Category Archives: Education

The loss of life over a pair of gym shoes?

I just read about Jawaad Jabbar, a 16 year old boy from Ohio who was shot and killed after allegedly trying to steal a pair of Nike Air Jordan basketball shoes.  Apparently, the new limited edition Air Jordan’s were sold out, so Jawaad tried to steal the shoes from someone who had just purchased a pair.


Expensive Gym Shoes & Ghetto Economics

I was in the fifth grade when leather gym shoes became popular in Detroit; that was 1978. Prior to this time, if you were cool, you had a pair of white canvas high-tops. Converse All-Star “Chuck Taylor’s” were the most popular brand. If you weren’t cool, you had a pair of non-brand-name gym shoes your mother bought from the grocery store. The “no-name” shoes sucked — they had a plastic sole and couldn’t grip the basketball floor, or any floor, for that matter. When I came to school wearing a pair of cheap gym shoes one day, the other kids laughed at me.

“Greg has on slip & slides,” they yelled as I slid down the hallways. It was as if I were wearing roller skates. Teasing by other kids is what one had to endure if not wearing the most popular styles of shoes and clothes. Little did I know the chaos children in the future would have to endure for the sake of style.

I was one of the worst players on my fifth and sixth grade basketball team, but since we dominated most of our opponents, I usually played all of the third or fourth quarter of games. I needed some cool gym shoes so I could be part of the in-crowd; slip & slides just wouldn’t suffice.

I convinced my mother to buy me a pair of leather basketball shoes. The pair I wanted were white high-tops, with a baby blue leather stripe. I was ecstatic when I got them. Now I’d be just like the professional basketball players, wearing the latest and greatest gear. The girls would look at me in my skin tight, low-cut basketball shorts, and they would see my shoes — I’d be popular. The guys would see my shoes and say, “Dog, your shoes are sweet.” I would be “The Man!” Life was good.

Just as important, I had the coolest of the cool new hairstyles, a shag. Not to be confused with women’s hairstyles that shared the name, in the late 1970s, the shag was a popular hair style among urban black males. To create a shag, long hair was cut low, while leaving a rounded section of long hair near the bottom of one’s hairline. A shag typically spanned two to three inches in vertical height, and stretched the horizontal length of one’s hairline.

Soon we were about to play our archrival. I probably wouldn’t get to play in the game because they always played us close. They had this tall dude named Norton, and he was good. But we had guys on the second string who could start for most teams, so they never beat us. Yet, it didn’t matter if I played or not; I’d look sweet during warm ups and on the bench in my leather gym shoes.

But when I unveiled my leather gym shoes with the smooth baby blue stripe, Aaron, one of the best players on our team, called me a biter (i.e. a copycat). He already had a pair of the same brand of leather gym shoes, baby blue stripe and all. Damn, I could have been a trendsetter, but instead was labeled a biter. Oh the shame!

If you had a “cool” hair style and wore the latest fashions, you were “The Man.”

I wished my mother had been willing to spend more money; I would have bought a more expensive pair of leather gym shoes — ones with a white suede stripe. Then I’d be “The Man.” The only other dudes with white suede stripes on their shoes were Todd, who had a different brand, and Tony on the seventh and eighth grade team; he had some low-tops with a white suede stripe.

The next year, I bought some leather high-top gym shoes with a white suede stripe, but once again I was labeled a “biter.” Aaron beat me to the punch again. He had already upgraded to the same brand of shoes — white suede stripe and all. (The next time I try to set a trend, I’m going to call Aaron to make sure I don’t copy his style inadvertently.)

My first pair of leather gym shoes cost around $30; my second pair cost around $35. This was the late 1970s, so when adjusted for inflation, $30 shoes easily equate to a pair of $100 shoes in 2012 dollars. I broke the $40 cost barrier in the eighth grade by buying the most popular brand of leather high-top basketball shoes. They had a black leather stripe and gripped the basketball floor better than any pair of shoes I’d ever worn. They had a terry cloth insole which absorbed sweat. Because I sweat a lot, this caused my shoes to stink beyond belief.

