Liquor and Leverage? -- How A Famous Investor Lost $17 Billion So Far This Year

  

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LIQUOR AND LEVERAGE

“I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.” — Warren Buffett

I wanted to share a brief article on Carl Icahn and how he's lost $17 Billion, yes with a "B" dollar in roughly 3 months. For a brief backdrop, you need to understand the players:

Carl Icahn is an investor who is known as a Corporate Raider. I'm not sure if that term is completely fair because there is a common term used in the investment community which is used to describe the INTENT of investment firms who accumulate a large amount of shares in a company. You must formally file a document that indicates if you plan to be a "PASSIVE" investor or an "ACTIVITST " investor. Icahn is the typically an activist investor. I guess activist investors also have an offshoot branch of their party called Corporate Raiders. Change can be positive and of course it can be negative. The Corporate Raider typically forces change in a company that some may see as a negative force. An example may be buying up large shares in a company, then firing a majority of the staff to quickly reap the profits and then leaving. The character most often associated with this label is Gordon Gekko from my favorite movie Wall Street. 

I wanted to share an article and a link on the negative impacts of leverage. That means borrowing money to invest in something. Over the years, I written about the perils of borrowing money. It can be a very dangerous tool to use. But it is so commonplace we forget that many of us use credit cards, mortgages, payday loans, buy now pay later schemes to fund our lifestyles. I call these items instant gratification. I believe there are rules to leverage and for example, I use mortgages to purchase my homes/investment properties. But I am also aware of my sources of income that would be used to buy said properties and homes. If those sources dried up...I'm sorry to say it's time to sell or give that home back to the bank. I would do it in a heartbeat. As for other types of credit or leverage, I stay clear of them. Here are a few examples:

Credit Cards - Yes, I use them, but I pay the balance in full each month. A future post on why then I even use credit cards at all coming soon.

Borrowing from Friends - I don't do it because it could end a great friendship.

Borrowing Against a Home - I don't do it because now, if I took out a loan against my home, now I've leverage my home as collateral. This is a possible way to lose my home and I definitely wouldn't do this against my primary home.

Now these are just my personal thoughts and yes, they are strict, but like Buffett I'm just not a fan of leverage and for the past five years liquor either (except Tequila or Cognac on special occasions).

It turns out Icahn has been using leverage as he runs his investment firm as a public company trading on the US stock exchange. Please read the first article which exposes his leverage:

1) Hindenburg Research Work on Carl Icahn's Company: Hindenburg Research - ICAHN

Key Takeaways that risks of Debt, Leverage, and Conflicts of Interest:

a) Debt: Hindenburg alleged that Icahn's firm has sell new shares (called units) to distribute new dividend payouts, which they called an unsustainable economic structure. Why might this be unsustainable?? Well Icahn's firm has not performed well dating back to 2014, losing 53% during this time. 

    Don't Believe me Just Watch: Since 2014 Icahn lost $4.9 billion in free cash flow BUT the firm continued to pay cash dividends of almost $1.5 billion during this period. And these types of results or returns have continued since then. 

    Urbanomics Lesson: Do get into too deep to debt, it only leads to hard times. Balance in life and     balance in your finances

b) Stop Playing Game 'Hoe': Hindenburg then noted that Icahn's portfolio valuations are inflated. This might be considered financial shenanigans and using these valuations to pay dividends or get other loans could come back to haunt you. 

    Don't Believe me Just Watch: Hindenburg found a few situations where Icahn's firm valued companies they invested in on their books MORE than than the entire worth of the company itself. 

  Urbanomics Lesson: Don't fake the funk. Stop claiming your car is worth $XX when you've had it for     5 years. It loses value, you can't sell it for what you bought it (usually). Next using these false                 valuations to get more leverage could squeeze you.

a) Leverage: Hindenburg also alleged that Icahn's firm obtained credit debt between the years 2017 and 2021. Debt was super cheap during this time. Well like interest only loans, these debs will need to be refinanced and now rates are much higher. Nothing is wrong with refinancing again if you use my motto of knowing your sources of income. But it was alleged that Icahn is using his own shares in the company as collateral to obtain loans.

