The Press Is Dumb About Money and Numbers #1
by Johnny Debacle
The press is bad enough when asked to handle simple things like NFL contracts with non-guaranteed money which consist almost entirely of hugely underwater option years or the compensation of retiring Exxon Mobil CEOs. But conflating geological based wealth and sports seems to lead to a whole ‘nother level of stupidity as evidenced by this sensationalist headline Dodger could be first billionaire player.
The player, Matt White, is a marginal one who owned property in Western Mass that happened to be situated on 24mm tons of goshen rock, which is used in landscaping and is sold for $100 / ton. So $100 times 24mm equals $2.4bn in value to the AP. Simple. Obvious. Right?
Wait…you are saying it actually might….cost something to pull that goshen rock out of the ground? Hmmm. And permitting for mining may be an issue? But he could still be the first billionaire ballplayer right? No? Then how does this help the article? You and your facts, factman! I hope the AP will just ignore the reality and continue to write almost all of their news ex anum.
I will say this unequivocally, there is no chance he makes a billion off this. There is no chance he makes $100mm off this. It is unlikely, in my relatively uninformed estimation, that he makes as much from his goshen rock as even the average earnings of a baseball player who squeaks out a 10 year MLB career.
Recommendation: Short the press. Long brains.
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I’m pretty sure you’re wrong here, but I have yet to obtain material non-public information to prove it.
Look at what we got here boys, looks like some kind of “expert” on landscaping rocks.
In a related article at http://blog.masslive.com/redsoxmonster/around_the_majors/ a UMass geology professor says the site is probably worth “several millions”. Score one for the blogs? As long as the press isn’t keeping score. But that’s not their job.
By the way, your article link did not work for me.
That’s what happens when I edit people’s pieces only looking within the editor. There was an errant single quotation market. Should work now.
A good friend who is VP at a mining and excavation company here in NYC (they don’t hand out VP at these companies like they do at IB’s, by the way) says that in the absolute worst case scenario, it costs $20 a ton to scrape the land, blast, dig, load, filter, then load to customer truck, and send this goshen rock on its way. This is factoring in the cost of labor, permits, etc in more-than-typically-expensive Massachusetts. So if White can get $100 a ton gross, he makes $80 profit on 24mm tons, which is $1.9 billion. Gotta figure even if the media is terribly wrong, and he only gets $50 a ton gross, an $720 million profit is still hefty, albeit not a billion. But my friend says that his gut estimate is that it takes $5 a ton to get it all out, meaning that with those margins, White nets $2.3 billion @ $100/ton.
Mining companies compete for contracts like this; they’re not the same guys you paid to haul away the busted concrete you created when you decided it was time for a new driveway.
uh no taxes?
Take 35% away from $1.6 profit, you still get $1.04 billion.
Sounds great. But are there other comparable goshen rock mines and if so what are their cash costs to pull a ton out of the ground? What are the sale prices for other goshen rock deposits? These are the kind of things that would I think dampen the skepticsm that Matt White is a billionaire.
Dampen the skepticism? Johnny Debacle created the skepticism, and I dampened it. We’ll throw scenarios around all day long, but could I first just get someone to agree with me that it is entirely possible that Matt White comes out of this thing a billionaire? If nothing else, Debacle claimed “There is no chance he makes $100mm off this”. That’s barely over a 4% profit margin. Surely someone else agrees that that is absurd.
re: the headline
Example 1A of media stupidity & numbers should be David Beckham’s (aka Beck’s)$250mm soccer contract here in America.
Wait, you mean he’s only getting about $5mm/yr from soccer and the rest from endorsements? WTF? Anybody not just trying to sell newspapers, but actually trying to maintain the intellectual honesty the MSM say they have would have seen through those numbers.
The MSM’ers don’t get why people are fleeing newspapers, the big 3 TV channels, and other MSM organs in droves. Of course, the smart people hanging around know why.
The Corner-
I will bet you the the value of 1 subscribership (currently $110.95 but it will move with the market and will pay you based on whatever the price is when this bet is settled) that Matt White will not make $200mm off this. The condition is that you provide conslusive evidence that he has realized that much from a goshen rock related transaction. I’m putting the line at $200mm because I can and I know you will take it.
Name one example of someone who has become a billionaire by buying a random property that happened to sit on landscaping rock. Think about the multilayered absurdity of that.
Cerberal Assassin-
The David Beckham contract was another great example. Basically they are ascribing what he is wasn’t getting due to contract terms with Madrid (the full value of his endorsements flowing back to him) to his contract with the MLS. This makes a lot of assumptions and it’s ludicrous. It would be equivalent to saying that Shaq is getting a $100mm per year from the Heat, when they only pay him $20mm and the balance is endorsements he makes on his own (these figures were made up but you get my gist).
He owns 50 acres of land – that’s one tiny quarry. There’s only one kind of rock that generates those kind of profits.
I’ll take the bet under the following pending clarifications and amendments. While I accept that I must provide conclusive evidence that he did in fact profit $200mm, I understand the bet to be open ended. In other words, what if he doesn’t sell the property, does that mean you win? Of course not. When White sells the rock the bet is over, and it is both of our duties to determine the profits. Further, I respectfully request the payment terms be amended such that the payoff is tied to the value of 1 subscribership (I don’t even know what this is, btw) to the downside as well as up, not to exceed $150. I feel this is necessary because there are no tradable instruments with which I would normally hedge my downside in a similar bet.
And it’s not a random property, he bought it from his aunt because she was cash strapped, and it turned out later that he was sitting on this goshen crap.
The Corner–
It is on.
A subscribership is worth the value of being a subscriber as determined with a Dividend Discount Model based on the LTM dividends and conservative numbers for growth.
I’m with The Corner on this one. Mining companies are extremely low margin because of the commoditized nature of the business. An excess supply of mining companies bidding on his land creates a low margin business in part because of of the extreme number of competitive bidders driving up cost to be paid to near market value.
This commoditized, high supply of bidders will allow him to get (market price – slight discount by miners)–and somewhere in that slight disount after costs the miner’s squeeze out a small profit. Bottom line though: slight discount to market.
JD-
This just sounds like a big rant.
You’ve taken all the humor out of construction aggregates.
I’m with The Corner on this one.