Market ups and downs are inevitable, but how we react to them makes all the difference. In this video, Mike Brady of Generosity Wealth Management explores the importance of having a plan in place before volatility strikes. From understanding emotional influences to maintaining a long-term perspective, this discussion highlights key strategies to help investors remain calm and focused.
Transcript
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive full-service financial services firm headquartered in Boulder with an office in Denver as well.
I’ve been with my wife for 31 years, and before we got married, someone suggested, “Hey, you really ought to go to marriage counseling or pre-marriage counseling.” The goal was not due to any issues we had, but rather to discuss, “How are we going to handle disagreements or miscommunication moving forward?” So we set ground rules for how we might overcome the speed bumps that are inevitable in any marriage. I’ve got to tell you, 28 years later, I’m still married and very happily married to my wife, Cassidy.
I bring that up because investing is no different. Before you invest, there’s certain things that you have to answer for yourself.
• How am I going to emotionally react?
• How am I going to push to the side the outside influences that want to excite my emotions?
• What about the duration?
• What am I going to do in bad times, because they are inevitable? As a matter of fact, the one certainty is that there will be ups and downs in the market.
So, therefore, how am I going to invest, not trade?
• How am I going to invest for the long term, knowing myself?
• How am I going to keep control of my emotions?
• How am I going to keep the duration, meaning the time horizon, with my goals so that I can have the desired outcome that I want?
You do that before something happens, any turbulent water like we’ve seen in the past few weeks.
I want to talk about that. One thing that I am always very sensitive to, and I admit it, is humility and the fact that the future is inherently unknown. One thing that you will not get from the TV or from reading any columns in the newspaper is a sense of, “Hey, I think this might happen, but I might be wrong.” You never hear that. It’s usually a very certain statement about what will happen.
What’s mildly irritating to me is that many of those pundits have not been held accountable for the previous times that they’ve been wrong. You can sit here and go through almost any pundit and say, “You were wrong here, you were wrong there, you thought this recession was going to happen, and it didn’t,” etc. They’re not always held to their conviction like those of us who actually do it for a living. That’s usually a little irritating to a guy like me.
One certain thing is that the market hates uncertainty. That’s just the nature of it. And I think that’s really what we’ve seen in the last two, three, four weeks. We’ve had some uncertainty. We’ve had some quite strong proclamations, and then maybe back down, and then said again and again and this and that. That just creates some uncertainty.
I’m not here in today’s video to say whether one is right or wrong or what the policy ought to be. Those of us here at Generosity Wealth Management care about how that impacts the portfolios that you have, and the reason you have those portfolios is to help you reach your financial goals.
So we think about that, we talk about it. We, in good times and bad times, try to create the best portfolio so that in either of those times, you’re able to go through it without too much stress.
Up on the screen, I’ve shown and I’ve circled the intra year. It is normal for every year for there to be declines from a top to a bottom within the year. And this has happened the last two, three, four years like it has for the last 45 years that you see on that screen. It is normal for there to be declines during the year.
Is this the beginning of a decline that will continue through March and April and May and June? No one knows. Anyone who says that they absolutely know that is lying to you because the future is inherently unknown.
You’ll see that three out of four years are positive even though the average decline since 1980 is over 14.1% within the year. That doesn’t mean that it ends negatively. It means that almost every year, there are declines, usually double digits. However, three out of four years are positive. I will tell you that my experience has been that three out of four is kind of a magic number. It seems like three out of four quarters are positive. Three out of four years are positive as well. So it’s both three out of four quarters, three out of four years. That’s just kind of the way it has gone, in my experience.
I want to show another chart up there–chart number 2.
Believe it or not, my experience is 34 years, so I’m actually older than this chart, which really makes me feel old. And I’ve been through this entire thing. We are right there. I’ve just circled where you are. And during that entire time from the left to the right, I’ve always heard, “Well, it’s different this time. Well, we’ve never had this before”.
I’ve heard naysaying my entire career that I’ve had for 34 years and I hear it now. I have ice for blood. That’s just the way it works, is that I’ve seen so much that those who the most successful are the people who are patient and the people who have their emotions in check. Doesn’t mean that you’re some kind of a Spock, some non- emotional being. But you can acknowledge emotions, but then not necessarily either act or let it control you.
I remember hearing something on the History channel that a soldier in a war-time setting is not someone who has no fear. If that’s the case, they might be a psychopath. It is human for you to have fear. The question of bravery is when you overcome that fear and do what needs to happen anyway.
This next chart here, three columns on the left-hand side. One year you can see 100% stock market index from 1950, it’s that green chart, the blue is the bond. It’s a huge range. If you look at each year from 1950 till last year, the big range, the best was +33, the worst was -13. When you squish them together, 50% bond index and 50% unmanaged stock index, you can see the range for one year.
