2020 Second Quarter Market Update

“In politics, stupidity is not a handicap.” Napoleon Bonaparte

We have a complex world, especially with the current tumultuous ripples of the pandemic. As we seek to make sense of the ups and downs we tend to assume a binary stance- it must be good or bad. But really it is a complicated formula with lots of different variables within the economy and of course how that relates to particular investments. We’ve gone from devastating declines to roaring rebounds – but why?

Listen for a full review of the second quarter.



Hi there.  Mike Brady with Generosity Wealth Management; a comprehensive full-service financial services firm headquartered right here in the Boulder Colorado.  Although you can tell by the background that I am still at the cabin in Wyoming.  If you’re going to be stuck inside may as well be stuck inside at 8500 feet with beautiful wilderness all around you while you’re working.  I’m recording this on June 30.  It was three months ago that I stood before you like I am right now to give a first quarter update and at that time February/March had been absolutely devastating, the biggest decline in a very long time, definitely since 2008 but also the worst kind of quarter because it was a very rapid decline very sharply and very rapid.

Who would’ve known, and this is where humility comes into it, that the very next quarter it would be roaring back and one of the best quarters in decades.  It has been remarkable.  Now what many people are trying to answer is why is that?  This is probably my 12th or 13th video so far this year and there’s a theme that’s in these videos, which is we’re many times looking for simple answers to complex problems.  I believe that it’s just sort of the way we’re wired, the way that we kind of evolutionarily, you know, it’s fight or flight that’s very simple.  You don’t sit there and say well I wonder what the intent is of that thing who is chasing me.  No, you have to make a couple of choices very quickly.  Today we have a complex world and a lot of times we’re looking for well is this good or is this bad, it’s very binary in that regard. when really it is a complicated formula with lots of different variables into the economy and of course how that relates into particular investments.

I’m going to put up on the screen a chart; that is what the unmanaged stock market index has done for the last quarter.  And then I’m going to put another chart on; you can see the context of the last six months the year to date and then the last 12 months.

It’s important to remember how our time horizon and what’s happening today are interrelated.  If we make long-term decisions based on short-term trends, short-term emotions that is a recipe for disaster.  You’ve heard this from me in other videos, you’re hearing that from me today.  So, it’s important for us to really let that sink in and ask ourselves how are we making decisions?  Are we making things because of a story that we’re telling ourselves about what’s happening maybe to justify the feeling that we’re having or are we having a long-term more logical approach to it, which I believe is the better approach.  I’m going to put up on the screen a chart.  You’ve seen this before because it is such an important chart I think that it bears repeating.

The columns on the left-hand side going back to 1950, that’s 70 years, 70 years, that first column is 100 percent stock market index, the S&P 500 unmanaged, the next one is an unmanaged bond index, and then a blend of 50 percent of these two.  You can see that they have high highs and low lows, that’s in one year looking back 70 years.  When we look at rolling five year time frames since 1950 I want to highlight the third bar there, which is there has never actually been with a 50 percent stock and bond mix a year going back 70 years where you haven’t at least broke even or may just a little bit on average per year.

The future could be different.  Absolutely.  Anyone who says that they know the future completely 100 percent is fooling you and you shouldn’t believe them.  However, for me if I’m investing long-term I think that it makes a lot of sense to be in the market and be diversified.  It is also a wonderful time for us to have sort of, you know, in a Super Bowl or in a football game you have a half time and you take a break, you go get a hotdog, a hamburger and maybe a Coke.  At the time you can reflect on the first half of the game and then talk about the second half.  This might be a wonderful opportunity to make sure some of the area, other areas of your life are together: your retirement analysis, if you’re my client I’ve done one for you.  If you feel like now is the time to talk about it again, you feel uncomfortable, you’re wondering what it might look like might need a refresher, give me a call and we can go over that.  Life insurance because the loss of a spouse or significant other can be devastating, no matter what great planning you’ve done in other areas that loss of income or that lose can be just absolutely devastating.  Loss of your ability work.   There’s many things that we can look at.  Estate planning, when’s the last time you‘ve done your estate planning?  If it was gosh I don’t remember maybe ten years, you’ve got a problem in my opinion.  You’ve got to look and keep those things updated.  Now might be a wonderful time to make sure those things are in order as well.

As we look towards the third quarter I think it’s going to be one of the most not memorable, the most important quarters in a very long time.  We’ve just had a huge shock to the system from an economic point of view.  In June we had some strong recovery numbers but the question is will that continue?  Will the third-quarter be a very sharp reversal of the slowdown that we saw in April and May?  There’s a lot of economists out there that believe that the third-quarter will be incredible.  Of course, there are many who believes it will not.  So, you’ve got to listen to both sides and make up the choice and the decision for yourself.  However, I think that what this next quarter kind of how it unfolds may be very important to how the short-term future when we’re looking out six months and 12 months unfolds.  The first quarter in my opinion was a huge overreaction, a huge oversold, very emotional to something that was unknown.  It was that fog of war that they talk about.  I think in April and May there was a realization that that might have happened, maybe things weren’t as we’re looking to the future not quite as bad as what it might have seemed like and February and March.  But the real test I think is going to be this next quarter so I’m going to be standing in front of the camera here talking with you again three months from now and, of course, I’ll have videos along the way as well whenever something important happens or I’m just giving some words of advice that I want to share with you.  This is what you should expect from your financial advisor if we’re on the same team.  I’ve used the analogy of a fitness coach, I’m your financial coach, it’s the same type of thing you’ve got to have good communication.  But I’m going to be here three months from now we’re going to see what this next quarter looks like.  I hope that it’s good because I think that that will be really important for the long-term.  But that being said, I think that long-term diversification, having the right time horizon with the right investments for that time horizon is very, very important, probably the most important thing.  Michael Brady, Generosity Wealth Management; 303-747-6455.  You have a wonderful day, wonderful weekend and, of course, let’s all hope for a wonderful quarter.  Bye-bye now.

