumes that the Marlins don't have any non-player expenses], is more interesting to me.

I think there are a couple of reasons:

The main reason I believe is that the job of asking for public monies [albeit not local taxpayer dollars] to build a new facility would be much more difficult if the public knew unequivicably that the Marlins, according to those wacky kids at Forbes, were in terms of operating profits, the most profitable team [$43 million] in 2006 and the 2nd most [$36 million] in 2007 - despite having the lowest revenues in MLB for both years. FYI, 2008 is looking good too. Toss in that the owner, Jeffrey Loria, recently gave a $20 million donation to Yale University, and you have the makings of a tough sell.

Now, once teams already have their stadiums built the incentive to mislead is significantly lessened. But to drop the facade has implications to their fellow owners, as I'm sure the Pirates recently found out.

The second reason is what they do with the revenue sharing [RS] dollars they receive from other MLB teams. What RS was meant to do, especially in the eyes of fans, was to help smaller market [lower revenue] teams compete with the larger market teams in being able to sign players. The language in the collective bargaining agreement, even states that it is intended to "improve on-field performance."

But that language has proven to be no obstacle for owners like Bob Nutting in Pittsburgh or Jeffrey Loria here. In the case of the Pirates, paying down team debt was considered, and the MLB Commissioner's Office and the Players Union implicitly agree [no protest has ever been filed as to the use of RS monies], to be a legitimate interpretation of "improving on-field performance."

So who is left to complain if the Marlins financial strategy since 2006 is to attempt to break-even while ignoring the RS monies they are receiving in the equation. Instead they are accumulating those RS monies to fund their portion of the planned stadium construction costs of $120 million. From the incentives angle [i.e. who has the most to lose], it should be the Player's Union, but they have been silent. Perhaps their silence is the last side effect from the steroids era.

Anyways, how does a MLB team remain very profitable despite having the lowest revenues? In 2008, a year where they can expect to receive around $75 from MLB [at least $35 million in Revenue Sharing and around $40 million in Central Revenues], their opening day salaries totaled $22 million. Imagine selling that at FanFest and you then have a better idea of why Mr. Samson makes nonsensical remarks regarding the Marlins finances and Forbes' credibility.

Name One, I Dare You

When Ted Kennedy first ran for the Senate in 1962, his opponent in the Democratic primary [the equivalent of a general election in MA] - Edward McCormack, state attorney general of Massachusetts and nephew of House Speaker John McCormack [not exactly an outsider himself] - commented during a debate on TV:

"If your name was simply Edward Moore instead of Edward Moore Kennedy, your candidacy would be a joke."

Can you imagine Sen. McCain turning to Sen. Obama during one of the upcoming debates and making the following comment:

"If you were a WASP, your candidacy would be a joke."

I can't either. It would take real skill to deliver that remark without appearing to be racially insensitive. But the type of people predisposed to be offended, probably aren't McCain voters anyways.

Anyways, the idea would be to highlight Sen. Obama's lack of significant experience or accomplishments. If he wins, he would become the president with the least elected experience since Dwight Eisenhower [elected 1952]. Generally, Supreme Allied Commander trumps community organizer, so let's keep going back to find out which previous president had less accomplishments or governmental experience than Barack Obama.

Here we go - Herbert Hoover had never been elected to office before being elected President [1928] - let's check that bio:

During the time in the early 1920s when legislation was being crafted to authorize a dam on the Colorado River, Herbert Hoover (1874-1964) served as Secretary of Commerce for President Warren Harding. Secretary Hoover drafted the Colorado River Compact. The Compact proposed dividing the Colorado basin into two parts, the upper and lower. Water from the upper basin would supply Colorado, New Mexico, Utah, and Wyoming, while the water from the lower basin would be used by Arizona, California, and Nevada. The terms of the compact seemed to quell the complaints of each of the states (with the exception of Arizona.) Hoover was congratulated for his skill and efficiency in handling the matter.

A millionaire before age 40, Hoover was admired for his talent as a mining engineer and his administrative skills. During World War I, he distinguished himself as director of the American Relief Committee, a London organization charged with assisting stranded Americans escape war-ravaged Europe. Following that assignment Hoover had similar success as the chairman of the Commission for Relief in Belgium, where he coordinated the distribution of clothing, food, and medical supplies to civilians in France and Belgium. Having gained high marks for his war-time efforts, Hoover gained political prominence in the administrations of Presidents Harding and Coolidge. He served as Commerce Secretary for both men. In 1928, Hoover benefited from Calvin Coolidge's decision not to run for re-election. Hoover handily defeated Democrat Alfred E. Smith to win the presidency.

