All the result of the Wilpons getting a "guaranteed" 10% return from Madoff. Instead of paying Bonilla in cash, they stretched things out using an 8% interest rate. Once Madoff was found out, the 10% return went out the window and they were stuck with a very bad/embarrassing deal. Bonilla earns 8% guaranteed.
OT: Bobby Bonilla Day
- Thread starter knightfan7
- Start date
Stop trying to paint the Wilpons as shrewd baseball people. Even a blind squirrel finds an acorn every now and then.
Correct. One of those acorns will be the best acorn. This was theirs.
I did not, cannot, and would not paint the Wilpons as shrewd baseball people.
Not sure about that:
Bobby Bonilla ‘took the Mets to the woodshed’ with his lucrative 25-year deal
https://www.cnbc.com/2020/07/01/bobby-bonilla-day-why-his-deal-with-the-mets-was-so-lucrative.html
Bobby Bonilla, who retired as a baseball player in 2001, hasn’t played for the New York Mets since 1999.
Yet Bonilla is among the highest-paid position players on the Mets’ payroll this year.
The team paid the 57-year-old $1,193,248.20 on Wednesday — as it has each year over the past decade and will continue doing through 2035.
His payday, July 1, is known widely as “Bobby Bonilla Day.”
That good fortune is courtesy of a contract Bonilla signed with the franchise in the early 2000s, regarded as one of the most legendary deals in sports history.
For the Mets, it’s known as one of the worst — and one that involves Bernie Madoff’s notorious Ponzi scheme that blew up during the 2008 financial crisis.
“I think he got the greatest deal in the whole world,” Jeffrey Levine, the director of advanced planning at Buckingham Wealth Partners, said of Bonilla. “He absolutely took the Mets to the woodshed.”
In 2000, the Mets agreed to buy out Bonilla’s remaining $5.9 million contract.
Instead of paying that cash up-front, the team agreed to give Bonilla $1.19 million per year for 25 years starting in 2011. His annual pay includes a guaranteed 8% interest rate.
Bonilla’s deal is extremely lucrative for two reasons, according to Levine, who is a a certified financial planner and CPA.
For one, the Mets are paying Bonilla nearly $29.8 million, which is the sum of all his annual payments.
That’s more than double the $12.7 million value Bonilla’s contract would have had at the time he started getting paid in 2011, according to Levine’s calculations.
Further, an 8% guaranteed interest rate is especially generous.
It’s the equivalent of an 8% return on an investment every year, and without the volatility or risk present in the stock market.
Since the Federal Reserve slashed interest rates to near zero during the Great Recession, savers can’t get a comparable return on traditionally safe investments like cash or bonds.
“If you could get an 8% guaranteed return on your money, would you do it? The answer should be yes. It is exceedingly difficult,” Levine said.
That return is similar to Social Security, regarded by financial advisors and money managers as one of the best deals in town. The system pays retirees an extra 8% each year that they wait to claim benefits, up to age 70.
But Bonilla’s deal is better yet, Levine said, since his heirs would also continue getting paid each year if he were to pass away.
For context, if the Mets paid a lower interest rate — 3%, for example — the team would have paid Bonilla about $455,000 each year (instead of $1.2 million), for a total value of about $11.4 million (instead of $29.8 million), Levine said.
Of course, the Mets didn’t necessarily completely lose out on the deal. For one, they were able to free up cash by deferring pay, according to some observers.
But the team did fall victim to a somewhat risky form of investment arbitrage involving Bernie Madoff.
Mets owners believed they would easily be able to finance an 8% interest rate, since they were supposedly getting a higher return on an investment they’d made with Madoff.
Unfortunately, that turned out to be a house of cards. Madoff ran the largest Ponzi scheme in history and is currently serving a 150-year sentence.
Money lessons
The Bonilla deal has some money lessons for the average person.
For one, it shows the importance of taking the long view of one’s savings and investment portfolio, Levine said.
Bonilla’s deal shows how Americans can benefit in the long term by tempering a short-term impulse like abandoning the stock market if there’s a sudden drop.
Further, it shows the need to be cautious about debt.
Loans and credit-card debt can help people buy things they otherwise couldn’t afford. A mortgage, for example, allows people to buy a house.
But the Mets deal, which is equivalent to taking on a 35-year mortgage at an 8% interest rate, demonstrates how bill payments can quickly start to build when debt carries a higher interest rate, Levine said.
Terrible deal for Bonilla.
If he had taken the money after tax and bought Microsoft stock, he would be worth over $500 million today. Even if he had invested in S&p 500, I am sure he would be worth over $100M.
Always take the money. You get to decide what to do with it.