Updates & Principles

“A cynic is not merely one who reads bitter lessons from the past; he is one who is prematurely disappointed in the future.”-Sydney Harris

My mission is to live a generous rewarding and enriched life and to help others do the same.  I apply this to so many areas of my life: personal, business and philanthropic. Today I want to focus a little bit more on the financial aspects of this mission and the principles I use to guide my own investments and those of my clients. Even in times of uncertainty, my philosophies remain steadfast.

Watch for more on recent events and how strong principles can help you weather any storm.



Hi there. Mike Brady with Generosity Wealth Management, a comprehensive full-service financial services firm headquartered right here in Boulder Colorado. Although you can see from my backdrop I am actually up at my cabin in Dubois Wyoming where I spend every summer, I continue to work here, I have wonderful views, as a matter of fact I was going to record this video outside of our rustic cabin but it was too sunny and I kept squinting. So, I’m going to put up on the screen a couple of photos that I’ve taken this morning so you can get an idea of what I look at when I’m looking outside of the windows of my office up here. It’s wonderful. I hope that you also have an opportunity to get away. Frankly, I was stay at home anyway in Boulder so we may as well do the stay at home here with quick jonts down to Boulder as needed.

Generosity Wealth Management Dubois Wyoming Retreat

Today I want to talk about, of course, the current situation and put that, of course, into context, but I also want to talk about some key principles. Because one of the books that I have really liked over the years was the Millionaire Next Door. And what he talked about in that book is there are certain key, how can I say, attitudes and behaviors of millionaires that we can all learn from. And I’m going to take that and I’m going to take it also kind of on the flipside of some key things that I’ve seen that we should avoid so I’m going to talk about some key principles. I sound like a broken record many times, particularly if you listen to my videos a lot because these key principles sneak into every single one of my videos it feels like because they are foundational and a basis for long-term, in my opinion, getting to where you want to be with your financial goals.

Now, so far this year we’ve had an unbelievably good couple of months. I’m recording this on Thursday I think it’s the 11th or the 12th, I think that’s the 11th, and nobody saw this happening so quickly two months ago. And one of the key principles that I have is humility. It’s amazing to me that when people talk about the future or they hear someone talking about the future they talk with such confidence that they almost believe that it’s going to happen and then when it doesn’t they somehow forget and then the next person around gives them such confidence about what is the future and that’s not very helpful so I’m going to come back to this key principle.

Up on the screen I have shown over the last 25 years the ups and downs in the S&P 500, which is an unmanaged Stock market index.

Now, while we have gone through a couple of really difficult times like 2008 and of this year, which was very sharp, very painful in a very short amount of time, I would argue that someone who has been around for 30 years doing this professionally working with clients, et cetera, is 2000, 2001 and 2002 were some of the most difficult years, not because they were the lowest but because it was one year followed by another by another. Duration and losing the faith after a while is what really dooms many people in my experience. Those people who lost the faith and then went in to go into money market or CDs around 2002/2003 did not see the nice upswings that happen over the next ten or 15 years. Up on the screen you’re going to see an arrow next to where we are now.

I think nobody foresaw the sharp upswing in the stock market over the last two, two and a half months or so. I’m recording this on Thursday and so yes today is a down day, yes it’s going to get lots of good news coverage and very newsworthy. There’s an old adage that the stock market takes the stairs up and the elevator down and that just means that it’s kind of 200, 300 points et cetera, et cetera, and then it gives it up very quickly. One of my key principles, which I’m going to get to in a minute, is being overly optimistic or being overly pessimistic. If only you look at the negatives you’re doing yourself a disservice and I think that you’re going to be unhappy along this path.

Let’s go to another chart.

This is a chart that shows since the last major financial crisis in 2008. And there were ten major pullbacks along that, ten major pull backs of which the worst one was this last March. It is important for us to remember that it is a long-term strategy, you don’t take short-term events and extrapolate them into long-term decisions if your goals are long-term. Now, one thing that people periodically say to me is hey I’m 70 years old, maybe I’m 75 years old I’m always looking short-term. I remember my grandmother she was in her 80s and she was very feisty and she says Mike, I’m not buying green bananas, which I always thought was very funny and I still do. You still have a long time horizon I would argue because you don’t want to outlive your money and unless you know you’re going to die in the next six to 12 months let’s all hope that you’re living five, ten, 20 plus years even if you are of course retired and living off your money. Most people that I meet with don’t want to outlive their money and they want to pass on the most that they can to the charities they care about or their heirs. And so, we can still invest for a multiple year time horizon therefore we should not allow our emotions to be controlled on a daily, weekly or even a monthly basis so it just is not helpful to you and it’s going to make you very unhappy.

On the screen though I am showing where we are right now.

Nobody saw two/three months ago what we have now and so now I’m going to start pivoting over to some key principles, which is the first one of humility. Anyone who talks absolutely about the future is crazy or a fool and I don’t want you to be that person if you’re listening to them. We can say hey I think this is what’s gonna happen, I want to increase my probability of the desired outcome that I have in the future so I do everything I can in order to situate in a certain way, but there’s no guarantees absolutely about the future in any aspect of our lives and finances are no different. So, humility is the first one. The second is having to understand everything. I don’t know about you but every day there’s always a reason why the market goes up or down and it vasawaits [ph] every day, the market is up it’s renewed optimism, the next day its down it’s real new pessimism about deaths, I mean all in 24 hours? That’s crazy. The mind is very logical and patternmaking and we look up at the clouds when we’re on a wonderful pasture and we see patterns. Our mind put together that that cloud is absolutely a sheep or a car or whatever it might be when of course our logical brains tell us that’s not the case. And so, many times our brain also starts to control the emotions and things that are going up we believe will always go up or things that are going down will always go down even if we look at the history of the unmanaged stock market indexes, unmanaged bond indexes that are diversified and that’s never always been the case. As a matter of fact, I’m going to put a chart up there, you’ve seen this before from me; a 50-50, and I’m circling it right now, a 50-50 stock and bond going back to 1950 has a 100 percent break even over five years. Yes a loss in one year, yes a loss in two or three years, but over five years a 50 percent of the S&P 500 and 50 percent of a bond index, which you should always be diversified and it was probably a bumpy ride along the way, is a 100 percent breakeven, although the future could be different. I have that humility as well that no one knows the future, but you know what, that’s something that I’m very interested in and when you find yourself being overly fearful or overly pessimistic it’s good to remember that and that’s why we have diversified portfolios.

