Investing in Change - Colin + Collectors Universe (CLCT)

I wanted to start off with an acknowledgement that we hopefully call rally around, the simple fact that Black Lives Matter.  I knew it mattered decades ago when I first developed this blog. Urban Economics - the intersection of what it means to be black and the development (over the years) of a toolkit to survive in a harsh landscape that is not welcoming to people that look like me. Urban was used to describe the music I listen to (Grammy: Best Urban Contemporary), the neighborhood I live in, and even the way my people spoke. So it was clear to me even then that BLM I just couldn't scream it to the rooftops because we all knew about the that thing lurking around the corner called "systemic racism". Today's post is not about the many times I've been singled out by the police, those articles will come but the "FEAR" of entering the corporate world and trying to survive for your family. The fear that being too outspoken can get you singled out. How do I know --- we've seen it happen too many times especially to the good ones. Muhammad Ali, Martin Luther King Jr., and yes Colin Kaepernick.  I saw that young brotha's wings get clipped too early and we all knew the unfortunate price he would pay.  

How do businesses deal with this issue, well there is a term and strategy I learned in the corporate world used to prevent them from getting singled out.  During the financial crisis it was invoked because there was a fear in the air and everyday people were taking matters into their own hands. They ran, literally into banks, and withdrew all of their money fearing one bank failure meant their bank would be up NEXT. There is a reason why the call it "A Run on The Banks"...look it up.  So during the financial crisis (feel free to read about it on my blog from 2008-2010), the people in charge (Ben Bernanke, Tim Geithner, Hank Paulson) devised a plan to help the banks survive being "singled-out" for taking funds from the government. Think of it from my perspective as an investor: if my bank is taking money --- they must be in BIG trouble! If I see this I sell my stock and further I pull my money out of that bank --- hence a run on that bank begins or continues. The plan that was devised was for EVERY bank to take the bailout money (the bitter medicine even if you didn't need it) for the greater good of the banking system and the country. They call that "ring-fencing". If everyone is doing it, I can't single out one why one actor is doing it.

Fast forward to what Urbanomics has always been about. A place for all people, but in particular my People of Color to learn from each other and not be singled out in Corporate America as too ambitious, driven, or looking out for your own personal or family's best interest. My issue with the NFL, the players, and the owners is they didn't realize this simple fact when we all watched Colin Kaepernick do what was right. No one ring-fenced the young man and I was irate then and still am. Like Lebron James said...the NFL owes Colin Kaepernick an apology and I agree. If everyone would have knelt....yes you Drew Brees maybe we all could have focused on the real issue at hand and maybe just maybe he would still be playing.

So if you are new, read this blog to empower yourself. Those of us that have read over the years realize what I am saying isn't anything new --- we are uniting as a collective unit to be great parents, workers, investors, and agents of change as there is strength in numbers. And I also believe that in a capitalist society, money talks. Because when you're are a collective unit, you have strength or as I like to call it leverage and you can negotiate what's in the best interest of you and yours.

I'm sharing the best performing stock in my portfolio in hopes that the NFL and teams do right by Kaep. In hopes that we ring fence and invest in our futures together --- strength in numbers. You can read my many posts over the years on Collectors Universe (CLCT). I bought this stock when I was a young pup and it holds true to my pillars. Build a strong core, work hard, and prioritize what's most important to you. To me it's family, so my portfolio of investments simply means I prioritize time and relationships in this short beautiful life. 

Thank you #Kaepernick, yes #BlackLivesMatter, and I remind you #ifnotnowthenwhen

If you need a disclosure, yes I own CLCT and have since at least 2007. Buy low and hold on to great investments. CLCT pays a dividend and most of your investments (real estate, business, stocks, etc.) should be providing you some type of return because it's a valuable asset. Be humble and surround yourself with people smarter than you. Take but manage risks very well.

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

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.

Playoffs...