But as you go from the left to the right, this is the reason why I’ve got that chart up on the screen, you’ll see that if you have a balanced portfolio of 50% unmanaged bond index and 50% stock index, there actually has never been a five-year time horizon going back 74 years where you haven’t at least broken even, made a little bit of money.
That doesn’t mean that on an annual basis, which is those first three bars we just went over, it could be volatile. My advice is if you go back to the videos that I’ve done for years, for well over a decade, you keep calm, you keep the duration in mind.
One of the most important things is your time horizon, and the more aggressive you are, each year you have more volatility. But my experience has been, and the recommendations that I have for people is that you will probably be happier over a 5, 10, and 20-year time horizon.
By the way, in that chart on the far right-hand side is the 10-year and the 20-year rolling averages. And you’ll see that remaining invested for a 5, 10, and 20-year time horizon is in your best interest. If you’re in your 60s and 70s, you might say, hey, I’m not going to live that long—I’m now retired. The answer is you got to stick with what you have that allows you to stay with your plan. Hopefully, you’ll have many 5 and 10-year time horizons left.
You know, one thing I’d like to point out on this next graph is what I just circled there at the bottom. When consumer sentiment / investor sentiment is at its lowest, you can see what happened in the summer of 2022, a very bad time. The next year, the unmanaged stock market index did +17%. How everybody feels about it, the sentiment, is not necessarily correlated to what is actually going to happen.
That’s why I talk about humility. When anyone tells me, “Well, this is obvious–this is going to happen this way.” Frankly, I discount you right off the bat. I will never talk with you that way in our interactions.
The last chart I have on the screen is the Fed and interest rates. I’ve just circled where we are right now, and this is a good thing. Interest rates coming down is a great thing for our mortgage rates, and for getting loans unstuck in the business environment. Lower rates is a good thing for fluidity in the markets.
So it is not all negative, as you might see in whatever news program–whether it’s from the left, the right, the center, — if it bleeds it leads. Not everything is negative. It is never black or white. If you feel that way, I’m just going to fundamentally disagree with you.
In my career, things have always been grey. It sometimes goes to the left and it sometimes goes right. Sorry, not politically left or right. I’m talking about life takes path A or path B, that’s just the way it works. What we have seen is in all different types of situations, including different precedents, with different styles, with different things happening in the world, that the market has over time always done better.
I don’t know the future any more than you do. But what we do is we have a plan in place beforehand, not during it, but beforehand, and then you just relax during it.
I have to tell you that some of the years that have been really difficult, like 2022 was a very difficult year. We had a lot going on then. Unmanaged bond indexes and unmanaged stock indexes– both of them down for the year double-digits. At the end of the year, some clients fretted the entire year whereas some clients were cool as cucumbers. They both ended with the same rate of return. The question is, which one do you want to do as you’re looking at how you’re interacting with your particular portfolio?
I do not recommend, those of us here at Generosity Wealth Management, do not recommend any changes just because the market has done one of its intra-year declines. It might be the beginning of a decline that might go for another quarter or two. That’s absolutely possible. But that’s why we don’t invest for one quarter, three quarters, even one year. That’s why we are invested for multiple years. If your time horizon is less than a couple of years, you should not have money in the market anyway. That’s one of the fundamental rules in investing.
Generosity Wealth Management. Annie and me Mike Brady, are always available at your service, to talk with you through this at any time.
303-747-6455. You have a wonderful day. Thank you. Bye.
Financial markets are unpredictable, but your strategy doesn’t have to be. In this post, Mike Brady discusses the importance of long-term fundamentals, managing emotions, and staying disciplined in your financial journey. Plus, we’re excited to share how Generosity Wealth Management is evolving with a refreshed mission, vision, and values—discover what it means for you!
Transcript
Hi there. I’m Mike Brady with Generosity Wealth Management, a comprehensive full-service financial services firm headquartered in Boulder but with an office in Fort Collins as well.
Today, I want to talk about a couple of things. The first one is about the fundamentals. You know, I repeat some of the same things over and over again. And I’m reminded of that Buddhist saying, “Before enlightenment, chop wood, carry water. After enlightenment, it’s chop wood, carry water.” The same things. Your perspective might change, but the fundamentals remain the same.
I bring that up because I’m recording this on a Sunday when there are some tariff discussions between the United States, Mexico, and Canada, and I have no idea how it will play out. That’s why it’s important for us to go back to what we believe, which is the importance of having a long-term time horizon, being disciplined with our emotions, being confident in our plan, and having a long-term time horizon.
You know, the one thing I’m going to guarantee going forward is that the market will go up and it will go down. But of course, we have investments because we believe that it will be two steps forward, maybe one step back. But we’re not going to have the two steps forward if we’re so worried about the one step back. That’s just the way it works. And as a matter of fact, we try to go four steps forward and one step back. Okay, so we’re really making great progress, given time with the ups and the downs.