If he had taken the money after tax and bought Microsoft stock, he would be worth over $500 million today. Even if he had invested in S&p 500, I am sure he would be worth over $100M.
Always take the money. You get to decide what to do with it.
Bonilla is tied for the team lead in every statistical category this year, including pitching, so there's that.
Yeah you could invest in great companies like Enron. WorldCom, Sears, JC Penny's or give it to a trusted financial guru like Bernie Madoff.
MO
Shake your head if you wish, but it was not an unreasonable rate at the time. The prime rate in 2000 was 9.5%.
nice!.
i found it a little funny the article didn't mention the Cougars were renamed the Spirits of St. Louis when they relocated.
A
anon_ivydyf0amkzay
Guest
I thought it was way more than 5 left? 2035
He is 58 and his last payment comes at age 72
He is 58 and his last payment comes at age 72
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One of the best BASEBALL decisions the Mets ever made. (Financially, not so much.)
- The $5.9M saved in 2000 provided enough budget space to acquire Mike Hampton, who helped get them to the World Series.
- When Hampton left in free agency, the Mets used the compensatory draft pick to select David Wright.
Nah not really he's getting paid in less valuable money and has forgone the ability to put it to work while it's deferred. Unless I'm missing something here...
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anon_ivydyf0amkzay
Guest
It wasn’t bad from a Mets standpoint. They just didn’t know the madoff returns were fake. I remember Steve Phillips saying how they all sat around and laughed at what a bad deal it was for Bonilla and good deal for the Mets since they were gonna make all that money back and then some invested with madoff.
I would get on the Mets harder for signing Bonilla to a historically bad deal the first time around in the early 90s
www.google.com
I would get on the Mets harder for signing Bonilla to a historically bad deal the first time around in the early 90s
Reminder: Bobby Bonilla's payments from the Mets aren't mockworthy - MLB | NBC Sports
We really should be mocking the Braves and Bruce Sutter, not the Mets and Bobby Bonilla
Yes. In this particular case, he would have been paid in 2000, paid taxes then @ I believe 39% Federal rate (prior to W's tax cut) and gotten to invest the remaining $3.6mm right before the dot com bubble burst, followed by a 3 year bear market that saw Nasdaq composite down by 75%, only to hit the housing bubble crash when finally recovered. He made out like a bandit.
"...Unfortunately, that turned out to be a house of cards. Madoff ran the largest Ponzi scheme in history and is currently serving a 150-year sentence..."
Well not anymore. He died April 14. Unlike Bobby Bonilla's heirs, his don't inherit the rest of his sentence.
Well not anymore. He died April 14. Unlike Bobby Bonilla's heirs, his don't inherit the rest of his sentence.
Only 13 more years to go.
nypost.com
Happy Bobby Bonilla Day! Only 13 more years until he’s off the payroll
It’s July 1, which means it’s time for Bobby Bonilla to cash another fat check from the Wilpons.
nypost.com
Here a few more players with deferred payments, including our own Max Scherzer (yes I am a Met fan)
https://www.cbssports.com/mlb/news/...ays-get-kumar-rocker-rays-take-crawfords-son/
https://www.cbssports.com/mlb/news/...ays-get-kumar-rocker-rays-take-crawfords-son/
On the bright side for the Mets if inflation keeps up in 13 years a million $ will buy a Big Mac and fries
Sad, but possibly true with the folks running(ruining) monetary policy now. I can't figure out if it's incompetence or on purpose. Either way, gird your loins. Gonna be a mess.
The US is pretty much midrange right now on the inflation rate world wide
The monetary policy of those above us and those below us do not appear to correspond to their rank
When you start quoting Joe Biden speech taking points you raise questions abt your knowledge of basic economics. We know that he and all that surround him are clueless or malicious. Said I don't know which. Hope they're just morons.
Please don't quote the one about him" cutting the deficit". I won't even respond to that nonsense.
Just hope we can change course before these idiots fly us into the ground. Obama was right about this guy's ability to eff things up.
OZ'S VOICE
... Oh .... Oh ....
MS - The Wizard peers out from behind the curtain -
MS - Tin Man, Lion, Dorothy and Scarecrow react as they look at the Wizard
o.s. to right - Dorothy speaks
DOROTHY
Who are you?
MCU - The Wizard peering out from curtain - he ducks back out of sight and
his voice booms out again -
OZ'S VOICE
Oh - I - Pay no....
LS -- Shooting past the Four at left to the Curtain in b.g. -- Dorothy
goes over to it and starts to pull it aside --
OZ'S VOICE
...attention to that man behind the curtain.
Go - before I lose my temper! The Great and
Powerful ---....
***** time to lock the thread *****
the Mets being bad... and the fact that they got ripped-off by Madoff as well is so... Mets.
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