"Playoffs...Don't talk to me about playoffs" is the infamous line in the Coor's commercial by coach Jim Mora. And even though its early in the year you have to treat your portfolio like its the playoffs. Its game time this weekend for the National Football League (NFL) and only the best of the best are around to fight for the title. And this is the approach that must be taken with your portfolio...only the best of the best will be accepted. The current market conditions: the value of the dollar, the credit crunch, the housing bubble, higher unemployment, deteriorating earnings, high gas, and the threat of inflation are just a few of the strengths working against you...kinda like the opponents defense in a playoff game. So the past week has seen me actively paying attention to the market. I gave you Bear Stearns (NYSE: BSC) just a few days ago as a momentum play as James Cayne stepped away from the company. That was a tough day for stocks you could have gotten in BSC anywhere from $71-$77 dollars. At all of these levels you would still be showing a profit at this point. I am not a huge fan of owning any financial companies at these levels.

My formal recommendation is to SELL Bear Stearns. However, informally if you got into Bear Stears near the 52 week low, I would licking my lips and thinking about keeping holding at those levels.

The next thing I recommend at this point is to closely watch analyst revisions and warnings of certain industries and companies. For instance, if you don't understand that the credit crunch is the real deal at this point and that ALL retailers are being affects EXCEPT for your discount and low cost retailers than you are napping on the market and deserve to be invested in index and mutual funds.

My next move this past week was to part with any RETAILERS that I own with a gain. The only retailer that I owned was BEST BUY (NYSE: BBY). BBY was sold for a small profit but this is an retail darling that I would keep a close eye on. As this stock continues to reach low levels and nears its 52 week low I would take our old price point and build in a 5-10% margin of safety. Our old price was 43.95 (need to verify that) and then I would think about buying in. I personally will lean towards a 5% margin because I think people with still shop at BBY for CDs, electronics, video games, and all discount priced electronics.

My formal recommendation, SELL BEST BUY (NYSE: BBY); look for points of reentry later

Lastly SELL gains with limited upside or in industries that will continue to lag the market. The following stocks are formal SELL recommendations:

Maximus (NYSE: MMS) - limited upside here after large institutional investors sold their stakes in the company...I walk when the big money walks!!!

Online Resources (NASDAQ: ORCC) - Sold after it soared to $12 and showed resistance at those levels (this was a nice gain in two months of over 20%)

Supertel (NYSE: SPPR) - I have owned this for at least a couple of years now. It was originally Humprhey Hospitality. Limited upside at this point (nice gain of over 60% in over 2 years)

Remember only go into the playoffs with the best players for your team. Now some of the best players can be guys that have performed in the clutch for you in the past. I say this because I am a believer of this philosopy. Need proof, check out Buffett's additional purchases of Burlington Northern Santa Fe's stocks at levels where he originally purchased the stock. My only wish is that I would have sold this stock (which we bought around $77) when it hit $86 and now we would be in position to buy again. So sell non-performers and hold cash for the Michael Jordan's, Magic Johnson's, and Larry Bird versions of stocks. My FORMAL BUY RECOMMENDATIONS will be a good number of stocks because the market is getting crushed here and I think plenty of stocks will surface with attractive values:

Burlington Northern Santa Fe (BNI) - Buffett's back and so am I love at our old levels of $77

Best Buy (BBY) - This sector (retailers) is getting crushed so wait for proof that the bad times are over and catch this stock, further build in a margin of safety so you can sleep easy at night; consider buy with a safety @ 40, give a hard look @ 42

Maximus (MMS) - This is an attractive stock with mostly buy and strong buy ratings by analysts. The biggest long shot of my buy group; buy at my old post rec price of $29 & 30 dollars.

Online Resources (ORCC) - We loved this stock when the CEO promised he would put up his own money to buy shares of this stock. And we bought around $8.9 dollars a share. Anything under screams BUY

Radisys (RSYS) - Guess who's back! This stock was a 50% gainer for us last year, when we dollar cost averaged our purchase prices on this stock at levels between $10.60-13. We sold when it hit @17 and smiled all the way to the bank. Well it hit my STOCK SCREEN AGAIN, and I will be adding Radisys back to my portfolio. The recent 10 - 15 low is $12.25 and that is where I will set my buy target. This stock closed at 12.19, and with this stock back to my old buy recommendation levels, I am RE-Recommending this stock. I truly don't believe it will test its 52 week low of $10.50 and we have the help of an earnings release in early February that could propel this stock forward.

Zhone Technologies (ZHNE) - I am going to recommend Zhone Technologies and believe that dollar cost buying down at these levels will have positive upside. This has buy a roller coaster ride and hopefully after the short sellers have to recover there will be huge swings to the upside for this stock.