5% 30 Year Mortgages

5% 30 Year Mortgages

According to Lou Barnes, a local mortgage broker who is frequently quo9-5-13 mortgage graphted in the national press, when the 10 year treasury yield hits about 3.33%, we’ll be back to 5% 30 year mortgages.

Right now, the 10 year treasury is around 2.775%, up about 1.1% in just a few months.  However, it has stabilized.

The big question those in the investing world are asking is whether the yield will continue up, or go back down.

If you watch my video, you’ll see that I believe the yield will go back down.

But, as Lou points out, the correlation between the 10 year yield and 30 year mortgages is very clear.

Click for the full article.

The Quarter in Review and Unintended Consequences

The Quarter in Review and Unintended Consequences

The first quarter was a strong quarter, particularly for the unmanaged US stock market indexes.

But what is going on in Europe? What might the unintended consequences be of the Cypriot banking issues?

I talk about all of this in my video, so I highly encourage you to take a few minutes and listen to my thoughts.


 Graphs referenced in the video: Full Graphs


Good morning. Mike Brady with Generosity Wealth Management, a comprehensive full service wealth management firm here in Boulder, Colorado, and I am so pleased to talk with you this morning because we’re going to talk a little bit about the first quarter of 2013. We’re going to talk about the rest of the year. We’re also going to talk about unintended consequences, and I’ll talk about what I mean by unintended consequences in just a little bit.

 First quarter of 2013, very good quarter, particularly if you’re 100% invested in the S&P 500 (which you probably shouldn’t be), and very disappointing for you if you’re 100% invested in wheat futures (which you probably shouldn’t be). Realistically you hopefully have a well diversified portfolio of stocks and bonds and cash in US and international, something that fits well with you with your risk tolerance level. If you’re my client, of course I’ve talked with you about that. If you’re not my client, well gosh darnit, you should call me so I can work with you on that.

 I’m going to put up on the chart there something that might be a little difficult so I’m going to put a link to it so you can grab the high definition JPEG of it, but you’re going to see across the gamut there, from on the left you’re going to see the S&P 500 all the way to the wheat futures there on the right, all kinds of ranges from – from very good double digits in the positive to for the unmanaged stock impact indexes to double digit negatives for those – those evil wheat futures.

 I’m always reminded that like predicting the weather, predicting the economy and predicting the markets, et cetera, is a very complicated proposal. No one is absolutely right, and there’s many different variables that go into it. The older I get, the more humble I become, and at the beginning of the year I said that I thought that this was going to be an up and down couple of years, that it’s going to be a trading range, and I was asked by a client last week if I was surprised by the first quarter strength and the answer is I was surprised but one quarter does not a year make. One quarter does not a two-year time frame make, and I hold to that.

 I think that going forward there are so many pieces of data that are negative, there are so many pieces of data that are positive, and that’s normal. When someone says to you, if you see some kind of a TV pundit or an analyst that, well, all these, we have conflicting data. Well, there’s always conflicting data. There’s never 100% way or the other. We have to become comfortable with that type of chaos, and we I think have to take all the data in and say, okay, what does it really mean? And for me it means that it’s going to continue to be that muddle through.

 One thing that does concern me from an economy point of view is it feels like a very sluggish economy. The participation rate from an employee point of view, I’m going to throw a chart up there, continues to discourage employees. That being said, I don’t take the complete pessimist view, because we knew this going back that there’s going to be so many baby boomers exiting the work force, so we knew this. Remember that book back in the early 2000s, The Roaring 2000s by Harry Dent, he talked about how around this time frame there are going to be a lot of people exiting the work force and starting to withdraw money from the market. That being said, I think that if you talk with some of your friends and family members, you probably know people who have tried to get a full time job that have decided to go back to school or decided to take something that is less than full employment or what they’re looking for, so it’s a combination of those two, and at various points in time we have a major shift change, and I think that we’re going through that right now and have been for the last two, three, four years, of what does it really mean to be fully employed? What skill levels are we as a society needing in some of those high tech and creative positions? And so that’s what we’re seeing right now. It’s always painful when we go through it, but I’m ultimately an optimist on the US and how we solve things and our ability to weather many things.

