Hammer Time for 50 cent as sub-prime rapper crisis grips America

by Niall Veale, NFC* Chief Advisor on Morality, Vice and Virtue

As America continues to reel in the aftermath of its sub-prime mortgage crisis, analysts fear that a new and more devastating economic catastrophe may be emerging. The Nation may be witnessing the start of a ‘subprime rapper’ crisis with R&B recording artists filing for bankruptcy in record numbers. This week, investors watched nervously as shares in P-Diddy reached a 5 year low and shares in 50 cent ironically dropped to 50 cent. In 2007, market fundamentals remained strong with concert, record and merchandise sales showing robust growth in the last quarter of the year. Despite these positive trends, high profile rappers like Chicago’s Kayne West, and even entire posses like New York’s Wu-Tang Clan, have seen their net worth effectively disappear. Other indicators point to rocky times ahead for the sector with foreclosures on ‘pimped’ rides reaching a 6 year high and dentists reporting strong demand for gold tooth extraction.

Goldman Sachs analyst Leonard Green commented that the ’sub-prime rapper’ crisis does not necessarily stem from any contraction in the sector’s overall growth but may be attributable instead to a disparity between market fundamentals and individual outlays. Green explained that “these guys are making a lot money but tend to blow it all on really really expensive, unnecessary and opulent crap”.

He continued: “Busta Rhymes may have felt that he could easily afford the 28 personalised gold plated toilet seat covers that he ordered for his Florida mansion, but when they had to be re-cast after it was realized that ‘Rhymes’ had been spelled without an ’h’, he probably should have reconsidered his purchase of that boat that used to belong to the Notorious BIG“.

Other analysts have argued that symptoms of a crisis were evident as far back as 4 years ago. One inauspicious event that went largely unnoticed in the financial community was New York rapper Ja Rule’s appearance on MTV’s cribs. It later emerged that the‘Crib’ in question didn’t even belong to Ja rule and that he had been sleeping on Method Man’s couch for a number of months.

Unsurprisingly, parallels have been drawn between the current crisis and the mid 90s market shock which saw MC Hammer file for bankruptcy with debts of over $12 million. While Hammer’s lavish lifestyle was ultimately the root cause of his demise, analysts have warned that current individual spending patterns far surpass those of the previous 2 decades. This, coupled with constant media pressure to maintain very outward displays of net worth, point to a greatly intensified crisis this time around. Meryll Lynch analyst Paul Goulder explains: “Although MC Hammer had debts of over $12 he was easily able to keep his creditors at bay as his acquired assets were easily liquefied. Someof todays rappers may have difficulty converting their assets into cash given current trends in personalized items” He continued: “Usher may have a difficult time selling his main residence due to the fact that every single wall in his house is adorned with ornate

muriels of Usher”. Goulder cited another example of the pitfalls of personalisation, that of Sean Combs who in August 2005 changed his name from ’P Diddy’ to‘Diddy’. The ensuing re-branding operation cost the rapper over $118mn after everything from personalized cars to his own personalized music player, the ‘iPdiddy’, had to be completely replaced.

With uncertain times ahead, many R&B stars have had to suffer income reductions and find themselves adjusting to more grounded spending patterns. In an interview with Forbes last month, 50-Cent admitted that his champagne consumption has had to be somewhat moderated: “yeah I got to stop using that Cristal shit to brush my gold teeth man”. Others face more serious problems. Former R&B superstar Jennifer ’J-Lo’ Lopez who once extolled the fact that, despite net annual earnings in excess of $160mn, she was still ’Jenny from the block’ felt the irony of those words as multiple bank foreclosures forced her to move back to ’The Block’. We spoke to J-Lo’s former class mate and current Block resident Yolanda Cole who stated “We gonna learn her broke ass some respect when she moves back here - Don’t be fooled by the rocks I got!? the only rocks she gonna get here is crack”.