Perhaps we were too rash. Relax, we'll find somebody.

Looks like we may have a chance with Woodrow Wilson [elected 1912] - let's check that bio:

In 1890 Wilson was appointed professor of jurisprudence and economics at Princeton. These were busy years for the popular teacher, who also devoted his energies to the publication of Division and Reunion (1893) and History of the American People (1902), as well as public lecturing and writing for popular magazines. A frequent theme that emerged at Princeton was his belief in the wisdom of having a strong executive at the helm of the nation. In 1902 he was unanimously elected president of Princeton, the first layman to hold that position.

As a college president, Wilson was an innovator and reformer whose stands eventually wore out his welcome. He was dedicated to the goal of making Princeton an institution of the first rank and fostered instructional reform through the use of “preceptors” — young academics who were assigned to live with the students and to hold discussion sessions related to the class work. Wilson also was successful in updating the university’s curriculum. Wilson’s victories and defeats were widely reported in the New Jersey press, making him a popular figure.

Tiring of butting heads over academic issues, and capitalizing on recent publicity, Wilson accepted the Democratic nomination for governor of New Jersey in the summer of 1910. James “Sugar Jim” Smith held the reins of the state machine and thought the college president would lend an aura of reform to his tarnished party. Wilson won an overwhelming victory in the fall and then quickly divested Smith of any notion that he would be easily manipulated. Smith had anticipated a Senate seat for helping Wilson, but the new governor spearheaded a movement on behalf of another candidate — and won.

Wilson aligned himself with legislative progressives and managed to record major accomplishments in short order. Laws were passed providing for regulation of public utilities, school reform, workmen’s compensation, direct primaries, and later, state antitrust legislation for the formerly permissive New Jersey. These successes made Wilson a national political figure.

Doesn't seem like a 'voting-present' kinda guy. OK, forget Wilson, let's keep hope alive.

Here's Chester Arthur's [elected 1880] bio:

Arthur became principal of North Pownal Academy in North Pownal, Vermont in 1849. He studied law and was admitted to the bar in 1854. Arthur commenced practice in New York City. He was one of the attorneys who successfully defended Elizabeth Jennings Graham [black woman], who was tried after being denied seating on a bus due to her race. Arthur also took an active part in the reorganization of the state militia.

During the American Civil War, Arthur served as acting quartermaster general of the state in 1861 and was widely praised for his service. He was later commissioned as inspector general, and appointed quartermaster general with the rank of brigadier general and served until 1862. After the war, he resumed the practice of law in New York City. With the help of Arthur's patron and political boss Roscoe Conkling, Arthur was appointed by President Ulysses Grant as Collector of the Port of New York from 1871 to 1878.

This was an extremely lucrative and powerful position at the time, and several of Arthur's predecessors had run afoul of the law while serving as collector. Honorable in his personal life and his public career, Arthur sided with the Stalwarts in the Republican Party, which firmly believed in the spoils system even as it was coming under vehement attack from reformers. He insisted upon honest administration of the Customs House but nevertheless staffed it with more employees than it really needed, retaining some for their loyalty as party workers rather than for their skill as public servants.

Sorry, I can't go against a guy who served his country during the Civil War.

Abraham Lincoln [elected 1860] - this is the one most mentioned as having less or comparable experience to Sen. Obama - but note the variety and depth of his experiences - bio:

Lincoln began his political career in 1832, at age 23, with an unsuccessful campaign for the Illinois General Assembly, as a member of the Whig Party. The centerpiece of his platform was the undertaking of navigational improvements on the Sangamon River. He believed that this would attract steamboat traffic, which would allow the sparsely populated, poorer areas along the river to flourish.

He was elected captain of an Illinois militia company drawn from New Salem during the Black Hawk War, and later wrote that he had not had "any such success in life which gave him so much satisfaction."

For several months, Lincoln ran a small store in New Salem.

In 1834, he won election to the state legislature, and, after coming across the Commentaries on the Laws of England, began to teach himself law. Admitted to the bar in 1837, he moved to Springfield, Illinois, that same year and began to practice law with John T. Stuart. With a reputation as a formidable adversary during cross-examinations and in his closing arguments, Lincoln became one of the most respected and successful lawyers in Illinois and grew steadily more prosperous.

He served four successive terms in the Illinois House of Representatives as a representative from Sangamon County, and became a leader of the Illinois Whig party. In 1837, he made his first protest against slavery in the Illinois House, stating that the institution was "founded on both injustice and bad policy."

