INVESTOR’S GUIDE • ROUNDTABLE
would keep their workers and the wheels
wouldn’t fall off. But we had a recession with-
out having a recession. And I don’t think that
we have fully mentally processed that.
And here’s the problem: We’ll have another
recession. It might be in three years, it might
be in 12 years, I don’t know. But the pressure
on policymakers will be to simply repeat what
we just did. And people will say, “Last time
you just gave everybody money. Why wouldn’t
you do it this time?” “Well, that was a pan-
demic.” “Oh, well, this time it’s an alien inva-
sion. I feel like that’s just as bad. Pull the trig-
ger.” It’s insanity, but Whirlpool just sold more
bathtubs in a recession than in an expansion.
Or look at GM’s earnings. It’s bananas. How
are we going to avoid doing this again? And
here’s the thing: Every time we do it, more
debt goes up. We’ve always been in this trap.
But now we’re really in it.
Here’s an opportunity that’s profound.
Direct indexing [buying diversified portfolios
of many individual stocks, rather than index
funds or ETFs] is going to change our industry
in massive, fundamental ways. We began
migrating ETF-only households over to direct
indexing. And I cannot tell you the degree
of client satisfaction, performance improve-
ment, tax-loss harvesting, the ability to remove
companies that aren’t highly ranked on gender
equality, to remove gun manufacturers, pull
out of oil companies that aren’t trying to im-
prove their environmental impact, etc.
All of the new wealth in the United States
is now being generated in Silicon Valley. The
new people with high net worth, they look
and feel and speak and act and think way
differently than the boomer generation. But
what they all have in common is they come
to wealth managers like me with $10 million
net worth, and $8 million of it is in Facebook
stock. And I can’t say to that person, “Let’s
buy [a Nasdaq ETF],” because all I’m doing is
upping their concentration risk in Facebook
stock. Ditto for Apple, Salesforce, Google,
Microsoft. So direct indexing is allowing us
to give them the Nasdaq minus Facebook, or
minus web advertising companies.
Every major asset manager is thinking this
way, because they know that the ETF is now a
1990s technology in the 2020s world.
FORTUNE: Thank you all for giving us so
much to think about.^
in the next generation?
It’s very hard for working parents, single
working moms, to fit into the rigid corporate
structure of having to commute in, having to
work from eight to five. So I’m very encour-
aged that people have now gotten used to the
fact that, hey, you don’t have to fit into that
rigid, traditional corporate construct. We can
work a little bit more flexibly.
SUBRAMANIAN: The S&P 500 in particular,
which we all watch as a barometer, has started
acting really weird in terms of price swings.
We’re seeing eight-standard-deviation events
happen every other day—these are supposed
to happen every hundred years. And maybe
this is because of the democratization of the
market, which is good—but it also means you
have the ability to express a bet very quickly,
and roil the market.
But there’s an opportunity there, too. For
the S&P 500, if you’re buying and selling the
market on a one-day basis, your chance of
making money is a little bit better than a coin
flip. But if you extend that time horizon to 10
years, your probability of losing money is less
than 5%. So thinking about the market from
an old-school buying-and-holding mentality,
and not trading as aggressively, might be the
biggest opportunity to make money.
BROWN: I’ll give you one very big risk. What
the Fed did this year was probably essential.
But it may have set a really bad precedent.
Normally, in a recession of the magnitude that
we’ve had, we would have already been in the
midst of a wave of corporate bankruptcies.
And in fact, there are almost no bankruptcies.
And we did that, of course, so that companies
Snowflake
(SNOW, $ 2 42)
Royal Dutch
Shell
(RDS.A, $33)
AMD
(AMD, $84)
Zoetis
(ZTS, $165)
UPS
(UPS, $ 168 )
Gap
(GPS, $ 24 )
PRICES AS OF 11/16/20
PICKS
FROM
THE
EXPERTS
2.8
AVERAGE RATE ON
A 30-YEAR FIXED MORTGAGE
for the week ended Nov. 5—
an all-time low. Some investors fear that
stock and other asset prices will slump
if interest rates eventually rise.
%