The third thing is what is your conviction? That is a key principle. Are you invested for the long-term or the short-term? And it’s okay to be invested for the short-term, you just got to know which one it is. And if you are invested for the long-term, and in my mind I think of long-term of being two, three, five, ten years. If you are invested for the long-term then you’ve got to believe that the market is going to be higher over that long-term timeframe or otherwise why do you have any investments? I mean that makes no sense. Why would you invest in something if you truly believe that in a longer timeframe it’s going to be negative, you should just put that in your mattress or a safe or something some safety deposit box. So, what is your convection and stick to it; very important. Number four is being overly optimistic overly pessimistic. Bull markets many times turn into bubbles and add are people who are being overly optimistic. On the flipside there are overly pessimistic individuals as well and you take three steps forward two steps back, all they talk about are the two steps back. That’s not the full picture, that’s not the context and if we’re going to use logic and we’re going to use some rational thinking in approaching the problems that you have then you’ve got to be aware of the two, find something in between. That’s why I try to not be overly emotional in these videos. Every once in a while someone will come to me and say gosh this big event just happened one way or the other and you were so even keeled. And the answer is well yeah. One, I’ve seen pretty much, it feels like I’ve seen everything of the last 30 years so it’s hard to surprise me anymore. But even then I’m approaching things from a rational point of view in order to get to that end result. I see variables in an equation and I am focused on what is the solution that we want and I have yet to find that being emotional about it helps me with any of those variables and getting to the solution.

And then kind of the last thing is overly complicated and looking for quick and easy solutions. What do I mean by that? Have you ever found someone who wants to lose weight or get in shape and they have this really complicated system, they’re going from one diet to the next diet to the third diet and they just won’t stick with it or they’re looking for some get thin quick scheme, whether it’s this pill or that liposuction or something that’s ThighMaster whatever it might be they over complicate it, burn more calories than what you take in. Exercise X number of minutes, you know, 45 minutes every day or three times a week, do something that works for you but also don’t over complicate it. I had a situation where someone was referred to me, and by the way you should always refer people to me even if we’re not right for each other long-term, that’s for us to determine, but I always try to give them complementary advice and point them in the right direction. And this was actually someone who had been referred to me a long time ago and it’s very painful because they just can’t seem to make good decisions. Like the millionaire next-door they’re the opposite. There is something that this person brings that is really holding them back and I try to point that out to them. I’m sure that we all know someone who has just been unlucky in love and maybe they’re your best friend from when you were five years old and you look back at their life and like yeah he or she always seems to pick the wrong guy or gal and they just can’t quite, you know, there’s a behavior, there’s an attitude that they bring that’s obvious to you that might not be obvious to them. And what I find is many times people who are later on in life, they have certain habits or attitudes that are holding them back and so one of the purposes of my videos here is to talk about what is that bias? What is that attitude and behavior that might be holding us back and how does that apply in a logical format? Being emotional, having biases, all that absolutely common to being a human being and I would want it no other way, but it doesn’t mean it’s got to rule our lives and not everyone can do that.

There’s not necessarily easy answers, I mean there are different types of people. Some people have a wonderful experience at the grocery store, they get up, they pay for their food, they get in line and then they leave and they say wow that was really fun. Other people go and get their groceries and they’re obsessing of which line to get into, they’re swapping lines, they’re going from this one to that one to this one. I have to tell you I watch people sometimes at the TSA getting through the conveyor belt deal and some people are swapping from line to line to try to find the absolute best and others are just totally chill just waiting their turn and going right through. Everybody gets to the plane at the same time. I mean at the end of the day one person had a good experience, one person had a stressful experience. They might have gotten to the same spot two different experiences.

Generosity Wealth Management Principles

That’s it. That’s all I’ve got for today. I’m going to have another video coming out to you by the end of the month all ready for July 1 the end of the quarter. Between now and the end of the quarter if something huge happens of course I’ll get one out even quicker to you. Volatility has not gone away even if it’s gone to bed for a little while, let’s keep our eye on the big picture. Just because it’s giving up some in one day or maybe two days or a week I don’t know what it’s going to do at this point, it’s a good thing that I don’t need the money tomorrow or you don’t need the money tomorrow or next week because you would have no money in the market. That’s why we have to keep in mind the context of what we’re doing. Michael Brady, 303-747-6455. Have a wonderful, wonderful day. See you. Bye-bye.

Math and Humility

“There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self.” – Ernest Hemingway

The market took a deep dive as the Coronavirus pandemic broke loose, but contrary to what many pundits believe would happen, the market is rebounding quite well so far. We have regained a significant amount of what was given up at that time. Let’s take a look at the math, it’s important to know how it works. And we’ll also talk humility – the future; it is inherently unknowable.


Hi there. Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

It’s about five or six weeks into our stay at home order. Hopefully you’re doing well. I like short hair and my hair is feeling long to me, but other than that I’m doing well and I certainly hope that you’re doing well as well. I am going to make this a relatively short video I just want to talk about where things are currently, what’s kind of happened in the last couple weeks since I last spoke with you. A little bit of humility speaking about the importance of humility and then we’ll kind of wrap things up for today.