A Whig and an admirer of party leader Henry Clay, Lincoln was elected to a term in the U.S. House of Representatives in 1846. As a freshman House member, he was not a particularly powerful or influential figure. However, he spoke out against the Mexican-American War, which he attributed to President Polk's desire for "military glory" and challenged the President's claims regarding the Texas boundary and offered Spot Resolutions, demanding to know on what "spot" on US soil that blood was first split.

By the mid-1850s, Lincoln's caseload focused largely on the competing transportation interests of river barges and railroads. In one prominent 1851 case, he represented the Alton & Sangamon Railroad in a dispute with a shareholder, James A. Barret. Barret had refused to pay the balance on his pledge to the railroad on the grounds that it had changed its originally planned route. Lincoln argued that as a matter of law a corporation is not bound by its original charter when that charter can be amended in the public interest, that the newer route proposed by Alton & Sangamon was superior and less expensive, and that accordingly, the corporation had a right to sue Barret for his delinquent payment. He won this case, and the decision by the Illinois Supreme Court was eventually cited by several other courts throughout the United States.

Lincoln was involved in more than 5,100 cases in Illinois alone during his 23-year legal career. Though many of these cases involved little more than filing a writ, others were more substantial and quite involved. Lincoln and his partners appeared before the Illinois State Supreme Court more than 400 times.

Lincoln returned to politics in response to the Kansas-Nebraska Act (1854), which expressly repealed the limits on slavery's extent as determined by the Missouri Compromise (1820). Illinois Democrat Stephen A. Douglas, the most powerful man in the Senate, proposed popular sovereignty as the solution to the slavery impasse, and incorporated it into the Kansas-Nebraska Act. Douglas argued that in a democracy the people should have the right to decide whether or not to allow slavery in their territory, rather than have such a decision imposed on them by Congress.

Drawing on remnants of the old Whig, Free Soil, Liberty and Democratic parties, he was instrumental in forming the new Republican Party. In a stirring campaign, the Republicans carried Illinois in 1854 and elected a senator. Lincoln was the obvious choice, but to keep the new party balanced he allowed the election to go to an ex-Democrat Lyman Trumbull. At the Republican convention in 1856, Lincoln placed second in the contest to become the party's candidate for Vice-President.

In 1857-58, Douglas broke with President Buchanan, leading to a fight for control of the Democratic Party. Some eastern Republicans even favored the reelection of Douglas in 1858, since he had led the opposition to the Lecompton Constitution, which would have admitted Kansas as a slave state. Accepting the Republican nomination for Senate in 1858, Lincoln delivered his famous speech: "'A house divided against itself cannot stand.'(Mark 3:25) I believe this government cannot endure permanently half slave and half free. I do not expect the Union to be dissolved — I do not expect the house to fall — but I do expect it will cease to be divided. It will become all one thing, or all the other." The speech created an evocative image of the danger of disunion caused by the slavery debate, and rallied Republicans across the north.

Don't be embarrassed that you entertained the thought that they had similar experiences prior to becoming president, just stop watching PMS-NBC. Bottom line, Lincoln really was a great lawyer, not someone who punched that ticket on the resume. Case closed. Onward Christian [as far as I know] soldiers.

Zachary Taylor [elected 1848] had a 40 year career in the Army and served in various wars - buck up lads, this post has to end soon.

This is getting ugly - from Jackson [elected 1828] through Taylor they all had extensive military and state government experience. The first six are an absolute nightmare for Sen. Obama, founding the nation and all.

Open challenge to Obama supporters; Name one president who had less experience or accomplishment than Sen. Obama will have had if elected in 2008 - with the caveat that experience does not equate to success in the presidency.

Umpiring and the Key Ingredient for Good Citizenry

Watching the Marlins @ Padres last night, I saw a borderline bad call get overshadowed by MLB umpire Joe West's subsequent imitation of the Federal Government - outwardly bloated with an impervious attitude. At the moment, I imagined terrible fates befalling Mr West with my enthusiastic assent, but in the light of day [and a Marlins win], I now thank Mr West for teaching me tolerance. Tolerance of mediocrity and the unions which shield them is needed in great supply - let's just call it the Brian Runge challenge.

On June 29th, Mr Runge, in his 2nd game coming off a one game suspension for bumping a manager, lost count of a ball 4 to Orlando Hudson and then made 2 of the worst called strikes - the mind wanders to Eric Gregg's glorious punch out of Fred McGriff in the 1997 LCS - imaginable in the same inning, one against each team.

As fans, we are aware that home plate umpires do make-up calls, but to watch him do it on pitches which were not close, essentially back to back [Mark Reynolds in the top of the 8th and Mike Jacobs in the bottom of the 8th], showed me how immune umpires feel to criticism. The NBA is not the only league with an officiating problem.

