Monthly Archives: June 2014

Detroit’s Bankruptcy: An Indictment On African America’s Institutional Power


Contrary to the commonly accepted belief, it is the risk element in our capitalistic system which produces an economy of security. Risk brings out the ingenuity and resourcefulness which insure the success of enough ventures to keep the economy growing and secure. – Robert Rawls

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The year is 1988 and Berry Gordy is completing the sale of Motown Records to MCA and Boston Ventures LP for a reported $61 million or $121.6 million adjusted for inflation today. Motown Records was an African American institution for over two decades and in 1983 was the largest African American owned company in the United States according to Black Enterprise. It had been the stalwart of Detroit’s African American community and the home of legends like Diana Ross, Smokey Robinson, and global icon Michael Jackson. 25 years later the city of Detroit is a shell of its former self and filed the largest municipal bankruptcy in U.S. history at an estimated $20 billion. How did the symbol of African American power have such an inglorious fall from grace?

Detroit is 138.75 square miles and in terms of cities with 100 000 or more people in it there is no city with a larger African American concentration than Detroit with almost 85 percent of the population being African American. In 1950 the city’s population was near 1.9 million. Historically, Detroit was once home to 18 African American owned hospitals between 1917-1991, home to Lewis College of Business, the only HBCU located in Michigan, and First Independence Bank which is still one of African America’s largest owned banks with over $200 million in assets or almost 5 percent of all African America’s combined bank assets. The city’s African American population was thriving thanks to strong institutions throughout the city much like Motown, but many could argue that complacency settled in. The African American middle class there felt like they had “made” it. Time to set the ship on cruise control and go fishing. The problem? There was an iceberg ahead.

Today, none of the African American owned hospitals in Detroit remain, Lewis College of Business struggles to keep the doors open with no working website or functioning phone number, and the unemployment rate still hovers around 20 percent in the city for African Americans despite the country’s recovery. The political infrastructure seems to be more ripe with corruption over the past few decades than leadership doing more to inhibit progress than promote it. Corruption in the city would be epitomized by the fall from grace at the time by one of HBCU’s shining political stars, former mayor and Florida A&M graduate, Kwame Kilpatrick who is now serving 28 years in federal prison for laundry list of scandals as Detroit’s mayor. The city has a reported 70 000 abandoned buildings, 50 percent of the city’s street lights are not working, and over 40 percent of the entire city is currently below the poverty line. Often times it is confused that the auto bailout of General Motors and Chrysler was an assistance to Detroit. Great job on the public relations of that one to John and Jane Taxpayer who bought it hook, line, and sinker. Unfortunately, GM and Chrysler had long moved their headquarters and majority of operations out of Detroit to suburban areas that were more tax-friendly. They were Detroit in spirit only. The $80 billion they received in bailout was not though. A bailout out that would see U.S. taxpayers lose $11.7 billion as the government divested itself of ownership of both.

Detroit has fallen as its African American population has seen its power decline and some very questionable leadership at times from the aforementioned mayor’s office. However, there is real opportunity in Detroit for African America and the barrier to entry has been lowered because of the distress. Capitalism in a nutshell rewards the creation of chaos or the organization of chaos. The latter is what is present in Detroit. A real investment in Lewis College of Business would go a long way to stabilizing the education and social aspect of African Detroitians higher education access. Dan Gilbert, owner of Quicken Loans, Cleveland Cavaliers, and most notably known for his famous social media rant against LeBron James for leaving him, has invested over $1 billion the heart of downtown Detroit. As one Bloomberg reporter pointed out he is  basically sifting through the best of food at the top of the trash can. He has purchased 3 million square feet or the equivalent of 0.07 percent of the entire city. Not a major overhaul by any stretch of the imagination, but probably the best quality of what is there and any revitalization will leave Dan Gilbert reaping immense rewards. Despite a declining population this is still a city with 700 000 residents which means it is the 18th largest city by population in America and $6.7 billion in household income, but is being treated like a ghost town.

There is still a “Hitsville” in Detroit for those that can see through the chaos of the battered and broken city. A chance to bring a phoenix from the ashes if you will. The city is in need of industry and a way to stem its declining population which for someone with a background in community development is like the opportunity given to Michelangelo to paint the sistine chapel. If African America was ever looking for an opportunity for a home run where the stakes of high risk and high reward, then there is no better place in America right now than Detroit. Warren Buffett is famously quoted as saying “be fearful when others are greedy and greedy when others are fearful” and right now Detroit is screaming to African America for an opportunity to be greedy. With 137 square miles still left of needing investment, maybe it is time to put some of that $1 trillion of buying power to use.

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HBCU Money™ Business Book Feature -The First Billion Is the Hardest: Reflections on a Life of Comebacks and America’s Energy Future


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With a Plan for Reducing U.S. Oil Dependency

It’s never too late to top your personal best.

Now eighty years old, T. Boone Pickens is a legendary figure in the business world. Known as the “Oracle of Oil” because of his uncanny ability to predict the direction of fuel prices, he built Mesa Petroleum, one of the largest independent oil companies in the United States, from a $2,500 investment. In the 1980s, Pickens became a household name when he executed a series of unsolicited buyout bids for undervalued oil companies, in the process reinventing the notion of shareholders’ rights. Even his failures were successful in that they forced risk-averse managers to reconsider the way they did business.

When Pickens left Mesa at age sixty-eight after a spectacular downward spiral in the company’s profits, many counted him out. Indeed, what followed for him was a painful divorce, clinical depression, a temporary inability to predict the movement of energy prices, and the loss of 90 percent of his investing capital. But Pickens was far from out.

