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New Orleans Pelicans Financial Education Seminar

New Orleans Pelicans Financial Education Seminar. Instructor: Bill Reese. 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

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New Orleans Pelicans Financial Education Seminar

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  1. New Orleans PelicansFinancial Education Seminar

  2. Instructor: Bill Reese • 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

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

  4. What do These Athletes Have in Common? • 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

  5. 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 

  6. 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

  7. 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

  8. Here’s What They 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

  9. 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. 

  10. 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

  11. 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.

  12. Where Will You Be? • “An estimated 60% of NBA players are broke within five years of retiring” - Sports Illustrated: March 23, 2009

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

  14. 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!”

  15. 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.”

  16. 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.”

  17. How does this Investment Sound? 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.

  18. It Was A Scam • 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?

  19. Tips for Avoiding Investment Fraud • 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”

  20. Why are Athletes More Likely to Lose Their Money? • 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

  21. Lifetime Earnings for Typical Person

  22. NBA Player’s Lifetime Earnings

  23. What Should I Do? • 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

  24. How Much Should I Save? • 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

  25. 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/yrfrom savings

  26. 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 $7million saved • Consume $400,000/yrin retirement • Shouldn’t have to work if willing to drop standard of living from $3 mill/yr to $.4mill/yr

  27. 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

  28. Where Should I Invest? • 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

  29. 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

  30. Where Should I Invest?

  31. 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

  32. 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

  33. 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

  34. Speculative Investments • Real Estate (other than your residence) • Commodities • Options • Hedge Funds • Private Equity • Businesses

  35. Businesses • 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.

  36. Basic Money and Investing Rules • 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

  37. Special Concerns for Athletes • 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

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