    Don't Believe me Just Watch: 60% of his Icahn's shared are being used to support the loans. This type of leverage is a risky because if the price of the stock declines, the banks can ask for him to fork over those shares AND even come up with more money. I assume the banks would want to sell those shares right away to recoup their loan investments. Icahn has not disclosed his collateral agreements used for these loans and quite SIMPLY that could be risky for people owning the stick.

    Urbanomics Lesson: While Icahn may understand the risk, using leverage and not knowing the     details could bring pain to investors in this stock.

Since this article came out in MAY, the stock in Icahn's firm as plummeted and he personally has lost over $17 Billion dollars. Don't cry for him as he is still worth over $7 Billion, but its a great case study on how to be careful and why I'm not a fan of debt and leverage.

#liquorandleverage 

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

A House of Cards --- Pt. 2 (Debt - The Gift & The Curse)

First, I wanted to apologize to a reader. When I was asked in my last post whether I thought the system is built like a house of cards --- I said I wouldn't use those words. But in fact, I actually did  just that during the financial crisis of 2009. See here: A House of Cards Pt. 1  🎴

Sorry Bill Maher, it was my very rare attempt at trying to be politically correct but I got caught so I thank the readers for keeping me honest. I recently spent some time reading my own posts from late 2007 into 2010 to remind myself of what we lived through in the last crisis. There were the market highs I wrote about in 2007 which were peppered with my incessant rants about the housing market being eerily over inflated. My saving grace was the Lord blessing me ☝ with an opportunity to be in town while my sister was house hunting for her first home. While I applauded her for getting a newly built home for a great price, I kept giving her grief for moving to the boondocks --- yep right across from cornfields. I soon began my path to homeownership and then stopped. My sister made more money than I did but somehow I was pre-approved for a loan almost double her amount. It didn't add up so I told myself back in 2005 something doesn't feel right. But what's the saying if you build it they will come. And of boy did they ever -- the city continued to extend and while some cornfields are still there, I see less and less as the years pass. I guess that's the perfect picture of the America dream, the big home -- but who is going to stop you when you can't afford it. My accounting background saved me I guess.

While I would love to get back to what I'm buying and selling, my goal right now honestly is on educating people about risk. I'm blessed to be able to sit back and write a blog because I have a rainy day fund built to withstand this disease and economic fallout still to come. I de-risked by moving my retirement fund to cash --- because it's purpose is just for that...RETIREMENT. And I'm blessed with a pot of funds I've saved over the years to take risks at a time when many are unfortunately being squeezed. These are pillars that you can implement to ensure you're built to last. And what I hope will stay with you is I did it the old-fashioned way --- I saved day after day reminding myself I grew up po' middle class and I'm not in a HURRY to go back. With 2 cars both going on 15+ years of age means, our cars are paid off (one less bill to fret about). Yes, they are showing their age and one is in the shop but that repair bill is looking better and better that getting a fancy new car in an environment like this. When my wife was my then girlfriend, she would jokingly introduce me as the guy who bought a new home but got his coach off of Craigslist. Yup that was me, but I shop well and it was Macy's higher end furniture and I helped a couple who needed it gone because they had to leave for Australia. But on my financial terms and that coach is sitting in my second home and still complimented to this day. 

When I think about this crisis, I wonder how much pain it will inflict physically from the disease, economically to the country, financially to all of us, but emotionally to most of us who did not or unfortunately cannot save enough to weather the storm to make rent or the mortgage or the car bill or the utilities. It makes me wonder how many lives could have been saved if the country did not need to remain "Open for Business" because of the curse of debt. I stand in awe at stimulus package after package that is thrown at this crisis and think about the gift it will provide to many to reflate the economy. I hurt thinking the richest nation does not have enough equipment to battle the viruses newest target --- the great people of New York, especially New York City. Two people to a respirator was an update I heard today and I was in disbelief --- mainly because I had spent over a month watching Eunice Yoon, a CNBC reporter from China day by day paint a vivid picture of how a bustling nation like China was slowly ground to a halt. Wuhan in lockdown, then further cities like Beijing take stringent precautions. Bleaching of streets and temperature readers shown on TV and then she would narrate about the strict restrictions just to get into her building which included ID and temperature checks. If this was in January and Wall Street and I were digesting this information you would assume we were preparing for what was to come. CNBC is a channel I'm positive many in the White House had turned on just as I did each morning. So hopefully you understand where I was coming firm almost a month ago when I was frantically asking for things to be locked down. My goal is not to ruin the dream, just a reminder than lives were at stake.