Another guarantee is around volatility. Sometimes, there’s lots of volatility in the markets. That’s just a given. It has always happened and always will be going forward. And sometimes there’s very little. I remember in 2017, there was such a consensus amongst all the pundits that we will have lots of volatility. And frankly, 2017 was one of the least volatile years in the unmanaged stock market indexes. I will tell you, in the last couple of weeks, we haven’t had much volatility, frankly, you know, not like, 4 or 5% or so in the unmanaged stock market indexes. So let’s have a sense of humility as well.
It is normal for a year to see declines. And if that’s going to happen sometime this year, and odds are that it will, I don’t know if it’s going to happen next week. I don’t know if it will happen next month, six months, eight months from now. There usually are those steps backward. It’s going to happen. That’s why we don’t have invested in the markets, money that we need for our use or need to convert into cash for our uses. The duration, the time horizon, when you’re going to need the money is very, very important. So let’s keep that in mind. Let’s keep the fundamentals. Okay?
Before the election, before the inauguration, we chopped wood and carried water and we’re going to chop wood and carry water once again.
Second thing I’d like to talk about is I’m going to have a kind of a series over the next, I don’t know, number of videos over the next year or two. I’m just going to drop them in here and there, sharing with you the mission, vision, and values of the work that I’ve done with my firm.
My firm, of course, is your firm. You are vested in my success and the way that I deliver and interact with you. And one of my taglines is:
Where wealth aligns with purpose and possibility.
What that means is that wealth aligns with purpose. That’s the present with what we want it to do. We want to live our lives now, whether that’s give money away, whether that’s take a trip to Europe, put your kids through school, or make your monthly mortgage payments. Purpose is the purpose of your money, but also your retirement.
Or the possibility. What is possible in the future? A great retirement. What are your dreams? Your retirement, put your kids through school, perhaps pay for your children’s weddings in the future, the down payment on their house, pass on to the next generation. You get to make the dreams and the possibilities.
What I do is say this is where we are, this is where we want to go, and what’s the gap between the two? We’ve got the purpose; we got the possibility. Let’s get that wealth to align. And that’s what I wanted to talk about today.
In the newsletter, I will link this video to the full mission, vision, and values that my team and I worked on. My colleagues, my partner, and the rest of my team on the mission, vision, and values for Generosity Wealth Management. I’m very proud of it, and I want to share it with you in the coming months.
In the meantime, if you have any questions or concerns, give me a call or an email. Of course, keep your emotions in check. But if you can’t do that, give me a call because that’s what I’m here for: 303-747-6455. Thanks.
Year’s end is neither an end nor a beginning but a going on, with all the wisdom that experience can instill in us. – Hal Borland
As we close out an eventful and rewarding 2024, Mike Brady, founder of Generosity Wealth Management, shares his insights into the past year’s financial trends and the fundamentals that continue to guide successful investment strategies. From market highs to economic shifts, Mike offers a thoughtful analysis of the forces shaping our financial landscape and provides a forward-looking perspective on what 2025 may bring. Whether you’re focused on long-term goals or navigating short-term challenges, this year-end review is packed with valuable insights for investors at every stage of their journey.
Transcript
Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered in Boulder, Colorado although we have offices in Fort Collins as well and clients throughout the whole United States. I’m coming to you right now from Boulder.
This is the yearend video. It’s been a wonderful 2024. I’m recording this video right before Christmas and I’m sitting here thinking to myself I’d like to get the video done so what exciting thing could happen between now and the end of the year. Of course, the market drops 1,000 points in one day, but the year is not just one day. It’s 365 days, it’s many weeks and from an investment point of view it’s many years strung together.
This really boils down to some of the fundamentals that I repeat over and over again which is you’ve got to know what your duration is and what your time horizon is for your money. If it’s long that’s completely different than if you need money next week, next month or even next year. That is one of the most important and deciding factors in your investment decisions as you reach your financial goals.
I always like to think of this as what are those fundamentals. We get into the weeds sometimes and I’m going to get into them here as part of my review and a little bit of hey, what are the variables that we’re going to watch going forward. I’m going to come back time and time again throughout this video about what are the fundamentals which is to be invested.
The very first graph that I’ve got up there is by decile. The last 96 years of the S&P 500 which is an unmanaged stock market index. If you look at all those you’re going to see that there’s a skewness, a preference for positive returns. Actually, 73 percent of the returns are positive, whereas of course 28 percent are not positive so zero or down. That’s important because we had better ask ourselves hey, do I have my investments and always worried about the steps back? Do we take three steps forward and one step back? Or do I worry so much about that step back that I also give up the three steps forward? There’s only one percent of the time that it’s been more than 40 percent. As a matter of fact, there’s only six percent where it’s been really horrible and nobody likes those.
