Will the credit crisis flatten big-time sport?

By Spiro Zavos
October 13th 2008 @ 8:24am

The New York Yankees are apparently having few difficulties in selling off the hugely expensive corporate boxes in their new ballpark. But as the world credit crisis deepens this might change.

However, there are so many billionaires in the USA that the couple of hundred boxes should be safe enough for the Yankees to bank on.

I’m reminded of the Hunt family, the Texas millionaires who bought the Dallas Cowboys in the 1960s. When they were told by some journalists that the team lost a $1 million the year before, one of the family mused for a while and then replied: ‘In that case we’ll be bankrupt in a couple of hundred years times.’

Right now the suggestions from people who should know is that while there will be some problems, in general the huge sponsorships of big-time sport will continue.

The UK Telegraph, for instance, has looked into most of the world sports and has concluded that right now the sponsorships will carry on. The Texas billionaire, Sir Alan Stanford, for instance, is intent on pushing ahead with his $20 million Twenty20 series in England next year.

There will be some spectacular failures, though, given the steep dive in the profits of financial institutions and the collapse of share prices around the world. The US market is at a 10-year low, with all the gains made in the decade wiped out. Some of the big bank sponsorships will now disappear.

So too will once-wealthy club owners like West Ham United’s Bjorgolfur Gudmundsson who has lost his fortune with the banking crash in Iceland.

Incidentally, this case points to the way that clubs in a number of sports in Europe have made themselves vulnerable by being taken over by wealthy individuals. This raises the issue of how some of the A-League clubs in Australia are going to get on if the crisis hit their owners.

Also, one would think that the franchise idea put forward by the ARU’s John O’Neill might have to be put on the back-burner. Macquarie Bank which is one of the strongest supporters of rugby had its share price down to $28 on Friday, after being as high as the $80 a year ago.

Rugby League has its TV contracts established for the next year or so and with the relative strength of the Australian economy, the localised nature of the sport has an advantage, for once.

Cricket has the Twenty20 game’s popularity and the vast numbers of Indian fans to keep the game afloat with money for years to come.

One benefit for Australian rugby is that its contracts with News Ltd are written in US dollars. With the Australian dollars plunging from almost parity a year ago with the US dollar to below 70c recently, the ARU has had a bit of windfall.

The days of gratuitous expenditures and outlays on players and their trips and training camps, though, is probably over. One would think that player contracts in sports like rugby will be pruned and that the excessive amounts of money offered to southern hemisphere players to play in the northern hemisphere will be cut back.

Like this article? Please spread the word about the Roar to your mates.

Recently popular

Free Email updates:

Our daily emails are only sent if there is content for the sport or that author. You can subscribe to multiple daily emails; or get the daily Roar email with all our content in it. We value privacy. More...

Redb said | October 13th 2008 @ 8:38am | Report comment

Sponsorship and TV revenue provide the majority of dollars to many sports around the world and in Australia. Sponsorship will be clearly be harder to attract as corporates cut back on marketing dollars to reflect reduced profits in times of lower business turnover.

TV rights revenue is also at risk to some extent cnow but definitely in the future. Sure Sporting bodies have contracts now in place, but if the TV channels are unable to attract advertising due to the same reason sponsorship will be harder to come by, their revenue will suffer. A contract is a contract but if a TV station fails there goes the contract.

It is the fringe clubs of the AFL and NRL who will suffer first from sponsorship drain and they will look to their governing bodies for support. In the AFL’s case it has a sizeable warchest to assist struggling clubs. I guess News Ltd could bail out the NRL clubs.

What does it mean for new clubs in expanded competitions?

Redb

True Tah said | October 13th 2008 @ 9:06am | Report comment

In this sort of credit crisis, I think the community-based sports model (like AFL clubs) have an inherent advantage over the private equity model (like HAL clubs) due to the fact that private equity needs to make an ROI and a profit on behalf of its backers.

For example, it may well have an impact on the new Gold Coast United Club - Clive Palmer is heavily involved in mineral resources and I gather one of the reasons behind his decision to back the club was to build business relationships with the Chinese…I read in the AFR over the weekend, that several Chinese manufacturers have asked Australian resource miners to hold back. If we ultimately do less business with the Chinese, then how would that impact on Clive Palmers committment to the club?

Having said that, AIG doesn’t appear to have cut its sponsorship to Manchester United, despite requiring government support to stay afloat…so I guess the American taxpayer is partially funding an English futbol club!

True Tah said | October 13th 2008 @ 9:07am | Report comment

BTW Spiro,

great article and Im sure it will ensure a healthy debate.