-------------------------------------------Debt - A Gift?-------------------------------------------------------------

A quick story of the gift and curse of debt. This a Bloomberg story on my buddy Tilman Feritta. I have a nice stake in Ceasar's which I think Tilman does as well so I wanted to highlight how debt is used to lever up to be a rock star. He is feeling some pain but it's a quick insight into how those more fortunate will not suffer like many others will. My next posts will show you the other side. 

Tilman Fertitta:

• Personal fortune of over $5 billion before the crisis.
• Most of his wealth is in the travel and leisure industry:
• Casinos -- Golden Nugget 🎲
• Restaurants -- The Landry’s Inc. portfolio includes Del Frisco’s steakhouse and Bubba Gump Shrimp 😋
• Sports Franchises - Houston Rockets🏀

Tilman has worked hard but he used an amazing amount of DEBT 💰💰(financial leverage) to amass his empire. How you ask:

• Well, leverage of course. He took an outstanding amount of debt out against all the companies he owned. To the tune of roughly $5 billion against Golden Nugget the parent company for his restaurants and casinos. So there is a big risk he could lose this part of his empire due to the crisis. 

How might this play out for Tilman, maybe coin flip odds in my view:

• Heads -- Confident the company will have access to enough cash to weather the storm
• Tails -- Fertitta said: "This year, his restaurants and casinos were expected to generate well over $700 million of cash, more than enough to pay $250 million to service the debt and invest as much as $200 million in new projects, he said." "That leaves you with around $300 million of free cash flow,” he points out. “I don’t think it’s a bad business model.”  

Heads would definitely require a sizable bailout and the economy being jump started within a few months. Tails if feels like he acknowledges I built the thing on steroids 💪 and if he loses he went out like a true Texas cowboy.

No worries on how this story plays out because the Houston Rockets, his bankroll, and other properties he owns are not tied up in his highly levered businesses. Great risk management Tilman but how many folks on main street will have an outcome with odds like this. 🤔 I hope we all have heads or tails outcomes like this as we learn more about how our economy works.

Source: Bloomberg Davide Scigliuzzo

Q&A Session --- Questions About A Coronavirus Recession

Yo, why is Jadakiss as hard as it gets?
Why is the industry designed to keep the artist in debt?

Why you don't stack instead of trying to be fly?
Why is ratting at an all time high?

