A Toast --- Refinance Your Future

Blessings all pon mi life and

Me thank God for di journey, di earnings a jus fi di plus (yeah)

Gratitude is a must, yeah

Me see blessings fall by mi right hand

Buss a toast fi di friends weh tek off heavy load

One time did sit down inna class and we bored

Den Oli say do road and mi gwan wid di road

Lyrics by Koffee --- "Toast"

Gratitude is a must, well said Koffee and a beautiful and fun song. A reminder life is short, thank God for the journey and the earnings that we have. I know many of us are following along and trying to position our family, friends, and colleagues in a position where we can come out of this COVID-19 pandemic crisis as as unscathed as possible. It is not easy but I remind people recessions are built into our economic model and life is uncertain --- so we must always stay ready for what life has in store for us. And yes Koffee me thank God for the journey, the earnings are just a plus..they cannot replace family, friends, memories, or life itself.  So this article is to stop and recognize the hard work of friends, family and readers. I think about all those hours I used to spend in the gym, on the football field, and on the baseball diamond. Practice helped me during the most difficult moments of a game. I relied on the skills I had practiced day after day. So "we" must all do the same in life --- keep your head down during adversity and keep your eye on the greater prize. Here is how we are surviving and thriving through the Covid-19 pandemic:

Liquidity is Key
Remember during a crisis, cash is king and debt is debt is not your friend because the people that provided you with that debt are afraid you won't pay. So rule #1 is to get your hands on cash.

Rainy Day Funds - Me personally I have a rainy day account that is just for these times. Pandemic, loss of job, emergencies.
Stock Funds - I got liquid here as well. It's easy to sell like I did in my 401K account and go to cash. But in my brokerage account I sold a few winners and reinvested in losers. I also bought some new stocks and I hope to ride them on the way up
Assets - Another popular way to get liquid is to tap your home equity. Also called "Cash-Out Refinance", you can borrow equity from your home. Readers and friends have contacted me about how they were able to successfully tap equity and are sitting on a war chest as small backstop through this crisis or to fund their next investment. But if you weren't in the gym with us, you'll find now that banks are reducing their risk and that means they are closing off this popular source of getting cash.

Debt is Not Your Friend

The most difficult thing during a crisis is paying debt when your primary source of funds dries up -- reduction in hours, loss of job, furlough. Hence why liquidity is key to hold you over.

Refinance - If you were in the gym with us. You used this time to refinance as much of your debt that you have. You can have good debt and bad debt but all must be evaluated. As mentioned above, I know of readers that refinanced, I just refinanced and dropped over 1 full percentage point off of my mortgage rate. Got the great news today the loan is closed.  

Cutting Costs - I recommend reviewing all of your costs. You choose what is necessary and what is a nice to have. But don't be scurred, all of your debt or costs need to be revisited. This is the fun part --- where you prove you are the boss of your life/household/path. Make a list and reach out to every vendor and see how you can renegotiate terms. First, they should value and covet your business. The biggest risk to a vendor is losing a good customer. Second, the next big risk is a customer who can't pay. So work out better terms or leave for a new vendor. If you cannot pay, talk to them about your hardship --- credit cards, student loans, and many utility companies will work with you on payment plans or temporary forbearance.  Over 7% of all mortgages (needs fact checking) are in forbearance so there is no stigma if you lost your job or have fallen on hard times. Many business people I know even go a step further and reorganize their corporation --- this is a fancy term for bankruptcy. Nothing to be ashamed of...you never want to get into debt so deep that you'll never really be able to pay it off.

I'm having fun with it and call it board meetings -- I just called Comcast and didn't like their answer so we are switching to a new vendor. For insurance, I reached out to a consultant who is calling a number of providers to find me the best insurance plan for my family. If you don't meet my demands in my board room, we jump ship. See ya Geico.  But read the fine print and avoid long-term contracts unless they are truly in your favor.

