Daily Archives: March 23, 2009

Houston golf is a bargain

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MemorialPark As I’ve noted several times over the years, the value of Houston-area golf courses is often under-appreciated by golfers in other parts of the country. In this Golf.com Press Tent blog post , Gary VanSickle indirectly highlights one of the major reasons that Houston golf is under-appreciated:

You tell me what’s wrong with this picture. I flew into Miami International Airport .  .  .  and thought I’d stop in at the Melreese Golf Course, a municipal track operated by the city of Miami. It’s basically just down the street from the rental car lots in an area that is not well-off — most of the neighborhood’s homes have bars over the windows.

It’s noon. It’s a Monday. It’s beautiful — 82 degrees, light wind. The course looks to be in outstanding condition, especially for a muni. When I ask if I can play a few holes, I’m told, sure, the course is wide open. In fact, it is all but deserted.

The girl working the register asks if I’m a Florida resident. Nope. She rings up my greens fee. That’ll be $158. What, I say? State residents play for $78, non-residents are $158. Do you have a nine-hole rate, I ask? No. I totally understand trying to keep a public course available for use by local golfers. They should get a big discount. It’s their course. But this isn’t a local discount, it’s statewide? What good does that do? You think anybody is going to fly down from Jacksonville to golf Melreese when there are 1,200 other courses in the state? City residents should get the golf discount.

So I settle on hitting a bag of 60 range balls (that’s what the sign in the shop says) for $6. When I dump the bag out on the practice range, it doesn’t look like 60 balls. I count them. There are 47. I’m 13 short. That’s more than 20 percent I’ve been shortchanged. And while many of the balls looked white and shiny, too many of them just didn’t get up in the air and go, no matter how well I hit them. Mushy range balls are a fact of life in golf. Getting 20 percent less product than I was promised, that’s something else.

After I hit balls, I chipped and putted on the practice green (which was in very nice shape) for more than an hour. A couple of German guys who’d been hitting on the range did the same. They eventually left. So did I. I spent less than $10 at the course — I bought range balls, plus a drink and crackers. I gladly would have paid $80 to play, but not $158. So due to excessive pricing, the course got zero.

Melreese used to be an example of how to run a muni. Improved conditions usually brings more play, more golfers. I was there for 90 minutes and saw no one tee off. I saw a couple of twosomes, a threesome and a single already on the course. The old parking lot was closed due to construction of a new clubhouse and, I presume, a new cart barn.

Somebody has to pay for that. But it’s not going to be my $158.

What’s wrong with golf? Gee, I can’t imagine.

VanSickle could have hit the same number of range balls and played 18 holes at Houston’s venerable muni, Memorial Golf Course (which is a better course than Miami’s Melreese) for $42 if he took a cart, $31 if he walked. $15 more if he called ahead to reserve a tee time.

Getting a Grip on AIG

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aig-logo.pngGeez. I leave the country for ten days on a European trip and, upon my return, the entire U.S. body politic appears to be going batshit over a couple hundred million dollars of performance bonuses that the now-thoroughly Enronized American International Group paid to its employees.

What on earth is going on here?

Well, Michael Lewis pretty well nails the dynamic in this Bloomberg.com article:

To the political process, all big numbers look alike; above a certain number the money becomes purely symbolic. The general public has no ability to feel the relative weight of 173 billion and 165 million. You can generate as much political action and public anger over millions as you can over billions. Maybe more: the larger the number the more abstract it becomes and, therefore, the easier to ignore.  .   .   .

Of course, the 173 billion that Lewis refers to in the foregoing passage is the amount that the federal government funneled through AIG to Goldman Sachs and various other big AIG creditors.

Meanwhile, Goldman is feeling some of the shrapnel from the AIG-bonus explosion and has disclosed publicly for the first time the details of why it would not have really been damaged all that much by an AIG bankruptcy.

When the U.S. Treasury started throwing money at AIG in September, Goldman had already gathered from AIG $7.5 billion of collateral against insurance that AIG had written on a $20 billion portfolio of debt securities.

Moreover, Goldman arranged $2.5 billion in primarily credit derivative hedges on AIG because Goldman was betting that the value of the securities portfolio was substantially lower than AIG’s was betting.

Finally, Goldman received another $2.5 billion of collateral from AIG between September and the end of last year and the Fed transferred another $5.6 billion to Goldman to purchase the AIG-insured securities for the Maiden Lane III bail-out entity.

Meanwhile, Goldman continues to extract additional collateral on about $6 billion of securities that did not qualify for Maiden Lane III.

None of the foregoing is particularly surprising. Goldman is one of the world’s largest trading entitles and AIG is one of the world’s largest insurers, so it is inevitable that their affairs are going to be intertwined.

When the federal government caved to fears of a global financial calamity and bailed AIG out, Goldman secured its position in regard to AIG in a manner that was consistent with Goldman’s best interests. As Joe Weisenthal points out, it really doesn’t make any sense to get angry at Goldman for taking advantage of the federal government’s bad financial decisions.

So, let’s lay off the AIG bonuses — in the big scheme of things, they are innocuous. Similarly, let’s not hyperventilate over Goldman and various other AIG creditors taking advantage of the federal government’s dubious investment in AIG. If we are honest, then most of us would admit that we would have done the same thing had we been in the creditors’ position.

But let’s do start insisting that our representatives get out of the way and allow the market to force these creditors to endure the true cost of the risk that they took in entering into contractual relationships with AIG.

Until that risk of loss is properly allocated, investment capital is going to remain on the sidelines, particularly while the government continues to make ill-advised investments that postpones and distorts such allocation.

It’s already been an expensive lesson, but one that might well be worth the cost if the counterproductive nature of the governmental actions in regard to AIG comes to be better understood.