Lyrics from Jadakiss --- Why ft. Anthony Hamilton

Q&A with the Lyrics from Why

Let me help my guy Jada out really quick: Jada Question: Why is the industry designed to keep the artist in debt? Urbanomics Response: Well Jada the bigger question is why was your song written in 2009 but this question is still applicable even today. Ripped from the headlines: Taylor Swift, Mase, Megan thee Stallion --- all recently complained about contract dealings in the past year. You heard me hear say Jay Z and Master P gave you the blueprint -- independent. Funny you were referring to the music industry but ironically this seems to apply to most every industry I can think off. Let's take the NFL and NBA players who constantly are asking for a fairer share of the total profits as live sports is cable's last hope. We see players as spoiled, rich and entitled but do you find it interesting that someone pays their salary AND no one (main street, public, suburbs, politicians, etc.) ever calls the OWNERS spoiled, rich and entitled? How about the fact that college athletes in America can make universities AND coaches millions of dollars but the players don’t get paid…let alone their are no where near their fair share OR market value of the contribution they made to the profits of the college sports industry. I just saw that disgraced college basketball coach Rick Pitino, who once had a $55 Million dollar at the university of Louisville, is now allowed to coach again at Iona…even though he was the coach during the school’s biggest scandal which uncovered players getting perks and incentives (under the table) to come and play for the school. Did all the players on his team become millionaires during that run -- funny in the business world we have a fancy word called profit sharing. Maybe the NCAA didn't get that economic memo. Jada Question: Why you don't stack instead of trying to be fly? Urbanomics Response: Let me help those who are a little challenged by our smooth language --- to stack means to save money. Trying to be fly --- insert: spoiled, rich, and entitled.  Jada we haven’t even talked about the “economic” industry --- is this designed to keep the aritist public in DEBT? The public continues to take on debt at an alarming rate AND from a young age: Student Loans, Credit Cards, Auto/Car Loans, Home Loans. If the system is working and fair, why is every article about students swimming in debt. Every piece of mail is another company asking me to take my already high credit card debt and “consolidate” it with more debt they are willing to offer me. Wait there’s more --- I can take debt out to purchase my brand new fancy car and of course my home which has more seats and rooms than people in it, respectively.  The US is one of the few developed to offer a 30 year mortgage. What a beautiful concept --- let’s give you debt for something you spend most of your adult life paying for. With interest IF you ever held your home until paid off you likely spent more 40+ years paying for that home. But similar to the whiny NFL players who we complain about --- who are the owners that allow people to take debt out like this?? I could rattle off every company but what’s the point --- the real question is why is main street not taught money, budgeting, debt, savings, retirement, wills, insurance, and how healthcare works?    Real Questions I Received this Week Q: Do you like leverage and is now the time to lever up? A: For those of you out there, leverage is borrowing debt (money you don’t own) and using it for purposes like investing in assets (home, stocks, etc.). I do not think now or ever is truly the time to borrow money.  Something I learned from Warren Buffet is during tough times, when tide comes in you’ll see who was swimming naked. What he is referring to is debt, and the tide is an economic or financial crisis. When it hits, swimming naked means you are OVER LEVERED --- you have too many debts that cannot be paid.  My motto since my dad required I get a job at 14 was that I would never take on true debt. I sacrificed for the greater good and went to a state school so the fees would be less and I earned scholarships to help with the cost. Was it enough – no I used debt (my credit card) to get me through the lean moments which were usually the last few months of each year. But only because I made a promise that every penny of my summer job would go to paying off that debt.  I treat debt like the Lannisters in the Game of Thrones --- don’t get into debt but when you do always plan to pay if off. While I pay my debts on time, it's because I want to have the privilege to access credit (mainly during bad times to benefit on fire sales). Public Service Announcement: If you are in too deep, see if your lendor/creditor will work with you to forgive some of the debt...do not be ashamed many people do this and many corporations go through bankruptcy all the time (it's easier for businesses). A: Now is not the time to borrow more debt because the markets are too turbulent and more downside is to come. I do think you should have Money/Capital/Savings set aside to take advantage of the upside when we do get through this crisis. But those funds should rarely ever be someone else’s money --- then you forgot one our cardinal rules --- never take on debt or you may be the one they find swimming naked. What someone giveth, they will taketh and they usually come knocking only when times are bad. Don’t confuse leverage or debt with equity.  For example, I plan to invest during the downturn but I would rather put my rainy day savings to use OR my equity in my home.  If I lose my own money, I have no one to blame but myself. Losing someone else’s money may mean a lot of sleepless nights. I am evaluating using my home’s equity but this does involve risk. If you look back to my posts in 2009-2010, I was one of the few who had savings and no debt during the depths of the crisis.  Unfortunately, there were many home foreclosures and asset repossessions going on. I bought my home on a fire sale from a local bank that similar to many people fell in love with giving people too much debt or the wrong people debt. Revisit that process here (note my house is one of those in the pictures): https://urbanomics.blogspot.com/2010/04/homebuying-101-tour-baby-tour.html My equity in my home means I have gains since I first made my purchase and I can borrow against that --- but the risk IS your home is the collateral. So to reduce your risk, I advise if you try this approach DO NOT take the full amount of equity in your home. If we are headed for a downturn and your home value decreases that $100K in gains may be more like $50K. Q: Why is oil going down so much? A: Haha be happy and take advantage of cheap prices. Prices are so low, someone commented to me I don’t remember the last time prices were below $2. The reason prices went down are primarily because of Saudi Arabia, no conspiracy theory here just market forces at work.  And this IS NOT linked to the coronavirus.  The Saudis increased oil output after they could not reach an agreement with Russia to limit oil production. In economics if you have too much product that you cannot sell --- prices WILL come down and they fell to the floor. The virus has made this worse because if people are being quarantined or staying at home the demand for the oil is now dropping.  Urb Lesson 101 – if supply goes up or demand comes down --- the value of a product usually drops. We have both.  I’ve provided a source here as well:  https://www.nytimes.com/2020/03/08/business/saudi-arabia-oil-prices.html Q: Can you believe it, 3 states have just now issued the shelter-in place strategy that you shared weeks ago were needed? A: Yeah and many more states have closed schools and are allowing people to work from home. I think this is a well needed step in the plan to starve the virus. People are its host and you need to reduce people being in close contact for extended periods of time to starve the virus. The concern I still have as testing is finally ramping up, what is the damage by not doing this sooner and because it is NOT a true national strategy and states are electing to shutdown individually we all may not resume being productive as soon as we’ve seen in other places.  I think many people are using grocery store pickup and delivery, drive thru’s, Uber Eats, and I’ve seen stocks around meal delivery services popping but I’m not as big on this service for the masses.  Q: So when I start to process everything I am seeing and hearing is this all a House of Cards? A: To start, I have never seen the show so I don’t fully know the premise. But I truly understand the disbelief people have in how this has been handled. I think there has been poor leadership and people are panicking, hence the toilet paper craze. I think there are two things at play working separately: 1) Poor leadership results in no trust of the data/information coming from the top. It’s displayed when Trump would rather yell at the reporters than calmly answer the questions we are ALL hoping to hear the plan or solutions too. It’s clear when I get FEMA texts minutes apart from many people that everyone is on high alert and susceptible to hoaxes. That does not happen unless if you don’t TRUST the daily briefing you’re receiving from your CEO or leader. 2) If a virus can bring world to its knees because the fact is revealed that most of us do not have enough saving to cover two weeks of shelter-in place that is a scary proposition.  The new questions that will come are: a) When a family is so far in debt you go into bankruptcy….what does a country do to get out of a mountain of debt? b) If a lot of that debt is used on our medical system why is it being called fragile --- and we only have 400K medical beds nationally?  c) Will every virus, major climate change, and/or recession cause panic and markets to crash like this? d) Who get's a bailout --- it seems this time like everyone needs one?  I pray we are all patient to get through this together and help each outer out. Because it will be a long drawn out process that is leading to an economic recession.  Next week, news is already coming out that the unemployment numbers will skyrocket to somewhere between 2.5 to 3 Million people. Stay tuned in and stay positive. We'll provide more on how we hold it down during a recession