Go on the Offense - My favorite thing is when the world is pulling back to find those pockets to begin investing. When things are at there darkest hours, I think of myself as an explorer looking for those rare gems. Again, my friends and family are already pouncing. Toast to my little brother purchased his first home and I know of friends who have offers on the table. If you look back, during the last major crisis is when I bought my home --- I did the math and prices in the city of Chicago had dropped roughly 40% since the peak. Remember my candy bar analogy, I only remember when Reese's Cups were 50c. So you're gonna have a hard time talking me into paying anything more. 

Now that I've refinance my home, I'm going to have a board meeting on my rental property...if my bank is smart they will come to the table with a good deal. After that, I plan to begin search on my 3rd property. This will take lots of research because my next investment has to earn the right to use my hard earned money. Hopefully this next property can be the stepping stone to fund an empire of diversified property. I guess you can say I have dreams like Lucious and Cookie in the TV show Empire. 

Moment of Prayer --- No matter how successful you are, there are variables that are out of your control. I saw the disgusting murder of a black man in Minnesota and I got emotional. Once again, the snuffing out of an innocent life was on full display for the world. It reminded me recently of the time, I was returning from the hospital to go to work and got pulled over. I was checking in on my critically ill father and the police pulled me over for speeding at 8AM in the morning (even though I was not given a ticket). I had recently watched the movie "The Hate U Give" --- and rolled my window down quickly and put my hands on the dashboard. The cop recognized how serious I was taking this event and commented that this is not the way to start you day huh. I stayed quiet because at that moment all I could think of was my critically ill father, my youngest daughter, and my pregnant wife. I have a family to come home too. And if someone took that away from me ---- they don't deserve that right. I tell everyone to please be safe from the Covid-19 virus but to my people of color I also have to tell you to please be safe AT ALL TIMES.  God bless you all

GrubHub (GRUB) + Uber (UBER) --- Hookup Alert

Uber everywhere, pre-rolls in my VIP (skrr skrr) / Yup I Uber everywhere, pre-rolls in my VIP
And I think that chick from Canada / I think she from the six / Yup I Uber everywhere, pre-rolls in the VIP, hey

~ Uber Everywhere (Artist: Made in TYO)

A bold move may be in play my Uber but I'm not mad at them. Many people have been saying the food delivery business is treacherous territory. I actually agree. The deals are so good for delivery right now because of the high competition between GrubHub, DoorDash, UberEats, and others.  Many don't know they are losing tremendous amounts of cash to be the top dog in this space. But I like GrubHub's position as being the dominant player in the industry. As a serial acquirer, they were taking the competition out one by one --- buying them up and essentially putting them out of business. Uber is a competitor in this space and it appears they have had enough. Logged in to my account to see my GrubHub position up fairly big. Why? --- because Uber wants to hook up in a major way.

The stock was halted pending news:

Here you'll see my position from the beginning of the year, an options contract. I listened to the CEO Matt Maloney back in January and it sounded like the company would be evaluating their options of buying or being acquired. 

I'm hoping these two hook-up, nothing is certain until they say I do but this would be a small win for my portfolio but I don't my letting go of that young flashy player on my roster that caused me some heartburn at the beginning of the year. Let's see if it works out.

Full Disclosure: I own option contract(s) in GrubHub from back in January 2020 (see above). Also another disclosure the artist above pronounces his name Make in Tokyo skrr skrr 🚗🚗

ALLERGAN (AGN) and Abbvie (ABBV) - Hookup Alert

"Called up the homies and I'm askin' y'all / Which park, are y'all playin' basketball? /Get me on the court and I'm trouble / Last week messed around and got a triple double / Freaking brothers every way like M.J. / I can't believe, today was a good day

~ Ice Cube (Today Was A Good Day)

Like Cube said today was a good day. Despite being busy helping corporations manage their business risks I still wake up and practice. For me, this includes catching a 3 hour business show every morning before I start my work day. I am not an early riser anymore -- no more commutes on the Chicago Metra train or taking the bus downtown to work. Instead I sleep in, record the show, and try to eventually catch up while it's in progress. 📺 It reminds me of when I had to wake up at be at the gym for 6AM practices for basketball. I wanted to have an Allen Iverson --- PRACTICE --- moment but hustle means hard work. And that work ethic has taken me a long way.

