One of the pillars of conventional wisdom when it comes to sports is that spending more equals more wins. If that were the case, then the New York Yankees, also known as the Yankee$, would have a lot more than two World Series rings in the past decade. So obviously, there is more to it than spending a lot of money. One of the reasons that this doesn't work as well now is that it is usually the older players who command the most money. They are the ones with the track records and histories to justify the big salaries. But they often are the ones who have past their primes, and who won't deliver as much as they have due to their skills declining as they age.
But that's baseball. The NFL has a hard salary cap, and it has a floor. So, the question is, in a more level playing field, does spending money equal success on the field?
Surprisingly, the answer is no. The top five spending teams in the NFL and their payrolls are:
On this list were the division winning Cowboys and Bengals.
So it's clear that in a more level playing field, spending does not equal winning.
That brings us to another question. Which team gets the most bang for its buck? In order to determine this, what we did is break down the cost per win among NFL teams. The leaders here are:
The key to winning in the NFL appears to be spending wisely. This is likely due to the salary cap and floor. General managers in the NFL have to balance their needs with the cost of filling those needs. And everyone has a budget. It's not like MLB, where teams like the Red Sox and Yankees can just outspend teams like the Twins and Devil Rays.
Want a league where everyone has a shot at winning? Implement a hard cap like the NFL has, and make general managers spend their money wisely. That will put a premium on intelligent decisions on players, and it will help alleviate competitive imbalances that exist in MLB.
Many people have criticized hedge funds and private equity funds for profiting from the big run up in various equities during the time when the bubble was inflating while buying credit default swaps to profit when the bubble burst. While that may be the case, sometimes, investors have a chance to trade a hedge fund stock to profit.
That is the case with Blackstone Group. The company will pay a dividend of $0.30 soon, with the ex-dividend date falling on March 11, 2010. As you know, that means investors need to hold the shares by the day before the ex-dividend date in order to receive the dividend.
The stock is trading at a shade under $15 right now, and it is yielding 8.1 percent. That means that if you buy the stock and hold it until the ex-dividend date, you will receive income of a little more than two percent. You'll receive that income for holding the stock for just four days, and you can profit more from any capital gains that occur. Or, if the share price goes down -- and the shares fluctuated by $0.48 on Friday so that's possible -- you just hold on until you break even. Even if that takes a month, you earn a little more than 24 percent on an annualized basis on your trade.
To boost your earnings, you can sell call options. The $15 March call for Blackstone is trading for $0.19, which means you book that additional income and goose your returns even more. That will increase your earnings to 3.3 percent, and you'll receive that for holding on to your shares for two weeks until the options expire. That's an annualized return of 85 percent, something you should be happy to take.
Many people hate hedge funds, saying that they make money unfairly and don't play by the same rules small investors do. While that may be true, sometimes, you can play the same game as they do, and profit from it.
Investors looking at economic data for signs that the economy is improving received some today. The ADP national employment survey for February showed that 20,000 jobs were lost in the private sector, which was the smallest decline in private sector payrolls since they started shrinking in February 2008. ADP reported that private sector service jobs increased by 17,000, which was the second monthly increase in a row. However, as in the previous month, this increase in service sector jobs was not enough to overcome the loss of jobs in the goods producing sector. This segment of the economy suffered a loss of 37,000. Even there, though, there was good news, as manufacturing added 3,000 jobs. This was the first increase in manufacturing jobs since January 2008.
Both large and small businesses cut their payrolls. Large businesses, with more than 500 workers, slashed 10,000 jobs. Small businesses, defined as those with less than 50 workers, cut 18,000 employees from their payrolls. However, medium businesses, which are those with between 50 and 499 workers, added 8,000 employees. This was the first increase in payrolls among medium sized employers since January 2008.
The Institute for Supply Management's non-manufacturing index (NMI) was also positive, coming in at 53. That was 2.5 percentage points higher than January's 50.5. Figures above 50 indicate growth. The index was higher than the consensus estimate of 51. Estimates for the NMI ranged from 48.5 to 52.9. Slightly more than half of the sectors in the survey showed improvement, with nine indicating growth, and eight indicating contraction.
Finally, the Fed's Beige Book, which sums up economic conditions in each of the Fed's 12 districts, showed growth in the economy as well. According to the Fed, "economic conditions continued to expand...but in most cases, the increases were modest." There were nine districts that reported gains. In the Atlanta and St. Louis districts, economic conditions were described as "mixed." And in the Richmond district, which was pounded with two huge snowstorms, reported that economic conditions "slackened or remained soft across most sectors."
The response of traders to this data was restrained. The major indices didn't move much today. The Dow dropped by 0.1 percent, falling to 10,397. The S&P 500 was essentially flat as was the Nasdaq. The S&P 500 ended the day at 1,119 and the Nasdaq closed at 2,281.
The reaction of traders may hve been the right one, as the data shows more of the same conditions we've seen so far in this economic recovery. While the economy is growing, it's not a smooth recovery, and it's certainly not a strong one. And jobs, like in past economic cycles, are going to be slow to recover. However, with consumer credit constrained, without jobs recovering, consumption can't. And that means the economy is likely to grow slowly.
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