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Wednesday, September 26, 2018

Fans of Dire Straits Can Now Make Money on the Band’s Royalties

It would be pretty cool to hear "Sultans of Swing" on the radio and shout “turn it up!” because you know you're earning, but only accredited investors need apply.

The manager of Dire Straits earned a percentage of their royalties, and he’s selling a big chunk of it to the public. For $3,970—a little cheaper if you buy in bulk—you can get 1/925 of an asset that has been paying around $296,992 per year over the last year for an annual return of about 8 percent* (corrected from earlier). That’s pretty good, and the prospectus argues that growth in streaming and a forthcoming Mark Knopfler tour will increase royalties.

I think it would be pretty cool to hear “Sultans of Swing” on the radio and shout “turn it up!” because you know you’re earning, but only accredited investors need apply. In related news, Matt Levine has an excellent piece on accredited investor rules and his alternative:

  • Anyone can also invest in any other dumb investment; you just have to go to the local office of the SEC and get a Certificate of Dumb Investment. (Anyone who sells dumb non-approved investments without requiring this certificate from buyers goes to prison.)
  • To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing, anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony.”
  • Then you take the form to an SEC employee, who slaps you hard across the face and says “Really???” And if you reply “Yes, really,” then she gives you the certificate.
  • Then you bring the certificate to the seller and you can buy whatever dumb thing he is selling.

This article was reprinted with permission from Marginal Revolution.

  • Alex Tabarrok is a professor of economics at George Mason University. He blogs at Marginal Revolution with Tyler Cowen.