While the morning updates scroll by, I log on to my investment account to check on my team.  Yes every sport has a name for this group: roster, squad, farm team, recruits, etc. So just like a coach, I watch film, recruit players, give them try-outs and eventually put them into the game. My goal is to field the Dream Team of investment companies. I do this by being data-driven but like any human I too can get caught up in the young flashy new player (Zion Williamson). Sometimes I tend to want to give the veteran player a longer leash than sometimes is deserved. I like proven winners like LeBron James and Kevin Durant but the trick is to find them as early as possible and hold onto them into the prime of their careers. While this sounds easy, remember:

• There will always be top picks that go bust
• Even the greatest players get traded or play past their prime
• Players make mistakes and get into trouble 
• Rarely do many greats play for one team and exit at the top of their game

I wanted to highlight Allergan (AGN) -- I would drop them in the bucket of a young flashy player. I need to look back to determine when I first bought them but I did see that 2014 is my first post about AGN. Then towards the end of 2014, you'll see I had to part ways with Allergan because they received multiple trade offers. If you remember LeBron's "The Decision", well Allergan was being courted by multiple companies:

Valeant - had a bid for $54 Billion for my player AGN
Actavis - trumped Valeant's offer with a $66 Billion takeover bid of AGN

The deal meant that I had to trade my player but I received cash compensation and even a few shares in the new company.

So like a good coach, I continued to watch Allegan (the acquiring company, Actavis, actually renamed their company to Allergan) over the following years. The maker of the popular Botox treatment stumbled for a few of those years. Somewhat nostalgic, I flashed back to those days of watching Allergan's rise and decided to give sign them to my roster for a much lower deal than before. They had lost a step but once again they showed there was still some value there. My range was between $125 and $140 a share, Allergan soon had teams looking for a trade again. Maybe they were nostalgic, saw value, or wanted to take advantages of those flashes of brilliance.  Along comes a company called Abbvie -- they decided to pay $63 Billion to acquire Allergan and that equates to roughly about $188 a share.

So as I close, I wanted to thank Allergan the two-time world champ on my team. Those long nights of research and recruiting paid off. And hopefully this serves as an example that you two can use everyday skills to invest --- just like I do. 

What Coronavirus Risk --- The Markets Have Roared Back

What Coronavirus Risk --- The Markets Have Roared Back

First I want to say WOW, the markets have bounced back in a loud way. Louder than my Cross Colours 👚clothes back in the 90s. I have been on a number of enlightening calls in the last few weeks to gauge the pulse of the us --- the people --- the consumers. I keep my ears to the streets to see what real people are doing and if it’s in line with what I hear in the news --- I do this because I am wary of Headline Risk. One hot topic is Real Estate and I’ve been very surprised to hear what people are doing in this space. Of course job security has been a frequent discussion as well. For example, bankruptcies are occurring as companies navigate the crisis. And stimulus oh my – it seems that the Federal Reserve and Congress have somewhat been on the same page and don’t care about debt, inflation, or the next generation because they have pumped a record 4 Trillion Dollars into the economy. It’s much harder to invest during a crisis because there is so much news and information flowing -- Headline Risk. The amount of texts I get and send about breaking news and events is way up. So I usually like to keep things simple and you got a glimpse of that last month:

Contagious Health Pandemic à BAD 👎

Administration Response to Pandemic à BAD + SLOW👎👎

Stimulus from Fed Reserve + Congress à Very Good (Rollout of Stimulus Checks – slow; PPP – well let’s just say the LA Lakers, a Billionaire’s holding company, and a rich Florida Homeowner’s association all got a $$Million$$ dollar checks before small businesses on main street did. Changing from Very Good to Good 👍👍

News of Re-openings à Risky (Again unorganized but I understand the need to get people back to work) 😬

News of Treatments à Very Positive as I wrote about Gilead and Remdesivir very early on 👍

