Financial Advice from the School of Hard Knocks

By Eddie Greenblat, Fall 2018 IAC Student Intern

I look forward to the show Hard Knocks every year. The show is a 5-part documentary that details one NFL team’s training camp experience. This year the show highlighted the Cleveland Browns. The Browns, which had a 1-31 record over the past two seasons, had some excitement coming into this season. Most people wanted to watch how the team handled Baker Mayfield, the first overall pick in the 2018 NFL Draft. One thing I did not expect was a crash course in money management.

The first episode had a segment where Carl Nassib, a defensive lineman from Pennsylvania State University, explained to his teammates how they could turn $1 million into $64 million by the time they retire. Here is a link to Mr. Nassib’s explanation but be warned that this explanation is full of colorful language. Continue reading

Mychal Kendricks Goes from the Super Bowl to Federal Court

By: Eddie Greenblat, fall 2018 IAC Student Intern

Mychal Kendricks was on top of the World. He helped the Philadelphia Eagles beat the New England Patriots in Super Bowl LII. For me, a lifelong hater of the Patriots, it was a joyous moment. Mychal Kendricks is out of the NFL after the U.S. Attorney brought insider trading charges against him.

Kendricks and Damilare Sonoiki, a former Goldman Sachs analyst, were indicted by the U.S. Attorney and charged the by the Securities Exchange Commission.  The SEC defines insider trading as “buying or selling a security, in breach of a fiduciary duty or relationship of trust and confidence, on the basis of material, nonpublic information about the security.”

U.S. Attorney William M. McSwain publicly alleged that Kendricks and Sonoiki committed securities fraud from July 2014 to March 2015. Sonoiki allegedly passed information to Kendricks involving upcoming mergers, which violated Sonoiki’s duty of confidentiality to Goldman Sachs. Kendricks used the information Sonoiki gave him to increase his initial investments of $723,000 to 1.2 million dollars.

Some might ask why this type of activity is such a big deal? Nobody was hurt and nothing bad happened. But the U.S. Attorney does not see it that way. The government sees insider trading as cheating the system. Christian Zajac, a FBI agent that investigated Kendricks, said “insider trading has long posed a threat to U.S. Financial markets, because it compromises the public’s trust our markets operate fairly.”

I strongly agree with Agent Zajac. Ordinary investors need to feel like they are on the same playing field as every other investor. If investors don’t believe they have access to the same information as everyone else, they will stop investing. In addition, because a NFL player pled guilty to insider trading makes the issue more public and could prevent more ordinary people from investing.

Chicken Parm . . . It Pays the Bills

By: Eddie Greenblat, fall 2018 IAC Student Intern

Almost all of us have had that Peyton Manning commercial jingle stuck in our head, you know, this one. Athletes are all over the advertisements we see every time we turn on the television, scroll twitter, or waste time on Facebook. Some athletes have turned their advertisement careers into their sole source of income. For example, the superstar tight end for the New England Patriots, Rob Gronkowski “Gronk,” has saved all of his NFL money and only spent money he’s made on endorsement deals.

Glover Quin, of the Detroit Lions, took 70% of his paycheck for the first three years he played in the NFL and invested in “well-known, publicly traded companies.”  John Urschel, a former offensive lineman for the Baltimore Ravens, decided he only need about $25,000 to live on each year, despite making around $600,000 per season. These players illustrate how athletes manage their money so that they are financially secure after their playing career ends. Continue reading

Mo’ Money Mo’ Problems

By: Eddie Greenblat, fall 2018 IAC Student Intern

Sports are a big part of my life. I watch them, read about them, and sometimes center my entire day around a big game. I think one reason I like sports so much is all of the side stories related to sports that are more about the athletes than the games. For example, I love this new tradition where at the end of the 1st quarter of every University of Iowa home football game the entire stadium waves at patients watching the game from the windows of the children’s hospital that overlooks the stadium.

ESPN Films produces a documentary series called 30 for 30. Each documentary installment highlights a different story related to sports, but not really about sports. The first one I watched, Broke, is about how athletes spend and lose their money.

This short montage of Broke provides some details about how athletes spend, save, and lose their money. For example, Dez Bryant, formally of the Dallas Cowboys, spent $56,000 on one meal at a restaurant (1:24). The clip also has some interviews that explain that the athletes invest if they “could help them and felt good about the project (2:00).” Broke was inspired by the Sports Illustrated article, How (And Why) Athletes Go Broke. This problem is specific to athletes because their opportunity to earn money based on their God-given abilities is shorter.

So, what exactly happens to the money? The SI article spotlights Rocket Ismail, a former University of Notre Dame and Canadian Football League player who signed his first professional contract for 18.2 million dollars. Ismail shared a memory where he went to a meeting with financial advisors and felt like he was “listening to Charlie Brown’s teacher.” Ismail “sank $300,000” into a restaurant modeled after Hard Rock Café, but “[had] no idea what became of the restaurant.” However, Ismail’s investment losses don’t stop there. He also invested in a failed religious movie, record label, new cosmetic procedure, phone card dispenser, and a tourist shop.

These investment issues are not totally Ismail’s fault though. Most athletes follow the advice of the professionals they surround themselves with, and Ismail did just that. Ed Butowsky, a financial advisor featured in both the documentary and SI article, explains that athletes’ portfolios are often heavy on risky investments like “inventions, night clubs, car dealerships, and t-shirt companies.”

This series will detail how athletes lose their money, save their money, and put their money to use for their communities.

Out of Commission: The Shutdown’s Impact on the SEC

By: Esmat Hanano, IAC Student Intern Spring 2019

With the partial government shutdown continuing to drag on, investors and the financial markets are having to deal with unforeseen consequences that could complicate the financial outlook for the year. Undoubtedly, the most glaring impact of the shutdown is the loss of income for hundreds of thousands of federal workers that have now missed two paychecks. However, an overlooked consequence of the shutdown is the limited operational capability of the Securities and Exchanges Commission (SEC). For retail investors, the SEC’s diminished operational capacity is a highly important bit of news to watch as the shutdown fight continues on Capitol Hill. The SEC’s work is critical to protecting retail investors from bad actors and others who look for ways to defraud the average investor. With the shutdown impacting the SEC, investors must be more cautious when dealing with financial markets and investment opportunities. Continue reading

Killing the Messenger: A Deep Dive into Lorenzo v. SEC (Part 6 of 6)

By: Matthew Haan, IAC Student Intern Fall 2018

You’ve made it to the end! In this conclusion, I will tell you what this case means for investors, broker-dealers, and the SEC. You might even find my prediction (kind of) buried in here somewhere. Continue reading

Killing the Messenger: A Deep Dive into Lorenzo v. SEC (Part 5 of 6)

By: Matthew Haan, IAC Student Intern Fall 2018

If you’ve made it this far, congratulations on being a full blown law nerd. You are in great company! Most of this series has focused on Francis Lorenzo, and you are probably wondering what the SEC could argue to support its position. After all, the SEC has won at every stage of the litigation so far, so it must have some pretty decent arguments. Today, I will discuss exactly what those arguments are. Continue reading