2014 - Themes Shaping My Investments (pt 1)

I want to capture the themes that I believe are shaping the world in 2014 and for the foreseeable future.  Game changing events shape people first, then entrepreneurs react, and finally investment dollars follow.  This is important for many people to remember in my opinion when looking back and asking why is the world changing right before my eyes and how can I participate. I've heard the phrase when life gives you lemonade...and changed it to when you and the world are buying or using a quality product think about investing in it.  I have a good friend that constantly talks to me about Whatsapp and if anyone close to me knows Apps are not my thing but I find out they were bragging about what would be a 19 Billion Dollar company I was just being introduced to.

Theme 1: E-Commerce

I write about this theme often and the verdict is in, many people prefer the comfort of buying things online. I know I do and a number of entrepreneurs have responded to become mega online retailers for everything imaginable.  Continue to think about the ways our buying patterns change on the Internet and take advantage of the companies that will capitalize on it first OR do it better. This will be a combination of new and old companies changing the way we shop. Remember last year, there was a reason why so many packages were delayed during the Christmas holiday by UPS and that theme is the comfort of buying things online.

- Amazon, Ebay (Paypal), Yahoo, Google, Walmart, Home Depot, UPS, Fedex

Theme 2: Mobile /APPS

The mobile wars are heating up. Finally, most of the world is warming up to a concept I've been using for quite a while: "No Debt/No Contract".  The mobile companies have used contracts to their advantage for quite some time and this has led many people to enter into never ending contracts that change usually on the companies terms. My philosophy is don't sign it until to read it. If you don't like what you read...call the company and see if you can change the terms...or don't sign it. I buy my phones myself and never enter into a contract. Many people have not paid attention to the fine print so AT&T, Verizon, and Sprint have dominated the US market. The public is tired of this model and now enters T-Mobile and their "no contract" and "cheaper packages".  And now the big companies like AT&T must follow suit with lower prices or lose customers.

Then enter the world of Apps...I can't explain the love affair for all things FLAPPY but Apps are the favorite hobby of the world.  I personally don't use very many apps but I can't deny their staying power. 

