Capitalism in the Age of Amazing Tacos - 10 min read
Open Essay — Published: August 17, 2020
I have an idea for an investing framework that would raise enough capital to address the social and economic issues that have generationally plagued Chicago's South and West sides. It is a scalable idea that we can use nationally, and it goes directly to the money source – Wall Street.
Our idea is going to take weeks, not years or decades.
Free-markets are the foundation of our beautiful country. This system is not without flaws, and there are valid arguments that it allows the economically privileged to profit off the backs of workers and creates unimaginable income inequality issues that seep into every social injustice our society endures.
I have a lot of love and respect for the protestors bringing these long-overdue national issues to the forefront of our daily consciousness. You are all making a difference, and I thank you!
While the burn it down rhetoric is fun and it gives energy to the masses, the idea of tearing our entire system down to rebuild from the ground up is short-sighted. Toppling statues and spray-painting federal buildings are symbolic and perhaps cathartic, but these actions do not address basic needs—food, safety, economic security. Kids are still going to bed hungry and young adults are killing each other in the streets.
Besides, defunding one organization to fund another is not thinking big enough; that model is still carving up the pie. We need to be having conversations of abundance.
The capitalist system has done more to fix extreme poverty issues and to create wealth over the past 200 years worldwide than any other economic model. There is no better real-world model.
What I propose is that we work within the system to get what we need. Our idea is a little free-market jiu-jitsu move—use the opponent's weight against him to upset his balance. And besides, I think there is something romantic about fixing the system with the system.
Our strategy is simple: (1) beautify blighted neighborhoods to increase the equity in real property and raise all boats; (2) Seek mother nature’s help to calm our anxieties, quiet our chattering minds, and create wealth in impoverished areas.
We can accomplish this objective without government assistance. Chicago had a $700 million budget shortfall in June, which has only increased due to the coronavirus. The government is not going to save us. We the people need to take care of each other.
Strategy for deploying capital:
Currently, Cook County and the City of Chicago have ownership of approximately 40,000 vacant property lots, acquired on account of unpaid property taxes. These lots are poorly maintained, garbage-filled parcels which are optically depressing and diminish community pride.
Additionally, since these properties are County-owned, they do not generate property tax revenues for local governments. This is a problem because 70% of those taxes would have gone toward funding our schools, which provide education as well as meals for children. These programs provide essential nutritional requirements for those most at need. I cannot highlight this concern enough – If someone is hungry, nothing else matters.
Our goal is to encourage private ownership of these parcels to get more people physically active and present in the community. I’m going to demonstrate money is a concept, so the cost doesn’t matter.
With the capital this plan will generate, we are going to turn these lots into private gardens and walking parks filled with art, flowers, and meticulously maintained landscaping. Some of the yards will have water fountains to provide natural white noise to drown out the chaos of the neighborhoods, while others will have berms for kids to ride their bikes. Whatever the inspiration is, pristine condition at all times to foster community pride.
A key component is these lots will be wifi hotspots for my neighbors to use. The COVID pandemic is unpredictable, a return to face-to-face education uncertain. E-learning will continue to be a more significant part of our education system; everyone needs to be connected. Access to the internet and information is one foundation to equity.
We have one stipulation for this no-charge wifi-access: in return for 12 to 24-hours of access, users will be required to first listen to a 10-minute meditation app. We am going to do this to encourage different behavior; to help people become more aware of their actions and thoughts. Why? Practicing mindfulness helps create space in responding to events rather than reacting to ingrained behavior patterns. We can all be more mindful.
But simply put, my goal is to be a good neighbor; to bring a little slice of heaven to the area delivered through nature, all while increasing the value of other properties.
As for building and maintaining these lots, we will hire local realtors. The realtors will act as property managers to ensure the properties are maintained in accordance with a predetermined agreement. The realtors can help make suggestions on insurance agents to protect the parcels, contractors to fix and build, and lawn crews to maintain. I am going to put the onus on these licensed professionals to help pump money into the local economy. We will build up our local small businesses. As those businesses grow, so will the economic and entrepreneurial opportunities available to young people.
