All Black Children are College Material

I recently spoke to a friend with whom I attended kindergarten through eighth grade in Detroit, Michigan. I had not spoken to my friend Eric for nearly 30 years. He found me on Facebook as he diligently worked to re-unite our junior high school classmates.  During our conversation, we spoke about the fact that during high school, we were both removed from a predominantly black environment, and placed in all-white environments.  Such an experience was culture shock to say the least, and quite frustrating. After living in Detroit, and attending school with almost no white students, Eric moved to Kentucky, and I moved to Oakland County, Michigan.  Eric and I share two common themes: we were among a handful of black students at our respective schools, and our guidance counselors told us we should not go to college – we weren’t college material.

My high school guidance counselor was a graduate of Eastern Michigan University. During a school event, the counselor advised that any senior interested in attending his alma mater should visit him. He claimed he would write a letter of recommendation for any interested student. Therefore, I added EMU to my list of potential colleges. When I went to the counselor to discuss, he told me I shouldn’t go to college. He said I was good with my hands, and a vocational school would be the right choice for me.

I wonder how many middle-class suburban white kids my counselor tried to discourage.  Similar dissuasion often takes place during college, and in the workplace. However, by staying focused on goals, and having access to mentors and positive role models, black youth can realize that there is no limit to their potential. Fortunately for Eric and I, we had such mentors and role models. All black children are college material.

Needless to say, Eric graduated from the University of Michigan, earned a master’s degree from Cambridge University, and a J.D. from Columbia University. Now a practicing attorney, I’m confident Eric made a wise decision to attend college. I earned a B.S. from Florida State University and an M.B.A. from Manhattan College. I also made a wise decision, as my education is the foundation of my success. But in one respect my high school guidance counselor was correct; I am good with my hands. Every time I use the manual shifting mode in my hundred thousand dollar car, I think about how great it is to be good with my hands.

“You were born into a society which spelled out with brutal clarity, and in as many ways as possible, that you were a worthless human being. You were not expected to aspire to excellence: you were expected to make peace with mediocrity.”

James Baldwin – The Fire Next Time

Two African American males who graduated from college: Greg Collier and President Barack Obama

Greg Collier pictured in his office in West Palm Beach, Florida

Two Degrees of Separation, James Baldwin and the power of Role Models

As I spoke to a successful businessman, I asked about someone who spends summers in Martha’s Vineyard, as he does. He was surprised I knew a particular friend of his.

I then said to him, “There are just six degrees of separation,” as in the title of the award winning play.

The gentleman replied, “With black people, there are just two degrees of separation.”

I stood silent for a moment to digest his statement. How prophetic  –  as a black man, there’s a minimal amount of separation between myself, a homeless person, or a senior corporate executive who is African American. In some respects, there is no separation at all. After all, even the most successful black men have difficulty catching a taxi in New York City.

So what separates us? Education, experience, access to opportunity, confidence, perseverance? There are many factors, but access to role models can help blacks understand our history, learn different points of view, see opportunities, avoid or overcome pitfalls, and thrive as individuals, families, and communities.

I’ve been fortunate to have many role models. I never had the opportunity to meet Dr. Martin Luther King Jr. or Malcolm X, but I had the fortune to meet author and civil rights activist James Baldwin, who knew Dr. King and Malcolm X. At the time I was 14 years old, too naïve to understand the magnitude of meeting James Baldwin, or the degree of separation between myself , Mr. Baldwin, and his elite circle of friends and acquaintances. Meeting Mr. Baldwin and his mother, Emma Berdis Jones, was an empowering moment in my life. The circumstances of our meeting is a thesis in and of itself, so I’ll digress – the confidence, eloquence and majesty of James Baldwin were apparent the moment I met him.

James Baldwin and a statue of William Shakespeare

Upon reflection, meeting James Baldwin reinforced the fact that if I work hard, I can achieve whatever I desire, and if someone impedes my ability to achieve, I must have the fire next time to overcome the obstacles in my path. As a tribute to Dr. King, Malcolm X., James Baldwin and the other African Americans who built a foundation that allows me to achieve, I must preserve their legacy by celebrating black history month, being a mentor, role model, and helping others achieve prosperity.

Working hard to make someone else rich?

As I stood in front of the world headquarters of Chemical Bank, circa 1992, a Rolls Royce stopped in front of the building. A small crowd gathered. Before a door opened, the crowd swelled. I thought it might be Elvis Presley on his way to see a private banker, or to give a press conference on the fact that he was still alive. The Rolls Royce was carrying a rock star for sure, but it wasn’t Elvis, it was John McGillicuddy, Chairman and CEO of Chemical Bank, the man who engineered the merger between his bank, Manufacturers Hanover Trust Company, and Chemical, creating what was then the second largest bank in the U.S.

