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

Investing in a Coronavirus Epidemic ---- No Testing Time to Move to the Sidelines

So 10 days ago, I wrote the following article: https://urbanomics.blogspot.com/2020/03/the-virus-goes-viral-why-stocks-are-in.html

Viral + Misinformation
I needed you all to truly understand in the age of social media, 24x7 news media, and poor governance from some world leaders -- the virus has truly gone viral.  The virus is NOT a FINANCIAL ISSUE it is a biological disease. A viral pandemic will NOT be cured by pouring money back into our economy.  The fact that our leaders have NOT provided a clear message is evidenced in my conversations over text, e-mail, and chat with family, friends, and co-workers. For example, a question came into my local public radio station. The question was: What type of antibiotic can be proscribed to combat the coronvirus?

Answer - This is NOT bacterial, antibiotics is not a solution to protect us. The fact is I wrote here weeks back, that a few companies have JUST started research on this virus in search for a vaccine and companies like Gilead, Moderna, and others are possibly over a year away from finding a cure and mass producing a vaccine. 

Stop Worrying About Perception
Crisis is managed by LEADERSHIP, constant factual messaging, and preventative and detective measures. I used to work with a guy years ago that bragged, boasted and used dumb ass phrases like 'epic fail', to put down everything and everyone in an attempt for him to look great. Well, this becomes an issue when you do and say these things all time. When a real crisis finally comes, he looks like the epic failure because he cried foul so long no one could distinguish the real crisis from the minor issues he used to rant about. The reality is his leadership was an 'epic fail' and that reminds me of what I am seeing today.  I get paid to manage risk and everyone knows the two primary methods of risk management are Preventative measures and Detective measures.

         Our leaders have dropped the ball on Preventative and Detective Measures. 
My colleague used the word perception and I thank him for that. My favorite term is optics as many of my colleagues and clients know. People drastically underestimate the optics of a situation and I believe its made me a fairly strong businessperson.

Perception 1 - In the US, we cannot and should not restrict people from travel, social gatherings and events, and work. It's draconian, un-American, because we're too sophisticated to adjust our way of lives.

Preventative Solution - Okay, to start...don't use the word quarantine (it's like socialism here in America just won't fly). But you should restrict travel, social and work gatherings, etc. To prevent a contagious disease spread by touching and coughing, you have to limit travel and close interactions. We know you want to keep the economy booming and the stock market up BUT this is the right next step. Like the loser who uses 'epic fail' many have dissed China for their draconian measures but their infection numbers are dropping, work is resuming, and confidence will slowly come back when you restrict or quarantine the nation.  Imagine that --- So Italy and the National Basketball (NBA) should be applauded for the courage to put people before profits because they would have been creating an environment to spread the disease if they did not quarantine their country and stop games, respectively.  If we are waiting for a message from every school, employer, and city to determine their own shutdown we are creating an environment of panic. This should be a message from the highest level, shutdown, so we are all on the same page. We call this setting the tone from the top. Don't leave it up to my elementary school, National Hockey League, Baseball, Golf, cities, states, and companies to make this call alone.

#2 or 3 weeks of profit pain help this disease go away

Perception 2 -  The greatest country in the world cannot develop enough testing kits to address this issue.

Detective Solution - We don't know how bad the situation is --- WHY because we DON'T HAVE ENOUGH TESTING KITS?  That seems more like someone doesn't want the real number to come out.  We talked about preventative measures, let's move over to detective. To detect the virus you need a kit. If you restrict people's travel period, then you can calmly share with people what the symptoms are, identify sick people, and test or DETECT whether they truly have the virus. We all know if the real numbers come out people will panic, but people are already panicking because they don't trust the current numbers being posted today. 

We freak out when an NBA player, or a guy on a jet, or symptoms show up in our local school --- I guess I wonder why people begin buying $100 dollar bottles of Purrell.  Tell the truth, most people have been exposed just like we all are exposed to the flu every year. Get us testing kits and let people know they will survive it JUST like you survive from the flu each year. We are all at risk --- risk is everywhere everyday --- but the people at high risk are the elderly and people with compromised immune systems. They need to be protected.

Restrict Travel and Movement - 2 to 3 week of pain could mean we get a handle on this

Get More Testing Kits - Yes testing reveals the true number and will burst everyone's bubble that many people around us are infected. But guess what, we stay home, treat ourselves, and get better

Ramp Up Protection For Elderly and Sickly - These are our most vulnerable population. Its time to give hospitals, nursing homes, and high risk people all of the resources they need. This includes make-shift hospitals just for the virus. Why because the last place I want to send someone with symptoms IS to a hospital FULL of people with compromised immune symptions.

Step Up and Pay for Time off and Healthcare - People sick or not will continue to go to work, in FEAR of losing their job. Pay for time off and for the fact that many people DO NOT have healthcare. If you ensure that panic dies down.

