By Daniel CreechAugust 4, 2020

The NBA’s Dinwiddie trailblazes a path for income investors

Money Basketball

You’d better learn to think outside the box—or off-the-court—to find yield in today’s world. 

Governments all over the world, led by the Federal Reserve, continue to print money to fight off coronavirus shutdowns. And Chairman Jerome Powell expects interest rates to remain low for a long time.

That means finding a solid yield without taking on risk is growing more difficult by the day…

The 10-year U.S. Treasury bond pays a dismal 0.567% right now. That’s $567 in interest on $100,000 per year, before taxes. Plus, many once-reliable income-payers are being forced to cut their dividends

But as I talked about in October, one NBA athlete has offered investors another way to collect income—by investing in him… and his NBA career. 

All-Star player Spencer Dinwiddie of the Brooklyn Nets has been battling the NBA since 2019 over his plan to tokenize a portion of his $34 million-dollar contract.

After delays and setbacks between lawyers and the NBA—even a threat by the NBA to dismiss his contract—a deal for a tokenized contract was finally made…

And it’s helped to create a whole new way for investors to earn income in the future…

When you tokenize an asset, you simply sell fractional ownership of an asset. Dinwiddie offered 90 tokens (or coins) for sale through the issuer, SD26 LLC, at $150,000 each. 

Dinwiddie was looking to raise $13.5 million in a bond-like investment that would repay investors the entire principle ($150,000) after three years… along with 4.95% per year—a mere 700%-plus higher than today’s 10-Year Treasury yield.  

In total, 90 SD26 LLC tokens were available for sale. But only 10%—9 tokens—were purchased by 8 investors for $1.35 million. 

While this may seem like a huge letdown, given the circumstances, it’s a positive. 

The coronavirus has caused chaos across professional sports (and everything else). Dinwiddie tested positive for the virus in June… and elected to sit out the limited season, now underway.

Given all the uncertainty, it’s understandable for investors to be cautious. But let’s take the longer-term view here… Tokenization is in its beginning stages. As this becomes more common, investors will become more comfortable and confident. It will be similar to buying a bond… and possibly easier. 

With interest rates remaining low for the foreseeable future, investors will have no choice but to look outside traditional bond investments and many dividend-paying stocks for yield. 

As regular readers know, tokenization isn’t stopping with the NBA… other professional athletes will follow. And I’m guessing Hollywood will too… with tokenization, producers could raise capital for movies… and pay out royalties from its profits. It’s already happening across the real estate sector.  

Going forward, tokenization will play a huge role in the allocation of capital. And with governments and central banks around the world hell bent on keeping interest rates low, it offers investors a unique new way to earn income.

Daniel Creech is a Curzio Research analyst with over a decade of experience. He writes on macro trends, large- and small-cap stocks, and digital securities. He’s a regular contributor to Wall Street Unplugged, Curzio Crypto, Curzio Research Advisory, and The Dollar Stock Club.

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