“Donʼt give up, donʼt ever give up.” Jim Valvano
John Lohr is an author and financial services industry veteran. He was one of the developers of the investment management seperate accounts which many financial advisors use. Lohr is an expert on fiduciary responsibility and investment management. He is the founder of The Learning Network powered by Howling Wolf. The site is dedicated to training individuals and financial professionals.
I am lucky enough to serve on an advisory board with John. I receive permission to share his recent email. Enjoy.
March Madness is upon us. Menʼs college basketball tourney time is the greatest spectacle in sports and is the second biggest wagering venue (behind the NFL.) It has inextricable ties to Wall Street because there you found the biggest office pool in history. Ever.
And it ran nearly year-round for years until the Feds supposedly broke it up about 20 years ago. The traders and specialists of Wall Street that manage the prices of the stocks we buy every year orchestrated a multi-million dollar market for college basketball picks in the NCAA tournament. It was legendary. Teams were bought and sold on the market for set prices that changed daily, just like stock prices. Starting in the pre-season, you could buy a team and throughout the college basketball season, you could buy or sell teams or buy or sell long or short options on any team. Unlike your current office pool, the prices werenʼt for the faint-of-heart. Kansas, for instance, might go for $40,000 pre-season. Millions of dollars changed hands and the winners werenʼt necessarily the ones that owned the ultimate champion. Just for example, suppose this pre-season, Louisville went for $10,000. It would have gone higher after they went 4-0 to start the season and then 7-1, then they went crazy tanking (they since recovered some). If you had the foresight to sell Louisville short when they were winning (you donʼt own them, but bet they will lose) you could have been a big winner. Personally, I donʼt think the Feds broke up the Wall Street pool, I think it just migrated to the internet where you can wager gazillions on thousands of online gambling forums.
So, what does this have to do with investing other than the fact that everybody and their brother has made Wall Street/ Casino comparisons? I came up with this game. Letʼs call it Stock Hoops. Iʼll pick 6 teams: the favorite, my home team, a personal favorite, a longshot, a “not much chance” and a “no chance”, and add the field (everybody else). Then I pick stocks to correspond to each team. Using todayʼs current Vegas odds and stock prices (March 14, 2011), we place a hypothetical $100 investment in each team and stock. After the final on April 2, we see which investment made more, using the opening stock price on Tuesday, April 3. Confusing? Nah, itʼs simple. Letʼs see:
CURRENT FAVORITE: KENTUCKY 2-1. Stock: Berkshire Hathaway, Class B, $80.69. Great resume, good track record, great leader–Warren Buffett. Just like Kentucky, John Calipari and Ashley Judd, donʼt bet against them.
MY PERSONAL FAVORITE: MISSOURI, 10-1. Stock: Apple, $592.38. Always a strong performer, Steve Jobsʼ brainchild usually gives the customer what they want. You either love them or hate them, just like Missouri
MY HOME TEAM: OHIO STATE, 7-1(Yeah, I hear you, but the flag stays). Stock: Limited Brands, $46.66.Columbus-based like OSU, it owns Victoriaʼs Secret. Whatʼs not to like?
LONGSHOT: TEMPLE, 100-1. Stock: General Motors, $26.28. Not much respect for GM, just like Philadelphia, but a huge payoff if they win.
NOT MUCH CHANCE: MONTANA, 300-1 Stock: Wall Mart, $60.85. A local favorite, but theyʼre in the dance.
SHOULDNʼT EVEN BE HERE: LIU BROOKLYN 500-1. Stock: CitiGroup, $35.68, Who? Nobody should bet on them.
THE FIELD: A lot of good teams left like Duke and Kansas, 1-1. Field: Olstein All Cap Value Mutual Fund. $13.77 Like the field, there have been more winners than losers, and itʼs run by a great coach, Wall Street guru, Bob Olstein. Tough to bet against the field.
We put a hypothetical $100 on each and the winners will be the team than wins it all and the stock or mutual fund with the best percentage increase by the morning of April 13. You could come up with your own team or investment stock and let me know. Or
you could take the hypothetical $100, buy beer and chips and watch the games on TV. Good luck.