I wore the shoes so much the stench of my feet could be smelled from across a large room. That’s when my mother threw them away, figuring such a smell couldn’t be removed merely by replacing the insoles. The era of expensive sneakers was in full swing. Today, the athletic shoe industry is a multi-billion dollar cash cow, along with various types of clothing brands.

But what’s the big deal about shoes and clothes? My father grew up wearing plain canvas Converse All Stars — fancy athletic shoes didn’t exist back then. To this day, my father has never had any problems with his feet. This, despite countless hours of playing basketball on the New York City hard courts. And if one dresses neatly, does it really matter if the clothes are made by a particular designer?

As time progressed, many popular brands of shoes and clothes emerged — a reason to spend money to keep up to date with the latest fashion trends. Or, as I like to say, a reason to spend money for the sake of spending money. And the prices of gym shoes continue to increase. It’s not uncommon now to see some sneakers priced above $300.

I remember visiting the home of a successful businessman in Detroit. His seventeen-year-old son had just returned from a sporting goods store with a new pair of expensive gym shoes. In the young man’s room, he had five stacks of shoeboxes, each seven feet high.

When the young man’s father questioned him on why he had purchased another pair of gym shoes, he said, “These are collector edition — a rare pair of shoes. They’ll be worth a lot of money someday. I’m only going to wear them a few times; then, I’ll save them for the future.”

The young man had an abundance of shoes, CDs, and DVDs in his room, but no books. It’s no wonder he was a poor student. The bigger question is why the young man’s father had not intervened earlier and prevented the purchase of so many shoes. Another question is why their home had multiple high-tech entertainment centers, but no library.

It’s not a crime to own a pair of nice athletic shoes, or an expensive pair. However, to own a portfolio of expensive shoes, if nothing else, is a poor financial decision. And to purchase shoes in hope of price appreciation is a speculative transaction at best. Sure, some rare gym shoes might sell for thousands of dollars today. However, money can be utilized more prudently on things that can provide a greater return with more certainty.

Young men have even been mugged for their gym shoes, and in some cases killed.[1] Such is the world today and a reminder to me of why young people must have priorities beyond owning material possessions, especially ones that earn no financial return. Money wasted is a potential impediment to one’s future financial success.

Rather than spend large sums of money on fashion, would it not be wiser to save and invest for one’s future? All children should learn the “Rule of 72.” This approximates how long it will take money to double at a particular rate of interest. Here’s how it works:

The number 72 divided by an interest rate, equals the approximate number of years it takes money to double at that interest rate.

Example: 72 divided by 6 equals 12 (72 ÷ 6 = 12).

Thus, it will take approximately 12 years for $100 to turn into $200 at 6% interest. Note: this does not account for inflation or tax implications (which will impact the real return).

Excerpt from The Janitor’s Sons: A True Story of Hope, Shattered Dreams, and Winning Despite Adversity (Chapter 8: Expensive Gym Shoes & Ghetto Economics) © 2012 by Gregory Collier. All Rights Reserved.

[1] See Paul Duggans, “Sneakers apparently led to killing,” The Washington Post, (January 9, 2012).


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I like the short put spread option strategy when I’m bullish on a stock

I trade options and like the short put spread option strategy when I’m bullish on a stock. With a short put spread:

  • my risk is capped (I know exactly how much money I can lose)
  • I know my maximum potential profit up front, and
  • the margin requirement is minimal

To set up an option play, my analysis is always thorough; however, this doesn’t mean I’m guaranteed to profit – profitability is never guaranteed. If anyone tells you otherwise, they either don’t know what they’re talking about, or they’re lying.

I analyze potential option plays post market-close, pre-market open, and intra-day.  Though prices can change dramatically overnight and intra-day, by starting my analysis after the end of a trading day, I can focus more intensely on my analysis, without the distraction of intra-day news and price swings.  Having analyzed closing-prices, I can prepare for anticipated price moves when the next trading session begins.

Two things I look at in detail are an option’s open interest and daily volume. I want to know which strike price has the greatest number of open contracts and the trading activity in those contracts. This is important because it’s a potential indication of where large traders (institutional investors, etc.) may try to pin a stock’s price at option expiration.