 Now, I want to talk about unintended consequences. The unintended consequence from August of 2011, remember what we were talking at that point about the down grade of the US from triple A down to double A, and everyone said oh, my gosh, no one’s going to want our treasuries. Well, the exact opposite happened and people basically looked at, investors looked at all of their options and said, you know, this can have a huge impact on some of these other asset classes. I actually want the treasuries which look the best horse in the glue factory, and so that’s exactly what happened. There was a huge rally in the treasuries. I think about, and this is a slight tangent, but I think about Kenya about four or five years ago. I think many of you know that I go to East Africa for two to three weeks a year and do some charity work there, and in Kenya they had a riot after one of the elections and it cut off the whole, you know, Rwanda and Uganda from the ability to get fuel and to get other goods and services because they were coming through Kenya. Well, what was the unintended consequence of that? Now there’s a huge pipeline and rail that’s going through Tanzania that completely bypassed – they’re going to completely bypass and have as a secondary something that’s not Kenyan. That’s really going to long term hurt Kenya, who had a monopoly on getting goods and services in there.

The reason why I bring that up is let’s look at what happened with Cyprus and the European monetary union. Essentially the Cyprus banks decided to treat their depositors as investors in the bank, saying, well we’ve lost all this other money, we can’t – we’re having real difficulty, and the European monetary – European Union is basically saying well, you got us tickets to those uninsured depositors. Now, if you were a depositor of a large amount, you think that’s not going to cause some concern down the road? I mean, I think this is probably the end of the Cyprus banks there, and it also had an unintended consequence of everyone else who is looking at the investing, not investing but depositing banks and European banks is that the European Union said, you know what? This country, the next time Italy comes around, the next time Portugal or Spain comes around, or Ireland, you know, you’re on your own. It’s up to the country. We’re not unified as a European monetary union, unlike what we have here in the United States.

 So I think that the unintended consequence of that is a further segregation of the banking system and financial system in Europe that’s just going to speed along what we’ve been talking about for two to three years. Whether all that money that was part there now comes towards the US banks is still to be seen. That being said, I actually think the US financial system is still sick, I mean there seemed to be no consequences for bad action and bad investments even here in the United States, and this is something that we’re going to have to pay at some point as a society and as tax payers, and I don’t know when that’s going to be, whether it’s one quarter, two quarters, two years, or within ten years, but that is something that is going to have to be addressed at some point.

 What does this mean for 2013/2014? I continue to believe in the trading range and that we need to be prepared for some up and down movement in the next year and a half, year to year and a half to two years. If you’re my client, of course I’ve talked with you about it. I met with pretty much all the clients in the first quarter and I tried to recommend managers and third party managers that I believe do well in that type of market.

 I’m going to put up there on the chart a long term 110-year, 113-year view of the market, and the longer the time horizon that you have as an investor, the happier you’re going to be. If you’re a minute by minute, if you’re an hour, a day, a week, a month, those are hugely short times frames, and what we want to do is have investments that do well on the yearly, the two, the five, and the ten-year time horizon, and if we can have decade time horizon, you’re going to be a very happy, happy camper.

Before I end here, I’m going to throw a couple more charts up to show you what Europe looked like in the first quarter. You’re going to see that Europe was definitely trailing the S&P 500. You’re going to see that the financials trailed all the European stock market indexes, the unmanaged stock market indexes even more, and going forward I think that we need to be prepared for some volatility. We have to remain diversified, and we have to remain consistent with the risk level that we need for the plan that you hopefully have in place. The reason why I say the plan that you hopefully have in place is you’ve got to know where you’re going, you’ve got to have that nice retirement analysis and plan, and what risk level do you need? Because if you only need 2 to 3% a year and you’re taking risks that can get you 10 or 12% in a good year but also lose it in another, why are you taking all of that risk? And so I think that that’s something that you need to keep in mind.

I’m going to wrap up now, because it feels like I’ve been talking for awhile. I’m going to be a little bit more consistent with my videos going forward because gosh darnit, this first quarter was so busy for me as I was meeting with my existing clients and meeting with new people, that I didn’t have – I felt like I was communicating one on one all the time but I wasn’t doing as good of a job with my newsletters and my videos, and I’m going to get back to that, so you’ll see an awful lot going forward.

