New Orleans PelicansFinancial Education Seminar

Finance Professor at Tulane since 1997 Ph.D. in Finance – University of Arizona MBA – Virginia Tech Worked in Investment Management for

large bank Managed an Insurance Agency Worked with Saints Rookies from 2000 -

2010 Local Runner and Triathlete

Instructor: Bill Reese

When Your Playing Days are Over, Will You Have a Roll of Money, or Will You be Out on the Streets?

Kareem Abdul-Jabbar – Leading scorer in NBA history and 5-time MVP

Scottie Pippin – NBA All-Star and teammate of Michael Jordon on the Chicago Bulls.

Sheryl Swoopes – 3-time Olympic Gold Medal Winner and 3-time MVP of WNBA

Latrell Sprewell – 4-time NBA All-Star with over 15,000 career points

What do These Athletes Have in Common?

Joe Gibbs – Hall of Fame Coach; Coached Washington Redskins to 3 Super Bowl Championships

Steve Carlton – Hall of Fame Pitcher for St. Louis Cardinals and Philadelphia Phillies

Dorothy Hamill – Olympic Ice Skating Champion

Johnny Unitas – Hall of Fame Quarterback and 3-time NFL MVP 

What do These Athletes Have in Common?

Michael Vick – Pro Bowl Quarterback Leon Spinks – Olympic Gold Medalist and

Heavyweight Boxing Champion after defeating Muhammad Ali

Lawrence Taylor – Hall of Fame Linebacker Mike Miller – Former Miami Heat Forward

What do These Athletes Have in Common?

Mark Brunell – 18-yr. NFL QB. Backup to Drew Brees in 2009 Super Bowl year

Deuce McAllister – Saints all-time leading rusher. Retired in 2010

Patrick Ewing – Hall of Fame NBA player. Member of first Olympic “Dream Team”. Now head coach of Charlotte Bobcats

Allen Iverson – NBA MVP

What do These Athletes Have in Common?

Kareem Abdul-Jabbar – Lost $59 million through bad investments during 1970s and 1980s.

Scottie Pippin – Lost $17 million in bad investments.

Sheryl Swoopes – Filed for bankruptcy in 2004 after losing $50 million in bad investments

Latrell Sprewell – Lost $300,000 in a phony investment with Calvin Darden

Here’s What They Have in Common

Joe Gibbs – Financially wiped out in 1983. Owed millions of dollars from a failed real estate deal. 

Steve Carlton – Lost $10 million in investments in dry oil wells and Florida swamps

Dorothy Hamill – Filed for bankruptcy from bad investments despite earning over $1 million per year in endorsements

Johnny Unitas – Filed for bankruptcy after losing $4 million in bad investments in a bowling alley, a restaurant, an air-freight company, and real estate. 

Here’s What They Have in Common

Michael Vick – Filed for bankruptcy despite earning more than $130 million and being previously listed as one of the 10 richest athletes in the world

Leon Spinks – Currently works as a janitor at a YMCA despite earning $4.5 million

Lawrence Taylor – Filed for bankruptcy in 1998 despite earning over $50 million

Mike Miller – Lost up to $8 million in phony investment

Here’s What They Have in Common

Mark Brunell – Retired broke after 18-yr. career. Lost $50 million in bad investments.

Deuce McAllister – Lost $7 million in failed automotive dealership

Patrick Ewing – Part of a group of investors that lost $97 million in worthless real estate

Allen Iverson – Broke in 2012 despite having earned over $200 million during career.

Here’s What They Have in Common

“An estimated 60% of NBA players are broke within five years of retiring”

- Sports Illustrated: March 23, 2009

Where Will You Be?

“In retrospect, it’s easy to see that I got involved in the business with wrong motives, selfishly thinking that I had nothing to lose – that if anyone was going to lose money, it would be my friends, not me. I was simply trying to make some easy money.”

Quotes from “Racing to Win” by Hall of Fame Coach Joe Gibbs

“An acquaintance from college offered to let me become a partner in a tremendous real estate opportunity in Norman, Oklahoma, for a minimal amount of money. He was building homes and apartment complexes and developing other properties in the area, and the extent of my out-of-pocket expenses would be only a few thousand dollars for closing costs on each property. He planned to rent the properties until they sold, with the rental income more than covering our expenses. This was a no-brainer! I was going to be rich!”

Quotes from “Racing to Win” by Hall of Fame Coach Joe Gibbs

“We can’t lose money in real estate, I said to myself…After all, where else could we make so much money, so easily, with so little investment? This deal was too good to be true!”

“An old saying warns that when something seems too good to be true, it probably is.”

“One of my partners reassured me, ‘Joe, don’t worry. Before you lose a dime, we’ll lose everything we own!’ ----- And they did.”

“As the only remaining partner, the entire financial responsibility was on my shoulders. Too late, I recognized the shocking truth: I was liable for everything the partners had done, whether I had been personally aware of the transactions or not.”

Quotes from “Racing to Win” by Hall of Fame Coach Joe Gibbs

“As we waded through the past-due notices and other invoices, I felt a vice grip clamp on my stomach, wrenching my insides tighter with each new bill the accountants turned up. We worked all day long trying to add up what the partnership actually owed. The bottom line: I was millions of dollars in debt with no means of repaying that amount of money! At the height of my career, at a time when I should be enjoying my success, I was wiped out. I was technically bankrupt.”