I sell out-of-the-money put options (i.e. options with a strike price lower than the current market price). I usually make sure the put options I sell have a strike price at or below that of the put option with the most open interest. I simultaneously buy put options on the same underlying security with a lower strike price, which limits my risk: I can only lose the difference between the strike prices plus commission, less the premium I received (credit received for selling a put option).

I prefer using this strategy in a short time frame prior to option expiration. By this I mean anywhere from a few days to a few weeks prior to expiration. This hopefully allows me to capitalize on the fact that a stock’s price may stay in the range I desire, maximizing my profit potential. I want the options to expire worthless so I keep as much of the premium a possible (100% if the options expire out-of-the-money).

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Generational Wealth

Too often I see people spending their money frivolously, and I admit, I’ve done it myself. Spending money is usually fun. Yet fundamentally, wasteful spending satisfies a short-term desire, often at the expense of long-term success. In other words, there’s an opportunity cost.

In the early years of my career I worked at several leading financial institutions, providing operational and technical support to fixed income traders. These were high-net-worth individuals, many of whom grew up in high-net-worth households. So whenever I got an opportunity, I would ask questions in an effort to expand my knowledge. The traders would often tell me things like:

  1. “Don’t take risks with your money; take risks with other people’s money,” and
  2. “Accumulate principal, then live off the interest – never, ever spend the principal.

The first point is an example of the risk taking philosophy of many people who accumulate significant wealth by using the financial resources of others. This includes corporate resources used to create profits; the more profits one creates for a company, typically, the larger income one can demand. “Other people’s money” also includes client resources: it’s no secret that wealthy hedge fund managers did not simply accumulate their wealth because they’re great investors. They magnified their wealth by charging a 2% fee on assets under management (AUM) and 20% on profits. So the first key is getting AUM (aka “other people’s money”), and keeping it long-term. To reiterate, this does not require one to be a great investor, but rather a great marketer.

The second point is the philosophy of many people who accumulated a large amount of wealth, whether on their own, or from family wealth passed to them. Irrespective of how wealth is accumulated or how much wealth one accrues, if one does not manage their money well, they can blow a fortune.

“…just look at the latest news headlines. I’m sure you’ll see an article about a down- and-out famous movie star, or a current or former professional athlete who has recently declared bankruptcy.”

-Gregory Collier, The Janitor’s Sons: A True Story of Hope, Shattered Dreams, and Winning Despite Adversity © 2012 by Gregory Collier.

Creating generational wealth does not require one to become the next Bill Gates and accumulate a large net worth via the price increase of a single stock. If one manages their financial resources well (including managing risks) and saves and invests for the future, they can establish the basis of generational wealth for their family.


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Ghetto Economics

My family didn’t move to the ghetto when we relocated from Brooklyn to Detroit. But by the time I moved out of Detroit, my neighborhood had a large amount of crime — it had become the ghetto. Even if I had spent my entire childhood in the most decrepit ghetto in America, it’s irrelevant. It doesn’t matter where you come from — what matters is where you’re going.

While education can help one achieve a level of financial success, good financial management can help one enjoy prosperity for an entire lifetime. In fact, good financial management can help future generations of a family capitalize on opportunities, and bask in the joy of success. This requires managing wealth with knowledge, skill, and appropriate risk management. Conversely, poor financial management can wipe out a fortune and potentially destroy one’s life.

I know many people who consistently earn large incomes. None live in the ghetto, but many have a ghetto mentality when it comes to managing their finances. “Ghetto Economics” is not limited to minorities living in urban areas. I can introduce you to numerous suburban white people who are as “ghetto as hell” when it comes to managing their wealth.

Class is open, please take notes. This is Ghetto Economics 101. Your final grade in this class is based on whether you succeed or fail economically. There are Ivy League MBAs who’ve failed this course, while folks who’ve never taken a college class earned an A. It’s not simply one’s level of education that makes them good at managing their wealth; devotion to using good wealth management principles is required.

Yet, probably the most important factor for continued prosperity is one’s ability to manage any emotional propensity to make poor economic decisions. There are PhDs in business and economics who cannot manage their money because emotions dominate their thoughts. This is practically the same as a medical doctor who’s overweight, smokes two packs of cigarettes a day, and never exercises.