As an ancillary benefit, getting more properties on the tax rolls will collectively lower the property taxes for all property owners in Cook County.
So what will this cost? Perhaps $40k per lot. This strategy is not a return on investment of capital. After their development, these lots will probably be worth $5-10k. This is an investment in people to help increase the velocity of money flowing through the hands of individuals in the community.
There are many things that can be done to improve the community if money was not a constraint. If my idea below is backed, this is how I will proceed.
So all we need is money, right?
The market capitalization of the stock market is over $30 trillion. This amount of money is so large that most people can’t even wrap their heads around it. At the billionaire level, money is only a concept.
Hedge funds with billions of dollars or more under management are placing bets on their views of how the market and consumers are going to behave in commerce. These corporations, that make no products and add no productivity in our economy, are making vast sums of money in the stock market when small incremental change occurs by buying and selling stocks.
Due to their “activist” billionaire stature, financial news outlets give these people a microphone to echo their pump and dump schemes. They are rarely held accountable by the watchdog agencies that are supposed to protect the consumer – case in point; corporations are no longer providing any financial guidance or forecast on account of the coronavirus.
I know this may sound like I’m preaching to the choir, but this is a good thing.
These factors make this a golden opportunity to turn the system on its head, economic jiu-jitsu, without the need to burn and rebuild. We can use the capitalist system to profit on extreme market inefficiencies in a short period of time, which is precisely what the system was designed to do. There are BILLIONS of dollars in low hanging fruit ripe for the taking – infinitely more money than any defunding efforts can generate.
Since the COVID lockdown, the investing world has witnessed the power of the retail investor by trading apps like Robinhood and other online brokerage accounts. For the first time, the retail investor, when trading similarly, is influencing the market like a hedge fund. The goal of this open essay is to organize.
So, who wants to play a game of “Capitalism” with me?
I call it “Eat Different Tacos.”
A corporation that is currently being pumped up by an activist investor, among other financial institutions, is Chipotle—the Mexican fast-casual food restaurant. Chipotle is a publicly-traded company that, in my opinion, makes ok tacos. The current market value for the corporation is $34 billion, and their P/E (price per earnings) ratio is trading at 134 times.
To put things in perspective, the average U.S. equity P/E ratio from 1900 to 2005 was 14. At the height of the Dot-com bubble, P/E had risen to 32. Chipotle is currently trading at 134 times. The stock price was trading at $1,216 as of August 17, 2020, and again, they make tacos.
They are not sending rockets to outer space. They are not automating our supply chains. They are NOT a technology company. They make ok tacos with a market value of $34 billion. One does not need to be a financial wizard on Wall Street to understand that this is silly.
If you want good tacos, go to Antique Taco, Big Star, Broken English, Fat Rosie’s, Mercadito - the list is endless.
For another reasonable comparison, McDonald's is currently trading at 33.
Bullish Wall Street analysts will explain that Chipotle’s all-time highs are due to its increase in digital sales and its continued operations during the pandemic. Even though Chipotle’s mobile sales increased after the initial lockdown, its total sales revenue fell; Wall Street rewarded the stock by pumping billions into the market cap value. Let that sink in for a moment.
Here is why I can’t accept the analysts’ justification for Chipotle’s value: What company does not have a mobile app or website in 2020? What small restaurant doesn’t have access to third-party apps like Ritual, DoorDash, GrubHub, UberEats, PostMates, etc.? The arguments do not justify a $34 billion market cap on an industry with small margins that sells tacos. Wall Street simply has too much money and not enough good ideas.
Chipotle can grow as fast as their little heart’s desire with a stock price at 25 times earnings. The extra is Wall Street fluff for billionaires to continue to pad their pockets. That means there is more than $20 BILLION in market arbitrage for the taking to help fund our projects.
