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Michael Kern

Michael Kern

Safehaven

Michael Kern is a newswriter and editor at Safehaven.com, Oilprice.com, and a writer at Macro-Investing.com.  

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A Lesson For The NBA’s Millionaire Rookies: Diversify

NBA

The NBA’s salary cap is set to hit $109 million this year, and teams are clearly swimming in money.  As The Ringer.com notes, it’s like 2016, “A gluttonous time when teams recklessly handed out big contracts like free samples at Costco”. 

So far, the most shocking contract has gone to Zion Williamson from Duke College--the number one pick of the NBA draft who will get paid $ 44.2 million for a four-year contract with the Pelicans. According to the clear rules of NBA, for the first two years of the contract, Williams has a $20-million guarantee. 

The No. 2 and No. 3 NBA draft picks are also cashing in nicely. Ja Morant, drafted by the Memphis Grizzlies, will earn $40 million, while RJ Barrett, drafted by the New York Knicks, will earn $36 million--both in four-year contracts. 

NBA players selected with picks No. 1 through No. 30 are guaranteed at least two years in the league, as well as their paycheck.

The first round of drafts is a list of crazy money: 

Top 10 2019 Draft Pick Projected Salaries 

(Click to enlarge)

Now, on Friday, the Free Agency frenzy kicks off in full force, officially, with most official contracts open for signing after a moratorium ends on July 6th. 

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The biggest money watchers will be narrowing in on Kevin Durant and whether he will leave the Golden State Warriors or stay on for a cool $31.5 million in the next season. The market seems to be betting on him leaving for the New York Knicks. But the kink in this chain is a torn Achilles tendon from the NBA Finals that could keep him out of play for part of next season. 

The numbers almost make one sympathize with the No. 10 draft pick, Cam Reddish, who will only earn $19.3 million over the next four years …

The real elephant in the room is this: What happens to these multi-million-dollar players after they retire? 

Many of them are broke within five years, according to the Vault, which puts the percentage of broke NBA retirees at 60. 

Unless, that is, they’re Sudanese-born Luol Deng, a 15-year NBA veteran most recently playing for the Minnesota Timberwolves. As Forbes notes, Deng has another game plan as well: He’s investing the over $150 million he’s name so far into real estate. He’s already collected $125 million in properties for his portfolio. He isn’t likely to go broke anytime soon. 

The incoming rookies gearing up to make $40 million over the next four years should also take note of Shaquille O’Neal, who earned $27.7 million in the NBA in 2004 alone, but is making far more than through endorsements and investments that vary from restaurant franchises and car washes to his own, rapidly expanding line of branded products. He recently scooped up Sports Illustrated, and now he wants to buy Reebok. 

By Michael Kern for Safehaven.com

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