Episode 125: Precious medals

GRANT: Ok, I’m a bit tired after our first week of school. Getting back in the groove was harder than I thought.  Early to bed and early to rise makes me less grumpy around the guys.

MAK: You may have to go to bed a bit earlier than that.  You had a bit of an “edge” this week.  Hey, but getting up early again is definitely a shocker to the ole system.

GRANT: Takes the body a bit of time to adjust to from the summary schedule.  Being back in school, eating in the cafeteria, and figuring out the mask rules is different too and it takes a little getting use to. But, when I think about the last week, I have to think about the Olympians. They get up early year-round and are always looking to get 8 hours of sleep. 

MAK: I like where this is going.  Hold that thought, let’s get the markets done first than we can circle back to the Olympics.  Ok, this should be quick.  The Dow pushed up to another high along with the S&P.  However, the NASDAQ saw its high 3 weeks ago, but is less than 15 points that number.  

GRANT: Bitcoin is on a tear.  It was up over 12% just this week and is now up 65% from the beginning of the year. Isn’t this crazy to talk about as it jumps and falls, jumps then falls.  It’s good to see Apple got a small boost this week and we’re back to double digits.  

MAK: We can’t expect it to always keep rising.  I think we should talk a bit about Bull and Bear markets next week a bit.  What do you think?

GRANT: Sounds like a good idea.  Always wondered why there is a bull and a beard.  Nice quick update.  Back to the Olympics.  We know it’s 2021, but the 2020 Olympics in Tokyo just ended.  The US had 113 Medals, with 39 Gold.  We were top of the heap, “Numero Uno”, and beat out China by one gold medal while smashing the total count.  Since we are such a big country, I was wondering if we looked at things a bit differently, based on our size, if we’d be as successful as the rest.  Sooooooo, if you look at population size by country, and medals won, it changes a bit. San Marino would be ranked number one. I’ve never heard of it, but they got 3 medals, and it’s located inside Italy. Yes, in Italy. They have about 34,000 people who live there and they won 3 medals.

MAK: That’s bizarre. It would mean one medal for every 11,000 people.  If you calculate that for OUR population, we would have won over 30,000 medals. Wow.  I also did the analysis, where I read about how richer countries, like the US, have an advantage.  If you adjust for the wealth of its population, China would actually rank the best based on its medal count, and the US would be ranked 15th.  Yes, 15th!! It kind of makes you re-think “Numero Uno” a bit. We might have to say “Numero Quince”. I guess there are lots of ways to skin a cat. Why did I say that? I don’t like that saying!!

GRANT: Yikes, me neither.  Investing is such a core part of our money discussions, I was curious to see what the return on investment, or ROI is for an athlete.  You can use ROI to calculate how much you get out of an investment.  If we did the calculation for a stock, it’s pretty simple.  Ask yourself what you paid for the stock and figure out how much extra you gained. It’s simply the gain divided by the initial investment. Super simple.

MAK: Ok, let me do an example.  Let’s say you buy Disney for $100.  Not the actual price now, but I want to make this example simple. If the stock goes to $110, you’ve made $10.  That means $10 is your return. Your original investment is $100. So, your ROI is 10%.  You take the $10 gain divided by the $100 initial investment.

GRANT: Great example. Mickey Mouse would be so proud.  Once again, it’s your return divided by your total investment. For an Olympian, wouldn’t you say their return is the medal they’ve won because that’s what they win? The investment would include how much time and money they spent along the way to get on the pedestal and hang that piece of medal around their neck.

MAk: Ok, I’m going to have say the return is pretty low if you look at it that way.  So, I reserve the right to add other things later. I’ve seen different calculations and prices for each precious metal which changes with Supply and Demand.  But, a Gold medal is calculated to be worth around $900, a Silver around $450 and a Bronze is about $3. So, the swimmer Michael Phelps who is the winningest Olympian in history would have made $22,056 from his 28 medals.

GRANT: Looks like someone is in “school mode” and has done their homework.  NOYCE… Right you are sis.  But, it’s a bit more tricky than that.  Each sport is SOOOO different.  First, the International Olympic Committee doesn’t pay an athlete, but a country CAN pay an athlete if they win a medal. 

MAK: That’s cool. I bet it’s a little icing on the cake for the Olympians, and it adds a bit more return to our calculation.  Wait a second, it says online that Singapore offers the most money to their athletes. If you win a gold, you’d receive 1 million Sing-a-pour-ian dollars, which is about $750,000 US dollars. Cha-ching. 

GRANT: That is pretty sweet.  I saw that Hong Kong is around $650k US and it looks like Kazak-stan and Malaysia are around $240,000 for gold.  The host country, Japan offers $45k for gold, $18 for silver, and $9k for a bronze.  But, get this, Great Britain offers “nada” along with other countries.  Did you happen to see how much the US offers?