For those who are interested, there is an article dealing with English futbol and the credit crisis in this morning’s SMH worth reading.

oikee said | October 13th 2008 @ 9:16am | Report comment

You know something spiro, redb, i have only been on this blog site for a few weeks, and the way some people carry on about sports you would think they are running the world. I had mentioned somewhere that the boutique sports will do well in the future and got laughed at and ridiculed for even making a suggestion like this and i talked about the economy at the time.

Football being such a large world player will be hit hardest, its only the tip of the iceburg at the momnet and i also said that sth africa is going to be its down-fall, i will stand by this remark and time will tell. Rugby will also be dealt a blow in europe.

Cricket 20/20 will also fall on hard times along with american sports, they are just too over-priced, the money does not match the game for what it really is worth. Rugby league as you said is well placed, this being my boutique sport as i have mentioned, and the t/v deal is a few years yet, 2012 is the expirery date so by then the economy will have changed.

Billionaires and sport dont mix in my mind, it turns the whole play of the game into a farce and inflates what the games are really about ansd worth, i will just sit back now and see how many clubs sink or implode .

oikee said | October 13th 2008 @ 9:21am | Report comment

Yes i also dont think the afl will be that affected true tah, they are another boutique sport.

Midfielder said | October 13th 2008 @ 9:27am | Report comment

The next few years will be interesting ……… it’s just a matter of time before this hurts some clubs ………. remember firepower ……….

Redb said | October 13th 2008 @ 9:38am | Report comment

True Tah,

I think your right AFL club membership provides considerable revenue for clubs and gets bums on seats. You can’t buy rusted on support, so this is good for existing clubs, more cautionary for expansion clubs.

EPL clubs running on casino capitalism would have found a salary cap mechanism useful to contain irrational expenditure. It is much more painful to contract than expand. The issue is how even the fall is across the differing competitions within each sport (futbol) and between sports (Rugby codes) .

Will rugby union suffer more than rugby league?, thus attracting more players and vice versa. The credit crisis is about creating winners and losers - a chaotic form of industry rationalisation.

Bubbles almost always burst - this ones a big ‘un.

Redb said | October 13th 2008 @ 9:41am | Report comment

TT,

AIG has a sponsorship contract and has been effectively bought by the American tax payer - it will be reviewed for value.

True Tah said | October 13th 2008 @ 9:46am | Report comment

Redb,

in the UK, I think rugby union is fairly safe, the clubs operate under a well-policed salary cap, and several own their one grounds. Both Leicester and Gloucester have recorded their highest ever season ticket sales.

Im not sure about France though, they do not have a salary cap, although the clubs are policed and audited by the governing body, but I predict things are not so sound there. In terms of crowds, Toulouse got over 30k to their game against Bath, so maybe my fears are premature.

I actually think Englsh futbol will level out a lot more, as the amount of billionaires will decrease. Those already in the game will stay there, but will probably find it harder to find the billions required to shell out for top level talent. So maybe we will see the likes of Wigan, Blackburn and Hull City push for the title? Plus futbol players might need to sell some of their bling and fancy cars and houses, but I dont foresee them having to make drastic changes to their lifestyles.

Pippinu said | October 13th 2008 @ 9:56am | Report comment

Will definitely affect new franchises. The AFL is already taking a closer look at its Gold Coast venture.

Some smaller AFL clubs, incl my own, the bullies, don’t have a major sponsor at the minute - if that persists for too long, it’s a huge chunk off the bottom line (for a club that struggles to break even at the best of times).

The AFL has experienced 18 years of constant growth, and may need to ready itself for a couple of years of stagnation (it will be hoping the decks are cleared before the next TV deal is up).

This comes at the worst possible time for the HAL - some readjustment of expectations is inevitable. It probably means little movement in the cap over the next few years, good for ensuring sustainability, not so good for the wow factor.

Gallop will be pleased that they have reigned in NRL salaries (after a mad period of unsustainable increases), and should ride it out, but with zero growth.

oikee said | October 13th 2008 @ 9:59am | Report comment

France rugby will be affected, dramatically. They are run by billionaire owners who are very fickle about money, also something that has been talked about and i think millster is a great supporter of,,, the salary cap. At least by having one the wages for players wont or should not go down alot, you wait to see the fall-out of the english and europian football after this world crash has settled, there was already talks about having one in their comp, this will bring it back on the agenda.

oikee said | October 13th 2008 @ 10:02am | Report comment

Super league in england has already just signed a 3 year deal so they are pretty safe also. The expansion into france and wales looks good now. At least they know there money is secured.

True Tah said | October 13th 2008 @ 10:08am | Report comment

oikee,

the money is only secured if they receive an upfront payment.