Machine learning and analyst models are not taking into consideration that customer food taste preferences can and do change very quickly. Like overnight, say August 25, 2020, Ate/25/2020; (Last taco Tuesday of the month)
Rules for our game of Capitalism: Eating different tacos
Collectively, we short Chipotle’s stock*
Start Eating Different Tacos - support your locally-owned restaurants (non Chipotle)
Donate 10% of your stock gains from this trade to the community reinvestment fund. These donations can be accepted directly on the website www.EatDifferentTacos.com - The entire movement is a handshake agreement.
*Note: If you do not understand the concept of shorting a stock, please don’t participate with the investing arm of this campaign. There is an inherent risk with investing, and this strategy is not guaranteed to work. You can lose money; just remind people to eat different tacos. Also, a warning to people that got lucky trading recently with the market swings and feel they are savvier than Warren Buffet, please shy away from puts and other options strategies with time decay. We are playing against formidable opponents in billionaires that are experts in trading – channel your inner Sun Tzu. Think “pigs get fat, hogs get slaughtered” - we want to be able to invest 10% of something vs. 100% of nothing.
**Handshake agreement. Investors that participate and capitalize on this community organizing effort, keep 90% of your gains to pay down your student debts, put into a reserve account or however you see fit, but please donate 10% of the earnings from this particular trade.
I also trademarked the phrase “Eat Different Tacos.” If you are more of a novelty t-shirt maker, merch type person, please do your best to profit from this idea with a fun slogan in an open licensing agreement – please kick 10% of your profits to help my efforts.
The goal is not to make this corporation insolvent, but if that ultimately happens and we helped stop the spread of ok tacos, I can live with that. Shorting a stock is simply a strategy to correct the market inefficiencies that currently exist. We would simply be helping the markets to function smoothly by providing liquidity and serving as a restraining influence on investors’ over-exuberance. Since retail investors have small pockets, an open essay like this is needed to organize our efforts. The little habanero kick is the suggestion to Eat Different Tacos to apply downward pressure on Chipotle’s sales, so the stock price falls, and investors profit. We can then pull our capital for social projects.
Every one multiple of Chipotle stock (133 to 132) is roughly $250 million. That is a significant dollar amount to invest in our impoverished neighborhoods that will not even make the radar on a Wall Street balance sheet. I believe this strategy will only take a few earning quarters to accomplish.
Chipotle stock’s beta metric at the time of this writing was 1.21, meaning its 21% more volatile than the rest of the market. Wall Street is just as spasmatic as the rest of us — I can say that, I am an American — so this stock has the potential to move fast. The professionals already know this stock can drop rapidly, so kindly do your due diligence and act quickly. If a financial show mentions 100k+ retail investors just shorted Chipotle stock in a matter of days, we know we won.
Additional Thoughts:
Common sense says there should be no such thing as a $1000 taco stock trading at 100 + times earnings– this is silly and will decline at some point. So instead of waiting for a hedge fund to short and profit, let us start our campaign today. We are merely combining activism with capitalism, which can develop into a repeatable model. There is $30 trillion in the stock market, yet kids are going to bed hungry and listening to gunshots. We can do more to help — I can do more to help.
I understand that there are more prominent market cap companies with higher PE ratios doing evil crap — polluting our environment and the like. Chipotle is simply a ridiculously overpriced stock, being puffed up by activist investors, with a big enough market cap to fund projects nationwide. They also sell a product that seems to be the only thing Americans can agree on these days — our love of tacos. So this should be both fun and easy!
The message of Eat Different Tacos is a peaceful one — no damage to any property and no shaming under any circumstance. We are throwing up the hang loose hand sign when we see someone with a Chipotle bag and just reminding them that we are now “Eating Different Tacos.” If they ask why, it’s to support our local restaurants, save the communities, create art, spread mindfulness, feed children, quell the violence, etc.