Then when we look at all the others it’s painful. That’s why I get back to one of the fundamentals. If you need the money in a short term – a year, two or three – absolutely you should think about the risk level and whether or not that’s something that you would be willing to take.
We have a skewness towards the positive in the markets and in 2024 it was very positive across the board whether it is the unmanaged stock market indexes, domestic or international or the bond index. So, just a wonderful year.
The next chart I want to point out is that’s what we’re looking at from an investment point of view. You’re going to see that last little bit there is 2024. We’ve had a wonderful runup even with you consider 2020. We’ve had a wonderful runup and we’ve got a P/E ratio of about 22 right now. Many times people say well, with a P/E ratio of 22 that means that the markets might come down. I’m going to show this next graph her and it is above average the 22. However, there’s two ways that it can revert to the mean. One is that the prices come down or the earnings go up. I’m going to make a proclamation here today that I believe that the earnings are going to go up to make that number go down and that the price is going down.
I think there are some fundamental shifts going on from an economic point of view, an economic point of view, that we haven’t seen in 30 years. It is all of the advances in technology, especially as it relates to artificial intelligence, the large language models and how that’s going to seep into everything that our economy is doing.
I remember when I was in college in the late 1980s and I used to write out in long form my papers. We also used to have to add and subtract on a piece of paper. Now we have spreadsheets, now we have Microsoft Word or Pages in the Apple world, and how efficient that has made so many businesses that have just propelled the earnings ratio for companies. I think we’re going to have the same revolution going forward in that and we’re just scratching the surface. It’s going to be my belief and what I’m going to say to you is the price going to go down or the earn is going to go up to meet those prices and to justify those prices. I believe it’s going to be the latter.
The Magnificent Seven which are some of the biggest technology firms have done very well. I’m highlighting it there right now which are the profit margins and I believe they are going to continue to stay very nice, if not go higher. This bodes well for those of us that have that long term time horizon.
I want to take a break here for a second. If you say to yourself hey, I don’t have a long term time horizon. My answer would be you probably do. Even if you are 65 years old and you’re about to retire you hopefully have many decades statistically to live. You’ve got to remember that there’s many five and ten year time horizons until you and your significant other, if you have one, might pass on.
If you say I don’t want to take any risk. Even though the probability is historically that it’s going to be positive and not negative and I don’t want to take that risk. Give me a call because there are some investment vehicles out there, some products I suppose, that do have floors so we can find something that might work for you. I don’t read minds so if your mind has changed, your mindscape, your belief, your risk tolerance has decreased or changed in some fashion you’ve got to let me know so that we can adjust accordingly.
Inflation has gone down, which is wonderful. It has gone down and I believe it’s probably going to continue to go down but that’s what the Fed is working on right now. They have just made a proclamation that they’re going to maybe slow down in 2025 and the rate decreases. We’ll see how it plays out. It’s hard to predict out a whole year but, of course, we don’t change our philosophy on what the Fed says in one day for one year. I don’t believe we’re going to see a zero interest rate environment like we have right after the great recession.
As you can see there that I’ve circled and highlighted it has continued to go down over the last couple of years and is expected to continue to go down and I would think that as well. That’s good especially for mortgage rates for those of you who want to buy and sell a house, real estate, people who have existing bonds that’s a good thing as interest rates go down and prices have a tendency to go up for existing bonds so that’s a good thing, especially when we have a portfolio that is stocks and bonds put together.
You’re going to see here especially on that righthand side that bonds had a tough year a couple of years ago – a tough couple of years. The last couple of years have been positive of the unmanaged aggregate of the Bloomberg U.S. aggregate for the bond indexes, but it’s still been pretty lame this year especially compared to what the equity markets have done. It still makes sense to mesh them together because as interest rates continue to go down it’s my belief that the bonds will go up. In the right portfolio it still does make sense. Let’s not get too negative about them going forward.
I think this is one of the key and fundamental charts that we always have to keep in mind. On the one year on the lefthand side is the range going back 50-60 years to 1950 – so I guess that’s over 73 years. The green is 100 percent U.S. unmanaged stock market index. The bond is the middle one, that blue one. The gray is 50/50 unmanaged stock market index and unmanaged bond index shoved together. What’s important is when you look at the 5, 10 and 20 year how the highs go down and the lows come up. We’ve had a 50/50 blended portfolio. There actually has never been a five year time horizon going back 73 years where you haven’t at least broken even and even made one percent. So, that’s what we’ve got to keep in mind. Has there been one year where a blended portfolio has lost money? Absolutely. We can see that by those bars on the lefthand side. If we blend them together we start to have at least historically something that has the worst has not been that bad so that’s what we’ve got to keep in mind.
