Great Golden Gamble

This past Sunday Tiger Woods won his fifth Masters tournament and his first since 2008. Many in the golf world had written him off after years of struggles both on and off the course. An excellent essay about his triumph can be read here. The author cleverly takes the point of view of the famous No. 12 hole, Golden Bell. The author noted that over the years many golfers have had their championship dreams dashed by this unassuming but tricky hole at Augusta. In fact, during the final round of play four golfers fell victim to the hole and ended up in the water. Tiger, on the other hand, played it safe and landed the ball in the middle of the green, leaving himself ample room to make par and continue his pursuit of the green jacket. By no means am I a golf expert, but something stuck with me after reading this essay, and that was Tiger’s strategy on this hole. He could have easily gone for the pin on his approach and tapped in for a birdie, but he didn’t. Why? It’s not that he doesn’t have the strength or skill to be able to make that shot, his career is etched by nearly superhuman feats that will help him to go down as one of the greats in all of golf history.

I think that in this case, he knew that he didn’t need to risk it. He watched four others land their ball in the drink and knew that he didn’t need to take the risk to win the tournament. All he needed to do was hit a solid shot onto the middle of the green and get par. He did just that and ended up winning the tournament by one stroke.

While the internet was plastered with pictures of Tiger on Sunday and Monday, a different story caught my eye. A 39-year-old man in Wisconsin had placed an $85k wager on Tiger to win the tournament at 14 to 1 odds. He said that he scraped together as much money as he could afford to lose. The payout was roughly $1.13 MM, and the man noted that he had never placed a sports wager in his life. I would say even more than a good story of the redemption of a fallen hero; people almost universally love a good story where someone beats the odds on a long shot bet to make an untold fortune. But here are some more facts about this man in regards to his current debt burden:

* Mortgage

* Two student loans

* Two vehicle loans

To myself as a 38-year-old with just a mortgage payment this doesn’t entirely paint the picture of someone that can afford to lose $850, let alone $85k. He made his wager based on a feeling that he had after watching Tiger in the months and weeks leading up to the tournament. He thought that Tiger was destined to win at Augusta, and it happened.

It’s disheartening to read these types of stories for a few different reasons. I think it reinforces the get rich quick ideas that seem to permeate our culture and lifts those that are making terrible financial decisions, and it also gives false hope to those in similar situations that they too can beat the odds. And this is where sports gambling and financial markets intersect. In the same respect that the casinos are known as “the house”, the big banks are “the house” in the financial markets. Just as nearly every year the casinos make untold billions in taking sports wagers, the big banks report trading profits every quarter. The banks are trading against investors like the man from Wisconsin or the investors that are trying to time the next big move up or down in the market by reading the economic tea leaves, looking at charts or worse following the advice of the pundits in the financial press.

When investing for our future, we need to step back and do what Tiger did so masterfully on Sunday. Assess the situation, define your goals, avoid unnecessary risks, and execute your plan. While we won’t be awarded with a green jacket when we reach financial freedom, we can certainly enjoy the fruits our labor during our retirement years.