I was a young employee at Chemical Bank, recently out of college and learning quickly about the real world.  Should I work hard to make someone else rich? Possibly –  by helping make someone else rich, one can get rich in the process. Also, work experience is a priceless commodity. Don’t get me wrong, CEOs are entitled to whatever their companies are willing to pay them, and what the market will bear, as are senior executives and profitable traders.

An example of why it's great to be a CEO in corporate America

As an employee in the public or private sector, few achieve the rock star status or compensation of the late John McGillicuddy. Though the same can be said of entrepreneurs, in the context of the psycho dynamics of work and organizations, not only does entrepreneurial freedom yield happiness, but it’s more conducive to allowing one to be the master of their fate, rather than the victim of their circumstances.  I can honestly say that the most miserable people I know either work in corporate America or have been displaced by corporate America. Though entrepreneurialism in and of itself does not create a utopia, the happiest people I know are entrepreneurs, and I’m one of them.

The Stock Market: How fast is too fast, how high is too high?

The stock market has been surging lately, with few moves to the downside. I’ve rarely been able to lose money for months, except when selling short.  For now I’m staying long. My simple strategy of buying “at the money” call options anywhere from 45 to 60 days to expiration has been highly profitable, and this scares me – things are just too easy now.  Almost everything I’ve bought for months or have been holding long-term is shooting to the moon, and seeing stocks hit their 52 week highs, or come close, is all too common.

What I’m going:

I’m going to continue following the market’s momentum to the upside, but I’m prepared for a big move to the downside. I’ll close any long call option positions when I either achieve my target profit, or as my gains erode due to time decay, a decreasing stock price, or other factors. For my long-term investments, I’m primarily invested in U.S. domestic equities, ETNs and ETFs. For most of my securities, I own put protection, which I usually finance by selling call options, i.e. I’ve created low cost to zero cost collars, having both covered calls and protective put positions.

To clarify, I’ve sold call options with strike prices above the current market prices of my securities to raise cash, and I’ve used the cash to purchase put options with strike prices below the current market prices of my securities. This allows me to protect profits because owning put options on a security gives me the right (but not the obligation) to sell the security at the strike price of the option  until the expiration date of the option (note: most index options are “European style” as opposed to “American style” and  can only be exercised on the expiration date).

If the market price surges above the strike price of a call option I’ve sold, I could miss out on the additional potential market gains as the  price keeps rising. This is because call options give the buyer of a call option the right (but not the obligation) to exercise the option against me, requiring me to sell them the underlying security at the strike price of the respective option.  I could avoid being exercised against by “buying to close” call option contracts, but will likely create a loss on the option transaction because an increase in price creates a more expensive call option, all other factors being equal.

Note: I like using stop orders, particularly stop-limit orders, but I’m anticipating the potential of a fast move to the downside. With a stop-limit order, if the stop price is hit, a limit order is triggered. However, if the market moves quickly below the limit price before my limit order can be executed, I’ll be stuck with the stock because I’ve specified my minimum sales price with the limit order.  And with a stop order, if an event like the “flash crash” occurs, even if less drastic, the stop price may be hit and a market order might not get filled at a price remotely close to the stop price that triggered the market order, leaving me with a large reduction in market value.

Be careful out there folks!

“If something cannot go on forever, it will stop.”

–Herbert Stein

How to protect yourself from being the victim of a Ponzi scheme or other financial fraud

Selecting an investment adviser requires due diligence on your part. To protect against fraud, I suggest the following:

1. Do your homework. The SEC has a website with tips on how to check out brokers and investment advisers:  http://www.sec.gov/investor/brokers.htm.
2. Never write a check or wire funds directly to an investment adviser to fund an account. Custodial accounts offer protection by safekeeping your cash and securities. With custodial accounts, funds are sent to a custodian for further credit to your account at the custodian. Firms offering such 3^rdparty accounts are highly regulated, and limit the risk of one being subjected to fraud. You should ask potential custodians questions regarding their ability to protect you from financial crimes, especially their ability to keep crooks from withdrawing cash from your account. Also, make sure the custodian is a member of SIPC (the Securities Investor Protection Corporation), and whether the firm has private insurance to protect you beyond SIPC limits in case the firm fails – the current SIPC limit is up to $500,000 including a $250,000 cash limit. If you’re not sure about the safekeeping of your cash and securities, consider consulting an estate planning attorney who should be able to explain this process in-depth. It’s better to pay for a legal opinion than to become the victim of fraud.
   

   Protect Yourself from Bad Guys!!!