That being said, 2024 was a wonderful year across the board which follows up to 2023 which was a great year even though 2022 was horrible. We’ve got now that horrible year in 2022, but 2023 and 2024 have been wonderful. In 2025 we have a new administration but let’s not forget the president is not all powerful. I think getting back that the technology changes that we’re going to see filter through from the technology firms, through all of manufacturing and service businesses and changing our daily lives is going to be a motivating factor in 2025, 2026 and going forward as well, but we will see. We don’t change our portfolio for one year. We don’t change because of a new administration. We don’t let our politics dictate our investment philosophy, but it is good to know what the long-term trend might be and I believe the technology advances that we’re seeing is going to be one of the most important variables in the foreseeable future.
Michael Brady, Generosity Wealth Management, 303-747-6455. I hope you have a wonderful new year and have had it by the time you get this, and that we have a wonderful 2025. Take care.
“Money, like emotions, is something you must control to keep your life on the right track.” ― Natasha Munson
This quarter has been nothing short of remarkable for the markets, but Mike Brady isn’t just here to talk numbers. In his latest update, the founder of Generosity Wealth Management dives deeper—shifting focus from market highs to what truly matters: the financial wisdom that comes from over 30 years of experience. With insights on long-term planning, managing life’s curveballs, and preparing for the future, Mike reveals how to stay ahead no matter what the markets are doing.
But that’s not all. Mike also introduces two exciting ventures under the Generosity Group umbrella—Generosity Estate Planning, led by his wife, and Generosity Business Exit Planning, designed to help business owners take control of their future. It’s been an incredible year of growth, and there’s so much more ahead. Hit play to hear it all firsthand.
Transcript
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive full-service financial services firm headquartered in Boulder, Colorado. End of the quarter, the third quarter. I’m doing this on Friday before the end of the quarter, before October 1. And this has been a wonderful quarter, a wonderful year. I mean, double-digit returns for almost every unmanaged stock market index, American US-based. Bonds are doing great–unmanaged bond indexes from a shellacking they took back in 2022.
If you look at a balance of stocks and bonds, it would be 50-50; we’re looking at seven out of eight of the last quarters, including this quarter, have been positive, which is wonderful. If you recall, I’ve used this statistic over and over again. In about three out of four quarters and years on the unmanaged stock market index, returns are positive, which means one out of four are negative, usually negative. And when you can break the trend and have a nice long history of many quarters coming together for a positive–that’s wonderful. We’ll take that every day.
I was joking with a client right before I made this video. He says, “Hey, Mike, things are looking great. You know, things are good in your world.” And I said to this client, “Yeah, you’re right. I mean, these are the types of quarters and years that we live for. There’s not much to say.” Therefore, I wanted to use this video not to have a technical conversation because you can go to the Internet and get so many opinions. You can go to 24/7 business news channels. Everybody’s got an opinion commentary. And I don’t want to pile onto that at this point. When things are going well, I can sit here and tell you why things are doing well in the stock market, etcetera.
But, it’s not so much information that you need anymore. It’s about what the right information is. It’s the wisdom. So I’ve been doing this since August of 1991 in the financial industry, and that’s 33 years. Back in 1991, you would have a competitive advantage if you could afford more information than your common person, your common trader, or your investor. And you did that by having a Bloomberg terminal, Morningstar reports, ValueLine, or Investor Business Daily newspaper. We had information that maybe the everyday person couldn’t afford or didn’t have. Well, that’s gone away. With the democratization of information through the Internet, you’re inundated with more data than you could ever use. And, of course, you’ve got more pundits on TV. At the time, we didn’t have the financial news every day today. What’s more important, I think, and what I’ve learned over the last three decades, are all the other variables in the equation leading up to reaching your financial goals. That is:
• Good retirement analysis.
• Are you saving enough?
• What’s your liquidity fixed vs. variable?
• Liquidity? Liquid and illiquid assets?
• What about the speed bumps along the way, like the ability to continue if you lose your ability to work or lose your spouse? You know, all these bad things.
We should spend a lot of our energy on these things that we can proactively address and assess the risk towards versus having a wonderful conversation about whether interest rates will go up or down and when it might do that. I mean, that’s kind of interesting and fun, I suppose. But you know what? We should have a portfolio that will weather over your time horizon and have a high probability that it will weather it just fine, whether it goes up or down, whether the stock market goes down or up this quarter. Okay. That’s the reason why one of the big questions I ask people is, what’s your duration? What’s your time horizon? Because that starts to inform the decision about the appropriate investments that might be appropriate for a client. So it’s good to know, are you an investor or a trader? Because frankly, if you’re watching this video, you’re an investor. If you’re my client, you’re an investor, because traders are not attracted to me. I don’t believe that, in the long term, trading mindset is the wise choice. We’ve got to have our duration, keep things in perspective, the right duration, and have a plan for how to get there and focus all of our energy on those things that we might be able to control, like, am I saving enough? What are my expenses? Taxes? Am I maximizing all the tax opportunities that are afforded to me? Those are the things that I believe we should spend the majority of these videos and our time to reach your financial goals.
