Financial Bloggers: The Conscience of Wall Street?

Many CFA charterholders blog, though it is a tiny fraction of the total pool of CFA charterholders.  Many of them contribute to Seeking Alpha.  Granted, if you look at lists of the most popular investment weblogs, few of the writers are CFA charterholders.  Why?  Well, having basic knowledge about investments and ethics does not mean that you can write about it well.  For those who can write well, there are other options, most of which are more remunerative.

  • Write internal research for a buy-side firm that no one else sees.
  • Be a sell-side analyst for those who trade with your firm.
  • Write a newsletter for paying clients.
  • Manage money, and write an entertaining quarterly/monthly missive that adds to the subjective value of having money managed by you.
  • Write for RealMoney, or some other major media newspaper/website.

The thing is, for most bloggers, it is self-expression, not remuneration, that matters.  For me, it is giving something back to the broader investing community.  The retail investor does not have many friends.

So, it was with puzzlement that I read Susan Weiner’s piece called, “Investment Strategy Blogs Slow to
Influence Financial Advisors
,” as cited by Felix Salmon.  Now, don’t get me wrong here, becoming a CFA charterholder opened a lot of doors for me.  But the CFA Institute, with its curriculum does not have a monopoly on training smart investors.  For those starting out young, getting an MBA from a well-regarded school can often be a better choice.  On the buy-side, having a CFA charter has some punch, but not so much on the sell-side.

I wrote for RealMoney for 3.5 years before starting my blog.  Writing for RealMoney taught me a lot about how to phrase things in an interesting way.  Most of the contributors there were/are very good at expressing themselves.  Most are not CFA charterholders.  Almost all journalists aren’t CFA charterholders either.  Buffett is not a CFA charterholder, though his mentor, Ben Graham, helped found the predecessor to the CFA Institute.

My surprise as a blogger has been the quality of the information/advice that I have run across in blogging.  The best are reflected in my blogroll, but there are many others that I like but don’t read regularly.  Bloggers tend to be more pointed, sometimes more sensationalistic, than the financial press, and the sell-side.  But there is a virtue to blogging that the others lack: criticism.

Look, I make mistakes.  As a blogger who prizes his reputation (and honesty generally), when I make a mistake, I try to be fast to confess it.  Blogging is more interactive than other forms of media, so the feedback cycle is faster for those who take honesty seriously.  Those that make too many mistakes, or refuse to accept criticism, get marginalized, and quickly.

Blogging has another virtue, in that bloggers are willing to take more chances in what they say.  Those who are wrong too often are disregarded… it’s a tough environment out there.  But those who are willing to hazard unvarnished opinions about tough issues will gain a following, if they are correct often enough.  Ask yourself this, in the recent credit crisis, who has been more accurate in their predictions, the mainstream media, the sell-side, or leading finance bloggers?  My money is on the bloggers.

Now, the articles cited above glorify CFA charterholders, licensure, and the mainstream media.  None of those are guarantees of good investing or writing.  Those that I interact with in the mainstream media are pretty sharp, and I think quality has increased there over the last ten years.  TheStreet.com has something to do with that, in that they have trained a bevy of young smart journalists that can write, and they understand the markets better then 95% of the population.

I place more stock in a strong liberal arts education that does not neglect business and the hard sciences.  Like Buffett and Munger, lifelong learners tend to be some of the best investors and writers.  We are strong generalists.  The CFA syllabus imparts a limited set of knowledge that is very useful, but most CFA charterholders are mediocre investors.  As Ken Fisher said to me, “The first thing you have to do is forget everything you’ve learned in the CFA training.”  He also told me to forget what I learned from his books.  What is known is not valuable.  What do I know that no one else knows?  That conversation kicked off my current investing approach, of which, 40% of it derives from the useful CFA syllabus.  (Though the advanced investing syllabus for the Society of Actuaries has a few things to commend it that the CFA syllabus does not have.)

You can get a CFA charter.  You can pass the Series 7, and become a broker.  You can become a financial journalist.  None of those guarantee that you can add value.  The best in each of those areas become known for the quality of work that they generate.  The cream rises to the top.  So, I put out this challenge to those that are skeptical about financial bloggers.  Look at the sites in my blogroll, and tell me which ones have poorly thought-out opinions that will harm readers.  I maintain that they are all useful for both experts and retail investors, and are a useful supplement to conventional investment research that doesn’t take chances, because it is not in their interest to do so.

UPDATE: NOON 8/21 – One emendation, regular reader Steve pointed out one bit of sloppiness in the above post.  Where it says “CFA(s)” it should say CFA charterholder(s), or charter.  I have adjusted the post to reflect that.

10 Comments

  • A.S. says:

    David,
    Your blog IMHO ranks in the top percentile of the many, many financial blogs I scan daily. Not because of the quality of writing only, but quality of analysis based on
    experience, discrimination and independent thinking.

    There are too many claiming to be financial writers who regurgitate what they’ve read elsewhere, esp. on the “consolidator” financial websites.

    Thanks for taking time to share your valuable insights via your blog, which surely must be taking time from other important tasks.

  • I couldn’t agree more!

  • David, congratulations on a well-argued and sincere response. The quality of your blogging speaks for itself.

  • Barry and Prieur, what a pleasant surprise. Thanks for coming by and commenting.

  • Paul in Kansas City says:

    Great blog today. I do miss your Real Money stuff though! David you are an inspiration to all of us to improve the quality of our work.

  • I don’t think the article implies “CFAs are better investors than bloggers.” Rather, it merely implies CFAs don’t use blogs to make work product. If blogs are the latest form of (conversational) media, isn’t the question: do advisors (if CFAs are a fair sample) use blogs any more/less than other public media sources (e.g., newspapers)?

    Maybe CFAs take to heart Standard V re: diligence and reasonable basis; i.e., blogs tend to be secondary on secondary sources.`

  • Mark says:

    Of course Aleph Blog is up there with the best quality sources for analysis. I hope a site upgrade isn’t out of the question though!

  • What would you be looking for in a site upgrade?

  • Mark says:

    The site has such great content … perhaps some ‘looks’ to go along with it.

  • David, I share much of your sentiment. Being a proud CFA charterholder myself, I recognize its value in what actually is a very broad body of knowledge. The ability to dissect financial statements, to understand accounting choices, and to do financial analysis are well-honed skills for most charter-holders. However, they are hardly an exclusive province for CFA charterholders.

    Getting a CFA charter is a very tough hurdle which tells the outside world that you have achieved an above average level of investment knowledge.But that, in and of itself doesn’t make you a superior investor anymore than possession of a driver’s licence prepares you for Indy.

    Interpretation of a company’s strategic direction, understanding the nature of competition, and most importantly understanding the competitive advantage period for a business are skills that evolve from experience and insight and are derived from mosaic theory.

    A liberal arts or science education provides great insights into logical thinking and writing.

    Your blog does represent in my opinion, a high quality resource that exhibits not only the acumen of the CFA Body of Knowledge but also a high caliber of interpretive thought.

    Keep up the good work!