If a PayTV provider goes bankrupt over the next three years, then its far from secure.

oikee said | October 13th 2008 @ 10:14am | Report comment

Thats right Pippinu, and he ruled out expansion awhile ago, maybe he knew something, maybe he (Gallop) is not the fool most people believe him to be, And yes the new franchises will be affected, but i dont think they should not go ahead, we are talking 3-4 years time. By then all should be restored in public confidence, but also by then the codes who have ridden the down-turn well will be able to move forward faster. Be interesting to see who has made the best progress.

oikee said | October 13th 2008 @ 10:16am | Report comment

There money is secured by local t/v deal not pay tv. BBC. If that goes broke then we are all in trouble, not just sports.

oikee said | October 13th 2008 @ 10:18am | Report comment

If they are looking at cost cutting i think there lousy 50 million will not be threatened, maybe the 1 billion for soccer will be the likely cost cutter.

Pippinu said | October 13th 2008 @ 10:20am | Report comment

oikee
none of the comps’ CEOs are fools - they are all very capable, and all perform solidly in the media spotlight.

Some have criticised Gallop for not taking sufficient risks - but my view is that he has to deal with the current landscape, and not the one that existed 15 years ago; and we’d all agree that the establishment of the Titans on the Gold Coast has been an outright success (and a very good strategic move).

oikee said | October 13th 2008 @ 10:30am | Report comment

Agree, and everyone thought that perth were a real chance of entering the comp, but for some reason he dismissed the idea. Well at least put it on the back=burner for now. League cannot lose alot of money in the present market, most of the clubs have survived without alot of help from the nrl. A.F.L has got alot of cash, so they should ride the storm out, depends on how far they go with the push into other states. World cups will also be affected. League will be ok at the moment, most tickets have already been sold and tv deals done.

oikee said | October 13th 2008 @ 11:21am | Report comment

Just reading that last paragraph again of yours pippinu, about the afl expansion, they really need for this to go ahead, if they faulter at all then you could expect alot of fall-out from this. Yes we are in a economic down-turn and they will lose millions trying to get it off the ground, but what awaits them if they dont go ahead is the ridacule they receive by not expanding when they have said they can and will. I know its not a good or fair assumption to make but alls fair in love and war. At the very least the gold coast soccer team have a billionaire to ride out the hard times. And he can also switch to the titans if he gets bored with soccer.

Redb said | October 13th 2008 @ 11:54am | Report comment

Oikee,

yeah like ridicule is going to put the AFL off. There are plenty to stick the boot in, one way or another. move on.

I doubt the AFL’s proposed Gold Coast team has too many problems. The AFL has to make long terms decisions for the bettement of the code it will be trying to avoid the mistakes of rugby league which failed two or three times before they got the Titans right.

Pippinu said | October 13th 2008 @ 12:07pm | Report comment

oikee

I have to be honest - I didn’t quite follow your last post. Was that in response to me saying the AFL were looking carefully at their expansion plans? I wasn’t suggesting that they’re thinking of shelving the plans, it’s just that the current economic crisis has forced them to double-check all thair calcs (and any intelligent commercial orgnisation would do the same).

One thing is for sure, the AFL are cashed up to the hilt, so they certainly have the capacity to ride out a period of zero growth without too much ill effect (but these expansion plans are a risk, and they’ve just got riskier, it all needs a watchful eye).

With the A-League, this cash crisis has hit at around the point the 8 clubs were to start generating profits. The Victory and Mariners already have, I doubt that the other six have. This crisis could push back their orginal forecasts by some two or three years, and I wouldn’t be surprised if we see the demise of at least one club out of the present 8 in the process.

Michael C said | October 13th 2008 @ 12:45pm | Report comment

oikee -

I’ve stated before on here (this is relative to your first input on this thread) - that the desires to bid for a FIFA WC in 2018 or 2022 are fraught with danger - -

- - given that Australia would be very heavily reliant upon tourism to recoup expenditure - - the current financial crisis is a reminder that a narrow focus ‘bid’ is pretty dangerous. Already we could speculate that international travel may or may not be the same as today in 10-15 years time, with the expense of fuel, new technologies etc…….perhaps we’ll only be economically able to travel on A380s everywhere.

But certainly in Australia - soccer is the sport that suffers most the tyranny of distance and rides most the global economic waves.

The AFL……..well……..whilst fully internalised, is least impacted by global factors.

Michael C said | October 13th 2008 @ 1:05pm | Report comment

re billionaires - agreed,

they distort the real picture, and clubs with ‘lesser’ benefactors risk over extension and might be the more vulnerable as they strive to compete.

The less distorted, the more stable. The AFL has that benefit - - which may sometimes be confused with ‘well managed’!!!!

