Quarter Review / Preview – 2011 07 06

The 2nd Quarter 2011 is over and I have a slightly longer video this week because I include my preview for the 3rd quarter.

I talk about what I think of the current economic environment, bucking the trend on some of the pessimism I hear and read about so much anymore.

I send my newsletter and videos on a weekly basis, so if you watch only a few througout the year, at least watch my more comprehensive quarterly videos.

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TRANSCRIPT:

Hi! Welcome to the Generosity Wealth Management Video.

This video is the second quarter review and the third quarter review. I’m going to try to spend most of my time on the preview because no matter what we do, we can’t relive the second quarter. Hopefully we can learn from it but we can’t redo it.

The second quarter for the stock market indexes- if we were, if the quarter had ended a couple of weeks earlier then we’d be saying “oh man, what a horrible quarter!” But well, it ends on June 30th. And the last week of June was a nice pop-up in the equity markets. All of April was pretty good, going into May, and then we just hit a big slide. For about six weeks all through May and June, except for this last week in June; relatively low volume though, on the exchanges. Bonds were just kind of chugging along through the quarter until the last week and the last week was a really bad week for the bonds. I think what was happening, is with Quantitative Easing ending, a big buyer of bonds, that bond holders were like, “wait a second! I don’t want to be the greater fool, holding these bonds. The demand for these bonds is going to be less and so I’d better get rid of them now.” And so, they got out of them and moved into equities.

Now let’s talk about the third quarter for just a second. I want to tell a little bit of a story about emotionality. There were mythical creatures called Sirens. And they lived, this is a Greek story, with Ulysses and the Sirens. And the Sirens lived on these islands and they had this beautiful music, sailors would become enthralled with the music, want to go toward the Sirens with their boats, where the rocks were, they’d hit the rocks and get a big hole and the boat would sink. OK, bad stuff. But Ulysses, he really understood this, but he really wanted to hear the beautiful melodies that he’d heard so much about. So what he did is he gave wax to the sailors on the boat that he was on, and said “put this in your ears and tie me to this pole” (that was on the boat,) “and no matter what I do, don’t untie me.” So they got close to the island, Ulysses was able to hear the beautiful melodies, he went stark raving mad, but because the sailors had the wax in their ears they didn’t hear it. They sailed away and they were just fine.

Now, Ulysses’ plan saved his life and the lives of all those around him because he had a plan and his foresight and his non-emotionality about it was, is really kind of something to be admired; and kind of the lesson in the story.

So why do I say that? Right now, it is very fashionable to be “bearish;” to be down, you know, on the economy and the recession and investments and the world is going to end. I mean I’m on a significant number of blogs and things that I read, and it’s very fashionable to say “You know what? Armageddon is right around the corner!” And I was just, two – three nights ago, at you know, a social gathering and it wasn’t “is it going to happen?” but “when is it going to happen?” They are actually trying to argue and pinpoint the actual month that the 2008 crisis is going to hit again.

You know, I listen to all that data. I look at yield curves, both in the U.S. and in others countries. I look at the various data that keeps coming out. I look at the balance sheets of companies to find out what their cash balances are and what their profit abilities are.

I listen to what’s happening over in Greece. Which, if you’re not paying attention to that whole Greece debt and austerity plan, and then, kind of, the bail-out, you’re missing good stuff! I mean that is just fascinating- it is better than any Jerry Springer show you could imagine.

So I have to talk all the stuff into consideration and I have not moved from my analysis six months ago, that this will be a positive year, 2011, for the equity markets and for the bond markets. And how positive it’s going to be? I don’t know. But you know what; I am still going to have a position in the equity markets. I am still going to be modestly positive in my outlook for this year.

When I look at the yield curves of the kind of, the other countries, you know; the Brazil, and Russia and India and China, some of the not quite developing countries; but not quite the been-on –the-world –stage –for a very long time like Japan, Europe and the United States; I, they have a curve that is going from normal to flat, to inverted. They are about flat right now. And that causes me concern. That will not bode well for them so I want to be more U.S. If we are relying on an awful lot of the growth going forward on these various countries, and so if they start to go towards a recession, then that’s impact us, and, here in the United States. But that being said, I think that we’re more willing and ready and able to handle that.

Particularly, since when you look at the cash positions of corporations it’s actually quite large. When you look at the profitability of corporations right now, they’ve gotten rid of, kind of, the “fluff;” kind of the efficiency. Now when I say “fluff” please don’t call and e-mail me with bad things saying “oh, wait a second, they got rid of a lot of people, that’s not fluff!” No. They did get lean and so that’s a good thing going forward even if there might have been short term, some pain, that they might have done in their own austerity measures. And so, I am continuing to be kind of mildly bullish, when most people that I have around me that I talk to are from mild-bear to full-blown “Armageddon is right around the corner!” I’m just not in that camp.

I still feel that bio-tech is going to be the next big thing in the next ten years. I continue to think that gold is something to be considered. And so, if I’m wrong, I believe that gold will dampen that wrongness. Because at the end of the day, nobody knows the future; I certainly don’t know the future. So what I’m going to do is I’m going to try to have a wise diversification, not a naive diversification; transparency, and of course communicate and keep the expenses as low as possible; because they can, of course, can drag down any kind of a portfolio if you have too high of expenses.

Anyway, I am not making any major changes for the third quarter. I’ve had an opportunity to go through all of the statements for clients. They were actually mailed out on Saturday. So hopefully clients have gotten them already either; Tuesday, Wednesday or Thursday of this week. But I’m not making any huge, major changes.

I will continue to have my video so that you know what I’m thinking about because if the data changes, you know what, my opinion might change. I have an opinion more than just once a quarter when I do my quarterly review and preview.

Anyway that is where I am right this second. I encourage you to give me a call if you would like or an e-mail with any thoughts or refutation of my conclusions. I am, my business is growing- I’m actually very proud of that, and so if you know of somebody you feel I should speak to who would like some guidance, you know, I’d love to talk with them, 303.747.6455. My name is Mike Brady. I am the President of Generosity Wealth Management. And I have a couple of disclaimers here at the end that you should definitely stay tuned for. But in the meantime I hope you have a wonderful week, I hope you have a wonderful quarter and I’ll do another video in a week. Talk to you later, bye bye now.



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