If you are similar to me, you love a good story, particularly when the company continues to make profits to make dividends. The company has executed on its game plans and in a tough marketplace continues to earn profits, which is a very good thing to be able to do. At some point, you may read or learn one of the reasons they are doing well is at some point the playing field was a little uneven. You may not have been born at that stage, but some companies had an unfair advantage, and they had the ability to take advantage and run with it. This does not mean you sell your holdings, just understand there was an unfair playing field in the past. Today the competition from many sources means the company has to bring its game day focus everyday of the year.

In a book called High-Risers written by Ben Austen, published by HarperCollins, NY, 2018, the author focuses on a high- rise complex in Chicago called the Cabrini-Green. The location of the complex is just north of downtown Chicago, and at the time of the building of the high-rises, it replaced many houses that were rundown and not modern or lack of modern sanitation. The people had a roof over their heads, but it was not safe, there were many fires and people died. Almost anything done to replace it would have been better.

The City of Chicago replaced the neighborhood with high-rises with plenty of park space for kids to play. They had a long waiting list of people whom they vetted to move in. The rents were stabilized and thanks to federal programs connected to rent gear to income which means the residents would not pay more than 30% of their income to rents. Relative to their units in which many were housed, it was a good decision to move into the complex. In the beginning most of the people worked, they were on the low-wage scale, but they worked in retail, manufacturing places that were not far from the complex.

Nowadays people talk about red states and blue states, Illinois is a blue state. Chicago has traditionally been a segregated community. African Americans moved from the south to the north, where Jim Crow rules did not apply and jobs were plentiful, however they tended to move to the Black Belt of the city. In Chicago it meant south of downtown.

During the 1940’s, the vacancy rate in Chicago was less than 1%. White neighborhoods established racial covenants, bylaws that barred homeowners from selling to African Americans. At one point 85% of Chicago was covered by these restrictions. After the US Supreme Court, declared the covenants illegal, assaults on blacks and firebombing homes proved to keep the status quo in place.

The federal government deemed existing black neighborhoods too risky for insured mortgages, coloring them red on maps. The process was known as redlining, and it meant African Americans could rarely purchase property in their own communities. If you understand how rent-to-own companies make their money, people buy things they need, but if they fall behind, the company repossesses the stuff. The only loans in the African American neighborhoods were rent-to-own and if they fell behind, the house was sold off and the person had nothing. The affect was in most households, much of the wealth that is passed down is from real estate, black families own little real estate to pass down.

In black neighborhood, rents were high and properties were divided into many kitchenettes, or small space for families.

The most virulent opposition in public hearing in Chicago came from working-income families who felt trapped in the radically changing city. Realtors used shady blockbusting tactics, moving a black family into an area, then drumming up fears about decreasing property values, your daughters are at risk, and a growing threat of crime. Why? realtors were buying property on the cheap to sell to developers to build high-rises.

Public housing residents in Chicago in 1960, rent for a 3-bedroom started at $41 a month and went up $1 for every $55 more a tenant earn annually, up to a maximum of $110 or 30% of income. In the 1960’s and 1970’s, more people on welfare came into public housing which meant the Chicago Housing Authority ran deficits. At the same time, federal funding was scaled back. The result a repair backlogged started and then the development spiraled downwards, to a point Cabrini-Green was one of the worst housing projects and the best solution was to tear it down and start again.

The complex was eventually torn down and has been replaced by middle income and luxury towers, due to its closeness to downtown.

Linking to dividend paying stocks, stories are wonderful, but often the history changes the narrative of why the world exists that way that it does. This does not mean you should change your investment strategy, but it does mean that often there are often reasons that are slightly different than the company history of why it succeeded and others did not. Sometimes those reasons are related to government policies, sometimes they are related to history being watered down, sometimes there are other reasons. In the meantime, for a company in this age to consistently earn profits it is doing many things correctly.

There are more questions than answers, till the next time – to raising questions.

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