Buy and Hold Plus

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:

• New York Giants, $138.4 million
• Houston Texans, $128.3 million
• Miami Dolphins, $126.9 million
• New Orleans Saints, $121.6 million
• Chicago Bears, $120.7 million

Of these teams, only the Super Bowl winning Saints made the playoffs.

The bottom five teams as far as payrolls go are:

• Kansas City Chiefs, $81.8 million
• Tampa Bay Buccaneers, $84.6 million
• Seattle Seahawks, $89.1 million
• Dallas Cowboys, $90.3 million
• Cincinnati Bengals, $93.8 million

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:

• Indianapolis Colts, $7.4 million per win
• San Diego Chargers, $7.5 million per win
• Dallas Cowboys, $8.2 million per win
• Minnesota Vikings, $8.3 million per win
• New Orleans Saints, $9.4 million per win

Now we're seeing a pattern here.  The teams that spent their money wisely, and who spent the least per win all made the playoffs.

On the other hand, the teams that squandered their money and paid the most per win?  Not a playoff team among them.  They are:

• St. Louis Rams, $99.7 million per win
• Detroit Lions, $50.0 million per win
• Tampa Bay Buccaneers, $28.2 million per win
• Washington Redskins, $25.0 million per win
• Oakland Raiders, $22.3 million per win

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.

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While larger businesses are starting to show optimism and some of them have resumed hiring, small businesses remain pessimistic.  The National Federation of Independent Business released its small business optimism index for the month of February, and it showed a drop of 1.3 points to 88.0.

Seeking to place blame, the chief economist for the NFIB blamed the "Washington DC agenda" for the negative sentiment among small businesses.  First, someone's got to define what that agenda is.  Second, what is it about, say, restricting large banks from prop trading that will affect small businesses?  If they were affected by the rule, then they wouldn't be a small business, would they?

It is disappointing to see what should be an economic data release tainted by political rants from the organization releasing the data.  Regulation is something that the NFIB rails against even though most regulations exempt its members, and the organization is seizing on this negative survey to push its agenda.  Nevertheless, there is useful information in the report.

While optimism has dipped among small businesses, they look like they plan to resume hiring.  Employment per firm dropped by 0.13 workers, which is way down from the 0.5 workers per firm average since the recession began.  Looking forward, 13 percent of small businesses plan to increase their payrolls, while eight percent plan to cut payrolls.  The number of businesses planning to hire more workers increased by three points, while the number of businesses looking to cut them decreased by two percent.  Thus, even in the negative survey, there's some good news.

Despite the ranting against the "Washington DC agenda" from the NFIB, the real reason for pessimism among small businesses is decreasing sales.  Companies reporting higher sales dropped by two points to 15 percent, while companies reporting lower sales was unchanged at 46 percent.  That is the real reason for pessimism among small businesses.  It is hard to be optimistic when you see sales falling. 

One of of the main pillars of conventional wisdom is that small businesses drive economy.  That thinking needs to be examined thoroughly.  It is clear that larger employers are the ones who are resuming hiring at a far faster rate than small businesses.  Maybe it's the large employers that drive hiring, and small businesses just follow along.

Small businesses and family farms are, in the opinion of this writer, often given a spot on a pedastal that they simply don't deserve.  And this comes from an individual who is the sole proprietor of a small business.  Who, incidentally, will never join the NFIB because they're so full of crap.

This is something to ponder on a day where there's little economic data to drive the markets.

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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.

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