Redb said | October 13th 2008 @ 1:11pm | Report comment

MC,

Only word to describe the current global financial malaise - f r a g i l e .

It’s interesting that the very factor of isolation that has limited the AFL’s growth beyond its traditional boundaries will mostly protect it during the current situation particularly in Melbourne which is not prone to boom and bust (ahem…State bank aside) unlike the economies of WA and QLD where mining (read commodity prices tanking) has all of a sudden gone on the blink and the bandwagon factor in sports rules.

Although I did see a bandwagon driven down Canterbury Road by none other than chief Hawks spruiker Jeffrey Kennett resplendent in his brown and gold jacket.

Millster said | October 13th 2008 @ 2:13pm | Report comment

Very very interesting discussion here. Before I put my point of view, I should say up front that it is in reality hard to predict anything at the moment.

I think one of two things may occur though:

First - there will be a retraction in marketing spend from global brands and they will focus on those sponsorships that give them ‘bang for the buck’ across a number of markets. So using HAL as an example, the 2 teams getting ACL spots may benefit while the others may languish. Super 14 may do better than AFL and League on relative terms due to the ‘three markets for the price of one’ effect that the competition structure gives.

On the other hand there will be a whole lot of smaller businesses that will have had expansion plans but will now want to sure up their home markets, rather than to invest offshore. So we may see some brands ‘coming home’ to the suburban teams to - as I said - consolidate themselves.

In summary I see domestic sponsorship being more concentrated on domestic codes, and global/multinational sponsorship being rationalised to only benefit those teams that get decent multi-market exposure (e.g. through inter-regional or continental competition structures). I will also admit in saying this that AFL’s partial ability to rely on grass-roots funding is a real asset at this time, compared to the other codes.

oikee said | October 13th 2008 @ 2:41pm | Report comment

Good to see you back M.C , how was the holiday. This world crunch we are having is going to really upset the apple-cart for world soccer millster. Expenses are going through the roof and fifa will be hit the hardest. I have been mentioning Boutique sports now for a few weeks, the reason why i do this is because i think the growth through-out the world now will come from this area. So television rites for games is the future, anyone agree, ? if you have a good local package then you can sell this game to other countries. Travel will be a issue for everyone, not just sports.

True Tah said | October 13th 2008 @ 2:46pm | Report comment

Pip & Millster,

do you think the new North Queensland futbol team (the Pineapple Express maybe??) will suffer from this?

We hear a lot about Clive Palmer and the Gold Coast team, but very little about the northerners - is there any danger they could be a Perth Glory or more like a Central Coast?

oikee said | October 13th 2008 @ 2:47pm | Report comment

Redb you should have your money safe by now, when the market bottoms put it back on aussie shares, its a different scenario than last crash being the mining industry is best placed to lead the boom. And china will lead the boom.

Millster said | October 13th 2008 @ 2:52pm | Report comment

Essentially oikee I disagree. In an era where people globally will be looking to limit costs, I see the already-global codes being in the better position.

In first year marketing every student learns the statistic that to sell someone a new product cost 7 times on average what it costs to sell someone a product they have already used or are familiar with. Same would apply to the introduction/expansion of new codes. People will take the “safe bets” which are those codes that are most entrenched already.

So globally I think football will be ok and competition from new sports will be less in relative terms. However I think in local markets (like I said before) where football doesn’t exist companies will support the strongest local codes to sure up their home markets - so in Australia AFL and League, in the US gridiron and baseball, etc.

Anyway my conclusion is that this financial issue is a nightmare for whatever codes are not strongest in a location. So my guess is it is a big downer for AFL and League expansion into new markets - and thats where we disagree. HOWEVER where League (in Sydney/Brisbane) and AFL (in Southern States) will win out is that Aussie sponsors may turn to the local safety of those traditional codes at the expense of HAL which - as an emerging/new league - is a bit more of a risk.

Millster said | October 13th 2008 @ 3:02pm | Report comment

TT - yes I have problems with Nth Qld. Even before the crisis. I have the view overall that the HAL is expanding just a little too fast and that we need to consolidate the lift in playing standards, and also deal with some off-the-field issues, while taking gradual steps towards expansion.

I’d love to be proved wrong but the cautious guy in me can see the case for Gold Coast, can see the case for a second Sydney (with preference for it to be badged Illawarra/Sutherland) and can see the demographic case for a second Melb (though lots of care with naming and differentiation will be required). But I’d like those 3 to be settled in before we go to the more ‘adventurous’ remote markets. Also it is ABSOLUTELY critical that Perth be settled and stabilised; HAL loses a lot as a national comp, not the least a link to a good state-level league and population base, if the Glory folds.

