Game Over: Toys "R" Us - Is One Of Your Investments Next?

Game Over: Toys "R" Us - Is One Of Your Investments Next?

As of last week, Toys “R” Us is officially closed. Could one of your investments be next? Listen to my thoughts on Toys “R” Us and GE in this week’s video. AND AS A BONUS - I share my funniest moments that happened when I worked at Toys “R” Us during winter break in college!

FULL TRANSCRIPT

Patrick King: Its game over for Toys "R" Us. Oh, by the way, GE ain't doing so well either. Are there any investments like this in your portfolio that might be at some point going out of business or not doing so well? We are going to talk about that a little bit, coming up. And be sure to stay towards the end and I'll share some funny stories of when I actually worked at Toys "R" Us, believe it or not. All that, coming up.

[music]

Hey, folks, I'm Patrick King with Transformative Financial. Here on this channel we help people make money, keep money, and feel more financially secure along the way. If that sounds like something you're interested in, I'd love to have a talk and see if it's a good fit. My phone number is 404-500-9261. My email is patrick@transformative-financial.com. But today, Toys "R" Us is shuttering the all of its stores. I think it's happening either today or this weekend. They're going to be a lot of empty giant toy stores very, very soon.

There's certainly been a lot of nostalgia around Toys "R" Us that I've seen lately in the media. It just goes to show you that companies, even though you might think that their institution, they might be around for a long time and maybe they have been on for a long time, but they can fail. There are plenty of enormous companies throughout history that that are no more. Toys "R" Us is just the latest example of why one stock, one company can be a dangerous investment sometimes even if you think it's a company that's going to be around for a long time.

Just to kind of give you an example, the Dow Jones Industrial Average (DJIA) which is a collection of the 30 biggest companies in the united states that are publicly traded. We're talking big, big companies here. The original Dow Jones Industrial Average, I think, started back in the 1890s, and some of the companies that were in the original Dow Jones Industrial Average, the 30 biggest companies in the US were the American Cotton Oil Company, the Distilling & Cattle Feeding Company, and one more that I love is the National Lead Company, because we all needed more lead.

Of course, these companies have been either sold off or purchased or dissolved into other companies throughout the years. But, you know, back then they were giant concerns and they were the staples of the U.S. Stock market. It just goes to show that, over time, things change.

I mentioned GE in the intro. GE Was one of the original Dow Jones industrial companies. They've dropped in and out over the years, but back in 2016 they officially dropped out. Even as recent as ten years ago, I remember being in business school, it was more than 10 years ago at that point. Jack Welch was the darling of B-schools around the country and now, here, GE is-- they're in trouble. They have got debt up to their eyeballs and they're divesting parts of their business, in order just to survive.

Even a 10-year period, or a 15 year period. Let's say a 15-year period for GE. Things can go from looking really good to, “we're just trying to survive”. Again, when it comes down to the financial crisis, we're talking about – General Motors went through bankruptcy. From the Charlotte area, my hometown area, Wachovia didn't survive.

What I'm trying to get to is, if you've got an individual stock in your portfolio, okay, yes, it might seem like a good investment, but diversifying is really kind of the best game in town. It's the only free lunch in town and those sure-shot companies that you think are going to be around forever may not be.

When I talk with folks who have individual stock holdings that are a large part of their portfolio, I hear a story. And the story goes something like this.

It usually has three parts. Part one, "Hey, this company is doing so well." Or, "Hey, I know/like this company." Now, you're playing favorites. This is what's called “active investing” in a lot of cases where you're picking a winner like Coke over Pepsi or whatnot. That's how it starts. I'm going to put my money into this one company.

Then, step number two in this story that I hear is one of the following things. It could be, "Hey, I've got a bunch of gains in this stock so I don't want to sell and diversify. No, it's really grown but I don't want to sell it because I might have to pay taxes on it." Well, for that story my response is usually, "Hey, I'll be happy to pay your taxes if you give me the gains." If you've had the stock for a while, you're going to pay 15% capital gains taxes for long-term gains. That's the best deal you're going to get from Uncle Sam. I say you take it and run or at least put a plan together to slowly divest and take those gains over time.

The second version of step two, what I hear is, "Hey, the stock is down but I know they're a good company so I'm going to hang on to it for a while." This could be good or it could come back, it could circle the drain at some point. Now we're talking about a psychological phenomenon known as anchoring where I bought in a $50 a share, "Gosh, it's all the way down to 20 now," but it's worth $50 in the back of my mind so I'm not going to let it go until it gets back to $50. That's a psychological mistake a lot of folks make around investing.

The third flavor of the of the second act of this play is, "Man, it's doing okay. I'm going to sell when the price reaches X," whatever that is. Coca-Cola was a great example. I think there were a lot of folks here in Atlanta that said back in the day, "I'll sell when it reaches 90." And then just there's that point where it never got to 90. Then the financial crisis hit and a lot of folks with their stock options, they're waiting for that price to get to 90 and they didn't execute their options. All of a sudden their options that were worth millions are underwater, they're not worth anything. That's a situation you don't want to find yourself in. That was kind of act two.

