During his recent interview with Tobias, Joshua Brown, CEO of Ritholtz Wealth Management, and author at The Reformed Broker Blog, discussed why he started and maintains his very successful investing blog saying:
Tobias Carlisle: When I first discovered you it was like December 2008, which was when I started writing my blog and I just looked you up then. You started blogging in November 2008-
Joshua Brown: Yeah.
Tobias Carlisle: Did you have any idea where it could go?
Joshua Brown: No. So I started the blog, like really just like venting. My blog started in between Lehman Brothers going bankrupt and right before like the Bernie Madoff revelation coming out that December. So it was just like a very fertile period of time to be ranting and raving about Wall Street and I really didn’t like, there was no like, premeditated plan it was just like, I have things to say. And at that time I’d been a retail broker, I hated the business. I hated everything that was happening in the markets and I just, I had some things to get off my chest. And I found an audience really fast and if I hadn’t I probably would’ve stopped because blogging is like a very demanding thing. Like if you’re not putting up content every day, you’re gone basically. But people showed up so I kept going.
Tobias Carlisle: So you started it as a result of the experiences that you had as a retail broker. And I read Backstage Wall Street when it first came out in 2012-
Joshua Brown: Thank you.
Tobias Carlisle: And so my, I haven’t told you what I thought about it yet. No I thought it-
Joshua Brown: Okay.
Tobias Carlisle: It was excellent, it was very, very good. But my impression of it was that it was something like, it was like working in Boiler Room or more recently Wolf of Wall Street, so is that what it was like?
Joshua Brown: So, yeah. So The Wolf of Wall Street era is before my time. That’s really early 1990s. By the time that I arrived in the brokerage business, that was already like on its way out. And what was really left was just people trying to do retail business, legitimate retail business, buy and sell stocks and funds, but utilizing the techniques that The Wolf of Wall Street era people used.
Joshua Brown: But they did not invent that, cold calling was invented at Lehman Brothers. It was a guy by the name of Marty Shafiroff who wrote a book called Telephone Selling in the 90s. And he was either in the Madison Avenue office or the Water Street office of Lehman Brothers which became infamous because they invented having brokers make 500 phone calls a day, call executives all over the country and essentially sell stock to people that they had never met before in person. That was like an innovation at the time. But that’s like the 60s and 70s, so cold calling culture had already been around for, which I talk about it in the book, for 30 years prior to Jordan Belfort. He just, he was the first to take that concept and turn it toward nefarious purposes and like, just build this empire of penny stocks where they controlled the prices and they made markets in all the stocks that were being recommended.
Joshua Brown: Prior to Stratton Oakmont, cold calling was a perfectly legitimate way to do business development. So after the Stratton era, that’s where I came along. There were still some people who were trained, at Stratton, and they were running some of these brokerage firms. So the idea was like, let’s get people to open accounts using legitimate investments but let’s use those old school tactics to, you know, get as many people as possible. So it was a unique moment, it didn’t last long. Eventually people stopped picking up their phones.
Joshua Brown: But yeah, that was kind of the environment that I walked into. So we had research analysts and we were trying to pick good stocks and they were all blue chips and liquid. But yeah, the tactic was how do you do business development, use the phone. And I got really good at it, and that was not really my big issue. My big issue was just like, realizing by the time the crisis rolled around, you say to yourself like, “Alright, I got all these clients. I have all these people that believe in me, they like me. What the hell am I recommending to them? None of this is helping them.” And so that was kind of the epiphany that I had where it was like, okay the part I love about this business is helping people, the part I hate is the sales side. And so being able to divorce the sales side from helping people side, meant dropping my Series 7 and becoming an investment advisor. So that’s kind of like, the evolution from where I started to where I ended up.
Tobias Carlisle: And that was the focus, and still is the focus of The Reformed Broker blog, that you talk about some of the abusive practices that they used to engage in and better ways that the business can go. And that’s, I’m guessing that’s the reason that you linked up with Barry Ritholtz, to form Ritholtz, right?
Joshua Brown: Well, yeah. I mean the stuff that I describe in the book doesn’t really exist anymore. There’s probably 20 of those firms left, they’re just, they’re gone.
