Let me begin by excerpting a couple of passages from a piece penned by one of the most recognizable pundits in the mainstream financial media:
We could be in the midst of the first fear-based investment bubble in American history, with the masses buying in not out of avarice, but from a mentality of abject terror. Robots, software and automation, owned by Capital, are notching new victories over Labor at an ever accelerating rate. It’s gone parabolic in recent years — every industry, every region of the country, and all over the world. It’s thrilling to be a part of if you’re an owner of the robots, the software and the automation. If you’re a part of the capital side of that equation. If you’re on the other side, however — the losing side — it’s a horror movie in slow motion.
The only way out? Invest in your own destruction. In this context, the FANG stocks are not a gimmick or a fad, they’re a life raft. Market commentators rhetorically ask aloud what multiple should investors pay to own the technology giants. That’s the wrong question when people feel like they’re drowning.
What multiple would you pay to survive? Grab a raft.
That’s from a post called “Just Own The Damn Robots” by Josh Brown, and it got a lot of spin on Tuesday.
As far as style goes, it’s a good piece. But that shouldn’t surprise you. After all, Josh is a writer. He’s also charismatic, which brings me to a point I’ve made before. In my opinion, the genius of Josh is that he is his own brand. And stick with me here because this is more important than it seems at first blush.
There is a “Downtown Josh Brown” that now exists outside of and completely independent of the books, the CNBC cameos, and his career in wealth management. And he works hard to cultivate that brand. It’s a mix of finance, sports, and mid-nineties hip-hop culture. It, like other brands, is trusted by millions of people – nearly 900,000 on Twitter alone, if you can loosely interpret a social media “follow” as an expression of trust.
When you become a brand, you take on a special responsibility. That responsibility involves being cognizant of the difference between the brand itself and your individual actions. Failing to fully appreciate that carries considerable risk for both the future of the brand and for the consumer (in Josh’s case the “product” being consumed is information about markets).
Josh Brown the CNBC Fast Money star can make a bad call – no problem. People make bad calls all the time (for instance, I’ve been implicitly calling for a meltdown in risk assets for a year). Josh Brown the Chief Executive Officer of Ritholtz Wealth Management can make a mistake – no problem. I’d be willing to bet that Josh is, in many ways, a better CEO than three-quarters of the people who run Fortune 500 companies. Josh Brown the author can write a book that’s not as good as his last one – again, no problem. It’s hard to live up to your previous work.
But here’s the key: While Josh Brown can make mistakes, “Downtown Josh Brown” cannot. Or at least the margin for error is much thinner.
Because “Downtown Josh Brown” is a brand. It’s a stamp of approval that is more universal in nature than say, a bullish call on an individual stock delivered on CNBC. Think about it this way: Jordan missed a lot of shots. Sometimes, he even missed the buzzer-beater. And that’s fine because Michael Jordan is (kinda, sorta) human. But Jordan’s “Jumpman” brand is different. Entire teams of executives spend countless hours and conduct all manner of strategy sessions to decide where the “Jumpman” logo that represents that brand gets stamped. Making a severe mistake there could quickly turn into a complete boondoggle for consumers and indeed, for an entire company (Nike, in this case).
And if you think I’m exaggerating when I say “Downtown Josh Brown” is a brand that represents a stamp of approval, go and look at how many retweets he gets when he say, recommends a new Kendrick track.
In my opinion – and, at least based on what can be surmised from letters that are public, Howard Marks agrees with me – Josh’s explanation for what’s fueling the demand for popular tech stocks isn’t accurate. Marks’ description of how the proliferation of ETFs has supercharged the “perpetual motion machine” seems spot-on and when you throw in the bid from price insensitive investors whose motivation for buying clearly has less to do with the fear of a dystopian future run by robots and more to do with things like, in the SNB’s case, keeping a lid on franc strength, you’re left to question what, if any, merit there is to an explanation based on retail investors snapping up Amazon because they’re afraid the neighborhood grocery store they planned on opening won’t be viable.
But that’s beside the point. The point, rather, is that the following excerpt isn’t something that needs to be given the “Downtown Josh Brown” brand universal stamp of approval:
Market commentators rhetorically ask aloud what multiple should investors pay to own the technology giants. That’s the wrong question when people feel like they’re drowning.
What multiple would you pay to survive? Grab a raft.
Josh Brown the Fast Money star can say that. Josh Brown the CEO of Ritholtz Wealth Management can say that. Josh Brown the best-selling author can say that. But “Downtown Josh Brown” the brand cannot – or at least should not – endorse that “product.” Because the message that “product” sends is that investors’ very survival might just depend on being willing to pay any price for the future. But as Howard Marks reminds you, “that raises the question of whether investors in technology can really see the future.” Spoiler alert: they can’t – see the future that is.
A brand cannot survive making that kind of mistake assuming, of course, it turns out to be a mistake. A person can, but a brand cannot.
Consider, for instance, Jim Cramer. If you read “Confessions of a Street Addict,” it is abundantly clear that Jim the person has at times done some things he regrets or at least that he would have done differently. But so what? We all have.
Jim Cramer the person could have said the things Jim Cramer the brand said about Bear Stearns “being fine” and been no worse for wear within six months (and please, spare me the tortured attempts to “explain” that Jim was actually saying something about their liquidity rather than making a reassuring statement about the equity). But that’s not what happened. Jim Cramer the brand (“Mad Money” being the conduit for the Cramer brand) said those things and that brand never recovered. I (very loosely) know Jim and I like him – I really do. But anyone who tells you his brand wasn’t permanently impaired during the crisis is either lying to themselves, or else lying to you. I think Jon Stewart would attest to that.
TheReformedBroker.com represents “Downtown Josh Brown” the brand – as does @ReformedBroker. Josh is imperiling that brand by telling investors that they should buy tech stocks at any valuation and by suggesting that their very life depends on it. It’s the difference between stamping the “Jumpman” logo on a business and Michael Jordan endorsing that same business in an interview. The former carries considerable risk, the latter, much less.
Of course this is all coming from a guy who uses “Heisenberg” as a pseudonym, so who cares, right?
At the end of the day, even if Josh and I can’t agree on tech valuations, at least we both understand how big of a loss Prodigy’s untimely death was.
RE: Jordan “Kind of sorta human…” lol
–> This was really good. Thank you.