Act three in this play is, "Wow, this stock is really, really down. Maybe now we should sell," which is how so many people end up buying high and selling low over time. And of course, the idea is to buy low and sell high, right?

That's kind of what I've got for today. Pour out a little bit of your 40 for Toys "R" Us. I know I had a lot of nostalgia for Toys "R" Us as a kid, which brings me to my final point: that nostalgia kind of got erased when I worked there during college. I would work there during winter breaks to make a little bit extra scratch.

Yes, it was an experience. It was one of those jobs. I knew my first day I was in for a treat working there. I worked in the back. I would unload the trucks and lift all the heavy stuff and put it onto the shelves. I kind of stayed off the showroom floor, at least initially. I remember the first day I walked from the storeroom to the break room to eat my lunch and this sweet old lady just stopped me in the middle of the aisle. I have my red smock on and everything. She stopped me she said, "Son, where are the Lickin’ Lizards?" What the heck? I don't know what a Lickin’ Lizard is.

Of course, I spent probably 10, 20 minutes trying to help her find Lickin’ Lizards for I guess, her kids or grandkids or whatever. Yes, I knew I was in for something there. Lesson number one on day two: I took my smock off before I went on my break!

But I do want to share a couple of more stories. The music, that Toys "R" Us jingle, that they had, the audio loop in the stores was probably only about 30 minutes.  If you were there for 9 hours, you were hearing those songs in your sleep. It was kind of crazy. I don't know if it was contagious to some of the customers or not.

The first one that just really pops into my mind is – and this is Christmas Eve –  gentleman comes in and he's looking for some walkie-talkies for his kid. "Okay, sir, we've got walkie-talkies in two places. There's the electronics and then there's a section of toys where we have some more toys like walkie-talkies." I walked him to the different areas of the store and, yet, he was looking for the Fisher-Price walkie-talkies. Not one of the five other different options that we had.

I said, "Sir if we don't have it on the shelves, we don't have it.” We've got a team of people that come and work the graveyard shift. They would come in at midnight and work until like 6:00 in the morning restocking shelves and I'm like, "If it's not here, we don't have it."

Evidently, that was not a satisfactory answer for him. After threatening bodily harm I just turned him over to the store manager and I just let someone who was being paid more than minimum wage to deal with that problem. That was one good story.

The second story that I have where I was threatened with bodily harm was with a gentleman who brought a gift back and he didn't have a receipt. We stocked that item. The detail here was I was doing returns the day after Christmas, which was about as fun as you can imagine. He wanted to return this item and didn't have a receipt and he was very upset that I couldn't give him cash.

Being a young person and, again, not being very invested in the company, I said, "Sir if you don't have the receipt, I can't give you cash. I can't give you dollars, I can give you Geoffrey Dollars."

Well, this sent him over the edge. At this point, he threatened to wait outside in the parking lot and "beat my ass". I think my Dad still laughs every time I mention “Geoffrey Dollars” or he'll bring up Geoffrey Dollars every once in a while. That set him off that day, but he did not get his real dollars because he did not have a receipt.

Then finally, I think my favorite story about working at Toys "R" Us was, like I said I worked back and in this stockroom, we sold these Little Tikes' / Step2 plastic things and you could buy these just elaborate yard play-structures. We had this one and it was, I think, the biggest one that they made. It was this castle. It was like a plastic castle that you put in a backyard, so the kids could slide around crawl and stuff. I was actually stunned that they could put all this stuff into this one giant box. I'm getting a big fork truck, pulling this thing out to the front of the store to meet the customers out there and help them put it in their vehicle. There were five of them there in the family. It was a group decision evidently.

They rolled up in a Geo Metro. Five people. And they looked at me, and they looked at the box, and they said, “That's just not going to fit in the car.” No joke. They had to go borrow a truck. I just thought it was funny that they were probably in the smallest car you could buy at the time and they thought that somehow they were going to get a plastic castle into this bad boy.

Toys "R" Us. That was one of those jobs. That was my job. I didn't work food service, I worked retail and it was a doozy.

That's what I've got for today folks. If you've got some individual stocks in your portfolio and you'd like an opinion about what to do with those to maybe get rid of some of that risk, that single company risk, give me a shout. Until next time – that's all I have for today. If you like this video click “Like”. Please subscribe. Thank you so much for watching. Until next time. cheers.

[music]

[00:14:18] [END OF AUDIO]

Quartery Market Report:  2Q 2018

Quartery Market Report: 2Q 2018

The Best Investment - 5 Ways To Invest In Yourself

The Best Investment - 5 Ways To Invest In Yourself