1st Quarter Review – Am I Still Optimistic for 2nd Quarter?
The first quarter of this year was very forgiving of any errors. We’ve had low volatility, generally positive economic reports, and even Europe has been less in the news than previously.
Watch my video for my thoughts about the 1st quarter, and to find out if I’m still optimistic for the 2nd quarter and rest of the year.
Good morning! Mike Brady with Generosity Wealth Management and I am here in Boulder Colorado, giving you my first quarter review and my second quarter preview.
Absolutely wonderful first quarter; I’m going to throw some of the numbers up on the screen, if you can look at them, looking great. I don’t know the exact numbers because I’m actually doing this on Thursday and the quarter ends tomorrow but I wanted to get this to you as quickly as possible the first week of April. But we have incredibly low volatility right now, so unless something really big happens on Friday, I thought I was safe.
This first quarter, very forgiving of any mistakes, almost every sector was up. Very strong quarter, we have six months that are up, the last six months; October, November, December, January, February, March. If you look at my video, and I’m going to provide a link to my video the first or second week of January, where I look at 2012, I stand behind what I said at that time. Which I believed that there was going to be some volatility for 2012, and I think we still have to see that. We’ve actually had unbelievably low volatility but I also said that I was optimistic about 2012. I believe then, and I believe now, so I’m sticking to my conviction, that the cash, the strength of the corporations of the companies that are out there, and that the PE ratios are low, that the companies are actually undervalued for what…, when they decide to deploy some of that capital back into their businesses, and into research and development and to really move things forward, this will be a very good thing. And increase the valuations from where they currently are.
And so I continue to be optimistic. I mean, I’m asked every once and a while why the volatility is so low right now? I mean, let’s, you know, together just remember when there was 100 point DOW swings all the time, and frankly, all the way up to 4 and 500 point swings. We haven’t seen that this past quarter and in quite some time. It’s my belief that the investors are out there, both professional and you know, kind of household investors, are not really having one conviction, one way or the other that this is a market that they absolutely have to participate in- and so strong on the “buy” side; or those that they absolutely don’t want to be a part of. I think it is somewhat of a low volume, listless market at this particular point.
Now that being said, as we look at the VIX, which is the volatility index, currently, kind of the spot price is very, very low- which is what we’ve seen. But when we start to go out, you know, two, three, four months, there actually is more implied volatility. So the market believes that the volatility will increase in the coming months and that makes sense. We should not be lulled into thinking that just because this last quarter was very low volatility that the next quarter or even the quarter after that will be low volatility.
This is also an election year. Let’s not forget about that. November, the first week of November is, one way or the other, when I say one way or the other, whether you’re a Democrat or Republican, whichever one that you want to win, at least there’s going to be a certainty about who’s going to win, and so that uncertainty starts to go away. And that’s a good thing, I think, for the markets the last quarter of this year, November and December.
But that being said, let’s get back to the second quarter. I think that things will continue to go forward. If I’m wrong, let’s say that I’m absolutely wrong, and the second quarter is negative, that’s one of the reasons we go back to our foundation, some of our basic investing 101, which is to remain diversified. I do believe that each client needs to look for themselves, and I work with my clients to determine, what’s the appropriate allocation of both stock and bonds? Because what I have found is that the thing that I love the most, many times I’m wrong on, the thing that I hate the most, sometimes I’m wrong as well. I remember a quote from Peter Lynch, who made Fidelity Magellan in the 80s extremely famous. He said, “you know I love all my stocks that I buy. That’s why I hold them, is that I like my stocks, I think they’re going to do well. But invariably, on 20% of them, I’m wrong. That’s just the way it is and I just have to learn to live with it.” And so, that’s one of the reasons why we diversify, is while I am optimistic, while you might ask yourself what’s my conviction? Do I believe the United States is the place that I need to invest in, both our companies and kind of stop listening to all the “perma-bears”; you know, people who for the last three years, as the market has basically just done extremely well, are always the naysayers. I mean there’s always something to be negative, if you’re looking for negative. But that’s why you remain diversified. I have my clients that way, I’d be happy to help you out if you’re not one of my clients.
So, anyway, that’s my video this week. I continue to be very pleased with the first quarter. I continue to be optimistic as the year unfolds. And there will be some volatility going forward, probably increased volatility, but you know what, hopefully we’re well prepared for that and I’ve … you know, we’re ready. When it happens we’ve already planned for it. And we’re thinking about it.
So that’s my video, and on a personal note, I usually go to Africa sometime during the year, usually in April. This year I am not going. I’m very pleased that my business is frankly hit a point where it’s really growing. I’m working with my clients, just absolutely having a great time doing that. So many of you have referred people to me and I’m working with them as well. I do some great stuff with two wonderful organizations in Uganda and Rwanda; BeadforLife in Uganda, and Peacemaker Institute doing some assistance with Genocide reconciliation in Rwanda that’s really kind of a humanitarian thing. I’m absolutely moved by the impact that we’re having there but also with BeadforLife in Uganda. It’s an income generation, kind of a women’s empowerment project there in East Africa. And I usually go there as I’m on the board of both those organizations. Perhaps I’ll be able to go later this year but for right now I am here in Boulder, working with my clients and of course, watching things very closely.
Give me a call, 303-747-6455, Mike Brady, Generosity Wealth Management. And I have a couple of disclosures here coming so of course stay tuned for those but you have a wonderful week and let’s all have a great quarter. Thanks! Bye, bye.
In case you’re curious about my video at the beginning of the year, here it is.