Jim McLennan, a Diamondback's fan, took a poll to find out who might be the best & worst umpires - check out his blog.

Judge Jeri Beth Cohen

Perception: The Braman lawsuit regarding the efforts to build the Marlins a stadium on the Orange Bowl site will determine if the local government's [Global] plans are reasonable and whether the Marlins are paying their fair share.

Reality: The case in Judge Jeri Beth Cohen's courtroom may be settled along technical legal grounds which don't address either the plan's reasonableness or whether the Marlins are contributing their fair share.

Normally, I'd label that perception as unfair, with the caveat that judges, of all people, should be able to deal with that, given [oncoming Godfather reference] the lives they have chosen. But that was just my first reaction. Then I remembered to consult Judge Posner.

I'd like to extrapolate his views from another issue onto this one. Recently I watched HBO's Recount - about the 2000 Presidential election - and started reading Posner's views on it [he thinks the Supreme Court's decision achieved the correct result, but was poorly arrived at]. Aside from his book on the topic, he had a lengthy exchange with Alan Dershowitz in Slate magazine, during which he made the following point:

Students of the law differ on the extent to which pragmatic considerations are proper in adjudication. I believe that they are proper, though with qualifications. If pragmatic adjudication means ad hoc decision-making that disregards everything besides the immediately foreseeable consequences of the case at hand, I am against it. But I'm for it if it merely means bringing into the decision-making process, to the extent allowed by the conventional materials of adjudication such as text and precedent, a consideration of consequences both long term (such as the importance of predictability in law) and immediate. Law's consequences are not "extralegal" matters that judges should ignore in accordance with the maxim ruat caelum ut fiat iustitia (let the sky fall so long as justice is done). Law should be in the service of life. Where do you think law comes from if not from practical concerns with attaining such social goals as prosperity, security, freedom, and, in Bush v. Gore, an orderly presidential succession?

The bottom line here is that if the Judge Cohen thinks the Global plan is a bad deal for local governments, that thinking may legitimately find its way into the decision which comes from her courtroom. Score one for perceptions.

Why Golf is not a Sport

While we're at, it let's add stock car racing to the non-sport list. Any 'activity' in which a semi-retired [from his main non-physical profession] long-time AARP member can take up and succeed in later in life means that the equipment mattered more than the participant. Anyways, if golf were a sport, the following posting on The Onion would not be funny, and it is very funny:

A man who used several different bent sticks to hit a ball to an area comprised of very short grass surrounding a hole in the ground was praised for his courage Monday after he used a somewhat smaller stick to gently roll the ball into the aforementioned hole in fewer attempts than his competitors. "What guts, what confidence," ESPN commentator Scott Van Pelt said of the man, who was evidently unable to carry his sticks himself, employing someone else to hold the sticks and manipulate the flag sticking out of the hole in the ground while he rolled the ball into it. "You have to be so brave, so self-assured, so strong mentally to [roll a ball into a hole in the ground]. Amazing." The man in question apparently hurt his knee during this activity.

A more serious argument is made by Michael Lewis in his commentary on Bloomberg.com - an excerpt below:

Once you see golf for what it is -- an activity more like birding than basketball that, for the sake of rich important people, everyone is pretending is more like basketball -- you begin to understand a lot of otherwise hard-to-fathom golf- related phenomena.

For instance, the huge sums paid to real athletes, from real sports, to play golf. The appearance fees that any recently retired jock can earn by playing a round of golf with businesspeople is, on the face of it, bizarre.

It's hard to think of another form of recreation that pays jocks to associate themselves with it. Spelunkers don't pay ex- jocks to spelunk; tai chi chuan masters don't pay ex-jocks to contort themselves conspicuously in the local park.

Only golf pays ex-jocks to play it -- so that the people who engage in it can feel more jock-like.

The un-Fab Five - MLB's Profitable Leeches

Please click on the spreadsheet to enlarge or print.

Tracking Bad Loans Goes Way Off Balance Sheet

The WSJ article [subscription needed] describes how banks are 'fixing' their bad loan problems, partly by making it harder to be a bad loan. The cynic in me hopes one day to see a 'badder loan' section on a financial statement. Another tactic is to transfer bad [baddest?] loans to non-regulated subsidiaries in order to avoid capitalization issues.

The obvious results of these types of changes is to make the accuracy of the liability section of a balance sheet suspect. Only those who are prepared to go in-depth into the notes of a financial statement can have any sort of confidence about the entity's financial condition.

