The Stunning Investing Takeaway From the Ohtani Theft Scandal
Don't Get Brainwashed ...
Ippei Mizuhara, the former Shohei Ohtani translator who has plunged his friend and former employer – as well as Major League Baseball (MLB) – into the biggest gambling scandal in the social-media era, has been hit with federal bank fraud charges for allegedly stealing more than $16 million from the superstar Los Angeles Dodgers player who is one of the faces of baseball.
The charges were announced Thursday after a joint investigation by the U.S. Attorney's Office for the Central District of California, the criminal division of the Internal Revenue Service and the Department of Homeland Security.
Mizuhara “stole this money largely to finance his voracious appetite for illegal sports betting," U.S. Attorney Martin Estrada told reporters at a news conference Thursday.
When you read what the now-fired translator is alleged to have done, it’s tough to keep from clenching your fists over the sheer effrontery of his actions. According to telephone-call recordings, Mizuhara allegedly pretended to be Ohtani in speaking to bank employees. And he reportedly kept Ohtani’s agent, accountant and financial advisor – among others – from accessing the ballplayer’s bank accounts.
He also allegedly used Ohtani’s money to cover his losses. But if he won, he funneled the money into his own accounts.
That made it possible for Mizuhara to drain away millions – and funnel them to an illegal bookmaker in the state of California, where sports betting is a banned activity.
And the scale of this is mind-numbing: According to news reports detailing the criminal complaint, during a stretch that ran from December 2021 to January of this year, Mizuhara allegedly placed about 19,000 bets. And while he’s charged with stealing $16 million, he rang up losses of more than $40 million.
If convicted, Mizuhara faces a maximum term of 30 years in jail.
MLB is scrambling – repeatedly saying that Ohtani is a victim, not a participant … and that no bets were placed on baseball.
For me, those points are almost secondary issues.
At a time when professional sports are pushing all their chips to the center of the table when it comes to legalized betting, it’s the fact that MLB is making those statements (repeatedly) that’s a crucial talking point.
My “Yikes Moment”
My real takeaway here has little to do with the Ohtani case.
It’s about our changing mindset about money.
Back in late March, sports-business journalist Joe Pompliano saw an interview where ESPN betting analyst Erin Dolan was talking the Over/Under on a UConn/Northwestern basketball game. After she made her case, ESPN anchor Rece Davis said: “Some would call this wagering … gambling ... the way you’ve sold this, I think what it is, is a risk-free investment.”
Yikes …
Or as Shaggy used to say in Scooby-Doo: Zoinks!
On his X account, Pompliano posted that clip … with a response:
Davis’ comment gave me chills (and not the good kind). And I really dug Pompliano’s “call me old school” response.
And I’ll tell you why.
As a guy who’s covered the financial markets for probably 35 of those 40 years – and who was the co-author of the Prentice Hall best-seller Contrarian Investing, – I’m a devout believer in the investing mantra: “There’s no free lunch.”
In columns outside of the book, that “no free lunch” belief is part of “Bill’s Rules for Wealth Building Success” – one that I’ve proprietarily named: “The First Law of Financial Physics: There’s No Free Lunch.”
I probably inherited this view from my late Dad – a really good guy and a smart man with two physics degrees – who worked for 65 years as an engineer … and used to say the same thing about energy and design … that there’s no free lunch … there are always tradeoffs.
Always.
In short: No free lunch = no such thing as a risk-free opportunity.
And it’s reckless for anybody to assert otherwise. But it makes you wonder if viewers were sitting there, nodding their heads in agreement, and accepting what Davis said … you know, at face value. (Interestingly, after some massive blowback, Davis later walked back what he said … contending it was “a joke.”)
I’m on record saying that a “DraktKings Mindset” has infected the financial markets.
By that I mean it’s become more acceptable to speculate.
The Mindset to Banish Immediately
There’s been an explosion in options trading – an asset class I fervently believe most retail investors should never touch.
And the numbers back me up.
Between January 2010 and February 2021, retail investors lost more than $3 billion, according to a study published in the report Losing is Optional: Retail Option Trading and Expected Announcement Volatility.
The mantra for us here at Stock Picker’s Corner (SPC) is: “You can be a Wealth Builder … or a Wealth Killer – the choice is yours.”
And options – for most folks – are Wealth Killers.
It’s no different than putting it all on black at the roulette table.
But I see more of it than ever before (and I’ve been doing this for a long time). I see folks taking a 100% loss on a hefty options wager and rationalizing with an “oh well, it was only <<insert dollar amount here>>” rationalization.
Doing that once isn’t necessarily a wealth-killing act. But that rationalization … and the “self-permissive” mindset that’s taken hold with the explosion in gambling … has bled over into investing. And it means folks do this over and over and over again – rationalizing it each time, and fooling themselves into believing that the “next trade” will not only get them even … but will put them ahead.
Even way ahead.
That’s the gambler’s mindset that’s bleeding over into investing … and it has no place here.
Banish it from your mindset.
And be a Wealth Builder here with us.
See you next time.