Pippinu said | October 13th 2008 @ 3:04pm | Report comment

True Tah
Hard to say about the NQ mob. You are right that both bids appear to be at polar extremes: one, the FFA were falling over themselves to sign him (and his billions) up, the other, I would conclude only just fell over the line and probably only just met the financial criteria (if they did at all).

Paradoxically, in the early days of the NQ proposal, a big mining firm like BHP was right behind it - but all that seemed to fall away later on - and it was GC that got the mining dollars behind it.

I think the NQ will have very strong grass roots support - but without a guardian angel, it’s just about the worst time you can think of to get off the ground.

Michael C said | October 13th 2008 @ 3:14pm | Report comment

two very timely and topical articles off fairfax this arvo :

http://news.theage.com.au/sport/gold-coast-continue-17th-afl-team-chase-20081013-4zmy.html

http://news.theage.com.au/sport/aleague-unaffected-by-economic-woes-20081013-4zm8.html

Michael C said | October 13th 2008 @ 3:24pm | Report comment

I’ve just posted links to 2 very topical and timely articles hot off the fairfax ‘presses’ re GC17 and HAL.

Ben Buckly “Absolutely, we’ve got no plans to put the brakes on expansion,”

Pippinu said | October 13th 2008 @ 3:33pm | Report comment

MC - where are the links?

Michael C said | October 13th 2008 @ 3:33pm | Report comment

had a good time in sunny Brisbane (both north and south suburbs and west for the wedding) and a coupla days at Currumbin including a drive up the valley (creek road) and a morning at the sanctuary.

Took the kids and our friends out to Redcliffe for an afternoon swim, and saw the new bridge being built.

Took the drive into town via a circuit of the Gabba (plus photos) for the 5.5 yr old who loves such things, and crossed the Storey bridge and ducked around towards Newfarm for a photo op of the bridge vista for the other 5.5 yr old who loves such things………..and then back down south via the Gateway……….and saw the new bridge being built.

btw - I noted how often I spotted Aust Footy ovals - - there’s some very nice ones, and how often one would spy soccer, rugby and afl goals across the expanse of a recreational reserve………..

seems like in QLD a lot of bridges are being built…………I could live there more easily than Sydney………….oh, except QLD truck drivers are INSANE!!!!!!

oikee said | October 13th 2008 @ 3:38pm | Report comment

Glad you brought this up millster, i was going to post on this subject but i thought against it because of your fickle nature

Look i see it the other way round to you, i look at global sport and see a satuated market prodominately futbol and the strong minor sports will be in a better postion. Because they can sell there product to more countries will alllow them to increase there strenght in local terms. Variety is the new market-place,..As for the a-league it will keep growing because people love there own country games, so i wont be buying any product with lets say spainish or french product only. Know what i mean. Townsville will go ahead because they will get the support, its a summer game remember,.

And the local market will benifit because we still have the socceroos which continues to grow support for the game.

The one thing that people like is a chance to watch different sport, i have said before i cant watch league all day, same goes for futbol, i can watch a match or 2 but it would have to be local futbol, not another country. Most countries are now evenly matched so whats the difference.

oikee said | October 13th 2008 @ 3:43pm | Report comment

Well there you go, and i did not read your post till now M.C, why would they stop expansion, like i said it will be tougher but the games are still going to benifit.

Millster said | October 13th 2008 @ 3:45pm | Report comment

Interesting perspective oikee and always good to get other perspectives. Even if we often argue it is interesting to find someone who will not really be interested in another country. I’m the opposite. I have my clubs of course that I follow, but if I’m watching a neutral game I prefer to see the best quality there is - so say Spanish or Italian or (perhaps) English league. I’d prefer to see Milan vs Roma than Perth vs Wellington for example.

Michael C said | October 13th 2008 @ 3:47pm | Report comment

Pippinu -

multiple links always take a while to come through - - but in letting you know also allows you the chance to head off to the Age or SMH and peruse - - but also to not waste time posting yourself…….

additionally by Buckley

“The people who are backing the expansion teams certainly have enough financial resources and management resources to see them through some of the turbulence that’s out there at the moment.

“We’re fairly confident of their business plans and one of them in particular is running well ahead of its business plan at this stage.

“So we have no intention at this point in time to slow down our expansion.”

————- guess which on ‘in particular is running well ahead of its business plan’…………..that’d probably be the billionaire backed team………..

oikee said | October 13th 2008 @ 3:52pm | Report comment

Dont you just love the gabba and how it sits out over the road there M.C the school on the corner gave up some land also to allow for the expansion, yes brisbane is very good for all sports and they dont really have a issue with any games, if its on they support it, pretty well like melbourne but without the undertones. I love those gateways, i painted a picture of the 1st one and gave it to a friend for his birthday, i might have to get back there and do a painting of the 2 one day.

