If You’re So Rich, Why Aren’t You Smart?

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The New York Daily News recently reported that Yankee’s superstar third baseman, Alex Rodriguez, was poised to spend $80 million on a 5,200-sq-ft penthouse at 15 Central Park West in Manhattan.

Allegedly, an important motivation for Rodriguez’s decision to buy this Taj Mahal in the sky was that it would move him five or six blocks closer to his itinerant girlfriend, Madonna.

Duh!

As a retired womanizer, I can think of nothing more idiotic than buying an expensive pad just to bed down closer to a woman who is going to be gone in the morning.

If there were ever a story that shows the importance of learning to read something other than gossip columns and scouting reports on pitchers with mediocre fastballs, this is it.

I wouldn’t expect “A-Rod” to read The Daily Reckoning or subscribe to Abundance. But his lack of awareness of the global financial crisis and its implications for Manhattan real estate is so pathetic that it almost makes me feel sorry for him.

Too bad for A-Rod that he wasn’t trapped in an elevator for a few hours with a Lehman Brothers investment banker or kept waiting at a doctor’s office with nothing to read but a copy of The Wall Street Journal.

I admit that I make the arrogant presumption that I could better advise A-Rod than his gaggle of highly paid hangers on. But on the evidence, that is a bet I am happy to make.

Of course, A-Rod can afford to be stupid with his money. He still has nine years to run on a ten-year $275 million contract with the New York Yankees.

So he can afford to throw away about one third of this sum without exposing himself to the risk of penury.

Still, why would you throw away so much money on a high rise in a city hurtling towards bankruptcy?

If you think for a just a moment about New York real estate, it will become obvious that the disappearance of hundreds of thousands of high-paying jobs on Wall Street is a prelude to the disappearance of most of those people from the Big Apple.

That means there will be a boatload of luxury homes coming on the market, many at distressed prices.

If Rodriguez were smart about it, he could hold off for a few months and have his pick of penthouse apartments for a fraction of what he is reportedly set to pay.

In fact, all around the world there are a ton of trophy homes for sale by former billionaires who got caught up in the Great Wipeout of 2008 – an event that has destroyed upwards of $32 trillion in wealth.

Thirty-two trillion dollars: It rolls easily off the lips, doesn’t it? But it’s more than 80% of the world’s yearly economic output.

In the wake of losses of this size, hurt investors are disgorging some truly amazing homes onto the market.

For a mere $15 million A-Rod could buy the trophy home of a former European tycoon on the island of Angra Dos Reis off the coast of Rio de Janeiro.

I would say that the Angra Dos Reis property is magnitudes more magnificent than a boxy penthouse overlooking Manhattan.

The house is about three times larger than the New York pad. The master bedroom alone is 1450 square feet. And the place comes with a home theatre, a gym, a sauna, a wine cellar, a library and five bedroom suites.

This is all nestled in about a million and a quarter square feet of private island on the doorstep of one of the world’s great cities.

The house also has sleeping quarters for 12 live-in servants, a captain’s quarters and facilities for bunking the crew of your yacht.

It also has a deep-water berth and several helipads. So you and your guests can come and go with the minimum of fuss.

A-Rod could buy this fabulous mansion on Angra Dos Reis and save $65 million in the process.

He could use that $65 million to buy shares of La Farge cement, a solid company that pays 8.5% dividend in euros.

Investing $65 million in La Farge would give you a monthly euro income equivalent to $125,000.

So when the dollar sinks into oblivion under the weight of all the deficits the politicians are creating, you could still live well in your Brazilian island mansion.

I think I would do a much better job of deploying A-Rod’s millions than he seems prepared to do. Of course, he can do a much better job of hitting home runs and fielding sharply hit ground balls than I could.

It’s his money. I can only wish him well in his new penthouse and wonder if he is so rich why he isn’t smart?

James Dale Davidson
for The Daily Reckoning Australia

The Daily Reckoning
The Daily Reckoning offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, The Daily Reckoning delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, The Daily Reckoning is published in 7 countries with a worldwide readership of almost 1 million people.
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5 Comments on "If You’re So Rich, Why Aren’t You Smart?"

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icy
Guest

I personally don’t believe anyone including A-Rod would spend 80 million dollars on anything short of a small country however, if it’s such a stupid investment the managing partner and many high ranking officials of Goldman Sachs as well as Jeff Gordon, Tom Brokaw and Sting were also stupid enough to buy into the same building.

Daloob
Guest

And if you’re so smart, why aren’t you rich?

Anthony Teamson
Guest

He is doing his part as a consumer to revive the economy.

Jon Bain
Guest

What makes you think his money is actually ‘his’ to spend?

Whoever
Guest

Monday, 9th Feb 2009: in an interview with ESPN, Alex Rodriguez admitted to using banned substances from 2001 to 2003, citing “an enormous amount of pressure to perform”… Anabolic steroids, testosterone and Primobolan…
Is he smarter than we thought? I don’t think so…

wpDiscuz
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