News of Vaccines  à Nothings seems imminent until 2021 w/ one big exception the Oxford vaccine out of London I believe could be promising as they were already working on a coronavirus vaccine and are using those building blocks to fight COVID-19. 👎

You do the math from what I’ve listed out and you’ll see why I split my investment strategy.  Without a vaccine, a contagious health pandemic is very dangerous and now cities have run the numbers and can’t stomach the shut-downs any longer…even if it means deaths tick up higher.  But 4 Trillion of Stimulus will make some of us temporarily forget we are in a crisis – but will everyone get a piece of this helicopter money strategy.  So my calculation is this:

• I need my retirement income protected – Retirement Funds out of the market ✅
• I need some exposure to Stimulus induced rally – Personal Investment Account (very active and I’m looking for big gains and possible exits) - Teladoc, Uber, Match, Roku, Gold ✅✅
• I need to cut costs and stockpile cash – Refinance, apply for stimulus funds, cut costs in my family budget ✅ (Comcast and Insurance cos I still owe you a call)

Headlines Versus Real Life

Headline -- Mortgage rates near record lows — and green shoots emerges as Americans prep a move back into home-buying

Real-Life – In the last few weeks, I’ve heard people are putting in offers, closing, and trying to move from being renters to owners. If the price is right, go for it because rates are low. Still a little surprised at the pent up demand here.

Headline – Banks are requiring HIGHER down payments (often 20%) and higher credit scores; JP Morgan and Wells Fargo have stopped Cash Out Refinances / HELOCs

Real-Life – Back in March, I told you to refinance and get cheap cash while you can. The Banks are sleepy and slow but are they are finally tightening the screws. I know of a Cash-Out Refinance recently closed and I got instructions to lock my regular refinance rate a few weeks back. Normal refi’s will still be occurring but look for more scrutiny because of the jobs landscape due to COVID-19.  As far as Cash-Out Refis, if you were slow this source of cheap cash may be narrowing.  

Headline -- Mortgage forbearance (program allowing people to NOT pay mortgage) has ballooned up to 4.1 million borrowers/ Over 7.5% of home loans

Real-Life – I have heard real stories of mid to large sized landlords saying their tenants have lost their jobs and their rental income is impacted. Do you fault the tenants for not diversifying their tenants or simply forgive tenants and renters because this is an act of God. What about this -- how long will eviction moratoriums be in place by cities AND will people pay – back rent and back loans may be too much for people to pay plus their normal rent when the economy picks up. This is the area that concerns me the most especially since I’m hearing of people buying homes NOW. Is this the tale of the halves and have nots or are people a little too early into a looming crisis?

Headline -- In roughly 6 weeks, unemployment claims have jumped to 30 Million people and projections of roughly 47 Million are being forecasted as the peak (by the Federal Reserve St. Louis)

Real-Life – Over the past few weeks, I’ve heard about management changes at corporations, bankruptcies, and mainly furloughs. Thanks to some courageous leaders many companies are pledging to NOT layoff but I’ve seen the layoffs in the restaurant, hospitality, entertainment, and travel industries. For example, United Airlines which accepted “stimulus” money will keep employees on the payroll until the money runs out. It’s April and they have already told staff to take 20 unpaid days off before October AND will lay off 30%.

I did my analysis back in March so I would not suffer from analysis paralysis today. You can easily get caught up with ALL of the changing headlines. I am preparing for the long winter like in the Game of Thrones. United Airlines is a big and resourceful company – if they have enough information in their crystal ball in May to a) take the stimulus money and b) still announce layoffs of 30% in October what does that mean for the economy, stock market and jobs picture. I always want to have optionality – you see I’m setup like United to ride the stock market being fueled by a) stimulus.  I’m only roughly 10% away from my all-time portfolio highs (4 Trillion in stimulus will do that I guess) but I’m slowly exiting winning positions AND my retirement funds are now not moving until I understand what United sees coming in October. Maybe they see reality sinking in once the stimulus wears off that we all must come together – stringent distancing, an effective treatment, bountiful productions of a vaccine, and less fear in the air.   If NOT it will be a long cold winter.