- Verizon, AT&T, Sprint, T-Mobile, Apple, Samsung, HTC, Nokia, Blackberry, Facebook, Whatsapp, Snapchat, Zynga, Candy Crush

...the remaining themes are to be continued

Personal Finance - Budget 101 / Free Credit History

I often get a number of questions related to everyday finances and how a reader can improve their financial health.  First thing first, is to take care of the basic key elements.  The second thing is to is to do it as cheaply as possibly.  And yes, don't let anyone fool you...you can Do It Yourself (DIY)!  There are a number of personal finance lessons that I have written about in the past and I will attempt to go back and re-tag all those posts to include the labels "PERSONAL FINANCE".  I will create a link for easy access to these tips but remember you can search the site to find notes and tips to assist you get financially healthier.

1) Going On a Healthy Diet - Budget, Budget, Budget

I am personally a spreadsheet man myself.  I create a very basic Excel spreadsheet that I use to track all my budget needs. So search the Internet and you can find many tools to assist you with Budgeting 101.  The key elements don't change often, so follow these tips:

• Categorize every expense by type and don't use MISCELLANEOUS (Examples: Utilities, Food, Entertainment, Auto)
• Don't you cash unless remember to 'categorize' every penny...exactly "Don't Use Cash"
• At the end of a Month, your goal should be to have more "Income" than "Expenses"
• Don't be afraid to make hard cuts (sacrifice now for a better future, every penny counts)
• Pay down debts quickly, and FOCUS on high interest rates first (Credit Cards, School Loans, Personal Loans)
• Once you pay off debts, try to pay off any new debts 'Each Month'. I know every month
• Yes its okay to have FUN, but budget and categorize it
• Use the extra money from your budget to "Invest In Yourself". The goal is to create a rainy day account

I use spreadsheets and some people use envelopes, but the important thing to remember is to find a system that works for you and to stick to it. Just like working out.

2) Get on The Scale - Check Your Credit For Free

Unless you can pay for everything with cash, then you need to be honest with yourself and "Weigh In" from time to time.  Financially, weighing your self on the scale is "Checking Your Credit History".  This is the one time when you want your numbers to go UP! A higher credit number is much better than a low score.  Now don't get crazy, check your credit annually...no more, no less.  Look for errors and make sure you pay your bills on time.  There are 3 scales that you will need to weigh in with, and they are the 3 major credit bureaus: Experian, TransUnion, and Equifax.

DIY Tip: Don't listen to commercials or some salesperson over the phone, check your report FOR FREE.  Yes, the government passed a rule years ago allowing you and I to have a FREE view of our credit history, once a year...and it can all be done through one website!  If anyone else claims to offer this service, ask them if you will ever be charged...and don't forget to tell them that you are recording the conversation. That should do the trick :)    Here is the link:

AnnualCreditReport

The Economy's First TIme...

First times are usually associated with fond memories that will last a lifetime. However, some first times are not what we truly expect.  I was listening/reading a discussion with hedge fund manager Kyle Bass.  I find him interesting because he tends to like going against the grain. The things that I hear from him don't always align with what many investors and analysts are saying at that particular point in time.  If you've paid attention to my posts or random outbursts I've definitely slowed down writing about all things Wall Street because the rules are being written and changing as we speak.  In the last year, you have often heard me say that the data and thus the signals I am getting are mixed.  Maybe it would be better put that situations are changing so rapidly that its tough to keep a gauge on the market unless I am watching constantly.  I prefer not to watch constantly because that would throw off my investment style and likely lead to a little more hedging or second guessing of my strategies.  While listening to Kyle Bass speak, I thought he put an interesting take on things which made me understand why I've had this whipsawed feeling about how the market is acting.  He simply stated, "We've never been here before".  Ever!  And the point he noted was quite interesting...during a peace-time era (may wanna slightly debate this part) the amount of debt we've amassed has never been this large.  Historically, it's interesting that countries massively massively build up debt during times of war to get through those periods of time.  However, why did and why now is debt level so far away from what we've historically been used to?!?  I've favored being in the market but tilted to the defensive side of things.  That is where I will stay for the foreseeable future. So dividends, growth, and maybe even higher risk debt securities are the road that I plan to take.  A little hint for my subscription folks, you'll notice that technology and software have surprisingly been in the mix!  I'll embed the video below, take a listen:

Til Debt Do Us Part...