From that personal and professional nadir, Pickens staged one of the most impressive comebacks in the industry, turning his investment fund’s remaining $3 million into $8 billion in profit in just a few years. That made him, at age seventy-seven, the world’s second-highest-paid hedge fund manager. But he wasn’t done yet. Today, Pickens is making some of the world’s most colossal energy bets. If he has his way, most of America’s cars will eventually run on natural gas, and vast swaths of the nation’s prairie land will become places where wind can be harnessed for power generation. Currently no less bold than he was decades ago when he single-handedly transformed America’s oil industry, Pickens is staking billions on the conviction that he knows what’s coming. In this book, he spells out that future in detail, not only presenting a comprehensive plan for American energy independence but also providing a fascinating glimpse into key resources such as water—yet another area where he is putting billions on the line.

From a businessman who is extraordinarily humble yet is considered one of the world’s most visionary, The First Billion Is the Hardest is both a riveting account of a life spent pulling off improbable triumphs and a report back from the front of the global energy and natural-resource wars—of vital interest to anyone who has a stake in America’s future.

HBCU Money™ Dozen 6/23 – 6/27


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Did you miss HBCU Money™ Dozen via Twitter? No worry. We are now putting them on the site for you to visit at your leisure. We have made some changes here at HBCU Money™ Dozen. We are now solely focused on research and central bank articles from the previous week.

Research

Getting closer to understanding dark matter l SLAC ow.ly/yxwip

Groups pressure U.S. lawmakers with NSA surveillance scorecard l Computerworldow.ly/yxwmH

Are Digital Retailers Focusing Their Security in the Wrong Place? l CIOonline trib.al/gtVPOfp

Want a tech career, college students? Better get an internship first l Computerworld ow.ly/yxwsL

US Renewable Usage and CO2 Emissions Have Both Substantially Increased l Clean Technicadlvr.it/67xZ3Z

Airport breach a sign for IT industry to think security, not money l CSOonline ow.ly/yxwGx

Federal Reserve, Central Banks, & Financial Departments

How is the U.S. economy doing? Janet Yellen’s dashboard l SF Fed brkn.gs/1uRU7DD

Data on reverse repo agreements have been added to U.S. Financial Data l St. Louis Fedbit.ly/wwEiJe

Secretary Lew Unveils New Efforts to Assist Homeowners l Treasury Dept. go.usa.gov/9v6

Pilot program uses crowdfunding to help underserved entrepreneurs launch their small business l St. louis Fed bit.ly/1ivXTR2

Where millennials are putting their money l Housing Wire hwi.re/6808rr

Our Piggy Bank Primer e-book helps children learn about spending, saving and budgeting l EconLowDown bit.ly/1mP8AQu

Now accepting submissions for the 2015 Federal Reserve System Research Conference in DC l St. Louis Fed bit.ly/1qLbXbR

Thank you as always for joining us on Saturday for HBCU Money™ Dozen. The 12 most important research and finance articles of the week.

The HBCU Money™ Weekly Market Watch


Our Money Matters /\ June 27, 2014

A weekly snapshot of African American owned public companies and HBCU Money™ tracked African stock exchanges.

NAME TICKER PRICE (GAIN/LOSS %)

African American Publicly Traded Companies

Citizens Bancshares Georgia (CZBS) $8.70 (0.00% UNCH)

M&F Bancorp (MFBP) $5.06 (0.00% UNCH)

Radio One (ROIA) $4.84 (2.76% UP)

African Stock Exchanges

Bourse Regionale des Valeurs Mobilieres (BRVM)  235.38 (0.74% UP)

Botswana Stock Exchange (BSE)  9 133.50 (0.12% UP)

Ghana Stock Exchange (GSE)  2 352.45 (9.66% UP)*

Nairobi Stock Exchange (NSE)  149.69 (N/A)

Johannesburg Stock Exchange (JSE) 50 625.37 (0.27% DN)

International Stock Exchanges

New York Stock Exchange (NYSE) 10 940.60 (0.08% DN)

London Stock Exchange (LSE)  3 604.39 (0.32% UP)

Tokyo Stock Exchange (TOPIX)  1 253.15 (0.81% DN)

Commodities

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HBCU Money’s 12 Month HBCU Alumni Giving Challenge


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To give away money is an easy matter, and in any man’s power. But to decide to whom to give it, and how large and when, and for what purpose and how, is neither in every man’s power-nor an easy matter. Hence it is that such excellence is rare, praiseworthy and noble. – Aristotle

The HBCU Money™ 12 Month Challenge is an effort to help HBCUs and HBCU support organization increase their charitable donations. We are offering this challenge sheet to HBCU alumni, alumni associations, and friends of HBCUs. You can challenge yourself, a fellow alum, or anyone who is interested in giving to the HBCU Diaspora. Share your progress on social media to inspire others. Keep a hard copy on your refrigerator. Whatever it takes to keep ourselves accountable to empowering our institutions for tomorrow.

HBCU or HBCU Organization:

Your Name:

Your Challenger:

Giving Purpose:

  • Month 1 – $1

  • Month 2 – $2

  • Month 3 – $4

  • Month 4 – $8

  • Month 5 – $16

  • Month 6 – $32

  • Month 7 – $64

  • Month 8 – $128

  • Month 9 – $256

  • Month 10 – $512

  • Month 11 – $1024

  • Month 12 – $2048