Which makes me wonder if there isn't an opportunity here to restate the financial statements for public companies to incorporate the contingent liabilities detailed in the Notes into a 'real' or 'worst case' liability section - i.e. what the regular balance sheet would look like if it were actually useful to independent 3rd parties. Online stock trading sites would seem to have the most incentive to produce something like that. To be followed up on.

Current Iraq Situation

I consider Thomas Friedman to be part of the responsible political left. In this column, he gives his assessment of the current situation in Iraq. Hard to argue with his points about the current political realities facing the next president - see excerpt below.

The first is the mood of the American public, which has rendered a judgment that the price we have paid in Iraq over the last five years far, far exceeds what has been achieved there to date. Therefore, whoever wins the presidency — John McCain or Barack Obama — will take office knowing that the American people will not tolerate another four years dominated by an open-ended commitment to Iraq.

But the second is the reality on the ground in Iraq, which is no longer an unremitting horror story. Clearly, the surge has helped to dampen the internal conflict. Clearly, the Iraqi Army is performing better. Clearly, Iraq’s Prime Minister Maliki, by cracking down on rogue Shiite groups from his own community, has established himself as more of a national leader. Clearly, the Sunnis have decided to take part in the coming parliamentary elections. Clearly, Kurdistan continues to operate as an island of decency and free markets. Clearly, Al Qaeda in Iraq has been hurt. Clearly, some Arab countries are coming to terms with the changes there by reopening embassies in Baghdad.

The third reality, though, is the fact that the reconciliation process inside Iraq — almost five years after our invasion — still has not reached a point where Iraq’s stability is self-sustaining. And Tuesday’s bombing in Baghdad, which killed more than 50 people at a bus stop in a Shiite neighborhood, only underscores that. The U.S. military is still needed as referee. It still is not clear that Iraq is a country that can be held together by anything other than an iron fist. It’s still not clear that its government is anything more than a collection of sectarian fiefs.

Cartoon Physics, Debt and Calvinism

On the one hand, I tend to be in philosophical agreement with the kind of people who feel that our societies are in decline. So when I read David Brooks column about how debt is undermining values required for a free and prosperous society, I did so uncritically and in agreement.

On the other hand, in my personal life, I tend to not trust people's memories about best meals, hottest summers, most exciting game, etc. It just always seems too easy to think that what just happened was the best or worst or that things were better in the past. It's the type of inconsistencies we see in others, but not ourselves. Recently. there was an interesting article from the noted writer David Mamet, in which he realizes that his politics don't match his more personal beliefs.

What I've learned over the years is that people don't appreciate being challenged on observations mostly meant to avoid silence. So nowadays I quietly nod and secretly wish their heads will explode [invoking Law #11 of Cartoon Thermodynamics - no real pain would be felt], as people begin to regale me with how they would categorize yesterday's heat.

But when they put it in writing, that changes everything. After I read Richard Posner's post about Brooks' column, I see how an open mind should work. I should always be applying my doubting instincts, especially on those views with which I am in agreement. See an excerpt from Posner below.

Max Weber argued convincingly in his famous book The Protestant Ethic and the Spirit of Capitalism that the frugality and industriousness promoted by the early Protestants in opposition to the opulence of the Roman Catholic Church were values conducive to and perhaps critical in the rise of commercial society. Protestants who believed in predestination wanted to show by their modesty, austerity, and avoidance of lavish display that they were predestined for salvation.

But saving plays a less important role in economic progress today than it did in the sixteenth century. Its role in powering economic growth has been taken over, to a large extent, by technology. The great rise in standards of living worldwide is due far more to technological progress than to high rates of savings, that is, to deferring consumption.

At the same time, now that we have efficient debt instruments that in former times did not exist or were extremely costly, the role of personal debt (Brooks does not criticize corporate or government debt) in human welfare is more apparent than it was. Apart from its role in solving short-term liquidity problems resulting from delay in the receipt of income, debt enables consumption to be smoothed over the life cycle. Without debt, a family might have to wait 20 years before it could afford to buy a house. Of course, debt creates risk for both lender and borrower, as the subprime mortgage crisis has dramatically illustrated. But if the risks are understood, it is unclear why the assumption of them should be thought harmful to personal or social welfare. At worst, debt leads to bankruptcy, but bankruptcy is not the end of the world either for the borrower or for the lender.

What is true is that easy credit facilitates bubbles, such as the housing bubble and the related mortgage-financing bubble, and the bursting of a bubble can, as we have been relearning recently, cause economic dislocations. This may require some regulatory adjustments; it does not require a return to Calvinism.

Wow - that might be Posner's best post EVER!!!