Mike Brady, Generosity Wealth Management.
Before I sign off, though, I wanted to let you know that there’s some exciting stuff coming in the next three to four months. I set up a couple of new businesses. It’s all going to be under the moniker of Generosity Group, Firstly, Generosity Wealth Management, which you’re used to. You’re my client, or because you watch these videos, Generosity Wealth Management.
My wife, who has been an attorney since 1999, will pivot her specialty towards estate planning. So we’re going to have Generosity Estate Planning, a wholly separate business run by my wife, a practicing attorney here in Colorado.
The third is Generosity Business Exit planning, which is focused on business owners personal life, their finances of the business owners, and also their needs after they sell the business. For those who are going to sell their business in the next three to five years or at least want to get ready so that they can sell it when they choose, not when someone else chooses. Maybe they get sick, or they’re not able to, or they die. You sell it when you want to because your business is already. So that’s my third business.
I’m also bringing in a business partner. Don’t worry — it doesn’t affect you. My clients will remain my clients, her clients will remain her clients, and we will do joint work together and have other collaborative opportunities. She will also be under Generosity Wealth Management’s umbrella. So that’s really exciting, and I’m looking forward to you getting to know her.
So lots of exciting stuff going on, even more when we, maybe when we talk in person, I’ll share with you, but this has been, 2023 was a tough year for me. I had some personal struggles, not me per se, but just lots of going on in my life and my family and other things, and got through 2023. 2024 has been the exact opposite. It’s just been one of the best years in my 55 years of living.
Mike Brady, Generosity Wealth Management, 303-747-6455
“Stay the course. When thwarted try again; harder; smarter. Persevere relentlessly.” – John Wooden
Dive into the recent market events caused by the carry trade and learn why it’s essential to stay focused on your long-term financial goals. Whether it’s through tax planning, estate planning, or simply ensuring your financial plans are up-to-date, these strategies will help you navigate through market volatility with confidence.
Ready to review your financial plan or discuss how these strategies can help you stay on track? Reach out to ustoday to schedule a consultation. We’re here to ensure your financial future is as secure and prosperous as possible.
Transcript
Hi there! Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered here in Boulder, Colorado. I’m usually in a button-down shirt and a blue blazer, but you know what? It’s hot outside here in Boulder. No clients are going to see me today so I figured what the heck. We’ll keep it our little secret that I didn’t dress up today.
I wanted to first explain what a carry trade is, to which many pundits, including me, and analysts like me, attribute some of the sharp decline, especially in Japan, over that Friday and that Monday when the market really tanked. I’m recording this on Wednesday, August 7, so I’m not quite sure how it all has played out, but it’s starting to recover. Whether that recovery has continued by the time you watch this video, we’ll have to see.
But let’s get back to what the carry trade is. The carry trade is any kind of arbitrage. Frankly, from a concept point of view, if you have a mortgage on your house at 3% and you invest money in investments hoping to make 6%, let’s say, that’s a 3% carry trade because you’re borrowing low and you’re investing high. Well, currencies are no different. For years since the late 1990s Japan has had very low borrowing rates, interest rates, near zero. And so investors would borrow in Japan, buy the currency in another country and then invest in some kind of a fixed instrument in that particular country. So, it’s really the difference between the two.
With the United States now talking about reducing rates and then Japan increasing rates, they are getting squeezed. Those people do speculative trade, such as short-term carry trade with currencies. That’s a lot of what happened over that Friday, the Monday, and the huge decline. It’s kind of the unraveling of that particular trade. Once that’s unraveled, we get back to business as usual. I think one of the things to keep in mind is that we’re investors, not traders, at least my clients are. We’re investors with time horizons that are not days, weeks, or months, but they’re years, and that could be two years, three years, five or five plus years. And so these blips happen. I mean, the most recent one of this magnitude happened in March 2022 – I think it was March. Don’t hold me to that, but it was in the year 2022, and that was two years ago. Things have gone up quite nicely since then. In 2023, the unmanaged stock market indexes were positive, and so far in 2024, the unmanaged indexes are positive as well. So, let’s not extrapolate a short-term event into long-term action or even decisions.
What we can do as investors is keep our eye on the things that probably have the biggest impact on reaching our goals and accomplishing our plan to get there. Of course, it’s taxes. Frankly, I think that’s one of the best things someone can do that’s identifiable and look for ways to lower your taxes. It’s most people’s single biggest expense. To that end, I have a great new software called FB Alpha, which you, of course, should talk with me about so we can do some tax analysis, and you can have a good conversation with your CPA and maybe identify some areas to talk with your CPA about.
The second thing is making sure you have that plan. I have new software, RightCapital, which I love. I’ve already moved many clients and met with them about that new software. If you feel that now is the time to update things, give me a call or an email.
