From the February 2012 issue of Research Magazine • Subscribe!

Financial Blogosphere Must-Reads

The Internet has spawned a brave new world of market reading as important to investors as The Wall Street Journal.

As a cub broker in late 2000, Joshua Brown would begin his day by making phone calls. Fifty to 100 times per day, he would pick up the phone, dial a number and give his clients the rundown on the day’s news. Waking up in the wee morning hours, Brown would scan newspapers, magazines and Internet sites, culling 8 to 10 of the most important stories. Out of these, he would create a picture of where the market was going. What was up and what was down. What was out and what was in. What to play short and what long.

But as Brown’s roster of clients grew larger, so did his phone list. One day, he realized he didn’t have the time to call each client with his market updates. The year was 2008 and the markets were imploding. Banks were failing, decades-old wirehouses were crumbling, and everyone, according to Brown, was getting it wrong ­­­— especially the mainstream press. So he logged onto WordPress, opened an account, and started writing.

Three years later, The Reformed Broker is a financial blogoshpere favorite, the place financial advisors go to read what they wish they could say if their compliance departments didn’t muzzle them. Brown writes about everything, from the pedestrian (market performance of stocks and commodities) to the esoteric (his favorite albums of 2011). In between, Brown, who lives and works in New York, offers his opinions on politics, economics, media, and what guys talk about when they’re not talking about stocks and bonds.

“I started the blog when there were a lot of lies and the media didn’t really get what was going on,” says Brown, vice president of investments at Fusion Analytics, a New York firm that manages just under $500 million in assets. “I was trying to tell the story of the meltdown from the trenches.”

Brown says his blog is not meant to be provocative, though it oftentimes is. Rather than present the image of the financial advisor as “the besuited, bespectacled paragon of financial literacy” Brown cuts to the heart of issues, allowing carcasses to fall where they may.

“I know people at Merrill Lynch who say ‘I wish I could say that,’” says Brown, whose site averages close to 100,000 unique visitors per month, according to Quantcast. “[But] they can’t say anything. They’ve got duct tape over their mouths.”

Brown is just one of a stream of financial industry professionals who have exploded into the financial blogosphere to create a daily menu of essential reading that in many ways rivals, or even bests, mainstream media sites. These sites come in many shapes and forms. There are blogs that focus primarily on the economy, often using charts and data to paint a picture of our fiscal health. Then there are blogs, like Brown’s, that are more eclectic in nature, commenting on everything from good television to the wisdom (or lack thereof) of Ben Bernanke to capture the market zeitgeist. Lastly, there are the aggregators, those well-read and tuned-in Internet trawlers who deliver the dozen or so links that point investors to the top stories and blog posts of the day and the data that will help them anticipate the future.

No reliable statistics exist to accurately measure this corner of the blogging universe, but in interviews with advisers and media professionals, a few names clearly stood out. The Big Picture, a blog created by Barry Ritholtz, CEO and director of equity research for Fusion IQ, an independent quant research firm, may be the most visited blog in this space. As the blog’s name implies, Ritholtz tackles anything and everything. On a day in late December, The Big Picture featured entries on deleveraging, the European Union crisis, the reported end of corn ethanol subsidies, and the best portfolio tracking software. Brown’s blog is universally admired (he also writes for The Wall Street Journal) as is Dealbreaker, the chatty, witty blog authored by Bess Levin that was aptly described by Time magazine as “a mashup of Page Six and Bloomberg News.”

In the mainstream media space, Megan McArdle at The Atlantic is admired for her golden pen, Felix Salmon at Reuters is a stand out, as is The New York Times’ financial and economics blog, Dealbook. And then there are the aggregators. Tadas Viskanta’s Abnormal Returns is widely acknowledged as a deep source for links on markets, strategy, companies, finance and more, and Seeking Alpha, a smorgasbord of stock market news and analysis, appears to be a must-read for nearly everyone.

Seeking Alpha provides so much information that one could literally spend weeks reading all the content. Firstly, Seeking Alpha is the online home for hundreds of regular bloggers and thousands of occasional bloggers. SA claims a virtual staff of over 4,000 contributors, 400 of whom contribute regularly. On a recent day in late December, these contributors included a precocious university student writing about top dividend stocks for 2012 (he likes KO, PG, JNJ, PEP and CL), huge financial information companies like Zacks Investment Research advising on the best countries in which to place your investing dollars, and the blog post of David Berman, a contributor to the Market Blog, a daily financial news blog residing on the website of Canada’s national newspaper, the Globe & Mail. All this content and variety produces huge numbers: Seeking Alpha is the 365th biggest Web site in the United States, according to Quantcast, attracting close to 5 million people per month.

Mick Weinstein, SA’s former editor and chief, was present at the birth of today’s financial blogosphere. In about 2004, he said, financial blogging began to really take off. There was an “explosion” in new voices, he said, some of it “junk,” some of it “very good.” The problem, he recalls, was that it was difficult to find individual bloggers in the vast Internet universe. Seeking Alpha’s innovation was to put the best bloggers in one place.

Weinstein, who stayed at SA from 2005 to 2010, now heads media efforts at Covestor, a New York-based asset management firm that allows clients to duplicate the portfolios of proven money managers. In addition to overseeing Covestor’s blogging and article output, Weinstein also creates a daily set of links for MarketWatch containing “10 actionable ideas.” According to Weinstein, the financial blogosphere is a must-read for investors and advisors alike.

“If you work as an advisor and want to be informed about what’s going on, I think you have to be crazy not to be reading blogs in addition to The Wall Street Journal and New York Times every day,” Weinstein said.

There are the let-it-all-hangout bloggers like Brown and Bess Levin of Dealbreaker and then there are bloggers who take a more erudite tone. The blogger known as Interloper falls into the latter category. Quoting French philosopher Jacques Derrida’s theory of Deconstruction to make a point about the value of asset markets (does objective valuation of asset classes really exist?) is a good example of Interloper’s unique style. The blogger, who chooses to remain anonymous while he works out a lawsuit with a former employer, penned a widely read blog entry in mid-December that asserted “Reading Fiction Will Make You a Better Investor.” In part, it read:

Unlike historical accounts, through [fiction] it is possible to absorb the world through another perspective, an immensely valuable skill for investors looking for ideas (or trouble). A memory bank of fictional characters will also help when the market “hive mind” pushes prices in unexpected directions, answering the question “what kind of person buys here?”

The primary lesson of fiction is learning “this is how people act” when they’re scared, confident, happy, determined or demoralized. Not how I would act, or how I think they should act, but how the combination of different experiences and different patterns of cognition lead to aggregate outcomes. Empathy.

Reached through email, the Toronto-based Interloper said he started writing while working at a boutique advisory firm as an overall strategist. Like Brown, he would wake up in the wee morning hours to read widely, then put together a 1,200-word piece on the shape of the day’s market. “The process of assimilating information, then writing as fast as I could, was the training for blogging,” he said. “I also used a lot of blogs for information, and was therefore aware of how useful the medium could be.”

Though his page hits aren’t enormous — he gets about 1,200 per day — he says he finds blogging “immensely gratifying and bizarre at the same time. To have opinions you’ve been thinking about for, in some cases, decades and then to have someone read and respond to them is incredible.”

There’s no money in it, to be sure, but Interloper says he does it for the love of the process. “I’m still a neophyte relative to true business writers or essayists, but there is the thrill of improving over time. I’m never going to write as thoughtfully and well as Megan McArdle, but I’m enjoying the attempt.”

 

 

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