So, up on the screen is a chart as of today and what you’re going to see is in the last month, you know, four/five weeks ago we were at our lowest for the year and at that time there were lots of pundits who were saying that the market is going to continue to go down and down and down and, of course, they were wrong. We’ve regained very quickly a significant amount of what was given up at that time. I think I mentioned if you go back to my video at the end of March and the beginning of April I talked about that when things are the most uncomfortable is when some of the most successful investors invest; Warren Buffett says to be greedy when others are fearful. And at the end of March was a very fearful time and really, at least so far from what we’re seeing in that on my stock market index, a great time for you to have bought in.

DJIA April 20, 2020

From a math point of view it is important to know kind of how the math works. If you have $100 and you lose 50 percent, that’s $50 left. In order to get back to you even you have to make 100 percent, $50 on the $50, just to break even. If you lose 20 percent, in order to break even to go back up you have to make a 25 percent. This is important because we went down almost 40 percent. It’s going to take quite a number of percentages if you’re just adding the percentages per day in order to break even. We are definitely on the right track. The momentum is there. There’s been an awful lot of reasons given in the last month for the market to recover how nicely how it has done. None of them are exactly right and none of them are exactly wrong so this really leads into my conversation around humility.

I watch the news all day long, I mean on the screen, I don’t watch it on a TV I watch it and I read it. And the headlines and the reasons I see them change all day long every single day and because of that I’m cynical that anyone has exactly the answer. If we went back I could sit here and show you day by day how the market is up because of renewed optimism and then the next day the market might go down a little bit and it’s like renewed pessimism. I mean really all in the same day? Within a day or two? That’s ridiculous. I think that it is more important to stick to the plan, have that long-term and get out of the way than it is to have an exact reason or an exact answer for why something went one way or the other. When you’re investing for a week or a month or even a quarter you’ve got to be right. You’ve got to call that thing correctly. When you’re investing for multiple years, five years, ten years, 20 you don’t have to be quite as accurate in the short-term. Of course it’s better to have good luck and get it at the bottom and the low and that adds to it, don’t get me wrong. But it’s important to be invested in it as well, particularly when you look back from two, three, five, 20 years from now.

So, having humility is very important. If I was to say exactly what the weather is going to be like next week you would say “Mike you might have a good idea but you’re crazy.” Why? Because I’ve seen weathermen be wrong so many times before. Well, I’m just telling you that people who tell you exactly what’s going to happen are also like the weathermen who profess to know with great confidence exactly what the future holds. I’m just saying I don’t buy into that and hopefully you never hear that from me as well. I always hedge my language by saying this is what I believe, here’s what I think and that kind, but it’s about the future; it is inherently unknowable.

Mike Brady, Generosity Wealth Management, www.Generositywealth.com. Have any questions any concerns give me a call.

I will send another video out in a week or two or if something really big happens. Always stay tuned because if something momentous happens I want to be there in order to explain it and kind of get through all of the noise of the TV and all that chaos to say this is what it really means and this is why it may or may not be important. Thank you. You have a wonderful day. Bye bye.

Healthy Body, Healthy Portfolio

He who has health has hope; and he who has hope has everything. – Arabian Proverb

Just like you need to be healthy in your body, you have to be healthy in your portfolio. How are these analogous you ask? Well, simple. In both you have to be proactive, not reactive. For your health you eat properly, stay hydrated and get plenty of exercise (or so we hope!), the same goes for your portfolio. You plan and diversify to ensure that, should one day an event cause a bit of “sickness,” both you and your portfolio, will have the strength and fortitude to regain health quickly.

Watch for more of this month’s discussion in finding some strength and peace of mind in uncertainty.


Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

So, my face is very red and you might notice that.  It looks all splotchy, but I am completely healthy.  I’m 51 years old, very fair skinned and I have a lot of accumulated years of skin damage.  Every six months my doctor uses that liquid nitrogen and zaps out those precancerous cells.  When I went there two or three months ago he said “Mike, I’m going to have to dunk your whole head in a liquid nitrogen or we can do twice a day Fluorouracil ointment on your face. It is basically a chemical that will cause your face to get red and it will peel off, but then new healthy skin will emerge.”  So believe it or not it’s been a week since I stopped taking it and now I’m in the healing phase.  Hopefully I’ll be looking even younger when my face completely heals.  But I just wanted to let you know I’m using my productive time of isolation at home to the best that I can.  Those of you who are reading this now I’ve given you a reason to watch at least the first minute of the video.

It’s been a couple of weeks since we’ve spoken and since I’ve given a video but I want to give a little update of what’s been going on. Then I want to equate your portfolio investments to reaching your financial goals to your body and to being healthy because I think that’s a good analogy and a good way to think about things.

I’m going to put a chart up on the screen and this is a multiple year, multiple decade chart.  What you can see is from where we were on the S&P 500 which is an unmanaged stock market index to where we are now is dramatic.  The last two to three weeks have been a nice rebound from the lows that we tested two or three weeks ago.  This is great.  Remember, go back and watch my videos.  This is my eleventh video since February 1 and what I talk about is that the economy and the stock market are tied together but they are not necessarily lockstep.  Sometimes you can overshoot so the stock market is forward thinking.  Therefore, it can sometimes overshoot what that mark is or what it believes in the future.  You’re going to see up there that from a time point of view we’ve given up a year’s worth of gain, but it’s not like we’ve given up 12 years’ worth of gain.  Quite the opposite and that’s why it is important to have investments, at least in my particular opinion.

S&P 500 at inflection points

I’m going to put another sheet up on the screen and what you’re going to see is all the pullbacks since the financial crisis of 2008.  It’s like the old adage that every general is fighting Vietnam or every analogy to any kind of skirmish that we’re ever in is equated to Vietnam.  Well it feels like every pullback that we’ve had has been equated to the 2008 crisis which was quite dramatic and probably the biggest one in all of our lives.  But they have all recovered and you can see that, and this one is no different.