My Interview with The Hardball Times

Please check out my interview with The Hardball Times. I owe a big thanks to John Beamer for giving me the opportunity to express my thoughts in such an extended format. Aside from hopefully making a good argument about how much reasonable people can deduce about a MLB team's finances, even without actually having access to their financial statements, I believe I make a good case about how MLB can address their revenue sharing problem - see the excerpt below.

Beamer: The Marlins don't use revenue sharing for its intended purpose. Is this a problem and any idea how it can be fixed?

Costales: The issue of how to deal with teams which don't use revenue sharing [RS] monies for their intended purpose is a problem for MLB. It undermines the entire revenue sharing structure which most would argue has served MLB well. Whatever "on-field performance" has come to be interpreted as in order to meet CBA provisions is almost irrelevant; it clearly was meant to help low-revenue teams compete by allowing them to increase their payroll beyond their normal means—MLB's version of the 'keep hope alive' mantra.

The 2008 Florida Marlins are making an argument against a salary base. The fact that no salary base was part of the new CBA probably means that it had some support, but not enough votes this time around. But not wanting teams to profit from RS monies received is a two-part equation. Salary expenses are only one side of it. The other is revenues.

Why not limit RS receiving teams revenues by forcing them to refund a certain amount of the RS monies received back to their fans? Begin with season-ticket holders and other fans which have purchased ticket packages. Reduce ticket prices dramatically for defined periods.

The mechanics can be worked out obviously, but the philosophical rationale is straightforward—eliminate the incentives for teams to pocket their RS monies. That way, those teams who wish to go with young players and minimum salaries can do so, but without the full MLB welfare check. What is it we say in business: a principle is not a principle until it costs you something.

This idea would address MLB concerns about teams pocketing RS monies, avoid a salary base which limits a team's independence, create goodwill among their loyal fans and likely increase attendance. It probably won't happen, but someone please tell me why it shouldn't happen?

Tim Russert, Catholic - RIP

Whenever someone passes unexpectedly, my thoughts run reflexively to my own mortality and then to my relationship with God. I take comfort in knowing that Mr Russert was a practicing Catholic. See the excerpt from an article regarding a commencement speech he gave in 2004.

In a speech emphasizing Catholic values, "Meet the Press" anchor Tim Russert told the Boston College class of 2004 yesterday that their Jesuit education is a special gift, and also called for measures to prevent clergy abuse of children.

Russert, who described himself as "a respectful servant in the laity of the church," also said the key to a meaningful life is understanding, "What is God's work here on earth?"

In his keynote speech, Russert described having a private audience with Pope John Paul II in 1985, to ask him to appear on the "Today" show. Russert said he forgot his concerns about NBC's ratings and instead thought about "the prospect of salvation."

"You heard this tough, no-nonsense hard-hitting moderator of `Meet the Press' begin by saying, `Bless me Father!' " Russert said.

He gave the following career advice to Robert Costa:

I'd first met Russert that June, while interning for PBS's "Charlie Rose" in New York. My important duties that day were to get Russert coffee and walk him out of the Bloomberg building after the taping. I told him I'd love to work on "Meet the Press."

"You're being too nice," he said at the time, laughing. "Guys like you should want to host the show." More seriously, he added, "Look, you just have to get out there and do it." Russert took in the swarm of people on Lexington Avenue and asked "Where are you from, son?"

"Bucks County, Pennsylvania," I said. Russert gestured to the people rushing by. "All of these folks," he said, "don't let them intimidate you. When I first started working for Pat Moynihan, I thought all of these Ivy League guys were ahead of me, that I could never catch up. Then Senator Moynihan took me aside one day, when I told him I didn't think I had it in me to compete in the big leagues, and he said, 'Tim, what they know, you can learn. What you know, they'll never understand.'"

Great Writing and a non-GIST Alert

Ever read or see* something you really enjoyed and discover later that it was considered that way by a lot of other people - otherwise known as the gratuitous inconsequential spotting of talent [GIST]. I've always remembered great articles I read in Sports Illustrated as a teenager about Tom Seaver and Jim Palmer. Recently, I discovered through the Sports Illustrated vault of past articles, that they were produced by writers considered among the best of their time, Pat Jordan and Frank Deford. Jordan's recent article provides insight into how the relationship between athletes and writers has deteriorated.

Michael Lewis is already well know, so no GIST credit can be claimed, but his article [warning it's long - a 23 page printout] is still amazing. The topics read like a personal wish list to me; baseball, communism, immigration, economics and native Cubans capacity for survival. The story takes you from a Federal courthouse in Key West to a Correctional Facility in California, with pit stops in Canada, Havana and Camagüey. Along the way, on a smaller scale I admit, Mr Lewis may have done for Victor Mesa what Tom Wolfe did for Chuck Yeager - shine a light on a larger than life character.

