A Nice Reprieve From The Doom and Gloom

I’ve been following the markets recently with a sense of awe, wondering for the life of me how on Earth they’ve gone up through April. I don’t invest my money personally and I don’t proclaim to know a great deal about markets generally, but I hold the opinion that I suspect (hope) many people also hold, and that’s WTF! It’s fairly evident to me that central banks are the only reason markets haven’t plummeted to a level that would mirror even closely the economy, but there was something I picked up on which got me thinking about golf. It always comes back to golf with me. The markets have really only rallied off the back of a few, very large stocks. It’s not like every stock is trading up, far from it. It’s therefore becoming ever clearer that after this crisis, there will be a further concentration of wealth, both in terms of companies, and individuals. Amazon will come out of this stronger, while dozens of other retailers go bankrupt. The Pareto Principle is once again coming fully into effect.

When I think about what golf might look like after this Covid-19 crisis, and specifically how the European Tour might look, I’m left with the unshakable sense that time might be up. Golf at the professional level (I’m aware that doesn’t make up all of golf), has done a fairly brilliant job over the last decade or so of maintaining astonishing breadth relative to many other industries. It’s maybe frustrating to some who believe golf should become more like the ATP Tour in Tennis and look to concentrate the best much more often than it currently does. But I did think it was interesting to see Federer, Djokovic and Nadal apparently have discussions about helping lower ranked players financially through this time… this is what comes of an industry that concentrates wealth less liberally than others, or rather, leaves the competition to the forces of the market entirely, and thus therefore allowing the Pareto Principle to do its thing. I would generally be an advocate of this, when it’s say, Spotify, but it’s becoming clear in a crisis that actually checking these things occasionally can lead to less dislocation in dire times.

The reason I say time might be up then is because I think these remarkably strong forces are now upon us, and there isn’t much we can do that wouldn’t be politically sour. Sponsorship over the last decade or so has followed what I opined above, in that we’ve got fewer sponsors supporting the Tour, yet they give more than what sponsors on average gave 10/15 years ago or so. It therefore just takes one or two of these sponsors to withdraw, and the Tour goes from experiencing nice gains, to worrying losses. This lack of diversification probably isn’t anyone’s fault, but we cannot hide the fact that this is a precarious place to be. Also, and maybe this is more pertinent to the professional game as a whole, is that I think the veil will finally be lifted on what we perceive as ‘value’. There’s no way I provide the kind of value that warrants what I’ve been paid over the last few years, and I think that could be argued across the board. But because liquidity in some areas has been so readily available, it’s gone largely unnoticed. My inclination is that this is going to change though, not so much the liquidity part, more the actual solvency part, and so naturally I think big companies, especially in Europe, are going to have to rethink their investments. The PGA Tour might be a different story for awhile. For one thing, America tends to value individuals above all else, but more directly, while the PGA Tour has it’s NPO (Non Profit Organisation) status, it will never have to compete in the much harder, and realistic terrain that the European Tour has to. Forget Tiger for a moment, The PGA Tour continues to have politics as it’s number one asset.

I can see a scenario then whereby we have tremendous hardship, relative to our recent past, in Europe, and that we retrench back to resemble a time in the 90’s. Speaking objectively, I don’t think that’s all that terrible neccesarily. It will however create an ever larger gap between the two Tours and that’s what leads me to think the European Tour really would have no choice but to join forces with the PGA Tour. There is another possibility I suppose in that enough stimulus is provided by mum and dad, (Lagarde and Bailey), and that we can continue along the road we’ve been on. I just can’t help feeling though that like Frodo and the gang, if we stay on this road for too long, we will eventually get found out.

 

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15 Responses to A Nice Reprieve From The Doom and Gloom

  1. Paul McEldon says:

    Very insightful and I fear you could be right about the European Tour having to merge.

    A great piece, would you be ok if I shared a link to this?

    • Tim says:

      Regarding your value EP, you give lots that isn’t necessarily bankable by staying grounded and entertaining in your own special way ! If golf goes belly up you will find another outlet.

  2. Daniel Love says:

    Well said, it’s like Darwin predicted 🍀

  3. Enlightening as always Eddie. I have been saying for several years the Europe Tour will have to join the PGA tour to survive. I’ve worked as a volunteer at the BMW at Wentworth for over 7 years and witnessed a decline in big names playing in it. If it is a world tour then the non traveling American players will have to find their passports!