3. Understand fiduciary responsibility, that is, an investment adviser’s duty to put your interests first. Brokers often use the title “financial adviser/advisor,” but don’t have fiduciary responsibility. Financial advisers who are registered investment advisers with the SEC or one or more of the 50 states, do have fiduciary responsibility.
4. If you require a financial adviser to trade for you, the adviser should only be empowered to trade in your custodial account, and not have the ability to transfer funds to other accounts, whether the other accounts are in your name or not. Suppose a corrupt adviser was able to use false identification to open an account elsewhere in your name, and then was able to transfer funds to that account for their personal use?  Restricting transfers can help prevent this scenario.  If you authorize your adviser to extract a “management fee” from your custodial account, according to the SEC’s definition of “custody,” your adviser has “custody” of your assets. If an adviser has custody of your assets, they could potentially divert your assets for their personal use. One can negotiate a fee arrangement whereby a financial adviser is paid via check, rather than direct debit. At minimum, you should be notified of any fund transfer requests immediately. For this scenario, you should consult your custodian regarding the specifics of receiving alerts, and ensuring your adviser can only extract the management fee to which you agreed upon, and at the specific interval agreed upon. Again, if you’re not sure, consider consulting an estate planning attorney.
5. Educate yourself on fraud. The Association of Certified Fraud Examiners provides anti-fraud training and education http://www.acfe.com/home.asp. Other resources include Fraud College, a non-profit organization devoted to helping protect people from fraud: http://www.fraudcollege.info.
6. Titles mean nothing. The fact that someone is a Senior Vice President, has a securities license, professional certification or advanced education, does not protect you from fraud. Titles also don’t ensure that a financial adviser is good or reputable. There are Certified Financial Planners (CFPs) and MBAs who cannot manage a portfolio, and people without a college degree who can. Your best defense is your financial knowledge. The greater your financial knowledge, the better your ability to judge the knowledge of others.
7. Understand risk and returns. “The greater the risk, the greater the return.” If an adviser promises a high return with little or no risk, there’s a strong possibility they are lying. Be careful if considering investing in a business start-up. People hopeful of high returns are often the target of entrepreneurs seeking start-up capital, and most start-ups fail.
8. Consider managing your own money, there are an abundance of free resources available to help self-directed investors. Most discount brokerage firms and broad-based financial websites offer an abundance of educational resources.

The “Carried Interest” tax loophole

In my opinion, the “carried interest” tax loophole should be eliminated. In December of 2009, The U.S. House of Representatives passed a bill to eliminate this loophole, however, this issue has not moved forward since then.

The “carried interest” tax loophole allows hedge fund and private equity partners to pay the capital gains tax rate on what is usually the most significant portion of their income. Hedge funds typically charge a management fee of 2% of assets under management, plus 20% of all portfolio gains. The management fee is taxed as ordinary income, however, the 20% of portfolio gains is considered “carried interest,” and is taxed at the long-term capital gains rate. However, if a corporation (as opposed to a partnership) charges an administrative fee plus a percentage of gains, the entire amount is taxable as ordinary income.

Despite the fact that capital gains tax rates are scheduled to increase in 2011, the new maximum rate of 20% (up from 15%) pales in comparison to taxes on ordinary income (note: “collectibles” held one year or longer are taxed at 28%, gold and silver are taxed as collectibles).  In order to help decrease the federal budget deficit, I think it would be a good idea to close this loophole.

Education Starts At Home

A recent Schott Foundation study showed the dismal state of high school education in the United States. The picture is extra pathetic when looking at the graduation rates of black American males.  I am not just embarrassed about the figures, I am completely ashamed.

From the Palm Beach Post article dated August 17, 2010:

http://tinyurl.com/2b9ksu2

“Graduation rates for the 2007-2008 school year

* Black males:

Palm Beach County: 22%

Florida: 37%

Nationwide: 47%

* White males:

Palm Beach County: 50%

Florida: 57%

Nationwide: 78%

Source: The Schott Foundation for Public Education”

After nearly two decades in New York City, I relocated to Florida to start several businesses and improve the quality of life for my family. Education was a consideration, as I knew the quality of education in Florida’s schools is sub-par compared to other areas of the country. However, I knew before my move that with my wife and I serving as role models to our son, he will see that education is important. I know my son will become highly educated. His options are: get his ass kicked by me, or get educated – it’s his choice.

The reasons for the poor educational record in Florida are many. However, education must start at home. Dysfunction at home is a precursor to dysfunction in school and in life. I cannot tell you how often I’ve been in the homes of people and observed more CDs, DVDs, and TVs than books. Many homes are complete with complex home theaters, but no library or books. In my house we call the TV, “the dumb box,” because the more you watch it, the dumber you get.

Hey, let’s get it together!!!! Education is important. The following is an excerpt of a poem I wrote and included in a previous blog post:

“On the Shoulders of the Souls of My Heroes”

“I stand on the shoulders of the souls of the tens of millions of Africans who never had the opportunity to educate themselves.  It is because of the great Africans, many whose names are not known, and individual stories may never be told, that I strive to achieve despite the obstacles in my path. The deaths of my heroes from the middle passage bound in chains, through centuries of hardships would be in vain if I did not constantly educate myself, strive to achieve, help others, and make the world a better place.“

-Gregory Holland Collier

Full blog post:

http://gregorycollier.wordpress.com/2009/12/08/this-is-what-inspires-me/