Learning from a Million-Dollar Bet on the Astros
Rodney Johnson | October 22, 2019 | My family moved a lot when I was a kid. In our travels, we spent a couple of years near where I live now, on the Texas coast south of Houston. Back then we lived on the beach, where cable was something you could only dream of. We spent this part of our youth flipping through the three broadcast channels, repeatedly watching local ads that included ones for Gallery Furniture. Every major market has a company like this, with an owner-pitchman who's a bit outrageous, screams too much, and becomes a fixture. Gallery Furniture had Jim "Mattress Mack" McIngvale who, at the end of his loud commercials, would jump in the air while pulling cash out of his pocket and yell that Gallery Furniture "Saves You Money!" When I moved back to the area more than 30 years later, I was surprised to see Mattress Mack still on television, albeit older and a bit more sedate. But he's grown into a larger-than-life character in Houston, supporting all sorts of charities and sports teams, and generally being a great guy. Now he's made headlines again, but in a different way. This year, Mattress Mack made $3.5 million bet on the Astros to win the World Series. Protect Your Neck He might be a big fan, but the bet wasn't about making cash. Rather, it was to protect a promotion he ran over the past year. Just as he's done for the last two baseball seasons, Mattress Mack promised that if you bought more than $3,000 worth of bedding and the Astros won it all, he'd send you a full refund. In 2017, he had to pay up when the Astros won the series. Last year, they got bounced by the Red Sox in the American League Championship Series. Tonight, the 'stros play game 1 of the World Series, and they clearly have a shot at reclaiming the championship. When the Astros won in 2017, Mattress Mack had to pay out $11 million. If they win this year, it could cost him $15 million. So he found a novel and publicity-rich way to lay off some of the financial pain. The Astros opened the season at 2.2 to 1 odds, so if they win, Mattress Mack will take home $11.2 million, which includes his $3.5 million original bet plus $7.7 million in winnings. By his own estimate, Gallery Furniture brings in between $150 million and $200 million every year, so if the Astros win it won't be terribly painful either way. But the bet shows that with a little ingenuity you can find interesting ways to lower risk or generate returns. Off the Beaten Path Maybe you can't, or don't want to, place a multi-million dollar bet to cover a marketing campaign. But perhaps you're trying to figure out how to navigate a near-negative interest rate world and still earn a bit of cash without taking a ton of risk. It's possible, you just have to consider unconventional avenues. Recently we added a stock to our Boom & Bust portfolio that's taken a beating over the last year. The stock price is more than 40% off its 52-week highs as investors worry about the product mix, but if you look under the hood, the company consistently generates great cash flow. With a 5% dividend and an opportunity to grow in the upcoming holiday season, I think Tapestry (NYSE: TPR), which includes Coach, Stuart Weitzman, and Kate Spade, can keep its dividend and potentially offer capital gains to boot. Closer to the fixed income world, take a look at Charles' Peak Income, where he commonly buys pipelines, REITs, and closed-end funds that hold anything from dividend stocks to municipal bonds. The beauty of the closed-end world is that they borrow money to supercharge their investments, so they can super-size returns. As short-term interest rates fall, these funds pay less for financing, which means they have more money to return to shareholders. Not a bad strategy in a declining rate environment. For investors comfortable with options, consider Lee's instant income approach , where he sells put options on great companies well below their current stock price. This allows Lee and his subscribers to earn consistent cash as they keep the options premium. And in the off chance that they take delivery of the stock, they've picked up great names at discounted prices. It's highly unlikely that any of these approaches will land you on the pages of USA Today like Mattress Mack, but they might make the pain of ultra-low interest rates a little easier to take. In that way, you can be a winner just like (hopefully) the Astros. 
Rodney Johnson Trending Stories... The only Phd economist I allow to speak each year at the Irrational Economic Summit is Dr. Lacy Hunt. (You can watch his presentation from this year's conference here.) Lacy can take that complex science and still see the forest for the trees. He can still find reality from all of that great theory to... The week's gone by and markets are still doing just what I predicted: bounding forward sideways until something breaks up or down. My Money Is on down Partially because of Bitcoin and partly because of politics. What's happening in Washington cannot be good for your money right now – between the Trump administration's dealings with... I'm stupid about the cost of a lot of things. I don't mean uneducated, or lacking knowledge. I'm talking about downright dumb as a stump. Thank goodness the Bureau of Labor Statistics (BLS) is around to set me straight. Take my television, for instance. Thank Goodness for BLS I have a 46" flat screen TV,... In the September issue of Boom & Bust, I talked about corporate debt being the greatest threat globally this time around. The worst is in the emerging world that used cheap printed dollars from the developed countries, primarily the U.S., to fund a debt binge concentrated in the corporate sectors. But our corporate sector also... David Stockman, Dr. Lacy Hunt and I agreed on a lot of things last week at the seventh annual Irrational Economic Summit in D.C. The Truth About Tax Cuts One of the key points that I have been harping on over the last year is simple: The recent tax cuts were destined to go into... | 
No comments:
Post a Comment