    • R G Lawrence says:

      If the tours joined forces I fear that most tournaments would eventually be played in America and the influence of the USGA / PGA would be catastrophic for the game.

  4. Good thoughts. Remember, financial markets have a different rationale than real enterprises, and their nature is often to discount both positive and negative events quite quickly, in ways that may seem perverse outside that arena, eg buying rumours (direction) and selling facts (once confirmation given). On golf and value, one thing that bothers me as an athlete and economist is how professional golf rewards the personal investment made in becoming a professional. I think golf is unique in not paying each contestant, only those who pass a certain stage in any competition (‘the cut’). That means those most in need of financial support (who’ve along the way often paid a lot in time, money and denial of other opportunities) get little back, often when most needed at the start of a professional career. The money that sponsors put into golf could be better shared from the bottom up, eg by guaranteeing anyone who makes it into the field at least the entry fee, or better still some amount that appreciates the costs incurred in trying to survive in the sport. I can’t cite a well-thought out figure, but say equivalent of 2 nights in a hotel ie US$500. I think pro tennis is the nearest to golf, in that regard, so the top 100 may make a great living from playing plus endorsements etc, but through the sport, most do not make a living from their chosen career. That tends to feed into notions of both sports as being for elites or those with deep pockets. That ought to change not least to make it so that deep pockets don’t really matter as much in determining who can make it to the top. In getting there, it’d mean the winners/best performers must take away less, so that more can flow downwards. Yes, pros can make money ‘on the side’ through teaching, exhibitions (if allowed), plus sponsorship/endorsement, but most want to make money from demonstrating their skills to the paying public.

  5. Martin Cooper says:

    Insightful and brilliantly written as usual.

  6. David says:

    Good insight Eddie, but I hope your wrong for all concerned. I’m just a high handicap club player but that doesn’t stop me from living the dream. I do that through watching entertaining pros like you. Their are two ways to do that. Firstly by watching tv. Sky coverage is fantastic as far as I’m concerned but having to watch golf coverage from the PGA in America would be insufferable.. Option 2,live European golf mainly in the UK. That would probably decrease to about 3 or 4 events per season. Up goes the cost of entry,food,accommodation and make visiting events elitest.
    God I hope your wrong.

  7. Brian Blanchard says:

    A very well written article Eddie and I can understand your argument fully.
    My worry is that the bigger just keep getting bigger, which is a major conundrum for society, because the rich corporations end up having too much power with which to manipulate governments.
    I don’t personally have a silver bullet type cure but government (its their job) need to find a way to create a more equal society (not suggesting we move to communism by the way I’m all for people earning reward for endeavour) where all are valued.
    If ever there was proof that those we have taken for granted in the past (health workers, bin men, shop workers etc) are a valued part of society this pandemic has taught us they aren’t.

  8. Interesting Eddie and spot on. Although the PGA Tour won’t want a drain on its resources.
    It’s a pity that footballers don’t see what you see. But then if a club offered me £100k per week am I going to tell them I only want £50k??
    Interesting times.

  9. Maurice Leahy says:

    Maybe conferring European Tour Charitable Status, as is the PGA, thus allowing companies to write off sponsorship as a tax efficient tool, may be the way forward?
    Well written, well thought out article .

  10. Peter Crabtree says:

    Another interesting perspective Eddie. Markets tend to move for profit nowadays – short selling, CFDs etc., but eventually move with value, although greed wins more. Merging with the PGA is not the answer if the outcome you posit comes to pass – a less lucrative European Tour will mean the top names like yourself playing in the States, but will offer a lot more European Players and maybe some Challenge Tour players a regular spot. Tour Champion maybe “only” winning a million or so, but a lot of golfers earning £100k or so, and making a decent living, and employing caddies. Don’t forget them in all of this, or they will be like a lot of League 1 and 2 footballers, and soon to be unemployed. Charitable status is not the answer – tax laws are different here, and spending money on sponsorship is a tax deductible business expense so that won’t be the problem. Looking forward to the next offering to cheer up my lockdown!

  11. Richard Walden says:

    The greatest asset the European Tour has is the likability of the players and the amount of fun they have play golf, in relation to the slow-playing, self-centered robots on the PGA Tour Many of them (PGA) are either dumbs bricks or have absolutely no interest about anything else except how much money they make and how unfair it is to pay taxes. I never watch the PGA Tour and always cheer for the Europeans. at the Ryder Cup despite being an American who loves his country (and despises everything Trump stands for).

  12. Niall Keyes says:

    Excellent piece.

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