MAK: Yep, got it right here. If Phelp’s would’ve won this year, he would’ve gotten $37,500 for every gold, $22-5 for a silver, and 15k for a bronze.  Plus, you may not know this, they put the nix on the “victory tax”, which means athletes no longer pay tax on their winnings outside the US. That could be a lot. If you make it simple and calculate Michael Phelps’s medals at the 2020 bonus rate along with the value of his medals, he would’ve gotten $982,056. Huge difference. 

GRANT: And, the IRS doesn’t get ANY of it.  I would think that makes it a bit more exciting for the athletes.  But, it takes a long time, talent as well as lots of persistence. Have you ever heard of the 10,000 hour rule?

MAK: Yeah, it was in a book written by a guy named Malcolm Gladwell called Outliers: The Story of Success. It says you have to practice an average of 10,000 hours to become an expert or master.  It’s an average, of course, and not a perfect number, but that’s a lot of hours.  If you worked 40 hours per week at a job, that’s about 5 years of doing nothing else.

GRANT: Ok, to be an Olympian, you have to be an expert and at the top of your game.  Depending on the sport, it takes 4 to 5 years to prepare for the Olympics, but you have years of work before that to become an expert.  Simone Biles started at age 6, and she’s been training many hours per week since then. About 9 years ago, she increased her training to about 32 hours per week.

MAK: Ok, that is a serious investment of time.  Plus, she’s said it costs about $15,000 per year to train and compete. The mother of Gabby Douglas, another US Olympic gymnast said her daughter’s training was a factor in her bankruptcy. It’s not cheap and varies a lot by sport.

GRANT: You got that right. Fencing, yes the one with swords, was estimated at $20,000 per year and required 10-15 years of training.  Sprint Kayaker, Shay Hatchette said she spends about $38,000 per year on her training.  That’s about 2 ½ times Simone Biles.

MAK: But, athletes do earn some money from both the winnings of sporting events they attend, as well as financial support from the USOPC. That’s the US Olympic and Paralympic Committee whose mission is to support athletes. 

GRANT:  The USOPC bases its support on the likelihood you will be successful at the Olympics.  It’s another type of “pay for performance”.

MAK: That’s true. For instance, if you were in weightlifting and were likely to receive a medal, you could get $4,000 per month. They call it a “stipend”, which is for people who get paid little or nothing to cover living expenses.  However, if you were “LIKELY to qualify”, you could get $2,500/mo and if you were “STILL developing” you’d only receive $750 per month.  Not much.  

GRANT: Many athletes will be competing in competitions throughout the year.  Depending on your sport and how successful you are, you could earn more or less.  It’s been said that in the US, if you are a track and field star, and are in the top 10 nationally, your average income would be less than $15,000 per year.

MAK: With such a low rate, many athletes have to take part-time jobs, get support from families and friends, businesses, and anyone else willing to support them.  A recent survey said about 60% of Olympic athletes earned about $25,000 per year. But, we have to talk about all the other money that an elite athlete can earn from endorsing products.  You know, when they say they really like a cereal, hair cream, sports clothing or something else.  Remember the “LIGHTNING BOLT”?

GRANT: Oh yeah, Usain Bolt was the fastest man on earth, with a DAB here and a DAB there.  That man is now worth $90 million.  Why? Because he had endorsement deals that were paying him $10 million a year. He was doing Puma, Gatorade and Visa to name a few.  I guess it’s good to run like a cheetah!!

MAK: Simone is worth between $6 and $10 million, and Michael Phelps is around $80 million.  It’s a bit harder to get endorsement deals in less popular sports, though. When’s the last time you’ve heard of a multi-million ping pong endorsement?  Forrest Gump, maybe?

GRANT: So, true. I think trying to really calculate ROI is seriously tough.  Many have financial trouble trying to find money to keep going, and you don’t make a lot in your sport after you’re done without the endorsements.  

MAK:  Makes sense. It’s very much the exception that makes it big.  There are around 11,000 athletes who competed in Tokyo and around 340 medals were given out.  That’s around 3% of all the athletes competing win a medal.  It may not be a perfect calculation, but you get the idea.

GRANT: It just goes to show it’s the exception.  If you took Usain’s numbers and said he spent his 10,000 hours and became worth $90million, that would be $9,000 per hour for every hour trained, which is awesome.  And, if all that training and effort offered NO medal, NO endorsement, and NO further competitions.  That would be an incredibly low ROI.

MAK: We may not be able to do the calculation, but, there is one thing you’ll hear and see in every athlete’s eyes. They say the experience, with or without a medal, is priceless.  It’s not the end result, but the journey for so many to represent their countries and compete at the highest level is what counts.  For us, we can’t be more thankful to them for giving us the pleasure to watch them compete and succeed while working as a team.  Until next time.

MAK/GRANT: Thank you Team USA.  We LOVE YOU!! BYE!!