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Thread: Can someone explain this to me - Damon can't pay his mortgage...

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    Can someone explain this to me - Damon can't pay his mortgage...

    http://msn.foxsports.com/mlb/story/9...-Nady?MSNHPHMA

    TAMPA - Johnny Damon, earning $13 million this season, cannot pay his bills.

    Xavier Nady, earning $6.55 million, cannot purchase an apartment in New York.

    The Stanford Financial Group scandal extends to Major League Baseball.

    The issues facing Damon and Nady both New York Yankees outfielders and both clients of agent Scott Boras stem from the alleged $8 billion fraud scheme involving billionaire financier Robert Allen Stanford.

    Damon, 35, and Nady, 30, told FOXSports.com on Friday morning that their finances are frozen because of money they have with a Stanford company.

    On Monday, the Securities and Exchange Commission froze all assets of three entities Stanford International Bank, Stanford Group Co., and Stanford Capital Management all managed by Robert Allen Stanford. Those were the only three entities whose assets were frozen, according to the SEC filing.

    "I can't pay bills right now," Damon said at the Yankees' spring training facility in Tampa. "That started on Tuesday. I had to pay a trainer for working out during the offseason. I told him, 'Just hold on for a little bit and hopefully all this stuff gets resolved.'"

    Nady faces similar concerns.

    "I'm affected in some ways. I have the same (advisor) as Johnny," Nady said. "He said I didn't have money with Stanford (investments). But all my credit card accounts are frozen right now because of that situation. I'm trying to get an apartment in New York. I can't put a credit card down to hold it."

    Boras said his clients have no reason to worry about losing money.

    "Our personal-management auditors have looked into the financial elements of it," Boras said. "None of our clients is in any financial jeopardy."

    Both Damon and Nady said they were told by their financial advisors that the matter could be resolved within a few days. Damon said he was told that his money was insured by a bank in New York, which Boras identified as the Bank of New York.

    First baseman Mark Teixeira, another Boras client who is a member of the Yankees, said he did not have money with Stanford. Third baseman Alex Rodriguez, who also is represented by Boras, was not available for comment.

    Damon, Nady and other Boras clients use Personal Management Consultants, a division of the Scott Boras Corporation, to monitor their assets.

    Players pay PMC a percentage of their earnings on top of the commission they pay Boras. The company employs CPAs who check investments, audit teams, do tax work, and perform other services.

    "I talked to PMC, talked to guys at Stanford Financial Group," Damon said. "The first thing they kept saying was, 'You should be OK.' I was like, 'Not should be OK.' They clarified it that yeah, I've got nothing to worry about. But unfortunately, the money is frozen."

    PMC does not make actual investments, Boras said.

    "We have no link to Stanford, no financial connection to any investment company with any of our clients," Boras said. "We do not invest our clients' money and receive no compensation for it, unlike other agencies."

    On Thursday, The New York Post reported that IMG, a sports management agency, quietly agreed to steer clients looking for investment advice to Stanford Financial Group, potentially exposing them to millions of dollars in losses resulting from the financial firm's alleged fraud.

    According to the report, which cited three sources with knowledge of the situation, IMG and Stanford have a quid-pro-quo agreement under which Stanford Financial pays IMG a low- to mid-seven-figure consulting fee in exchange for IMG advising its clients to have their money managed by Stanford.

    IMG has denied the quid-pro-quo charges.

    The SEC alleges that Stanford ran an $8 billion fraud that involved luring customers into buying certificates of deposit that carried "improbable and unsubstantiated high interest rates." Stanford's operation claimed the CDs were backed by the U.S. Federal Deposit Insurance Corp.

    "I have not gotten into the CDs," Damon said. "But I will tell you one thing: When I did see the CDs that were that high, I thought, 'Why don't I just do that?' It's a good thing I didn't."

    Still, both Damon and Nady said they were uneasy about the state of their finances.

    "I hope we're all safe," Nady said. "You're concerned because of things that have happened these last few months. To get that kind of news is never good news. You've got to hope you're OK."