Market volatility

What I want to talk about today is the philosophy and how to have a healthy portfolio or a healthy mindset because I believe that our attitude is very important in some of the fundamentals.

Let’s talk about our body.  I had a great conversation with a doctor client of mine 6 to 12 months ago and he said something I thought was really poignant and I’m remembering it now.  He said “Mike, the body in general if you just leave it alone it’s going to be fine.  As a doctor it’s first do no harm and that’s what the doctor said.“ Now it’s Mike Brady talking and I have to tell you that I grew up with that philosophy.  My parents believed that in general you leave the body to handle most of its stuff for 90-95 percent of it.  Of course you need to see a doctor, but not every time you get a little tiny cut or a cough or a sneeze.  Well, your portfolio is very similar to your body.

Prior to getting sick you need to eat well, you need to exercise, you need to watch your weight.  There are certain fundamental things that you need to do to be a healthy human being.  You need to have multiple types of exercise.  If you’re only doing one you might have an overtraining problem and that might lead to an issue down the road.  If you’re an active person, you eat well, you eat different types of food so that when you become sick – which you know that you will become sick.  You will get a cough or a cold or even the flu at some point and you will be well prepared for that situation.  Now, if you spend all of your time in conversation of “gosh, I wonder when I’m going to get the cold.  Gosh, I wonder when I’m going to get the flu.”  Or you situate your whole life to avoid a cough or a cold or the flu, that’s not a very exciting life and I don’t think that it’s very helpful.

It’s the same way with portfolio.  It’s important to be well diversified in advance and to have a healthy portfolio and understand that you will have a cold or a sneeze or a cough or even the flu at certain points in time.  While it might be interesting to say “gosh, I wonder when the market is going to have a correction”, I don’t believe that’s very helpful.  If you were healthy and you were doing everything that you can to have a healthy portfolio like you do everything you can to have a healthy body, it doesn’t really matter.  It’s going to happen.  That’s wasted energy–that’s wasted effort.  If you do everything  you can to avoid that portfolio correction or the market going down or to have any short-term loss, you haven’t really lived in your portfolio.  I think you’re going to hurt yourself long term. That’s in my opinion.

Of course, there are lots of hypochondriacs out there in your life and for them every cough and cold is immediately to the worst case scenario.  It’s no different with our media and with certain investors as well. Avoid that–avoid that tendency.  If I have just described to you when it comes to the portfolio that every single cough or sneeze is all of a sudden the absolute worst case and you sit there and worry yourself needlessly.  You might say to yourself “yes Mike, but this is different. Flu can sometimes kill you.  Maybe your analogy doesn’t really work.”  My answer is you’re right, it is not a perfect analogy.

I’m going to put a chart up on the screen and since 1950 a diversified portfolio, a 50 percent unmanaged stock market mix, 50 percent unmanaged bond index.  A diversified portfolio has always recovered within five years.  It could be different in the future.  Does the flu kill people?  Absolutely, it does.  I heard a statistic and you know this because of everything that we’re going through, killed 60,000, 70,000, 80,000 people in the United States last year. “Mike, isn’t that very similar to a portfolio.  We’ve got to make sure that we don’t kill ourselves.”  Yes, that’s why you have to go into it very healthy.  You can reduce that probability of that happening of dying from the flu, but you can’t eliminate it.

Time, diversification and the volatility of returns

What if I told you that at least historically a portfolio has always come back.  It has always come back.  And in order for you to die, everybody else has to have died as well.  Unlike the flu when it would be just you, if you have a diversified portfolio you might get sick and everybody around you might get sick. But in order for you to die then everybody dies and then what’s the whole purpose.  It’s the same way with a portfolio.  In order for your portfolio to go down to zero, if you’re diversified with hundreds of stocks, maybe thousands of stocks within a mutual fund or bonds or various investments, marketable securities, all of them have to go down to zero and everybody that you know, everyone around would have gone down and we are in a real Armageddon situation.

Please, I recommend that you look at my last video.  Do you arrange your entire life, your whole portfolio, around the absolutely worst case scenario of everything going down to zero in that incredibly unlikely, but possible, situation?  My answer would be absolutely not.  And, if so, I’m probably not your guy because I think that makes no reasonable sense.

Just like you need to be healthy in your body, you need to be forward thinking – you have to be healthy in your portfolio.  Some people are not.  Some people just never think about it.  They don’t care what they eat, they don’t care about exercise.  When they get sick they load their body up with lots of chemicals. They’re very reactionary.  That’s not the way I think things should be.  It’s very similar to a portfolio. They’re reactionary and they’re freaked out and they’re doing all kinds of crazy things in the midst of all their emotions.  They’re thinking with their stomach, not with their head.  Those of us who are thinking with our heads have already thought about it.  We know it’s going to happen. Great.  I don’t know how long it’s going to last just like I might not know how long my cold or my sneeze or my flu is going to last.  But I have high confidence because I’m healthy going into it that I will emerge from it and then move on with my life.  It’s no different with a portfolio.

Mike Brady, Generosity Wealth Management, 303-747-6455.  You have a great day.  Bye bye.

Risk – Eliminate or Minimize

“The dangers of life are infinite, and among them is safety.” — Goethe

Life is full of risks. Every time we get in the car, there is that slim possibility that something could happen. Same when we fly, though the odds are smaller, there is always a chance that tragedy could strike. So, do we just stay home? Well, aside from our current unique stay-at-home orders, most of us would say there are actions we can take to minimize the travel risks, thus the overall risk is low, so let’s get to where we want to go.

Then how do we take these particular lessons into our investing? I found that people don’t talk about risk very much unless there’s lots of volatility on the downside. Nobody ever minds making money quickly. It’s only losing money quickly that people seem to have a problem with, which is natural. The question is “do you not invest because you’re worried about the downside?” I would say no, you don’t. You do everything you can to try to reduce the probability of that happening and prepare yourself for it.


Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

Today I want to talk about risk – mitigation, elimination, what risk do we want to take on, et cetera.  Let me start off by saying that life is full of risks.  When I leave the house and I get into my car I assume the risk that I could be involved in a car accident and the absolute worst could happen which is I die.  Now, that probability is very small and I go through a very fruitful life taking that risk on.  I do everything I can to minimize that risk, but that’s a risk that’s greater than zero.  It’s the same thing with getting into a plane.  I have a very good life.  I go and visit family.  I go and travel the world, but I take the risk that the plane could have a problem and crash in a spectacular fashion.  I’ve decided that I’ll take that risk because it’s a very small probability.

Well, how do we take these particular lessons into our investing?  I found that people don’t talk about risk very much unless there’s lots of volatility on the downside.  Nobody ever minds making money quickly.  It’s only losing money quickly that people seem to have a problem with which is true.  I mean me too.  I’m no different.

The question is “do you not invest because you’re worried about the downside?”  I would say no, you don’t.  You do everything you can to try to reduce the probability of that happening or prepare yourself for it’s a part of it but yet is the probability much greater that the desired outcome that I want will be there for me. In my example of the car of course you put your seatbelt on and you have the airbags.  You drive at a reasonable speed.  These dramatically reduce the probability of that really horrible outcome.

I’m going to put a chart up on the screen, kind of a graph up on the screen and what you’re going to see is what we call a probability bell curve.  You can see that it looks like a bell and the vast majority of the events happen right there in the middle.  I’m going to put a red line in the middle and that is the breakeven.  Half are to the right and half are to the left.  Way out on the far right and far left are what we call tail events.  That means that not very many instances happen there on the right and the left.  When you’re listening to the news or reading the news and they talk about tail events that means that they’re very infrequent but perhaps very big events that happen.

Distribution Curve Bell Curve

I’m going to put another graph or chart up on the screen and this is going all the way back to 1926 through 2017.  What you’re going to see is on the right hand side are the number of positive years.  On the left hand side are the negative years for the unmanaged stock market index.  You’re going to see that unlike the first graph I showed where it was very evenly distributed of 50 percent to the right and 50 percent to the left, it’s actually 75 percent, about three out of four on the right which is positive.  Only one out of four is on the left.  You’ll see that the far left there’s only been a couple of years of more than 50 percent or greater which is just absolutely horrible.  The real tail event.  We didn’t even reach this particular year although it was very quick, a very bad month, a very bad quarter in the stock markets and all the investments, but it’s very infrequent that it happens.

Morningstar Direct

The question is how much energy do we put and how much money do we put towards avoiding something that is very infrequent which I’m going to put another chart up on the screen.  You’ve seen this before because I use it all the time which depending on whether or not you have stocks or bonds or equities your breakeven at least from the last big tail event was a breakeven of two to five years.

Diversification and the average investor

How much effort and energy do you put toward something that is from a long term point of view relatively short and very infrequent?  I would argue that you shouldn’t spend too much time.  There’s some people who say yes, you should.  You should always do what you can.  When I go out in my car I should go out in a tank because that is the way that I can really make sure that nothing bad happens to me and that I’m able to walk away from it.  Well, there’s some disadvantage to that of course.  Only an unreasonable person thinks that there are no disadvantages to it.  It’ll be slow, it’ll be heavy, it’ll be costly.  Lots of things, but you’re almost guaranteed that you’ll be able to walk away from it.

In this particular case we’ve had a very bad incident happen in the markets in the last month or two, and I’m going to talk about the economy in just a second.  Very infrequent, very painful, but in my opinion very recoverable.  The question is when will it be recoverable and that will be still to see.  In the last 40-50 years we’ve had four events like this so about one every ten years give or take something like this happens.  If you have a diversified portfolio it has recovered within five years.

What are the things we could do?  What’s our seatbelt?  One of them is to not invest in individual stocks.  They sometimes go down and never recover.  That absolutely happens.  So being diversified is very, very important.  Having the right time horizon is very, very important.  Even if you’re 60, 70, almost 80 hopefully your time horizon is long.  Because going from Point A to Point B, Point B is not retirement.  Point B is not outliving your money.  It just happens if you retire in between there happens to be another point in there.  That’s an event along the line from Point A to Point B.  It’s important for us to know what are the risks that we’re willing to take and what can we do to mitigate those particular risks.

I’m very concerned about the economy.  You’ve heard me and I highly recommend you look at the last two, three, four videos.  I’ve done nine I the last eight to nine weeks because it’s so very important to communicate with you.  I’m concerned with the long lasting impact to our national and our global economy and we don’t really know the impact of that even as we’re here in the first week of April.  All of the unemployment, all of the small businesses.  This is going to be impactful for a very long time.  However, as I’ve made the argument in my videos the investments and the economy are not necessarily the same.  The question is how much have we already priced in forward looking into the economy.  That’s a big question that I still think is out there.  I think we have some volatile times ahead of us, but I also think that at least from the stock market point of view, from the unmanaged indexes and things of that nature I think that we’re going to particularly over the next year or two get out of the big shock to the system that nobody really saw even two, three months ago.

My name is Mike Brady, Generosity Wealth Management, 303-747-6455.  Give me a call at any time.  I’m here at my home office as you can see.  I’m staying at home like everybody else but I’m always working.  You have a great week, a great weekend.  I’m doing this on Sunday so I’m not sure when I’m going to  get it out but nonetheless have a great day.  Bye bye.