URB - Social 

The new conversation line may go a little something like this, "So How Much Debt Do You Have?".  This might follow: (1) Are You Married, (2) Do You Have Kids, and (3) What Do You Do?

All are common conversation starters when chatting up the future Mr. or Mrs. Right.  I have always been called 'mechanical' but I always held onto the need to ask or discuss the financial health of your significant other just like we discuss other serious topics: such as health, kids, and marriage.  I held onto to this useful tip when a alum came back to campus and oddly enough ended with that as one of his life lessons.  Its a touchy subject but consider talking to your significant other about debt just like you bring up conversations on kids and marriage. So I found it shocking to listen to a radio segment that was reporting on this very subject of debt and relationships.

Here is an excerpt from NPR's segment and call, "Call Me Maybe When Your School Loan is Paid In Full:

"The increasing debt load of college graduates has affected young people's lives in untold ways, from career choices to living arrangements. Now add another impact on a key part of young adult life: dating and marriage.

Rachel Bingham, an art teacher in Portland, Maine, learned this a few years back, when a guy broke it off after four months of a budding relationship. Among other reasons, he cited her $80,000 in student loan debt.

"He said it scared him," she recalls, "that it really made him anxious. And he just did not want to take on my responsibility."

Included is a link to the full article: Debt Caused My Break Up

Next time, I'll share the lesson learned from a Toyota's executive on the beginnings of the Lexus concept. 

Hot Topics - Oil, Housing, & the Economy

A common question people have these days is how is someone expected to maintain or get ahead when prices keep going up everywhere you look. Well, I will admit I don't have an answer for each and every person but when times get tough you have to get a real understanding of how much money you are making and even more importantly where is ALL YOUR MONEY GOING. I am in the trenches with you and we have to work even harder to win the war against debt, bill collectors, and crazy spending habits.

To win the battle we have to have a great strategy and understand what we are up against. If you are living in the same world that I am, we are fighting higher oil prices, declining home values, and a slumping economy. Here is a quick summary of our opponents:

People are losing jobs: The financial capital of the world, New York City, estimates job losses to the financial industry which also represents their highest-paid workers and a huge source of tax dollars. They are estimating the losses are very similar to the 2001 time period another time when the economy felt the impacts of a recession.

People ain't paying loans back: The Federal Reserve reported that more people are delinquent across all industry except agriculture (probably because they are making big bucks on high food prices). Some people have stopped paying their credit card bills and those numbers ironically are roughly around the same mark to the 2001 recession. They are watching closely to see if we reach levels that were similar to 1991, another period of economic recession.

Mortgages and the housing industry is a mess: Not only did buyers take on houses they could not afford but how many people do you know that bought huge places way out in some random suburb. These were incorrect bets because most jobs are not located in these remote suburbs and long commutes are very expensive and its harder to sell your home when times get tough...all bad miscalculations that have caused home prices to decline.

People are not pimpin their rides: Car industry experts are predicting people won't be buying as many new cars and threw a chance of a rebound in 2008 out the window. Need proof take this weeks forecast by Ford (F), then yesterday's comments by General Motors (GM). Both said car sales will be horrible and imagine that, GM's stock is trading a levels that haven't been seen in 26 YEARS!! So if you are buying a car, enjoy but do you really want that Range Rover now and all the gas it guzzles.

The Repo man is tired: When people were buying houses they had to keep up with their neighbors and also buy boats. As houses dropped people stopped those boat rides which take gasoline and diesel and cost hundreds and thousands to fuel. And when you can't sell because no one want to buy then you stock paying...and people have stopped paying on boats, cars, bikes and any other thing that you buy with a loan and that means that banks are calling on the REPO MAN.

POSSIBLE PLAYS
On to my recommendations after understanding your Hot Topics. The repossession industry is finally a sexy business because banks want their stuff back. Oddly enough a company came up on my screening this month (which makes sense) and we have a few stock picks for you:

Credit Acceptance Corporation (NASDAQ: CACC)
Asset Acceptance Corporation (NASDAQ: AACC) - Search Urbanomics for the recent recommendations about this stock. And notice how it has been scorching hot since then. I am waiting for any pullbacks and loading up on the REPO MAN

Urbanomics ~ A site where the average person can learn to invest, manage their finances, ask stock and retirement questions in a format that easy to understand.