Quotes from “Racing to Win” by Hall of Fame Coach Joe Gibbs

Program Name: High Yield Investment Program

Deposit Opportunity: These investments which take place in Europe are for large account holders only, and involve the side of the banking and investment industry with the European Bank Traders where large block commitments are made for cash contracts, which are resold at a high rate of return. It is the mass buying power of the trader coupled with the large quantity of cash input from the client, that allows the client to enjoy a higher than normal rate of return for his investment.

Deposit Requirement: Two-Hundred Fifty Thousand Dollars ($250,000.00)

Funds accepted in blocks of Twenty-Five Thousand Dollars ($25,000.00).Program Term: Ten Months. Program Features: Safety of Principal

High Yield Liquidity

Yield: Ten Percent (10%) per month. Paid the last Friday of every month.

How does this Investment Sound?

About 20 well-known New Orleans athletes, business owners, and politicians invested

They lost a total of more than $10 million They all got their names and pictures on the

front page of the Times Picayune Is that the kind of publicity you want?

It Was A Scam

Don’t believe claims that there is no risk Beware of promises that you’ll make big

profits fast Get the details in writing Don’t agree to anything on the spot Understand your investments Don’t act on testimonials from strangers Be especially wary of investments in

commodities Steer clear of “offshore investments”

Tips for Avoiding Investment Fraud

Well-known Salaries are often public information Young Come into money suddenly rather than

gradually Sports teaches you to trust your teammates Little or no prior experience with failure

Why are Athletes More Likely to Lose Their Money?

First Job

Raise Raise Second Job

Raise Third Job

Raise Raise0

2

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12

Lifetime Earnings for Typical Person

Rookie Veteran 2nd Career

Raise Raise Raise Raise Raise0

1

2

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7

NBA Player’s Lifetime Earnings

Average NBA Career Length is 4.8 years Most players will retire before age 30 Your earnings for 5 years will need to last

you the next 50 years Others earn for 40 years to last 15 years Work and Hope for the best; but plan for the

worst

What Should I Do?

Most save for 40 years to last 15 years You need to save for 3-10 years to last 50

years Taxes: About 50% of what you earn

◦ Federal Income Taxes ◦ State Income Taxes◦ Medicare Taxes◦ Property Taxes◦ Social Security Taxes

30/40/50 Rule

How Much Should I Save?

Group 1: Earn $1 million/yr for 3 yrs◦ Earnings after taxes of $1.5 mill for career◦ Save 30% per year◦ Retire with about $500,000 saved◦ Plan to work after retirement◦ Consume about $50,000/yr from savings

How Much Should I Save?

Group 2: Earn $5 million/yr for 6 yrs◦ Earnings after taxes of $15 mill for career◦ Save 40% per year◦ Retire with $7 million saved◦ Consume $400,000/yr in retirement◦ Shouldn’t have to work if willing to drop standard

of living from $3 mill/yr to $.4 mill/yr

How Much Should I Save?

Group 3: Earn $10 million/yr for 10 yrs◦ Earnings after taxes of $50 million for career◦ Save 50% per year◦ Retire with $30 million saved◦ Consume $1.5 million/yr in retirement◦ Lifestyle goes from $5 mill/yr while playing to

$1.5 mill/yr in retirement

How Much Should I Save?

Rule #1 – Diversify Rule #2 – When in doubt, refer to Rule #1

Diversification Reduces Risk◦ Don’t put all your eggs into one basket◦ Something bad can go wrong with ANY

investment◦ But it won’t go wrong with ALL of them

Where Should I Invest?

Start Basic Invest for the long-term, not the quick buck Don’t invest in anything you don’t

completely understand Don’t gamble with money you are not

prepared to lose There is no such thing as a high return with

little or no risk

Where Should I Invest?

Where Should I Invest?

Bonds – you are lending your money to someone◦ U.S. Government (Treasury)◦ City or State◦ Corporation◦ Will they pay it back?◦ Yields on bonds are currently low◦ Other than U.S. Government – still need to

diversify

Where Should I Invest?

Stock – you are purchasing ownership of a corporation◦ Stockholders get paid after bondholders – but get

whatever is left ◦ Stock price changes when new information about

future profitability comes out◦ Some stocks pay dividends◦ Stay away from “Penny Stocks”◦ Stay with names you are familiar with◦ Diversification across companies and industries is

essential

Where Should I Invest?

Mutual Funds and ETFs (Exchange Traded Funds)◦ Money from many investors is pooled together◦ Many types of funds◦ Diversification within each fund

But you must diversify across different industries◦ Vanguard and Fidelity are two well-known names

Where Should I Invest?

Real Estate (other than your residence) Commodities Options Hedge Funds Private Equity Businesses

Speculative Investments

Investing in a business can potentially be either the best investment you’ll ever make or the worst investment you’ll ever make.  

First Rule: Know The Business! Don’t invest in a restaurant unless you

know the restaurant business. Don’t invest in an auto dealership unless

you know the car business. Don’t invest in a clothing store unless you

know the retail business.

Businesses

Never loan money to a friend or relative◦ Either give it as a gift or don’t hand it over

Don’t let anyone else sign for you unless you are willing to give them every cent you have

Know how to say, “No” Homes usually go up in value but cars

almost always go down in value Know exactly where your money is

invested Know how your advisors are compensated

Basic Money and Investing Rules

Don’t “compete” with others in this area◦ Desire to “outperform” friends and teammates

has led to many bad investments Don’t commit to payments on anything that

will likely last beyond your playing career Don’t get overconfident “Special Deals” are the ones you will most

likely regret Remember that you won’t be earning this

money for long

Special Concerns for Athletes