    Asked if the situation makes him nervous, Damon responded candidly.

    "It does," he replied. "I'm not sure if the banks we owe mortgages would understand our money's frozen, start putting penalties on stuff. The whole financial world is all messed up right now. Hopefully they will go on a case-by-case basis. I'm not sure the mortgage is going to be paid this month. But hopefully it's only a couple of days."

    Information from Fox Business Network was used in this report.

    """



    Sure, I understand your cashe being frozen - but what in the world is a guy who made $60M over the last 7 years - AT LEAST $30M take-home (though you know their accountants make sure it's much more than that) - doing with a freakin' mortgage?

    WHY would you pay interest on a mortgage when you can afford not to?It's idiotic.

    This is why I have no compassion for these guys when they end up broke.

    If you can't come up with a million or so - or in his case $3M or so - to pay off a house, you're stupid, plain and simple.

    The advice these guys get - or don't get - is obnoxious, but they deserve it if they can't find good advice to overcome their stupidity.

    PEACE

    -BLEEDS
    I think that in a year or two, one of these guys - Frazier, Dorn, Valaika, Cumberland, Stubbs - will be ready to replace Dunn. They won't hit as many home runs as Dunn, but they should have similar OPS. - 757690, July 22, 2008

    Alonso will be playing 1B for the REDS and batting 4th one year from today. - Kingspoint, July 9, 2009

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    OCS Prez Cant Touch This's Avatar
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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    Because paying interest on a mortgage is a tax benefit. And when you can borrow money at such low rates, it makes even more sense. Maybe his cash is tied up in other investments...? If I fell into a large sum of money, the last thing I would do is pay off my mortgage. Maybe I'd refinance it, but I wouldn't pay it off.
    A flute with no holes is not a flute. A doughnut with no holes is a danish. -- Zen Philosopher Basho

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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    It's not that Damon and Nady don't have money, they have no access to the money they currently own as there financial planning/services firm has had all assests frozen. The gov't won't let them take out their money while they investigate the financial group. Once the assests are unfrozen they will be able to pay their bills, assuming their money isn't seized.

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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    Quote Originally Posted by Cant Touch This View Post
    Because paying interest on a mortgage is a tax benefit. And when you can borrow money at such low rates, it makes even more sense. Maybe his cash is tied up in other investments...? If I fell into a large sum of money, the last thing I would do is pay off my mortgage. Maybe I'd refinance it, but I wouldn't pay it off.
    That would make sense - if you actually knew what a "tax write off" consists of.

    You spend $100K in interest, and you get to write it off, but you only get back what you would have been taxed on that money, so even if you are in the highest tax bracker, 40% maybe? a tad more if you include state taxes?

    So, spending $100K to get $40K back is NOT a good idea, no matter how you slice it.

    That's how most American's get broke. Buy a $200,000 and pay $350,000 for it, and getting $35,000 in tax breaks over it... pfft!!

    Heck, the FIRST thing I'd do if I had a large sum of money is pay off my house, then all you have to do is pay the real estate taxes for it. No brainer.

    PEACE

    -BLEEDS
    I think that in a year or two, one of these guys - Frazier, Dorn, Valaika, Cumberland, Stubbs - will be ready to replace Dunn. They won't hit as many home runs as Dunn, but they should have similar OPS. - 757690, July 22, 2008

    Alonso will be playing 1B for the REDS and batting 4th one year from today. - Kingspoint, July 9, 2009

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    OCS Prez Cant Touch This's Avatar
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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    Quote Originally Posted by BLEEDS View Post
    That would make sense - if you actually knew what a "tax write off" consists of.

    You spend $100K in interest, and you get to write it off, but you only get back what you would have been taxed on that money, so even if you are in the highest tax bracker, 40% maybe? a tad more if you include state taxes?

    So, spending $100K to get $40K back is NOT a good idea, no matter how you slice it.

    That's how most American's get broke. Buy a $200,000 and pay $350,000 for it, and getting $35,000 in tax breaks over it... pfft!!