The third thing is estate planning. So many people don’t have estate planning. That is, of course, what happens with all your assets when you pass away and while you’re living. Who makes medical decisions for you, end-of-life decisions, and financial powers of attorney? So, with all that package, give me a call because I have new planning for that as well and a way to help you get that done with an attorney or with even a service that I have that I’m able to open up a portal, an account for you so that you can do some of that stuff online.
Anyway, those are the things I believe we should be focused on. It’s our duration, it’s our long-term investments, and, of course, it’s our taxes, our planning, and our estate planning. Those are the things that are probably going to have, in my opinion, the biggest impact on your life, not the impact of a carry trade or the impact of a couple of days of decline.
Michael Brady, Generosity Wealth Management, 303-747-6455.
One thing before I leave, I did want to remind you if your situation has changed and I’m not aware of it, your financial situation, your family situation – I’m in constant contact with my existing clients, but we want to make sure that our beneficiaries on IRAs, retirement accounts, life insurance, all of those things are up to date. If you have any concerns or you don’t know what they are, give me an email, give me a call and we’ll get that for you. That is absolutely essential to continually ensure that the beneficiaries are what you want. The reason why I say that is I had a situation in the last couple of weeks where the beneficiaries of a client were inconsistent with what their desire was, and fortunately, we caught it, of course, before there was any problem. I want you to be well taken care of, too. Whether you’re my client or you’re not, I still care about you and the control and the desire that you have to have your money go to who you want when you pass on.
Mike Brady, Generosity Wealth Management, 303-747-6455. Thanks.
“A goal should scare you a little and excite you A LOT” – Joe Vitale
As we surpass the midpoint of 2024, it’s time to reflect on the financial journey so far and strategically plan for the remainder of the year. Mike Brady of Generosity Wealth Management provides a comprehensive review of the stock and bond markets, shares key insights on current economic conditions, and offers forward-looking strategies to help you make informed financial decisions. Discover how to balance strategic and tactical thinking to optimize your financial future.
 
Transcript
Hi there! Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered here in Boulder, Colorado.
It is the midpoint of the year. Half of the year has gone by, with half still to go, and so I want to first discuss what’s happened so far and where we are presently, and then I want to discuss strategic and tactical levels of thinking going forward.
First, what’s happened so far? The unmanaged stock market indexes are at all-time highs and looking great. The first quarter this year was outstanding. April wasn’t so much fun and frankly, we gave some of that up. Then May and June were good, recovered and back to highs again, which is outstanding.
When you look at the growth, specifically the large-cap area, that’s been the winner so far this year. The loss on the equity side of the big categories is the smaller cap on the value. If it’s a small-cap, smaller companies, in general, they’re single digits. If it’s larger company stocks, then it’s double digits for the year, which is outstanding.
As we look at the unmanaged bond indexes, those indexes that are short-duration, meaning a couple of years, are actually slightly positive for the year. If it’s anything longer than that, they’re probably a little negative for the year. The unmanaged stock market indexes are positive for the year from single to double digits. The bonds indexes that are short are maybe slightly positive but the vast majority of the duration of the longer term are slightly negative.
Most portfolios have a stock and bond component to them, which still makes sense. One of the reasons why the mid to longer-term duration bond indexes are negative is coming into 2024, most people had priced in, most traders had priced in, a decrease in the rates from the Fed, the discount rate from the Fed, over the next year much more than what’s actually happened so far, and what they’ve led us to believe will happen for the rest of 2024. It doesn’t mean that it’s not going to happen. It doesn’t mean that the middle and the longer durations are not good places to still be and to have a portion of a portfolio in general of course. But it just hasn’t happened yet. So, it’s better to be too early than too late is what we always say.
So far, 2024 is looking great. For the rest of the year, we have a lot of stuff going on. The biggest impact is probably the election in November, which is the biggest uncertainty. They’re neck and neck at this particular point. This has long term consequences for the next four years and the economy and regulations and things of that nature. There’s a whole other podcast about the interaction between our fiscal policy, which is our government policy, the regulations from our executive branch, and, of course, the interaction, the overlapping areas with the private sector, and how that moves things going forward.
Of course, from a monetary policy point of view, the Fed has not been as aggressive in decreasing rates as it was in increasing them, so hopefully, that will happen soon for the second half of the year and going into 2025. There is still a lot going on this year for 2024.
I’m going to put up on the screen the S&P 500, which is an unmanaged stock market index, and various inflections going all the way back to 1996. Now, the reason why I share this is because many times, people say well, we’re obviously at a high. The answer is, well, there’s nothing obvious about the future, and frankly, most of the time, it was under 1,000 – the S&P 500 was under 1,000, so 600 or 700 back in 1996. I’ve got to be honest with you, people then were saying, well, it’s obviously at a high. Now it’s closer to 5,500, and I’m pretty happy that people didn’t say it’s obviously at a high. Let’s move everything to the money market or out of some kind of an index or in equities.