If you do the following things, you are “ghetto as hell,” regardless of your income level. Unless you avoid these pitfalls, you deserve an F in this class, and failing this class may lead to failing in life.

1.      Spend all of your money and save nothing

One way to help achieve this is to attempt to keep up with the Joneses; that is, buy things because someone you know has them. Another way to achieve this is to become a connoisseur of the finer things in life when you can’t afford them: expensive automobiles, McMansions, expensive vacations, and designer clothes.

Even people who earn massive amounts of money can go broke — just look at the latest news headlines. I’m sure you’ll see an article about a down- and-out famous movie star, or a current or former professional athlete who has recently declared bankruptcy. A way to avoid going broke is to maintain a budget and manage your finances meticulously. If necessary, you may need to aggressively alter individual and/or family spending habits in an effort to thrive financially. This may require distancing yourself from friends and family members, and may even cause divorce.

2.      Get payday loans or otherwise use credit poorly

 By spending money you have not yet earned, not only will you waste money on finance charges, you’re on a path to ensuring you remain broke. Every dollar spent on finance charges is one less dollar available to save and invest for the future. Bad things often happen to good people, but good people make bad things happen to themselves when they spend money they don’t have.

Ideally, the full balance owed on a credit card should be paid off each month. The only debt that is “good debt” is that which earns a greater return than the cost of the debt. Many financial advisors consider the purchase of one’s primary home “good debt,” as a long-term investment in real estate tends to rise in value over the long term (that is, many years). Children should educate themselves on using credit wisely, so by the time they are young adults, they’ll understand the optimal uses of credit, as well as the risks. (Adults should educate themselves on this too.)

Using credit poorly can easily lead to having bad credit; this is not good for any reason. Whether due to a catastrophic circumstance, or living a lifestyle of the rich and famous, bad credit is typically a roadblock to success. This can ensure you don’t quality for credit in the future, and prevent you from being able to purchase a home or vehicle. At a minimum, bad credit may require one to pay an extremely high interest rate when approved for a loan or credit card.

Good credit is often a prerequisite for many job opportunities, as many employers consider bad credit a sign of incompetence. Also, from the point of view of many potential employers, someone with poor credit is a risk to a company. Such individuals are often desperate to dig themselves out of a financial hole, and therefore, lack the ability to focus fully on a job.

Long-term strategic financial planning can help individuals and families avoid financial disaster. Some keys are to have the appropriate type and amount of insurance coverage, as well as a savings plan for the future.

3.      Drop out of high school or college

This is a prudent strategy if you aspire to limit your career options and earning potential. The statistics on education and lifetime earning power tell a compelling story of why education is important. Though there are financially successful people who drop out of high school or college (or don’t attend college), I doubt any of the wealthiest people in the world would honestly advise anyone to drop out of high school or college. If I ever meet Bill Gates, I will ask him about this.

4.      Rest on your laurels

 Some people stop working hard once they attain a level of success. This includes those who think education ends the day they graduate from high school or college:   they never focus on learning new things. Many such individuals watch in disgust as the world changes and their nice, safe jobs go by way of the dinosaur — to extinction.

Most often, it is those who continue to expand their horizons who achieve at the highest levels. Whether earning an advanced degree, professional certification, or otherwise enduring the pain associated with striving for a higher level of achievement, one should never rest on their laurels.

If you achieve all of these points, you are well on your way to having a miserable life. If you achieve just one or two of these points, you’re in luck: you still qualify for potential misery. Ghetto economics dominates the lives of many people. In fact, it dominates the spending habits of many local and national governments. Alas, the world has embraced ghetto economics — now much of the world finds itself in peril. Please take my words to heart for your own good: save and invest for the future — and never spend more money than you earn. 

 “To whom you give your money, you give your power.”

—W.E.B. Dubois

Excerpt from The Janitor’s Sons: A True Story of Hope, Shattered Dreams, and Winning Despite Adversity © 2012 by Gregory Collier. All Rights Reserved.

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Educate yourself on Finance!

Everyone should study finance. Quite possibly, it is the most important thing people should learn and teach their children, especially behavioral finance, that is, how emotional factors can impact financial decisions. If more people actually understood finance, I doubt there would have been a global financial crisis.

