Economic Fallout On Golf

The International Herald Tribune has an alarming article on the fallout of the so-called economic crisis on the PGA and LPGA tours.

The very popular Wachovia Championship no longer has a title sponsor, and several LPGA events also are in trouble.

The future is even more muddled on the LPGA Tour.

Two tournaments already were gone before the Wall Street meltdown — the Fields Open in Hawaii and the Ginn Tribute in South Carolina, a sponsorship that leaned heavily on real estate. Ginn consolidated its two LPGA events to one outside Orlando, Florida.

SemGroup sponsored an event in Tulsa, Oklahoma, but it filed for bankruptcy in the spring. Safeway, which sponsored tournaments in Phoenix and Portland, Oregon, also consolidated and now has only the Portland event. The LPGA, which doesn’t nearly have the financial strength of the PGA Tour, said it might have to run a Phoenix event with its own money.

About one-third of the LPGA sponsorship deals are up for renewal this year.

Clearly, the golf world tied its fortunes too tightly to the financial companies. There’s something to be said in investments (and in business deals) for diversity.

At the same time, Titleist is reporting a third-quarter drop in profits. Country clubs are closing.

Golf course openings are down. The National Golf Foundation says:

U.S. golf course developers are on track to post the lowest number of openings in two decades, according to the National Golf Foundation. Measured in 18-hole equivalents, 65 courses have opened so far this year and NGF estimates, based on the number of courses currently under construction, that another 10-20 will open by December 31st. That would bring total 2008 openings to 75-85 18-hole equivalents, the lowest number in over 20 years.

Course closures, however, are down compared to the previous two years:

So far this year there have been 74 verified course closures and NGF currently forecasts the number of closures to be less than 100 by year’s end. There were 146 closures in 2006 and 122 in 2007. Therefore it appears that 2008 will be the third year in a row with zero to slightly negative net growth in supply (openings and closures canceling each other out). NGF points out that closures continue to be disproportionately public, stand-alone 9-hole facilities or short courses (executive or par-3 length) with a value price point.

In spite of all of this, I will go on record as saying that this so-called economic crisis is a bunch of media-inflated hooey. If you’re among the 94% of Americans whose jobs are NOT in the financial sector, it likely won’t affect you at all. Even if your broker goes under, you still own the assets. And you can always get another broker.

The numerical values of the stocks may be down in a panic, but unless the companies you own go belly up, you haven’t lost anything at all. Your stocks (or your mutual funds) only lose or gain real value when you sell. I have both, and am not doing any selling until the prices go back up. (Which they always do. The DOW at the end of 1930 was at 374. Even after the last few days, it’s more than 20x that figure.)  My portfolio is just as ugly right now as anyone’s, but I’m not going to panic.

Credit crunch? Not from where I’m sitting. I know two people who bought and financed cars in the last week. I know another who recently closed on a house. My credit cards haven’t been rejected or canceled. And if a couple of banks go under, the depositors still are insured by the FDIC (assuming you kept your deposits in any one bank under the insurable limit) The worst case scenario is that you move to another bank. Its not like banks are going to disappear. There’s too much demand for their services.

Anyone remember the Carter years? 7.8 percent unemployment, peaking at 10% in 1980. 16% mortgage interest rates. Prices rising 40% in just three years.

Now THAT was an economic crisis. Today’s equivalent figures are: 6.1% unemployment; 6.16% mortgage rates. And the inflation rate is just over 5%, even with the increase over the last year.

And speaking of gas prices. They’re going down. But even at those prices, gas is really not any more expensive than it was in the early 1980s. Gas in those days averaged $1.35 a gallon—the equivalent of $3.17 today.

I filled up today for $2.35. That’s historically low.

And the best news is that there’s still gas available. Those of us of a certain age remember gas shortages, when we waited in line for hours to fill a tank.

So a little perspective here. The PGA Tour will survive. Golf will survive. We will all survive.

 

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3 thoughts on “Economic Fallout On Golf”

  1. 1. As far as the LPGA, They can ask the Asian companys for more money and sponsorship. since they seem to be the ones winning in most of the tourny’s

    2.country clubs and credit crunch, I started playing 3yrs ago I am 46yrs old now and addicted to the game. I am a skill trademan and country clubs would not fit my life style, but I am not hurting, I play where I want if “I” think it worth it. so maybe they can bend the rule’s a little bit and let the general public play at a reasonable price if they are hurting.

    It’s a good time to be playing golf.

    Reply
  2. It isn’t all hooey.  The market is skittish right now, not just because of the credit crisis, but also because of the election.  Investors are trying to weigh what Obama’s election will exactly mean.  If it is changes like described here: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971 where significant changes to 401ks may reduce investment in the markets, then we are in for a long period of negative or at best slow positive growth. 

    The changes for me will most likely be less drinking and less cigar smoking at the club, but I plan to go on playing as long as I can.

    Reply
  3. The conspiracy theorist in me thinks this economic crisis was a plot set forth by the Bush administration to bring the world to its knees for all of the injustices the Bush administration thinks was done to it by countries who weren’t supportive during the Iraq war. 

    Not that I’m following the news or care about the election, but I do wonder at what the ‘spread the wealth’ plan will do to the stock market.  If we take the wealth from the biggest chunk of stock market users, then how is the stock market supposed to rebound?  There won’t be any new wealth invested in it.  I know if Obama gives me a tax cut (he won’t because I am single and have no children – those darn social security people won’t give me SSNs for my dogs)I won’t be investing that extra wealth I find in my check.  I’ll either be paying off my car or putting it in the bank in accounts of under $100,000 to save for my retirement since there won’t be any social security by the time I reach retirement age.

    Reply

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