Pippinu said | October 13th 2008 @ 3:52pm | Report comment

MC - it’s ok - I found the the two articles.

It’s interesting that they both came out so close to each other!

So the FFA is saying everything is going ahead, etc. etc., and that was pretty much the gist of the GC17 article as well.

I’ve already briefly mentioned the financial criteria that NQ needed to meet, I’m not sure of the details, but I think they would have needed $5 mill start up capital minimum (happy to be corrected if I’ve got that wrong).

The AFL also laid down stringent criteria for the Gold Coast club, as follows:
1. sign up 20,000 would-be members,
2. 110 business sponsors as well as a major naming rights sponsor.

In a 170 page report they have just submitted to the AFL, they reckon they signed up 43,000 potentials and
confirmed a total 124 businesses as sponsors including a nationally recognised company as the club’s
naming rights sponsor.

Whether all that was pre- or post- financial melt down, I do not know.

Pippinu said | October 13th 2008 @ 3:54pm | Report comment

” ————- guess which on ‘in particular is running well ahead of its business plan’…………..that’d probably be the billionaire backed team……….. ”

Yes - I had guessed the same way!!

oikee said | October 13th 2008 @ 3:58pm | Report comment

I was a bridge builder about 30 years ago M.C , we built all the bridges along the sunshine coast road, overpasses, and one at the exabition ground and the moorings at bribie along with train bridges around brissie. When i was 12 sold icecreams at the gabba. I use to yell out “I scream” and the crowd would say “well shut up then”

oikee said | October 13th 2008 @ 4:10pm | Report comment

I mentioned the school on the corner because i went there when we shifted to brisbane, thats how i got the job at the gabba, i was very industrious early and we lived right on the river where mobray park is, up the oneway street there M.C heading towards the ferry just off the story bridge. Right beside the highschool at coorparoo is a aussie rules club, was there when i went to school so rules has been well intrenched up here for quite awhile. That was 35 years ago.

Pippinu said | October 13th 2008 @ 4:16pm | Report comment

So Oikee - did you ever go down with mates and play kick-to-kick with a Sherrin?

To have a simple kick of the footy is still one of life’s great pleasures.

LeftArmSpinner said | October 13th 2008 @ 4:27pm | Report comment

the credit crisis ignores the reality that every developed economy now has a fully deployed Superannuation scheme, pumping billions into funds that in turn need to go somewhere. Sitting as cash will be fine for a short period but cash rates worldwide are low and in australia, on the decline.

Staying in cash produces two problems, virtually zero returns, an unbalanced portfolio and for many, against most funds investment rules of a typical portfolio that has about 5% in cash and 40% in local and international equities.

It will correct itself quicker than we think.

in the meantime, a little tightness is a good thing as it will be a good excuse to remove some of the largess that has resulted from the boom. and just watch the different codes unofficially gang up together!!!!

Michael C said | October 13th 2008 @ 4:29pm | Report comment

wasn’t Jason Dunstall out of the Coorparoo club…………he’s an all time goal kicking legend of the game……….

that’s the thing so many people choose to ignore or forget -

NSW for example has provided such legends (on field) as Paul Kelly, Wayne Carey, the Daniher clan, Shane Crawford

QLD has provided J.Dunstall (only a knee injury really stopped him competing with Plugger right to the record number of goals), and Michael Voss & even Aker (he is a brownlow medalist after all)…

not bad for non AFL states.

btw - did you ever hear of Des Hughes - - played 275 games for Coorparoo back in the ’60s. (made the QLD team of the century).

————-

I must commend you on your bridges………….none collapsed whilst we were up there, they seem to be doing their job!!!

The Gabba - certainly struts out, a bit like driving Brunton Ave ‘under’ the MCG…..but I think the Gabba wins for protrusion value.

Ian Noble said | October 14th 2008 @ 2:41am | Report comment

True Tah

Nearly 50% of the overall debt held by English Premier League clubs is with Manchester United and Chelsea. The Glazier debt for financing the purchase is held on the balance sheet and is serviced out of the annual turnover of Man U. The Glaziers are very secretive about their finances and don’t interfere in the running of the club, but if Man U had a poor season probably after Alex Ferguson retires and the dip in income means they can not service the debt, then there could be a problem. Chelsea has an interest free loan from their Abramowitz of £570+M, which will probably have to be repaid, if A lost interest.