When I moved into a technology role on Wall Street, many of my coworkers laughed at me because I have a MBA in Finance. Little did most of them understand that many of the senior most technology managers on Wall Street hold MBAs, including the global head of IT at the company where I worked at the time. Now many of my former coworkers question why they didn’t continue to educate themselves (especially in finance).

I didn’t get a MBA to get a higher paying job in corporate America, though higher compensation did come. I did it because I wanted to acquire the same level of formal education many CEOs of the world’s leading companies have. This would not guarantee I rise to the level of CEO, but it would ensure I possessed additional tools with which to capitalize on opportunities.

I also chose to study finance because I sincerely believe the more one knows about finance, the better their life will be. As an example, having started my career in fixed income, I’ve become knowledgeable on the subject. This helps me to structure scenarios whereby individuals can use their money to make money, and based on their level of risk aversion. To structure a bond purchase that allows the accrued interest received to pay all or part of one’s living expenses is a win-win situation. This is a strategy often used by the rich and powerful — those who most often have educated themselves on finance.

Take time to study finance and control your destiny.

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Banking: The Besieged Profession

A former co-worker told me, “bankers get a bad rap.”

I disagree! Bankers deserve criticism. However, my former co-worker is correct that bankers get much more criticism than the general public and government in regards to the global financial crisis.

So why does it seem like banking is “public enemy number one?” Because in banking, even with just a hand-full of bad people with decision making authority, you have a recipe for disaster. This also holds true when there are good people in leadership roles who make bad decisions.

I worked at investment banks for nearly 20 years, and had business dealings with numerous commercial bankers as an entrepreneur, consultant, and on a personal level. I can say from first-hand experience, most bankers are hard working and honest people. But often endemic in business is a financial incentive to be devious – an incentive clearly present in banking.

What profession other than “check cashing stores” so aggressively targets the poor, uneducated, and vulnerable?

Of the investment banks I worked for that also had commercial banking units; each one was sued by governmental bodies for predatory lending while I worked there. Many of the cases were settled for significant monetary damages, with the banks admitting no wrong doing.

To give banks the benefit of the doubt, certainly some of the lawsuits against them were frivolous – but not all; at minimum, some were culpable of aggressively seeking profits with a blatant disregard for ethics. Banks are profit seeking entities. However, to what extent must one go in order to achieve profitability? The answer to this question depends on who you ask. It was apparent to me in my days on Wall Street, as it is now to the global masses, that some banks will go to nearly any extent to maximize revenue.

So now bankers must work hard to re-build public trust. It doesn’t help that a British bank was recently fined £290 million for attempting to fix the London interbank offered rate (LIBOR). The same bank now faces new charges for allegedly selling interest rate swaps to small businesses. The interest rate swaps were designed to protect against interest rate volatility, however, in numerous cases the buyers of the swaps were crippled by them – many lacked the capacity to understand the complexity of the transaction they were entering.

To reiterate, not all banks are bad, and not all bankers are evil. But just like there’s a heaven, there’s also a hell. Evil bankers created their own purgatory, and in doing so besieged the entire banking industry, and the world for that matter. It’s up to the good banks and honest bankers to always serve their clients with honesty and integrity. Only then will the trust of the public be restored, if this is even possible.

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President Obama, the Antithesis of Arrogance

Yesterday I met President Barack Obama prior to his speech at a luncheon in Coral Gables, Florida.  What was extra special is I was able to bring my five year old son, Bradley – his second time meeting the President.  What amazes me most about President Obama is his genuine lack of ego – the antithesis of arrogance. Despite handling the most difficult job in the world, among a frenzy of people trying to shake hands and take photographs, he took the time to take a personal photo with my son, creating a cherished memory for my lineage.

I’ve been active in politics for decades, but in the midst of the global financial crisis, I became much more active. The future of America requires leadership and participation by people committed to doing the right thing. I can’t compare my level of service to some, but I have to do my part. Much of my attitude is inspired by President Obama.

Over the years I’ve met many business leaders and politicians. A few traits stand out among many: selfishness and arrogance. However, in President Obama I see a lack of  selfishness, combined with pride and a passion to do the right thing – helping all of us win, not one of us win at the expense of others.

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