Loans to Affected Cities/States - Put in place the items I shared above. Every company and city will need a loan soon if you don't limit the spread further. So I don't love this idea b/c Cruise ships, retail, food, sports companies all will be hit --- are you going to bail them out. Bail people out first and companies will be saved. You do that and maybe it lessens the impact to business

# 2 or 3 weeks of profit pain helps this disease go away

Bad Ideas:

Payroll Tax Cut - Stop the optics of politics. This is a also a way to NOT fund Medicare and Medicaid. Just send me a check and ensure I have a job and health until the crisis is over.

So unfortunately since 2008, I have not had to make a call like this but I truly believe we are at this point. Until I hear the governance of our leaders changing, I will be personally moving my retirement portfolio to cash and safe assets. I have lost faith in the message coming from our leaders, the data being presented, and the actions -- or lack of actions being taken.

No Testing means I don't trust the data. If we don't implement the steps above then unfortunately my indicators say we are headed for a recession. I plan to move my retirement vehicles to cash, but I will keep my personal portfolio in stocks, I have some protection from the VIX, Gold, etc but it's not helping that much.

Finding Value in Media and Sports Stocks

Time to get back to the basics. I've been laying the ground work for how to build a successful business, but it's time to get back to the basics of investing.  Remember, investing is something every person should consider once you pay down your debts and establish a rainy day fund (savings account).  In my perfect social media world, people would go viral for:

- Paying off their school debt

- Putting off unnecessary purchases

- Improving their credit score

- Hitting their retirement goals 

While I personally turn off the tweets and so-called influencers, I do not deny the irrational impulses of the masses. Everyone wants instant gratification, personalization, and to think they are influencing someone else's opinion.  So I try to keep it simple by recognizing the trend: "Content Is King".  Some of my recent investments over the last few years have been media AND social media stocks:

Social Media - Twitter (TWTR); Facebook (FB); Snap (SNAP)

Media - Time Warner (Acquired); Time Warner Cable (I think Acquired), AMC Theatres (AMC); ROKU (ROKU); Twenty First Century Fox (Recently Acquired); Verizon (VZ); Disney (obtained through FOXA shares)

Sports - Manchester United

My investing logic is simple. With cutting the cord coming and the fact that I DVR record and stream most of my television viewing due to my busy schedule, I want to own the content and pipes.  My influencers love Netflix, Apple TV and Roku and I buy the content that they are paying top dollar for to watch on all their devices.  Because everyone is giving themselves (free content) away for free on Instagram, Snapchat, Facebook, and YouTube for cheap...my investments are focusing on content specifically Sports.  Why!! Because Sports is one of the last few things that people WANT to watch live.  Take March Madness, NFL, NBA, and the English Premier League. This is amazing content bringing lots of viewers to the media stocks listed above. The games and players are the real influencers and it actually drives more business.  You do not have to believe me, just look at the how your favorite politician has flipped in the last decade. Very soon, a majority of states will allow legal sports betting to cash in on the trend.  If you do don't know now ya know: Fan Duel, Draft Kings are partnering with major sports leagues to get everyone betting Billions of dollars.  What am I watching next:

Media - CBS (CBS), Liberty Media, Madison Square Garden

Sports Betting - Ceasars Entertainment (CZR)  

The value is there for good content. I owned and watched Twenty First Century Fox's stock skyrocket as multiple companies fought to buy it out and Disney eventually paid top dollar. Then I inherited a new company with AMAZING content Disney. Every movie my daughter watches 50 times over are Disney movies. And sports is the Top Dog! 

URB Prediction: So I think Ceasars and their big bets on online gambling are good for business and they will be bought out in the next few years. If the NBA, NFL, and MLB were smart...they would form a consortium and purchase Ceasars outright.

Urbanomics Pillars - The Path Set For Stability and Financial Freedom

I have not written much lately because my focus continues to on working thoroughly on the Pillars I have written about so much over time. A quick recap of those principles that are grounded in the following Pillars:

Spiritual - a belief in something (for me that is God), love for your family, and a willingness to treat others with the respect and the equality they deserve

Financial - a belief that financial independence on your terms will give you a freedom from the shackles of debt, the privilege to work on your own terms and a future legacy to pass down to the generations of your family.

Mental (Education) - a belief in the importance education and the sharing of various human experiences to allow you to grow

Physical - a belief in the importance of enhancing your physical health to support a sound mind, body, and soul

I hope you find these simple pillars interesting but you can't stand tall with just one, while the rest languish.  Here is a quick example of why just having lots of money can't get you Financial Freedom. We all pick on star athletes and how much money they make. But they are also given a blessing at such a young age. Without the proper nurturing, it's easy to see how a mult-million dollar star can go broke fairly quickly. Forgetting about taxes, living for today but not for tomorrow, and making bad investments usually seem to be a common theme. Listen to this story and remember money is just relative, someone will ALWAYS have more of it than you will. But if you use it to free yourself or UNPLUG from what everyone always tells you that you should have or that you need...you'll find yourself the richest person in the world.

1) Article on a NFL Player Who's Mom Demanded $1Million Dollars

http://profootballtalk.nbcsports.com/2015/04/11/phillip-buchanons-cautionary-tale-my-mom-demanded-1-million/

2) Quick Video from former NBA player Josh Childress (Why Athletes Go Broke)
courtesy of Grit Media