Two interesting yardsticks, according to the people handling the sale of Newcastle United there are 6 parties who have been invited to submit bids. The revised asking price is circa £280/£300M, this will realise a profit of nearly £50M to Mike Ashley if achieved. Everton have been approached and negotiations are currently underway to sell Chairman Bill Kenwright, s interest, the party concerned is believed to be from the Middle East. Everton has planning permission for a new ground and Kenwright personal fortune is insufficient to raise the finance for a new stadium and the purchse of new players.

The picture is confused and both the proposed sale of Newcastle and Everton will be a good indicator of the strength of the market, because as shown by the influx of foreign money into the EPL it is a global brand.

However in a radio interview over the weekend both Dave Whelan (Chairman of Wigan) and John Madjeski (Chairman of Reading) expressed concern about the influx of foreign investment as they were concerned about the sole of English football and the danger that clubs would become “boys toys” for the international billionaires and they would drop the clubs when they lost interest. To put it into context Wigan overdraft facility is £22M and they are close to the limit. Dave Whelan confirmed if necessary he would put a few million into the club to meet its debt, very much the tradition approach of the local businessman made good and looking after his club he has supported since he was a boy. However not a bad call as each EPL club is guaranteed £45/50M at the end of each season from the current TV contracts.

Oikee

I wish you would get your facts right, the BBC (FTA) only have the rights for the RL Challenge Cup not SL that is Mr Murdoch’s preserve. In many peoples eye particularly those from Widnes and Leigh the invitation to Celtic Crusaders in Wales to join the SL is a disaster for RL.

By the way, so there is no misunderstanding every household in the UK with a TV pays a license fee currently £130+ per annum, which goes directly to funding the BBC. Those you don’t pay. pay a fine of £1000.

True Tah said | October 14th 2008 @ 6:22am | Report comment

Ian Noble,

as someone who is somewhat familar with the debt/equity rules, albeit here in Australia, Abramovich’s loan to Chelski seems to be more like an equity investments, given that its interest free and Mr Abramaovich is not guaranteed any repayment of what he is owed. Personally I would not classify it as debt, but that is the accountant in me picking the fine detail apart!

I had a conversation on the weekend and the whole Islamic finance issue came up and how it has fared well in relation to our traditonal western capitalistic model, therefore it does not surprise me that there is considerable interest in the Middle East to purchase English futbol clubs.

I thought a Nigerian business interest was looking at purchasing Newcastle United, although the source of the funds would need to be dubious.

oikee said | October 14th 2008 @ 7:46am | Report comment

Well my facts were sort of right, if murdock calapses then the worlds in trouble , is that a fair statement.? Either way the deal is done, so wheather these are false or not is only nit-picking. I dont really know what the problem is with the wales team, we had all this issue about french rugby league when they moved into the game, now we have the same crap being thrown about wales. Worry about the english football, the game will take the biggest hit, its over priced and over-rated.

True Tah said | October 14th 2008 @ 7:58am | Report comment

Sorry should reword that

I thought a Nigerian business interest was looking at purchasing Newcastle United, although the source of the funds are likely to be dubious.

oikee said | October 14th 2008 @ 8:46am | Report comment

I understood what you meant TT ,,, i would never let that happen, we all know what the nigerians are like with money.

Just to give you some more facts Ian, 3 england banks are now gone broke, the government has had to buy them out, this is only the tip of the iceburg.

oikee said | October 14th 2008 @ 8:49am | Report comment

USA bush government has bailed out the yankie banks, the government now own them. Fact

oikee said | October 14th 2008 @ 8:50am | Report comment

Aussie banks doing well, fact.

Slippery Jim said | October 14th 2008 @ 8:53am | Report comment

Oikee, my CBA shares would tend to disagree

True Tah said | October 14th 2008 @ 8:55am | Report comment

you can’t really compare the Australian and US banking systems, US is far bigger and far less regulated, whereas, the Australian banks were far more regulated and operated in something of a sheltered workshop, which has to date stopped mergers of the Big 4, but for how much longer? I guess the counter argument for this is that having such an approach will never allow an Australian bank to become a global giant to extent of say Citigroup/Wells Fargo.

in the light of all this, the Newcastle Falcons recently sold their home ground to Northern Rock and leased it back - do you believe this to be a prudent business move?

oikee said | October 14th 2008 @ 9:18am | Report comment

I tend to agree with you true tah, but i think the aussie economy punches well above its weight, and dont forget that maquarie is well and truely a world player so suffers along with the world on a even par, as do most banks. We ride the sheeps back, but we ride it rather well.

