RIA Reads: Stock selection advisers and over-indebted billionaires


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One of the well-known problems faced by advisers trying to market using social media is that it is very easy to reach the wrong audience. You might tweet jokes and memes that get widespread engagement, but that doesn’t mean you’re generating customers. You may feel like your ‘relentless marketing is paying off’, but when your ADV comes out the world learns when you actually didn’t bring any. trumps in the door.

Or, as Monument Wealth Management’s David Armstrong memorably said in an interview with Barron’s in August:

It is very easy for a financial advisor to start hanging on to your [number of] subscribers without really looking A) What is your social media strategy in terms of audience? and B) What is the net result of your efforts? Because I feel like a lot of this social media activity going on with the advisers I see has become nothing more than this self-licking ice cream cone of advisers talking to each other. . It’s great, but I don’t know if it generates business.

Armstrong may be right, insofar as he assumes that counselors are interested in counseling. But quarterbacks throw SPACs and TikTok dancers drop singles; why shouldn’t advisors find new ways to monetize their own modest slices of fame?

Ross Gerber, the little shy CEO of Santa Monica-based RIA Gerber Kawasaki, is trying to do just that. After Citywire RIA learned that it was launching an active ETF with the help of AdvisorShares, Gerber told reporter Ian Wenik:

One of the things that struck me over the past six months based on my own experiences on Twitter is the engagement I get from individual investors who want to engage with someone like me, but they don’t. not necessarily looking for financial planning services. We get a ton of leads from people who want financial planning services, that’s great. But it was like: what about all these other people?

The man has 140,000 followers, many of whom have strong opinions about him because of his public stances on Tesla stocks, Dave Portnoy and other financial news topics. But how can Gerber monetize its perceived expertise from those who are not willing to shell out more than 1% of their money? Well, by charging 0.75% for access to his stock picks (although they’re not just his own; Gerber says he will “crowdsource” and “work with different independent analysts in each of our 10 themes ”, for what it’s worth).

We have seen this before. Portnoy himself supports the ETF VanEck ‘BUZZ’, which aims to hold popular stocks on social media. It’s worth pointing out that Portnoy’s giant social media platform can help create the “bullish sentiment” this ETF is looking for, and one of the stocks Buzz owns indeed turns out to be Penn National Gaming – a stock. of which Portnoy is an important holder. through the acquisition by the casino company of Portnoy’s Barstool Sports. Talk about a self-licking ice cream cone.

And we cannot conclude without mentioning Cathie Wood. Its multi-pronged content strategy has been described as “brilliantly underhanded” by Ranjan Roy for its ability to capture the imaginations of investors, keep the ARK Innovation ETF at the forefront of investors’ minds, and “hack the bank. press ”by convincing reporters to treat statements of stock pumping as the reasoned exit of disinterested analysts.

With Wood and Portnoy leading the way, why shouldn’t Gerber have a taste? After all, it already has notoriety and notoriety – enough, by the way, for Citywire reporters and editors to spread our share of digital ink around the upcoming launch of its ETF.

Rich irony

We all know how stressful it is to live beyond our means. That is why our thoughts must go out to 50 of the richest people on the planet.

Wait what?

Bloomberg studied the leveraged positions held by wealthy investors and found:

More than 10% of the richest 500 people in the world have pledged stocks totaling $ 163 billion, according to an analysis of the Bloomberg Billionaires Index based on the latest information available. This represents nearly a fifth of their public assets …

This is of course an article on Bill Hwang, whose family office, Archegos Holdings, had leveraged positions that had to be liquidated to the tune of $ 20 billion, resulting in declines of over 40%. shares of certain companies.

As Bloomberg also noted, Hwang isn’t the only billionaire to have run aground recently; “Luckin Coffee chairman Lu Zhengyao has defaulted on $ 518 million in margin loans. “

Hwang was a hedge fund manager trained by Julian Robertson, before pleading guilty to insider trading in 2012 and converting his fund into a family office. Even after the incredibly public collapse of his fund, his supporters stressed that he “generated returns on investment eclipsing other funds, using PUBLIC EQUITIES, no outside money, no venture capital investments. /angel”.

But I guess the question is… why?

As Bloomberg noted in a separate article:

Bankers estimate that Archegos’ net capital – essentially Hwang’s wealth – had reached over $ 10 billion …It evaporated in a few days.“I’ve never seen anything like it – how quiet it was, how focused it was and how quickly it faded,” said Mike Novogratz …

Why is someone with more money than almost anyone else in the world still taking massive leveraged positions? Imagine throwing your wallet into your financial planning software and seeing if the risk – of massive losses and the global humiliation that could come with it – would be worth it.

To find your motivation, you obviously have to get out of traditional financial planning concepts. The real answer seems to have something to do with Hwang’s deeply held religious beliefs:

Hwang is a director of Fuller Theology Seminary and co-founder of the Grace and Mercy Foundation, whose mission is to serve the poor and the oppressed. The foundation had assets of around $ 500 million at the end of 2018, according to its latest file.“It’s not all about the money, you know,” he said in a rare interview with a Fuller Institute executive in 2018, in which he spoke about his vocation as an investor and his faith. Christian. “It’s for the long haul, and God certainly has a long view.”

In Protestant Work Ethics and the Spirit of Capitalism, Max Weber theorized that if you want to show the fact that you have been chosen for salvation, the best way to do it is to display worldly success.

It is in this context that I interpret Hwang’s statements:

I invest with the perspective of God, according to His timing …I try to invest according to the Word of God and by the power of the Holy Spirit …I am able to see reality from the time and perspective of God.

By this logic, we can assume that if Hwang’s investments are successful, it shows that he has a direct line with God. Which would answer our question. Because no matter how much money you have raised, how could you give up this opportunity to commune with God?

There is a risk that I will go too far. Maybe Bill Hwang just didn’t want to retire.

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