Six Questions for Josh Brown

There are lots of insightful people. There are lots of entertaining people.

There are very few of both.

Josh Brown, who blogs and tweets under The Reformed Broker and is CEO of Ritholtz Wealth Management, is one of them.

He’s one of the only people in finance who is as entertaining as he is smart. And the former shouldn’t be discounted: Josh was one of the first to figure out that effective communication through simple-language content that you want to read is indispensable to getting clients to listen to you and follow your advice.

We asked him six questions about investing.

Collaborative Fund: What’s a piece of commonly accepted investing advice that’s totally wrong?

Josh Brown: Well, I think just generally all the aphorisms are stupid and context-free. Sometimes they’re applicable and sometimes they represent the exact wrong thing to do. “Nobody ever went broke taking a profit” is maniacally bad advice for the majority of investors, unless they’re responsible for a P&L with a 90 day time frame. Can you imagine buying Amazon at 50 and selling at 70 if you really believed in the company ten years ago and then seeing what’s gone on since? “Let your winners run and cut your losers” is another one. Okay great, tell me which ones are my winners and which are my losers. No way to know.

When I hear a trader reeling off one of these lines, I know he’s either an amateur or a schmuck. “Sell in May”, don’t even get me started. Rules of thumb are not helpful in this game.

CF: What do you want to know about investing that we can’t know?

JB: I want the Biff Tannen sports almanac from Back To The Future except for asset class returns, inflation, and standard deviation. I don’t even need to know the next 20 years, I could probably raise a trillion dollars with just the next five years’ worth.

That’s a testament to how easy it is to raise money from past performance by the way. Almost no one would think to ask, “How did you get all this stuff so right?” They’d be in for a real shock in year six!

CF: What have you changed your mind about in the last decade?

JB: I don’t know that I’ve changed my mind so much as seen my own knowledge base grow. I’ve absorbed a lot and so maybe some things I think are very different but, I hope, there’s been a broad evolution in the way I look at the world. If not, then that’s kind of missing the point of life, no?

One thing I will say is that having my daughter ten years ago and my son three years later definitely forced me to grow up and get more serious about my habits, my future and my priorities. Thank god, because I was probably headed nowhere good. Now I attack life like a terminator everyday because, well, no choice ;)

CF: How much of what Benjamin Graham wrote about investing before 1950 is still relevant today?

JB: All of it and none of it, depending on how you’re trying to use it.

If you’re worshipping at the altar of Graham because of his elemental principles, well then you’re in the luck - the idea of trying to buy a dollar for 80 cents will never go out of fashion. It’s genius. If, however, you think his spells and incantations are going to enable you to perform miraculous feats in a relative sport like the stock market, it’s going to be a disappointment. His doctrines were almost too good, and now there are a million players armed with the ideas he explained and the software that takes them even further.

CF: What does financial advice for my son look like 30 years from now?

JB: The good news is that your son will be investing in a regulatory environment in which many of the conflicts inherent today will no long exist. The arc of history is long but it bends toward justice. The business of delivering financial advice will, by then, be carried out only by those practitioners who could survive by doing the right thing.

Unfortunately, this won’t entirely prevent human nature. There will always be frauds and con artists, but the scams will be new.

There will always be fear and greed, the two primordial enemies of the investor. Both are healthy in moderation, but since when have people been good at moderating anything? That stuff is hard-coded into our DNA and it is something that both self-directed investors and advisory clients will always be faced with.

CF: What aren’t we talking enough about?

JB: Why don’t any financial industry celebrities have endorsement deals? Too niche? Wouldn’t you play with the same tennis racquet Bill Ackman uses? Drive the same pickup truck as David Tepper? “Hi, Carl Icahn here for Centrum Silver…”

More seriously, think about credit cards, trading software, shoes, insurance, steakhouse chains, shirts and ties. Finance bros are very easily influenced. I popped a tweet about Allbirds on my stream and within a month they’ve become the unofficial shoe of the finance blogosphere. And that was accidental. Imagine a real campaign?

I know it’s a relatively small audience but it’s a really rich one. Someone will start an agency and start cutting these endorsement deals for Wall Street names and it will be a bonanza. Have your people contact my people, I’ll walk them through what could be a 9-figure market opportunity that literally no one has attempted yet.