What, Why, When

“By three methods we may learn wisdom:  First, by reflection, which noblest, Second, by imitation, which is easiest, and third by experience, which is the bitterest”  – Confucius


We’re all under strict stay-at-home restrictions now and trying to make predictions about an unpredictable situation, which is impossible. In today’s video we take a look at what we are seeing in the market and the economic factors at play; when we might see a rebound and; why we are seeing such a strong impact as a result of an unprecedented health situation.

As you watch, I want you to remember what I say in every video, please stay calm and let’s do our best to look towards the horizon and keep our eyes set on better days.



Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

As you can see from the backdrop I am under a stay at home order just like you are so I’m recording this from my home office.  This is my ninth video in the last two months because there’s been an awful lot going on. I’m recording this on Sunday, March 29, in the afternoon.  Normally I wait until the quarter is over to record the video and get the newsletter out to you but frankly, I want to be a couple of days in advance so that I have the recording and the video so that I can get it out to you right away as the quarter ends.

I want to talk today about what, why and when.  Before I do that I just want to share with you a personal anecdote about some of my current thoughts not related necessarily to the market.  I’ve only been out two times in the last week and both times have been to a restaurant.  There’s a number of restaurants that I like here in Boulder and I want them to do well.  While I have lots of food here at home I want to go out and support them so I’ve gone and picked up my food from the takeaway.  When I go in there it’s just really sad.  I go in and all the chairs are up and in both restaurants all the tables were pushed to the side.  I’m not sure if they’re doing deep cleaning or what they are, but it was just so very sad.  Boulder is completely empty.  When I see the photos of New York City and some of the other big cities – San Francisco, Los Angeles, et cetera, it just really makes me sad and it’s just a bizarre time that we’re living in.

But what it does also do is remind me of all the goodness that is in my life.  The fact that I can stay at home and have a wonderful place in the mountains of North Boulder with a wife and dog that I love and I’m safe.  I don’t have to worry about that.  Most of the people that I associate with, the fact that my clients are doing well, I know because frankly, I have a small microcosm.  To be my client you have to be either on your way to reaching your financial goals or have reached them and want to continue to maintain them.  There’s a lot of people who are not in that situation.  The restaurant workers, the servers, all the blue collars, the people with only a high school degree, those with very little college.  There’s a lot of people who are going to be hurt by this.  The small businesses.  This is just really painful and we’re not really sure how this is all going to play out going forward.

The fact that we can have a fridge full of food and a pantry is a great thing.  There’s a lot of people in much of the world who don’t have that option whether you’re in India or Africa or many other places where you have to go and get food every day.  I just can’t help but think about how blessed I am even in a situation that if I allow it, I allow it to get down and it gives me a little bit of perspective.

Let’s talk a little bit about the what has happened over the last couple of months.  I’m going to put up on the screen a chart – the percentage change of an unmanaged stock market index, the Dow Jones industrial average.  What you’re going to see is that it went significantly down since the middle of February all the way up until Monday of this past week and then it had a nice rally this past week as well.  It hit a low on Monday and then by Tuesday, Wednesday, Thursday it started to come back, but it is still over 20 percent down for the year as of Sunday, March 29.

Let me put another chart up on the screen.  This is the S&P 500 which is also an unmanaged stock market index.  You can see that I put a line to where it is right now and that it’s given up a couple of years’ worth of gain.  We worked really hard for all those gains and I’m very happy with all of the gains over the last 10 to 12 years.  We’ve given up a few of those years right there as you can see.  That’s the red line that we’ve got, that horizontal line.

S&P 500 at Inflection Points

The next chart that I’m putting up on the screen are bonds and general bond indexes, unmanaged bond indexes or treasuries and various particular categories of bonds.  They’re doing what they should do which is go positive when the stocks re going negative.  That usually is what happens.  Not always.  Many times they do the same thing if everyone is rushing toward cash.  They are positive for the year and a return that a diversified portfolio will have is dependent upon how much bond, stock – what that allocation is between the two.  If you’re very aggressive and have a high percentage in stocks or equities then, of course, you’re going to be lower now.  You were higher last year.  You’re going to be lower this year.  More volatile.  If you had lots of bonds then, of course, last year in general a diversified portfolio was probably not as high as a stock portfolio, and it’s not as down this year.  That’s really the what has happened so far this year.  And this is just talking about the stock market.  This is not talking about the economy because frankly, that is still to come.

Fixed Income Yields and Returns

Just a few days ago we had the weekly unemployment numbers and they were huge compared to 100,000 or 125,000 it was three million.  Just an absolutely unprecedented number and more is to come.  One of the things that I would say and I’m going to repeat this by the end of the video is I would argue that the stock market and the economy are even more complicated or at least as equally complicated with the number of variables and moving pieces as a pandemic, a virus and how that might move.  Think about how many experts are giving various opinions and they’re not really sure because it’s about the future and nobody knows the future.  We put a huge stock on the economy and that’s going to have some big impacts for quite some time.

Let’s talk about the why.  Well, the why is this virus and the response to it.  Let’s talk about what it wasn’t.  It wasn’t because of an oil embargo.  Quite the opposite.  Oil was at an all time low.  Not an all time low but the lowest we’ve seen in decades.  It’s not because of a tech bubble.  It’s not because of a financial crisis or real estate.  No, this happened because we flipped the switch.  We pretty much put a halt on much of the economy worldwide and this is something that we have not seen before.  The stock market is forward thinking. The stock market is saying how is this going to impact.  And sometimes we get it right and sometimes we get it wrong.  Sometimes we being the stock market and investors.  Sometimes there’s an overreaction, a belief that it might be worse than it is.  Maybe it’s priced it in already.  Time is yet to tell on this.

I want to put up on the screen the price of oil.  You’ll see I’ve circled it.  That’s what I’m talking about.  On the far right hand side is the price of oil and it’s under $25 a barrel.  The demand has completely dried up because we’re all staying at home.  I’ve never filled up my truck as little as I have this month because I’ve only put 10 or 15 miles on it in the last two weeks.  There’s also an awful lot of oil out there.  This video is not about oil, but oil is at a huge decline.