 I am taking new clients. I would love for you to give my name out to your friends and colleagues and family members, et cetera, have them give me a call. We’ll have a conversation whether or not it makes sense for us to sit down and whether I’m the right guy to help them out. What people want, I can’t help everyone, so what they might need might not be what I do, and I’ll be very blunt about that and then very timely of course, but I’ll try to point them in the right direction.

 Mike Brady, Generosity Wealth Management, 303-747-6455. You have a wonderful week, wonderful quarter. Thanks, good-bye.



IMF to Kick Out Greece

IMF to Kick Out Greece

August 20th is a pivotal date when 3.8 billion Euros are due from Greece to the European Central Bank.

The IMF is saying that if this isn’t paid, they’ll stop loaning money to Greece.

Once the IMF is done with Greece, will the European Monetary Union be far behind?

In my opinion, Greece will exit the Euro sooner rather than later, and this is good for the long term strength of the Euro.

How will this affect our US markets? Always the big question. More stability and stronger private balance sheets makes the US a better investment I believe.

Here’s a good article for a full description.

IMF Set to Kick Out Greece



Are you tired of reading and hearing about Greece? Me too, but that doesn’t mean it’s going to stop.

The most recent Greek agreement is a joke (in my opinion) and makes a significant number of overly optimistic assumptions about the future.

As I view it, there is no way the European Monetary Union can survive in it’s current form, and definitely not with Greece in there.

Where is the money to be made for investors like us?

I continue to advise a higher allocation to the United States and avoid Greece and the whole of Europe for at least 2012.

Open Questions Surrounding the Second Greek Bailout

2011 Recap and 2012 Outlook – Year End Video

Goodbye 2011 and hello 2012! What happened and what’s my outlook for 2012? Optimistic or pessimistic?

Watch my video to find out.



Hi there, Mike Brady with Generosity Wealth Management, and today I want to talk to you about a little bit of a review on 2011, but spend most of my time talking about the current situation right now. And you know, maybe do a little bit of a, …, thinking about 2012 and what the future may hold.

2011 was a real volatile year. I mean frankly, when we look back at year upon year we can always say that it’s very volatile. I’m going to show you a graph in a minute or two that actually shows, we kind of forget about it, but many years have large declines intra-year. So 2011, (I’m going to throw this box up there); this is kind of a style box from value, blend, growth, and large, and mid, and small cap.* And by the way, I’ve got lots of disclosures at the end of this video so I highly encourage you to read those disclosures about the unmanaged stock indexes. So what you’ll see is, in general, the U.S. market was up a couple of percent to down five or six percent, but it was a wild ride the way we got there.

The first four, four and a half months of the year were up starting in May and June, we saw some weakness and then August and September were really quite brutal. Just huge, you know, hundred point swings in the DOW every other day and it was really quite painful and there was a huge focus on the downgrade of the U.S. government by S & P and a real focus on the U.S. federal debt. And, you know, 2011, one of the surprises was how well bonds did. I know I’m very surprised. And Bill Gross, who runs one of the largest funds out there, particularly bond focused funds, he admitted half way through the year, well maybe three quarters of the year, that he guessed it wrong. So, I think that how well the bonds did in 2011 is going to be the big surprise. But that’s why we remain diversified. Because my experience has shown, in twenty-one years, that the thing that you love the most sometimes you’re just darn wrong about! And so the thing that you hate the most, sometimes you’re wrong about that as well. So it’s really looking at the percentages, maybe weighting one over the other and changing that allocation throughout the year.

So you’re probably wondering about 2012. Right here in my hands I’ve got “15 Experts Predict 2012,” a little article. And we’re talking big names, Goldman Sachs, and UBS, and you know, kind of every big name that you can think of out there. And frankly, one article says that China is the best thing in the world, then the next one says China’s going to be a problem. One says that the U.S. is going to have great growth and the next one says it’s going to have poor growth. One saying bonds are good, one bad, and really the answer is always unclear, this year is no different.