    Heck, the FIRST thing I'd do if I had a large sum of money is pay off my house, then all you have to do is pay the real estate taxes for it. No brainer.

    PEACE

    -BLEEDS
    But I'd rather have that $100K at my disposal (i.e. invest it in other cash-flowing assets) so I don't mind paying interest for the privilege to use someone else's money. I agree that too many people abused the lenient lending parameters, but when following a plan tailored for maximizing cash flow while growing the spread (principal balance compared to market value) and while also benefiting from tax breaks - it's no longer a "no brainer."

    But....to each his own, right?
    A flute with no holes is not a flute. A doughnut with no holes is a danish. -- Zen Philosopher Basho

    www.OnCampusSports.com -- college sports covered by college students

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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    I'd probably lean towards paying it off too but it would depend on what the interest rate was and a couple years ago they were pretty low. If a player bought a $5million house they could have had a dirt cheap interest rate which would've allowed more money to have been invested in ways that could've made alot more money.
    "Now that's a real shame when folks be throwin' away a perfectly good white boy like that."

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    Socratic Gadfly TheNext44's Avatar
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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    Quote Originally Posted by BLEEDS View Post
    That would make sense - if you actually knew what a "tax write off" consists of.

    You spend $100K in interest, and you get to write it off, but you only get back what you would have been taxed on that money, so even if you are in the highest tax bracker, 40% maybe? a tad more if you include state taxes?

    So, spending $100K to get $40K back is NOT a good idea, no matter how you slice it.

    That's how most American's get broke. Buy a $200,000 and pay $350,000 for it, and getting $35,000 in tax breaks over it... pfft!!

    Heck, the FIRST thing I'd do if I had a large sum of money is pay off my house, then all you have to do is pay the real estate taxes for it. No brainer.

    PEACE

    -BLEEDS
    Intuitively, it would seem to make more sense to pay it off, however, since you can write the interest off of your taxes, and with interests rates so low, it actually makes sense to use a loan to buy a house, especially if you are in a high tax bracket like Damon.

    Here is the basic math.

    At around 6% interest, over a 30 year loan, you would pay about the same in interest as you would in principle. So for a house that costs $4M, you would pay another $4M in interest. You get to write off 35% of that from your taxes if you are in the highest bracket, so you only end up paying around $2.6M in interest.

    Remember that this is over a 30 year period, so if you took the $4M you did not use to buy the house and invested it and got 5% interest, which is very low, you would get that $2.6M back in around 10 years. That means that any interest you got for the next 20 years would be profit. This still works no matter what bracket you are in, but just not as well.

    I know it doesn't seem right, but it is, and is why most rich people buy houses with a loan, even if they have the money in the bank.

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    Member redsfandan's Avatar
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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    I know I said it once already but interests rates were MUCH lower 2-3 years ago. He may have had a rate low enough where it wouldn't make sense to NOT have a mortgage.
    "Now that's a real shame when folks be throwin' away a perfectly good white boy like that."

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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    Quote Originally Posted by redsfandan View Post
    I know I said it once already but interests rates were MUCH lower 2-3 years ago. He may have had a rate low enough where it wouldn't make sense to NOT have a mortgage.
    Agreed, he could have been earning a higher return in his investments than the return on his house.

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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    Maybe the stimulus package will save them?

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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    Is government cheese in their near future?

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    We Need Our Myths reds1869's Avatar
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    Re: Can someone explain this to me - Damon can't pay his mortgage...

    There is talk in Washington of getting rid of the mortgage interest deduction; one of the large reasons given is that it artificially inflates home prices and encourages the rich to use their home as a tax shelter. Having once been in the real estate business I will agree with both of those things. Damon and Nady are not in an unusual situation. I've worked with extremely wealthy clients who could drop cash for just about any house in the world but choose to have a loan because they need every ounce of tax reduction possible. If they can get a rate low enough (not a given for a jumbo loan, even with sterling credit) it doesn't make since NOT to have a mortgage.


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