As if Tiger Woods hasn’t been enough of an embarrassment for American golf fans, along comes Phil Mickelson and his insider trading scandal.
At a time when much of the world sees America as the Home of the Robber Barons, the thought that we might send a golfing Bernie Madoff to represent our nation is beyond unsettling. Even Freddie Couples
would might draw the line at that.
According to the data gathered by the FBI and SEC, Phil Mickelson stole money. Plain and simple. Who were the victims? The people who sold the call options on Clorox stock.
Options can be confusing, especially to those who have no desire to trade them themselves, so I’ll describe a comparable scenario: It is decided that a big shopping district will be built across a parcel of barren farmland, but this is not public information. An insider goes to the farmers owning the barren farmland and buys it. A week later, the project is announced, and the insider sells the land, which has now increased dramatically in price, at a great profit.
A more precise example would have the insider buying not the land, but the right to buy the land. Like this: Hey, Farmer Joe, your land is worth $1000 an acre. I might be willing to buy it for $2000 an acre next week. How about I give you $50 an acre now for the right to buy it next week, if I so desire, at $2000 an acre? If I don’t buy it, you still get to keep the $50 an acre. That’s called an option. An option to buy. That’s how Mickelson handled it, as it allowed him to spend less and profit more.
Is this theft? After all, the farmer willingly took part in the transaction? Yes, it’s theft, because the insider knew the shopping district was about to be announced. Had the farmer known, he certainly would not have sold so cheaply.
It can sometimes be hard to prove this legally, but morally, it’s an open-and-shut case. Ask yourself this: If your own child were the farmer, would you make such a deal? Of course not, as your child would soon understand you had tricked him.
It’s funny that Mickelson was so arrogant that he didn’t think he would be caught. The SEC monitors for such easily identifiable cases of manipulation. If they don’t police the markets and keep them honest, investors will lose faith and invest in companies overseas. When a guy with no history of investing in Clorox, like Mickelson, makes a huge short-term bet that the stock will suddenly go up, and then the stock suddenly goes up, that sets off all manner of alarms. Mickelson wasn’t saying, “I think Clorox is a good company and will increase in value over time.” No, he was saying, “I bet Clorox stock goes up next week.”
Which brings us back to golf. The Ryder Cup is not a war. It’s a trivial golf exhibition with nothing riding on its outcome. It’s a mindless diversion and a opportunity for some corporations to make a buck. So, while all might be fair in love and war, the Ryder Cup is neither. Let’s send golfers who represent the best of America, not the worst. Phil Mickelson might be good for the corporate executives shilling to the mindless American public, but he is bad for America.