I do believe we’re going to continue to have volatility, and one thing that I’m going to do is meet with clients and talk about whether or not some strategies need to be implemented to take advantage of that. But I am optimistic about 2012. I’m going to throw up a chart here; we’re going to see that the percentage of current assets that are in cash and equivalents has increased. And from a corporation point of view, that makes a lot of sense. I mean that when there’s uncertainty, you’re not sure how many widgets you’re going to be able to sell or how many services you’ll be able to provide, you want the best balance sheet that you can have. And I think the best recipients, when that cash gets converted back into research and development, gets back into the economy, I think that mid and small cap companies are going to be the ones that are kind of the first beneficiaries of that.

2012, I feel will be event driven, just like 2011 will. [sic.] We’re going to hear lots of stuff from Europe, and we’re going to hear a lot about the debt, and of course this is an election year so we’re going to hear all about, all about the election year politics. But I think we’re also going to hear about China. That’s going to come in here because it’s had a huge growth. It’s been one of the largest, kind of emerging into the developing markets, but it’s faltering. And this could be the year where it kind of teeter-totters to the bad side. So that’s something that I’m going to really watch out for.

I’m going to throw up here on the chart, that as it relates to volatility, here’s a chart that, we kind of forget about it but most years have some kind of volatility. The bottom number is entry year, kind of decline, and that does not mean that the year ended. The black number is actually what the year ended. So although there might have been a double digit decline throughout the year and everyone kind of freaks out, you know, it’s not over till it’s over. I’m here in Boulder and we got our Denver Broncos and between the fourth quarter and overtime, you know, the game’s not over till the whistle blows. And so throughout the year if we have some huge declines we have to assess at that time, “hey, wait a second, is this going to continue, or is this just one of those throughout the year declines that we still feel firm in our analysis that the market may be under-valued?”

Speaking of the market being under-valued, I don’t hold much weight with forward price to earnings ratios, but I do like, not the forward, but the actual price to earnings ratio is low right now. Particularly in comparison to like the twenty year average and what it’s historically been. So I’m kind of in the Warren Buffett camp that believes that this is a market that is under-valued; that the economy is actually getting better, it might not feel that [sic.], particularly if you’re unemployed. I mean we have an unemployment problem, and we have a housing problem. But you know, I’m kind of in that camp.

You know I could sit here and go on and on and on. But I think that I’ve gotten my feelings out to you that in general, I’m optimistic about 2012. I think that small and mid-cap are probably kind of the styles that deserve closer attention. But you’ve got to, of course, do what’s consistent with what your risk levels are, and your particular goals. And work with your financial advisor and hopefully that financial advisor is me, but if not, of course, everything I say here today is kind of general, so you can get a general feel for how I’m thinking.

That’s it for 2012.

Mike Brady, Generosity Wealth Management; I do have these videos on a weekly, sometimes every other week, depending on how busy I kind of get and if I’m able to get it out in time.

I am a full service wealth management firm, here in Boulder, although I have a number of clients in many different states. I named it Generosity Wealth Management because I truly believe that people are trying to make the world a better place and that includes making things better for themselves so that they are not a burden upon others in their own retirement. That they make things better for their family – so that they can pass money on to their family or just provide for them; whether it’s a college education; whether or not it’s just to make their life a little bit easier. But also to make their community a better place- both local and global community. And so there’s some “generosity” that each of us have inside us. And that’s many of the thoughts that went into my company name of Generosity Wealth Management.



And please, stay tuned, I will have another video and another newsletter before you know it. You have a wonderful, wonderful day- bye bye.

* Small Cap- refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokers, but generally it is a company with a market capitalization of between $300 million and $2 billion.

Mid Cap- refers to a company with a market capitalization between $2 and $10 billion, which is calculated by multiplying the number of a company’s shares outstanding by its stock price. Mid cap is an abbreviation for the term “middle capitalization”.

Large Cap- A term used by the investment community to refer to companies with a market capitalization value of more than $10 billion. Large cap is an abbreviation of the term “large market capitalization”. Market capitalization is calculated by multiplying the number of a company’s shares outstanding by its stock price per share.

Keep in mind that the dollar amounts used for the classifications “large cap”, mid cap”, or “small cap” are only approximations that change over time. Among market participants, their exact definitions can vary.

Definitions courtesy of www.investopedia.com and reflect a general rather than specific understanding of these industry terms, unless otherwise stated.