Sunday, 1 June 2014

Buy New Ferrari

Buy New Ferrari

Steve Ballmers arrange to buy the LA Clippers for $2 billion is an unusual situation for both the buyer and trader.

As one close friend ofBallmerstold me Friday morning: Hes obsessed with basketball, he needs impressive to do and hes got $18 billion.

Related: In Politics, the Wealthy Move What They Want

So we cant extrapolate too much from this yet. Other than it does underscore a basic shift in sports.Teams are now valued extra like Picassos, rare diamonds and vintage Ferraris than basic businesses.

Their value is extra likely driven by the deal in of billionaires and their capital than by bed lines and a sports teams record of wins and losses.

Here is how the Clippers are like a collectible:

1. The main buyers are rich people, not companies.Most big companies have divested their teams, other than the Clippers bidders integrated David Geffen, Oprah Winfrey and Tony Ressler. So just like that$142 million Francis Bacon paintingthat sold end collapse, values are determined largely by emotional bids from billionaires, which tin build for irrational values.

2. They are scarce assets.The National Basketball Association, National Football League and Major League Baseball arent making new teams every yearjust like how Pablo Picasso isnt making in the least extra paintings. So its not replaceable.

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3. Way in to an elite club.Just like the Ferrari club or an art museum get on, trade a sports team gives you connection in a out of the ordinary group. There are extra than 2,000 billionaires in the world. Owning a sports team makes you speciallike havingone of only five balloon dogs made by actor Jeff Koons.

4. Parabolic valuations.Donald Sterling bought the Clippers in 1981 for $12.5 million. If the team sells for $2 billion, thats a 16,000 percent gain.

The only thing I might find that compares is theFerrari 250 GTOthat sold for $18,000 in the mid-60s and sells for extra than $50 million today.

This article originally appeared in CNBC.

Read extra at CNBC:Investors snap ahead collectible toys$59 trillion to heirs, charity by 2061Art is the worst performing collectible

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