If this catches on, the first $100 million gets invested in my hometown of Chicago – that’s only 0.3% of Chipotle's market cap to put the amount of money available into perspective one last time. After that, the next 19 MSA markets that house half of our country’s populations will have their beautification projects funded on some future assessed valuation metric.
Who knows, maybe the optimist in me feels that Wall Street wants to help, and we are just helping them help us. It might be easier to take a loss on a trade rather than to write a $1 billion check to our communities and justify it to shareholders. And the realist in me knows people are not going to care whether they eat Chipotle again when they can support their local restaurants instead.
One last point on Wall Street’s tone-deafness in case there is any sympathy for billionaires. An activist investor who made billions pumping up the Chipotle stock to all-time highs during the pandemic recently went public on a new fund he arrogantly named “Blank Check.” The target of his fund will be “Mature Unicorns” – a term referencing private companies valued at more than $1 billion – an acknowledgment that money is no object and just a concept.
I think this idea has scalability, and if this initial attempt does not work, the model will be tweaked until it does. The funds exist in the stock market to close the income inequality gap, and we can do this quickly. This is our first attempt to organize the masses, so fingers crossed. Best case we help improve the well-being of thousands, worst case is I am a knucklehead who thought he could change the world telling people to Eat Different Tacos.
Help spread the word
Tag your Tacos #EatDifferentTacos
Recap
The crux of the idea is to organize a group of charitable and somewhat sophisticated investors to pool their powers to skim the froth off the exorbitant greed and VC money that pours into companies like Chipotle. That activism, opposite of mine, has bid them up to absurd valuations.
Disclaimers:
Eat Different Tacos LLC (“EDT”) is not a registered investment, legal, income tax advisor, or a broker / dealer. All investment and financial opinions expressed are from personal research and experience of the owner of the site and are intended as educational material.
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Past performance is not necessarily indicative of future results. All investments carry significant risk, and all investment decisions of an individual remain the specific responsibility of that individual. There is no guarantee that systems, indicators, or signals will result in profits or that they will not result in a full loss or losses. All investors are advised to fully understand all risks associated with any kind of investing they choose to do.
Hypothetical or simulated performance is not indicative of future results. Unless expressly noted otherwise, all return examples provided in our websites and publications are based on hypothetical or simulated investing. We make no representations or warranties whatsoever that any investor will, or is likely to, achieve profits similar to those shown, because hypothetical or simulated performance is not necessarily indicative of future results.
Don’t enter any investment without fully understanding the worst-case scenarios of that investment; the risk of loss on a short sale is theoretically unlimited.
As of this writing, the author is short this stock. If donations collected do not exceed the estimated $40,000 to purchase, develop, and properly maintain the first parcel, taco food trucks will be hired to spend funds in targeted areas instead.
Peer Review
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Stoic Meditations
“Be tolerant with others and strict with yourself” — Marcus Aurelius
“We are more often frightened than hurt; and we suffer more in imagination than in reality.” —Seneca
“You will earn the respect of all men if you begin by earning the respect of yourself.” — Musonius Rufus
“You always own the option of having no opinion.” — Marcus Aurelius
“Man conquers the world by conquering himself.” — Zeno
“If your choices are beautiful, so too will you be.” — Epictetus
“Between stimulus and response, there is a space. In that space is our power to choose our response.” — Victor Frankl
“And you can also commit injustice by doing nothing.” — Marcus Aurelius
References
Yahoo Finance [finance.yahoo.com] (August 17, 2020) Market Valuation, P/E ratio, and other financial data
Wikipedia Market capitalization of listed companies [en.wikipedia.org/wiki/New_York_Stock_Exchange#:~:text=It%20is%20by%20far%20the,US%24169%20billion%20in%202013]
Historical Price-earnings ratio [en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio]
Short Selling [www.investopedia.com/articles/investing/100913/basics-short-selling.asp]