No ideological rant could be as damaging to any delusions of adequacy the Cuban government may still harbor, than this example of Lewis' reporting:

On either side of the highway as you leave Havana you see to the horizon fields now fallow that under better management would be making someone rich. Much closer, right beside the highway, you see Cubans selling the items most easily pilfered from the government and resold on the black market—fruit, milk, eggs, giant cheese rounds, live turkeys—while everyone from small schoolchildren to little old ladies waits for buses that run only in theory. On the road itself you see horses, mule-drawn carts, bicycles, army jeeps, ancient tractors, sugarcane cutters, and Soviet dump trucks belching hot black smoke. What you don’t see is anything resembling an automobile. The moment we leave Havana, in a 2003 Korean-made rental car, we become an object of wild curiosity. Everyone we pass stares in to see what sort of important person must be inside this exotic vehicle. “They probably think we’re either artists or musicians or maybe famous baseball players,” says the young Cuban guide I’d talked into coming with me.

By the time I reach the province of Camagüey—birthplace of Gus Dominguez—I’ve seen almost all the Cuban teams, talked to managers and players, and gotten a general sense of the caliber of play (high). But there are two things, in addition to cars, that I never saw. One is other tourists, who seem to be well imprisoned either in Havana or at beach resorts. The other is journalists. I’d been to a dozen games but had yet to encounter a single Cuban reporter. The games are on national television, they get written about in the national paper and get argued about on the streets—and yet no one interviews baseball managers or players. “The journalists don’t even want to talk to us,” the Camagüey manager tells me. “They think they know everything. I tell my players: Don’t read or listen to them. They don’t know anything.”

* - My all-time GIST was the fact that my favorite Hawaii Five-0 episode - the Monopoly clues thief - turned out to star legendary actor Hume Cronyn - as the only bad guy McGarrett ever liked.
** - GIST also named in honor of the proverbial character actor and director, Robert Gist, a native Miamian.

A Lesson in How to Insult

Courtesy of George Will commenting on Sen McCain's ability to give a speech:

"McCain is fortunate. The eerie narcissism of Clinton's speech the night that Obama clinched the nomination distracted attention from McCain's badly delivered speech the same night, in New Orleans. If he really opposes torture, he will take pity on the public and master the use of a teleprompter."

See the entire column.

Florida Marlins FinancesPigs get fat, hogs get stadiums?

Please click on the spreadsheet to enlarge or print.



While most have heard of the Forbes reporting on the valuation and profitability of MLB and the Marlins, I think having their work summarized in a P&L financial statement format will help us fans understand this issue better. For those who really want to get into it - Free pocket-protector anyone? - please see the related postings on the right side of the page under Florida Marlins Finances.

Back in April 2008, we got some attention at 2 of the more serious baseball blogs: Sabernomics & The Hardball Times [THT]. Then in June, an interview with me was posted in THT. Aside from an initial concern over being labeled a 'fiend' on a web site whose title includes the word 'hard,' I am very appreciative to John Beamer from THT for the opportunity.

A Lesson in Thinking

Please read Richard Posner's analysis of a proposal to pay kids to go school. Aside from the insights, admire the way he builds the argument:

• Background into Friedman's proposals re welfare in the 1960's
• How Friedman's cash grants morphed in the earned income tax credit
• Why children affect a normally libertarian mindset
• Why compulsory-schooling and child labor laws are necessary
• Analysis of why some parents don't send their kids to school
• How paying them could be expected to impact those factors
• Identifying a potential unintended consequence - lowered truancy but continued poor quality of education

Who's fooled by $19.99 instead of $20?

Answer: Apparently we are.

"There were three scenarios involving different retail prices: one group of buyers was given a price of $5,000, another was given a price of $4,988, and the third was told $5,012. When all the buyers were asked to estimate the wholesale price, those with the $5,000 price tag in their head guessed much lower than those contemplating the more precise retail prices. That is, they moved farther away from the mental anchor. What is more, those who started with the round number as their mental anchor were much more likely to guess a wholesale price that was also in round numbers. The scientists ran this experiment again and again with different scenarios and always got the same result".

See the complete article in Scientific American.

Morality & Globalization

Perception: Globalization may have been oversold. We are beginning to see unanticipated problems which should give us pause.

Economic Reality: The idea behind Globalization - defined as the increased integration of the world’s economy - is that resources should be allocated by markets, instead of government's. That idea has been and remains a great success.

"Countries don't get rich by staying isolated. Those that embrace trade and foreign investment acquire know-how and technologies, can buy advanced products abroad and are forced to improve their competitiveness. The transmission of new ideas and products is faster than ever. After its invention, the telegram took 90 years to spread to four-fifths of developing countries; for the cell phone, the comparable diffusion was 16 years."

