It’s easy to lose perspective. To underestimate how much has changed. It helps to have someone who has been along for the ride to remind you.
In his new book Joshua Brown takes a look back at this tenure writing the groundbreaking The Reformed Broker blog.* If you are reading this you are likely already familiar with Josh’s writing, but you may have forgotten some of his insights along the way. You Weren’t Supposed to See That includes many of Josh’s best posts over time and gives him an opportunity to review and expand his thinking.
One post that sticks out is The Relentless Bid, Explained. In it Josh looks at the shift from commission-based to fee-based advice. The ongoing flood of money into target-date funds in 401(k) plans and index-centric model portfolios with advisors has changed the nature of markets and how people interact (or not) with them. Josh writes:
Whereas yesterday’s brokers were principally concerned with keeping money in motion and generating activity each month, today’s brokers – who call themselves wealth managers by the way – are principally concerned with making client retirement accounts stretch out over decades. Stocks are increasingly the answer to this puzzle. Bonds, with their fixed rate of income, by definition cannot get the job done. This means a bias toward buying equities everyday and almost never selling. It means adding to stocks sheepishly on up days and voraciously on the (rarely occurring) down ones.
As Josh notes the ‘relentless bid’ doesn’t mean we won’t see bear markets. Since the piece was written we have seen the GFC and Covid, for example. It just means more people are sidelined from doing stupid stuff with their money.
All that being said there are still a record number of ETFs launching. Many of which employ leverage, focus on a single stock, or are crypto-related. We still can get speculative manias like the Covid-era crypto boom. That’s okay. We are never going to rid itself of speculation, gambling and bad decision making.
But for a lot of people the everyday management of their portfolio is off the table. Professionals are handling that. Hopefully leaving clients more time and psychic energy to do stuff that doesn’t involved smashing the buy or sell buttons. In his book Josh writes:
Once you have tens of millions of people handing over their portfolios to advisor operating this highly rational method of investment management, you see the dips get bought faster and market volatility being dealt with more dispassionately.
In a world that seems increasingly irrational, this one area where people do seem to be making better decisions. Over the time Josh has been writing online things have gotten better, pretty much across the board, for investors. We should be grateful for that and should thank Josh for shining a light on things most people were missing or choosing to ignore for purely financial reasons.
*Josh isn’t done writing. You can find his new stuff at Downtown Josh Brown or see his weekly on The Compound.