Joshua Brown: The bigger abuses now that are interesting to me, you have a lot of people who are unregistered and they just every day have these extreme opinions and I guess there’s nothing you can do about it from a regulatory standpoint, but they have absolutely spent the last 10 years scaring people witless. And causing people to either not invest or to invest in really, really, poorly chosen asset allocations that virtually doom their proposition of retirement. Like if you missed most of the market over the last 10 years, you’re never going to see a period like this again. Like I don’t know, how do you get those years back?
Joshua Brown: Like I feel like that’s the current abuse that is significantly more damaging to the investor populace, than anything Jordan Belfort ever did. Like, Jordan Belfort preyed on people who were greedy, psychopaths to begin with for the most part. Like you would not have given him a million dollars to steal from you, if you didn’t think that you found a shortcut to investing because of what he was doing. That put that aside, compartmentalize that, what’s happening now I think is significantly more widespread and worse and we have the first amendment here. Like people are allowed to say whatever they want to say. But I do think that there’s this arbitrage where people are like, selling newsletters, rather than becoming registered as investment professionals, and they are giving advice and it’s shit advice and they’re out of their fucking minds and they’re scaring people out of investing for their retirement and these people are not going to get this time back. So to me that’s an interesting abuse and that’s the kind of thing that I’ve been writing about lately. To talk about like, the old boiler room brokerage days, those days are gone, there’s nobody left. So like I feel like the threat, to the investor populace is always shifting and I kind of, I try I think to help people with whatever the threat of the moment is.
Tobias Carlisle: Well let’s talk about that a little bit. So, what are you talking about, the Gold Bugs, the doomsday guys?
Joshua Brown: I just, yeah. I feel like there’re a lot of people who have no skin in the game, who are not… Look, if you’re an unregistered person screaming about what you think the stock market’s about to do or interest rates or gold, you have the right to do that. But if you manage no money, who gives a shit what you think? Like a lot of the loudest, most extreme voices are people that have no money at stake, have nothing at stake. They don’t have any professional licensing, they don’t have any… And so what I’m not saying is like, they shouldn’t be allowed to talk, everyone has the right to talk. I think giving those people a platform though, and then they lead thousands of unsuspecting, average investors down the wrong path, I think that’s like problematic.
Joshua Brown: So I don’t know what you can do about it other than to provide the counterbalance to that. Say, “Yes, we know that markets go down. Yes, we know that recessions happen. Yes, we know that very, very occasionally there are crashes. But here’s the context for all of that, and here’s a more rational way of looking at the potential risks that you’re taking.” As opposed to, “The dollar is going to disappear in 18 months.” Or, “The entire global financial system is about to become unglued and you’re going to need like, swords and spears to fight World War 3.” Like that is what’s being offered out there and there’s a huge audience for it. And that audience wants it but then there are concentric circles around that audience, there are normal people being sucked into that. I know, because we come across these people all the time and usually it’s because they’ve blown up an account or several accounts and they’re basically at this point like, “I don’t know what to do. I need to invest but I’m terrified.” So that’s the role that I think we play in the ecology of financial media. I think we offer that counterbalance and we try to do it with evidence.
Tobias Carlisle: That’s Ritholtz or that’s CNBC? Or both?
Joshua Brown: No, no, no, no, no. That’s my gang. But I think I bring that element to CNBC so I’m on a show called The Halftime Report. It’s a really interesting mix of, some people are options traders, some people are hedge funds, some people are asset management. I think I’m the only person in wealth management, that’s on my particular show. So that’s, the perspective I bring is, “Yes, I understand what’s happening in the headlines, here’s our take on it.” It’s really, it’s a privilege that, they really, they give me that opportunity to bring that perspective because most of what’s in financial TV is not people in wealth management. It’s people that are in other aspects of Wall Street.
Tobias Carlisle: So how did that come about? Because that was about five years after you started The Reformed Broker blog, I think in about 2013 you started appearing on CNBC. What was the process for-
Joshua Brown: No, I made my first appearance in 2010.
Tobias Carlisle: But in terms of being a regular commentator, like a daily-
Joshua Brown: I became a regular in 2011, when The Halftime Report first came about. And I’m not sure how that happened, I just got a call like, “Hey, we’re doing this new thing at 12:00 want to be in it?” And I said, “Yeah, I want to be in it.”
Tobias Carlisle: And you’ve managed to stay in ever since which is incredible.
Joshua Brown: Well, you know. It seems like I’m on a lot more than I am. I’m doing a couple days a week at this point. There were periods of time where I was doing more. I don’t know that I have that much to say to be doing five days a week. And a lot of the things that I’m interested in or that I talk about aren’t fit for TV, which is why I maintain the blog and there are things that just, television wise would not be interesting but that I find really interesting. So I try to write about that stuff. But then the markets are really my first love, like I’ve always been interested in stocks and interested in how economic trends relate to the markets. And I just, I love it so if they keep calling me I’ll keep appearing. I think it’s a lot of fun and it’s a great way to reach a lot of people who would not ordinarily find me or read a blog, you know. Most civilians are not reading financial blogs. So if you want to appear where people’s attention is, that’s where people’s attention is, it’s on financial television. So adapting my message to that audience is what I try to do and I think I’ve done a pretty good job at it.
Tobias Carlisle: The most amazing thing is that you’ve been able to sustain the output on The Reformed Broker for so long, how do you do that?
Joshua Brown: It’s not easy. I think you have to just be reading a lot at all times to be a blogger. Like I don’t know that there are, I don’t know that there are any good financial blogs written by people who aren’t constantly reading. And sometimes you’re reading other people’s blogs, just to get a sense of what they’re saying. But a lot of the time you’re reading the news of the day, or you’re reading research. And I think you have to be comfortable with the idea that you don’t know what you’re going to want to write about tomorrow, or the next day. Things are just going to have to occur to you in the course of your reading which is why you need to do a lot of reading.
Joshua Brown: So if you didn’t love the subject matter, it would be really hard to maintain a blog. So the thing I tell people is that, like, I don’t have a lot of hobbies. Like there’s a few things I do outside of finance, but I do spend a ton of time reading and that’s where a lot of the ideas of what I’m going to write about come from. And if you’re not somebody that’s just constantly curious and wanting to read, it’s going to be hard to do a blog because like you might have three or four good ideas up front, but then what? Like what are you going to say next week? What are you going to say the week after? I’m fairly confident that at this point, it’s 11 years, I’m fairly confident that I’m going to keep reading things and things are going to keep occurring to me. And that doesn’t mean like, my takes are so great all of the time, but every once in a while I will put a few things together from a wide variety of sources I’m reading, and I will write something that I’m like, really proud of. But that’s not every day. You have to be willing to go, almost every day and then understand that most of what you write will not be remembered. You just have to be willing to go through that process.
Tobias Carlisle: I mean, we hope that most of the things that we write aren’t remembered.
Joshua Brown: Yeah, it’s probably better off that way. But I think the best financial bloggers are the people that aren’t trying to specifically hold to a schedule. But they’re people that when something occurs to them, like they’re willing to drop other shit and sit down and write it. And that’s not always easy for everyone to do, right? Like if you have a nine to five job and you have like phones ringing and people that you’re supposed to be answering to, and you have this really great thought occur to you, like, it’s hard. Like I feel you like have to be like, in an advantageous place to even begin the process of blogging.
Joshua Brown: Now for me, I was effectively out of business. So it’s not like I was like, brave and courageous and I was like, “No, put all that work to the side I’m going to do my blog now.” Nobody fucking wanted to talk to me when I started. Like I was in retail, think about what it meant to be a retail broker a month after Lehman goes down. So even like your blue chip stocks are cut in half, right? Like even the best mutual funds that you had recommended to people, they’re down 30, 40% from the peak. The only people who want to talk to you want to yell at you. And as far as like, going out and finding new clients, like that is not a thing that is happening at that moment, in American history.
Joshua Brown: People, they either want their money in cash or they know exactly where it is and they will not move it. No one’s moving money to anyone else. So it was just this six month window in time, from let’s say the fall of ’08 through the summer of ’09, where the market is erased 20 years worth of gains, or 15 years worth of gains. I have nothing else going on in my life, like my career is, that’s it. Like I have my clients, they don’t want to talk to me, and I have no investment ideas. The market looks like it’s going to zero at that time. So it was like a very advantageous window. If I tried to start a blog now, from scratch, it would never happen. I just don’t, I don’t have time. And you know, I think that that’s something that I try to like be really honest about, is that a lot of things fell into place at the right time for me to begin. I think now it’s much harder, harder to get attention for something new that you’re starting, harder to build an audience. And if you’re in a position of success right now in the industry, like, when the hell would you have the time to do that? So I was very fortunate to have started when I did and I don’t think I would be able to do what I’ve done if I were starting today.
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