The above quote is from a column by economist Robert Samuelson.

To take the globalization / free trade argument to another level, check out the posting by one of those heavyweight-ivy-league blogoshere-icon economist types - Greg Mankiw. He's for it and writes:

"Economists' devotion to free trade is based not only on the positive conclusion that it leads to a bigger economic pie but also on a couple of related philosophical positions."

Iowa's Immigration Problem?

Perception: The Federal Government is addressing the problem of immigration which is costing US citizens and residents their jobs.

Economic Reality: A 3.5% unemployment rate is the equivalent of full-employment. Raids in Iowa have more to do with presidential politics than immigration.

Below is an excerpt from the WSJ Editorial - May 24, 2008:

"Federal immigration officials raided an Iowa meatpacking plant this month in what is being called the largest operation of its kind in U.S. history. Nearly 400 of the plant's 900 employees were arrested on immigration charges. Do you feel safer?

Ever since immigration reform died in Congress last year, the Bush Administration has made a show of stepping up enforcement. But do homeland security officials really have nothing better to do than raid businesses that hire willing workers – especially in states like Iowa, where the jobless rate is 3.5%? These immigrants are obviously responding to a labor shortage for certain jobs. Giving them a legal way to enter the country would free up homeland security money and manpower to focus on real threats."

See rest of the WSJ editorial [subscription required]

Hanley Ramirez signing - Change in strategy?

Please click on spreadsheet to enlarge or print.


At first glance, the signing of Hanley Ramirez appeared to signal a shift in philosophy for the Florida Marlins management. If there was going to be a shift, this would have been the logical first step.

But as the numbers in my spreadsheet above indicate, this signing by itself does not represent any commitment of the $105 million in Revenue Sharing [RS] monies the Marlins will probably receive over the next three years prior to the planned new ballpark opening. The RS estimates are based on the statements by Pittsburgh Pirates President, Frank Coonlley, who disclosed that the Pirates would be receiving $35 million in RS monies in 2008. That level of RS monies are consistent with the Forbes estimates regarding Florida Marlins revenues from 2002 through 2007 - see the Marlins P&L I have compiled. By any criteria of how RS monies are allocated - Marlins have less Local Revenue and lower Payroll - the Marlins should receive a greater share of RS monies than the Pirates.

Put another way, in 2006 & 2007 the Marlins pocketed 100% of the Revenue Sharing monies received [about $72 million]. In the case of the 2007 season, they did so with a major league salaries level of $30 million. They then reduced their major league salaries by $9 million for the 2008 season. So even after the new Ramirez deal kicks in for the 2009 season [$5.5 million], they would still be under their 2007 salary levels - levels at which they were able to pocket all RS monies. Think about it, even after the Ramirez deal, the Marlins are currently on track to be under their 2007 major league salaries level of $30 million for the three years [2008 thru 2010] prior to their stadium opening.

Why is that important? Because part of the company line the Marlins will put out as valid reasons for not spending money on other players is that due to their low revenues and the Ramirez deal, they can not afford to do much else. The Ramirez deal, as of today, does not even bring them back up to their 2007 level of salaries, let alone dip into using their Revenue Sharing monies for the first time since 2005.

An article by Juan Rodriguez about the signing points out that Ramirez was worried about making a mistake by not holding out for an additional $30 million dollars. An ESPN article addresses how Ramirez would have benefited from the Ryan Howard arbitration awarded salary of $10 million for 2008. My spreadsheet provides a reasonable scenario under which Ramirez could have made an additional $30 million by going the arbitration then free agency route. But that route entailed a risk of injury and or sub-par performance. This is a good example of how to quantify the cost of avoiding risk.

The joy in South Florida over the Ramirez signing is probably the latest example of the Societal Stockholm Syndrome, the scenario whereby victims begin to feel sympathy for their captors.

Sowell on Oil Supply & Demand

Perception: Increasing oil prices may be a complicated issue, but we know that certain parties - i.e. oil companies and President Bush - are exploiting the situation.

Economic Reality: Oil prices are not immune to increased demand price pressures. The incentives to address the problem politically [identify bad guys] differ from potential economic solutions - decrease demand [kill Commies] or increase supply [kill environmentalists]. Gee, can't we do both Santa? See the column by economist Thomas Sowell - an excerpt below:

"Is there anything complex about the fact that with two countries-- India and China-- having rapid economic growth, and with combined populations 8 times that of the United States, they are creating an increased demand for the world's oil supply?

The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains."