Police Body Camera Stocks

As a resident of Baltimore, this week has been nothing short of surreal for me.

I’m sure many of you have been watching our city burn (both literally and figuratively) from the comfort of your own homes over the last few evenings, and for that you are quite fortunate.

For those of us living in the heart of Baltimore, the situation has been especially tense.

I spent Monday evening guarding my home and surrounding businesses armed with an AR-15 alongside the owner of a neighboring restaurant, a broad-shouldered Salvadoran man who kept a sawed-off 12-gauge close to his chest (I’m not making this up).

This is something I never once thought I’d find myself doing, but when large mobs of adolescents began throwing bricks through my neighbor’s windows, my naivety was immediately extinguished.

I would say I was surprised to see Baltimore’s youth being so destructive and unruly, but as a former teacher in this city, I honestly wasn’t very surprised at all.

For years, most of these children have been neglected by both their parents and the American community. It was only a matter of time before the emotional toll of their environment hit a boiling point.

Shifting the Conversation

Just to be clear, I mention this not to justify the actions of rioters but rather to point out the simple reality of cause and effect. When you combine a lack of family structure with poorly funded public and social services (schools in particular), what you end up with is total chaos.

The immediate thing that came to my mind when groups of Baltimore teenagers began throwing cinder bricks at police earlier this week was, “Where are the parents? Where are the teachers?” Both groups were well aware through social media that students were planning a “purge,” yet virtually no one was there to stop it from happening.

Within an hour of that thought, though, news crews at CBS famously caught Baltimore resident Toya Graham laying into her 16-year-old son Michael after seeing him with the protesters. Here’s a photo of the two after (and possibly before) some reasonable corporal punishment:

Credit: WBAL

Just a few hours after the broadcast, Toya had become an Internet sensation — #MotherofTheYear was trending on Twitter, and people finally began turning their attention to a crucial issue: raising our children.

“It takes a village,” several protesters remarked.

Rand Paul also spoke out on the topic, saying:

There are so many things we can talk about. It’s something we talk about not in the immediate aftermath but over time: The breakdown of family structure, the lack of fathers, the lack of sort of a moral code in our society. This isn’t just a racial thing; it goes across racial boundaries.

Now, the reason I bring this all up is because public conversation seems to finally be shifting from highly destructive “F*ck the police!” rhetoric to a more constructive “What can we realistically do to prevent this from happening again?” approach.

In the wake of all the chaos and all the finger-pointing, productive and cooperative dialogue has finally begun to emerge. It’s a small step, but it’s incredibly important.

In the coming presidential elections, race relations are now all but guaranteed to be a contentious topic of debate. Strategies will be proposed for reducing the tension, and the American public will decide which of those strategies make the most sense.

As for how any of this pertains to investing, I’m going to explain that right now.

Investing in Crisis

As is often the case with politics and legislation, the debate surrounding racial tension in America is bound to move a few markets.

We’ve seen the effect (good and bad) of the Affordable Care Act across the medical device and pharmaceutical industries. We’ve also seen the effect subsidies once had on solar stocks.

From a pure moneymaking standpoint, whether or not you agree with any of this legislation is beside the point. It’s not about your personal opinion on the matter — it’s simply about what is most likely to happen in response to these events.

There are a few specific markets that could be impacted here, but I’m only going to touch on one today. This is a market we’ve touched on before, and it’s now a topic many people are beginning to address…

I’m talking about the deployment of police body cameras across the nation.

Back in December, President Obama announced $263 million in funding for body cams and police training. This was the initial step, but in all likelihood it’s not the last.

I may be speculating here a bit, but it seems reasonable to assume at this point at least one legislator out there is going to propose a bill that mandates the use of and provides full funding for police body cams across the U.S. It’s also reasonable to assume the American public will support it. (Note: Hillary Clinton has already called for mandatory body cams as I was finishing this article.)

The reason you can be especially confident something like this will happen is because it’s to the benefit of all parties. This is not a point of debate, but rather a simple matter of fact.

Activists, for one, want body cams because they believe they will keep the police honest and non-violent… And they happen to be right.

The Police Foundation recently completed a yearlong study on body cams by deploying them to the Rialto Police Department in California. Wearing cameras was associated with a stunning reduction in use-of-force, with findings suggesting:

…more than a 50% reduction in the total number of incidents of use-of-force compared to control-conditions, and nearly ten times more citizens’ complaints in the 12-months prior to the experiment.

For all the Americans out there concerned about reducing police brutality, this evidence makes the use of body cams a no-brainer. Want to improve relations with the police? Here’s how you solve half the problem.

For governments and police, body cams are also the obvious route to take at this point.

In the past few days, Baltimore has seen a jarring 144 vehicle fires, 15 structure fires, and 200 arrests. Conventions have been canceled, Camden Yards is losing ticket sales, property value has been destroyed, and businesses now have to rebuild. It should go without saying that the financial toll on the city will be absolutely immense.

Had the Baltimore police interacting with Freddie Gray been equipped with body cams — had the events been caught on tape — there would have been, undeniably, far less speculation about what happened that day.

Arguably, video evidence of the events could have prevented these tragic riots from happening altogether, either by making it clear the police officers should be charged or by making it clear there was no brutality going on at all.

The reality is that when questions arise without clear answers, people are going to fill the void with their personal assumptions. The less room you leave for speculation, the less maneuverability there will for those who simply want something to get angry about.

If you examine the shooting of Walter Scott in South Carolina earlier this month, this point becomes especially clear. Police officer Michael Slager is seen, on video, shooting Scott in the back as he runs away. The case is cut and dry.

The death of Walter Scott definitely sparked international debate and protest, but not the same unbridled anger and rage we’ve seen in Ferguson and Baltimore. The reason for this is that video left very little room for speculation, and Slager was charged with murder almost immediately as a result.

Cameranomics

The price of a police-standard body cam sits in the range of about $400. Outfitting every one of Baltimore’s 2,800 sworn police at that price would cost the city no more than $1.2 million in equipment.

When spread across the expected life of the device, the investment is mere chump change to the insurance it brings.

For perspective, let’s consider the cost of the LA riots. In a 2004 study, researchers found that over the 10 years following the riots, the city faced a cumulative loss of at least $3.8 billion. Suddenly, $1.2 million sounds like a drop in the bucket, no?

Just to crunch of a few more numbers here, consider that the average salary for a Baltimore police patrol officer is $53,958, meaning the city spends ~$1.2 million (the cost of outfitting every single officer with a body cam) for every 20 officers it employs.

Even if the department can’t obtain additional funding, it seems obvious enough at this point that a police force with 2,780 officers equipped with cameras would be better for the city than 2,800 officers without. This is true not only in regards to citizens worried about police brutality but from a financial standpoint as well.

Of course, the same cost-benefit thesis applies to every one of the 18,000 state and local law enforcement agencies across the U.S.

Body cam stocks like Taser International (NASDAQ: TASR) and Digital Ally, Inc. (NASDAQ: DGLY) are up in the wake of the recent riots in Baltimore, but not nearly to the extent that they rallied in August throughout the events in Ferguson.

If you think things are going to flare up again in Baltimore, it would be a good play to purchase DGLY short term. It’s possible that when investigation results are released, there will once again be a surge in violence, and consequently a rally in DGLY’s share price.

For those who are less active in trading, Taser and Digital Ally are promising long-term equities regardless of timing. I could always be wrong, but my forecast is that within five years tops, every police officer in America will be equipped with a recording device.

Until next time,

Jason Stutman

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