Oil Markets

The next graph that I’ve just put up there is unemployment coming into this particular situation was also at historic lows.  The top line are those without high school education and those are the ones who are going to be the hardest hit.  Not everybody could just work at home.  Not everybody is a white collar worker who can do something like that – a tech or other types of financial workers.  A lot of people have to interact with others and those are the ones who are going to be hardest hit. It’s good for us to know why, but also why not.  I mean let’s talk about before I get into the when because that’s really the big question.  Coming into this situation we were actually in a pretty good spot and we still are for many companies, particularly the large corporations.  When you look at Apple with over $200 billion in cash, when you have Amazon hiring over 100,000 new employees to meet demand.  When you look at some of the other companies – Microsoft with over $100 billion, with Alphabet which is the parent company of Google.  Much of silicon and technology and pharmaceuticals and big companies are going to come through this okay or at least they’re coming into it in a strong position unlike where things were at the last financial crisis which was 2008.

Employment and Income by Education

It’s really good to remember that there’s a lot of reasons to be optimistic because we came into this with a reasonable, many of those companies reasonably over the last ten years said we want to be ready for the next big shock.  Some companies are ready and some aren’t.  One of the things that a situation like this shows are those companies whose balance sheets are not good, and this goes from the big companies, the middle companies all the way down to the small.  What we’re going to see in my opinion in many of our communities is a lot of businesses go out of business whether that’s restaurants or service businesses, et cetera.  Those that were either highly leveraged with lots of debt or they have profit margins that were extremely low and they just couldn’t handle something like this.  So it’s important to always have a good balance sheet and to have strength when the unexpected happens.

The big question – let me pivot now to the when because isn’t that really what we’re always talking about.  If the market loses 20 percent on Monday and comes back on Tuesday, Monday night was really horrible.  But most of the time people don’t mind.  I mean people move on.  They quickly forget.  It’s really how long you are under and the longer from a stock market point of view or portfolio that you’re negative, the longer that timeframe goes, the less comfortable you become because you’re always remembering where it used to be. We call it a high water mark sort of like water in a tub.  You can see the ring and where it used to be and that’s your new base for where you believe that you should be.

One thing that the stock market does is it continually gives us daily prices, and our house we don’t get daily prices because we don’t sell our house every day or other people aren’t buying exactly the same house.  We might have an estimate but we don’t have daily pricing.  The same thing with the economy.  We do not have daily, minute, by the second pricing and so as this dribbles out over the coming months we’re going to have a better and better picture.

I remember back in 2000, 2001, 2002 all the way up to about March 2003 so it was really about March 2000 to about March 2003.  It was a three year timeframe from the last big tech bubble.  It was bad.  Didn’t like it at all.  It was uncomfortable, but it was the length of that where I saw people after a couple of years start to say to themselves wow, maybe this isn’t for me.  I mean really almost the exact time when it was the perfect time to buy, it was that length and that loss of confidence in the plan.

It’s important to remember that when you do a financial plan or some kind of a what do you need in order to meet your financial goals, it’s an average rate of return.  Let’s say it was five percent.  That doesn’t mean that every year you make five percent.  By the way I’m just making up that number.  It means that 50 percent of the years you’re above five percent and 50 percent of the years you’re below five percent.  If one year you had positive 20 (I meant to say negative 20), maybe another year you had negative 15.  It was the average of five and that’s what’s real important is to keep that in mind because you can’t just focus on the negative 15 in my particular example here.

I’m going to a chart up on the screen of some bear markets and subsequent bull runs.  You can see all the way back to 1928 some of those huge declines. And that red line up there at the top is a 20 percent market decline.  What you’ll see is not necessarily just on this chart but I’ve shown other charts that about every year we have a ten percent decline in the market.  About every four years we have a 20 percent decline in the market.  And about every ten years we have a 40 percent or more.  One thing that has been consistent is it has always come back but not always in the timeframe that we would like.  We would like it to come back the next day.  It just doesn’t quite work that way.

Bear markets and subsequent bull runs

I’m going to focus in now, I’m going to zoom in on the bottom left hand side where that circle is.  You’re going to see the last four major corrections and the last one there is the one that we’re in right now.  That number, that duration, the number of months.  Right now we’re one month into it.  See that number one.  The last one was 17 months.  Thirty months, three months in the 1987 crash.  The average was a couple of years.

Bear markets and subsequent bull runs

I’m going to put another chart up on the screen.  You’ve see this before because I keep using this chart over and over again.  If you’re not paying attention well, shame on you.  Pay attention.  If you were 100 percent in the S&P 500, the unmanaged stock market index, it took you five years give or take to break even from the last financial crisis.  It took you either two or three years depending on the allocation of 60/40 stocks or bonds or 40/60 stocks or bonds.  It has always come back not when we want it to, but sometimes it takes a little bit longer than what we would like.  It’s the when that is going to determine your happiness.  And so that’s why I have repeatedly over the last eight, and I say it here again in the number nine, the ninth video in the last two months that it’s the timeframe and the time horizon and your discipline to stay with what you spent years developing and becoming comfortable with.  Know that these things happen.  When it does happen you still stick with your plan.  The people who are going to be, in my opinion, the happiest five and ten years from now are those that look back and say it was absolutely horrible, it was a lesson I wish that I didn’t have to go through but I’m actually wiser because of it and I believe my outcome is better because of it as well.

Diversification and the average investor

I’m going to continue to do the videos throughout the month of April.  Why?  Because lots of stuff happens and I think that this is a great medium in order for you to get clear and concise information from me.  Hopefully non-emotional, non-sensational like you get on TV.  I’m going to try to be as up front and blunt with you as I can.

Mike Brady, Generosity Wealth Management, 303-747-6455.  Thank you.  Have a great day.  Bye.