True Tah said | October 14th 2008 @ 9:20am | Report comment

I thought it was Kiwis who rode the sheeps back rather well!!

oikee said | October 14th 2008 @ 10:29am | Report comment

Millster said | October 14th 2008 @ 10:46am | Report comment

I take a more cautious view, perhaps because of my position. The Australian economy is around 10% of the global one, but most of that is reliant on export of commodities (resources and agriculture) to other nations, and the domestic service industries that support that commodity business. Their demand for our resources is directly linked to their economic circumstances, and in this way we are only as robust as our ‘clients’ economies are.

Fortunately we are located to address fast-growing markets in the broader Asian region so the fundamentals are ok. But we should not be smug. Our economy is not super-human. And remember that the infrastructure and services growth needed to underpin growth in commodity exports needs to be funded - from those very capital markets that are currently rocking.

[Aside to True Tah] While in travels in Asia recently I saw increasing numbers of ads for Malaysian financial institutions positioning themselves as centres of excellence in Islamic finance. I found it very interesting and could be a new dynamic throughout our region, which of course will perhaps touch on sport. Imagine an Islamic Bank leveraging the Lebanese constituency of the Bulldogs and sponsoring that League team for example. No funtamental reason it shouldn’t occur, but I imagine it would nott pass uncommented on…

True Tah said | October 14th 2008 @ 11:00am | Report comment

Millster,

I think you added a 0 to Australia’s % of the global economy!

oikee said | October 14th 2008 @ 11:46am | Report comment

Once again you underestimate the power of sheep TT I will give you a quick lesson, 20% of worlds alum, iron,uranium,mineral sands, and diamonds.40%of worlds bauxite (you might not know what this is used for) Gold, 3rd largest provider, over seas value around 4.7 billion,,,,,also we have copper zinc nickel and tin, we are the worlds largest provider of mineral sands. Largest provider of diamonds by volume. We have 40% of worlds uranium reserves found so far.

We also have oil and natural gas, we provide china with gas also. Not to mention the wine or cotton along with the sheep, and grain. The only area we lack is brains, but even thats improving,,,, liked your post millster, there improving.

oikee said | October 14th 2008 @ 11:56am | Report comment

And i also said that we are better positioned than we were before, like you said millster our growth depends on the rest of the world, but when it starts up we will benifit the most, unlike last recession in 87, thats why i said put your money back on the aussie shares when the market flattens, we will grow the fastest. In 87 the international grew the fastest but we are now suppying alot more countries than ever before.

True Tah said | October 14th 2008 @ 12:05pm | Report comment

Im going to give you a quick lesson.

All these massive amounts of minerals in the ground will not benefit Australia if no one else is able to buy them. A few Chinese steel mills are already scaling down their orders for Australian iron ore. If countries can’t afford our commodity exports, it will not benefit Australia.

This argument is even more pointed when you look at things like diamonds and gold - these are discretionary items, and I think people around the world would rather spend whats left of their savings than on a new diamond necklace.

Australia has not developed a manufacturing sector big enough to ensure adequate domestic demand for these products. One could argue that this is due to Australian labour being uncompetitive relative to our neighbouring countries, and we would rather develop a large service industry which is supported by primary industry.

Re: uranium, personally I hope we develop our our nuclear energy system and find a use for it all…I take my hat off to the French here, I think their approach to nuclear energy is far more progressive than our own.

Michael C said | October 14th 2008 @ 12:17pm | Report comment

Slippery Jim -

depending when you got in on your CBA shares - then you couldn’t really complain the long term trend……

Millster said | October 14th 2008 @ 12:21pm | Report comment

I stand 100% alongside True Tah’s last post. And yes I overinflated Australia’s economy by a factor of 10 or so. We are the 12th largest economy in the world, but it is far less than 10% of the worlds total aggregate GNP.

Fundamenatlly yes to the riposte to oikee. It’s easy to list the supply side of the equation. But there has to be demand as well for any vaue to occur. Its one thing for us to be sitting on all these minerals but its not much good if world markets are contracting and infrastructure/growth/expenditure programs are being delayed.

Australia’s labour market uncompetitiveness has been a peeve of mine for a decade. And yes we are not strategic about our uranium resource. Political gutlessness, and the fear-factor driven by an extremist fringe, have ruled the day on this one.

Getting it back to sport (coz in case you forgot this is a sporting site) if we capitalise on our uranium resources perhaps an Olympic Dam United is a possibility for the A-League circa 2030??

Oh, I disagree that we don;t have brains. We do. But we have a mediocre education system and also no way to keep the best onshore (linked to TT’s observations on manufacturing and value adding, plus a range of other reasons)

oikee said | October 14th 2008 @ 12:23pm |

By Spiro Zavos
October 13th 2008 @ 8:24am