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Susan Tompor: 'Downtown' Josh Brown talks about bitcoin and boomers

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

"Downtown" Josh Brown, a panelist on CNBC's "Fast Money Halftime Report," isn't afraid to be blunt. Ask him to talk about what baby boomers need to do if they're edgy about what's driving the Dow Jones industrial average beyond 23,000 and he gives you quite an earful.

Brown says someone who is 65 now cannot afford to take all the risk off the table -- particularly given that some retirees can easily live until age 95.

"If you think you're going to fund a 30-year retirement with a Treasury yielding 2 percent, then you're smoking crack. Never going to make it, never going to make it," Brown said.

Like it or not, baby boomers need to learn to deal with volatility and take on more risk, he said. One cannot just turn to all-cash or bonds in his or her 60s anymore -- given low interest rates and longer lifespans.

Brown has a straight-shooting style. He's colorful and not afraid to take on the conventional wisdom. He writes a popular finance blog called The Reformed Broker, in whish he recently disclosed that "I bought my first bitcoin."

Brown has said he got into bitcoin -- a digital currency that could be an alternative to the dollar or euro or yen -- at around $2,300 in July and has been "alternately skeptical and bullish pretty much every day since."

He joked in July that people would be free to dump all of their "cryptocurrencies because this surely marks an all-time top" when he bought bitcoin. But bitcoin had climbed above $6,600 to hit a record high on Nov. 1.

Brown warns, though, that he's not setting any price targets or giving any advice on bitcoin. "I don't know anything about this 'asset class' and probably no one else really does either," he wrote in October.

Brown, CEO of Ritholtz Wealth Management, said that even though he's skeptical, he's "old enough to realize that just because I don't see a use for something, that doesn't mean I won't be proven wrong by others who do."

Brown doesn't like forecasts. He likes to give a running commentary on perceptions and events as they unfold. He says his blog is "forecast-free."

"Forecasts are nice because human beings crave certainty," Brown said. But forecasts are inherently flawed, he said, because things often don't go the same way they did in the past. And a forecast can be the enemy of an investor -- if you're always chasing the last expectation.

"You literally cannot assemble a data base of data and have it spit out the answer to what things are going to look like in a year, three years, five years. It's just not literally possible."

Remember all those forecasts that predicted gloom and doom for stocks if Donald Trump was elected president? The consensus was that Trump would be a disaster for the stock market.

Or what about the Brexit buzz in the summer of 2016? Again, the stock and bond markets were convulsing over the prospects of the United Kingdom leaving the European Union.

And don't forget that the experts said people in the U.S. wouldn't vote to leave the EU. And the polls indicated that Trump wouldn't be elected president.

But the people of Britain voted to hit the exit doors and a few months later @realDonaldTrump was even more of a must read on Twitter. Trump was elected.

The talking heads got the votes wrong and stocks went up, not down, in both cases.

"Polling is a whole separate category of nonsense," Brown said. "With polls, people are virtue signaling."

They might say what they expect the pollster wants to hear or what, maybe, they should say.

"Think about some of the stances President Trump took during the campaign," Brown said.

"There's no way people who were secretly supporting him would have been able to say in public 'Yes, I'm going to vote for him.' Anti-immigration. Anti-Chinese. Anti-Mexican. Anti-gay. Anti-women. No one was going to say 'Yeah, I'm going to vote for Trump' out loud."

Brown said the U.S. stock market benefited once the uncertainty of the presidential election was over.

"A lot of times, the fear of an event is much worse than when the actual event happens," Brown said.

He dismisses theories that the stock market is going up now on the premise that Congress will agree on a fiscal stimulus package and tax cuts.

"The evidence suggests that the stock market is rallying because there's a global economic recovery," Brown said.

"It's synchronized. For the first time since the crisis, all of the world's economies are growing at the same time."

Investors, of course, cannot expect stocks to go up indefinitely. Longer term, Brown said the outlook in 10 years or so indicates that returns for stocks could be lower than average, given that yields for 10-year Treasury bonds are less than 2.5 percent.

Investors "should curb their enthusiasm about future returns. They should be planning to put away a lot more money because it's probable, not definite, but probable that returns could be lower."

Brown said he wouldn't advise anyone to make drastic moves of any sort because they think the market could go up 20 percent or more next year for some reason -- or because they think the market is on the verge of a crash.

Don't go with your gut.

"I don't think people should be investing based on their feelings because feelings can change day to day."

About The Writer

Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.

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