The question you have to ask yourself is it’s a high compared to what? I mean, it might obviously be a high to what we already know, which was five and ten years ago, but it’s certainly not obvious that it’s a high to where it might be in five or ten years from now. As a matter of fact, we hope that it’s a low. It’s a high from where it was. It might be a low from where it will be. If you don’t believe that the future is brighter than today, then why do you have investments? I mean, in 5 or 10 or 20 years from now, whatever your time horizon might be, if you don’t believe it’s going to be higher, then you’ve got to put it under the mattress or in CDs or money market. That’s the answer if you don’t believe that. Is it a high to where it would be in a week, a month, a year? Sure, possible. But that sure better not be your time horizon when you’ve got some kind of an equity position. I want to highlight that. I have to tell you that the S&P 500, since 1980, which is 44 years, has had 33 positive years. So, three out of four are positive, and one out of four are negative. The future could be different. It’s just that simple.
I want to quickly change to strategic and tactful thinking because this is really important, I believe. It’s what we do, where we might add the most value to our lives, and I, as your financial advisor or potential financial advisor, might add the most value. Strategic thinking is the big picture. Tactical thinking – let me step back and let me give you an example.
Strategic thinking if you’re working at a company is, hey, if I work really hard, maybe someday I’ll be department head. Then, if I do that, then I’m going to become the chair of something bigger than that. Then someday, if I work really hard, I can be CEO, and I’ll be successful in my career. Well, I had better get down to today’s job, which is filling out these forms or all my reports or whatever my daily job is that I have to get done this particular week.
But thinking about what’s possible, all those steppingstones, the path to your ultimate goal, that’s strategic thinking. Then you’ve got to bring it back down to tactical thinking. Okay, great, I have step number one, step number two, and step number three. The strategy might be from department head to vice president to CEO. Whereas we also have to get down to okay; what’s the nitty gritty on my to-do list? A company is no different. If you’ve got a manufacturing company, you’re sitting there thinking, what are my customers going to need three and five years from now? What are my employees going to need three and five years from now? What’s the environment? Where do I want to go? Do I want to sell the business at some point? Do I want to have my employees take it over? There’s lots of different strategic decisions, but then I also have to make sure that we get these sales orders out today and this week so that we make our numbers. We’ve got tactical and then we have strategic.
The reason why I bring this up is your life is the same way. I mean, it’s this cliché that life is a journey, but it’s more than a cliché. It really is a journey. When you’re young, you’re thinking to yourself well, if I go to college, then I’ll graduate and hopefully get a better job or get the skills in order to make my financial life good and rewarding. But I’m probably going to get married and maybe have a family and buy a house, a boat, an ATV, and all that stuff. Along the way, I will try to accumulate some assets for retirement. Then, at a certain point, I’m getting closer to retirement, and I want to protect that and make sure I don’t lose what I’ve worked 20-25 years for. Then you go into a protect mode and maybe a distribution mode. Great, I’m now retired. How am I going to get the money out? There’s a lot of decisions. That is strategic thinking.
And then there are a lot of decisions along the way. Do I do the 401k? A Roth 401k or not? How can I reduce my taxes along the way? If I’ve got a brand new child 18 years from now, I want to help with education. Or maybe my child is 17 and is going next year. How do I pay for that and the distribution from that? As we get older, we think about long-term care, we think about Social Security, and we think about required minimum distributions. We think about lots of things along the way, and my job is to help you with those strategic questions about where I am going and then implement and help you – maybe I take some of those tactical decisions on myself on your behalf, and then I’m going to report to you, or we work on them together. Hey, did you do this? I can’t do that, but you can, or have you worked on that? It kind of knocks those things off.
This is one of the things that I’m really working on going forward over the next six to nine months. I have lots of really fun and exciting things to share with you because, strategically, Generosity Wealth Management, I’m going to try to do a better job of describing all of the services that we do. We’ve done a good job of saying who we are, but what and how is what I’m going to start to articulate a little bit better over the next six to nine months, and all of our services. And I’m adding services, taking nothing away. I’m enhancing and upping our game so we can have Generosity Wealth Management 2.0, which is what we talk about here behind the scenes. So, Generosity Wealth Management 2.0. New services, a more comprehensive list of all the things that you may or may not be taking advantage of. I want you to get the most out of our relationship, and I want to be better about explaining that to you, to your friends, your family, and potential people as well going forward. That is forthcoming.
That being said, I’m going to end today’s newsletter. Mike Brady, Generosity Wealth Management, 303-747-6455. Give me a call or send me an email. I’d love to hear from you. You have a wonderful summer. Thanks. Bye-bye.
I think this is one of the key and fundamental charts that we always have to keep in mind. On the one year on the lefthand side is the range going back 50-60 years to 1950 – so I guess that’s over 73 years. The green is 100 percent U.S. unmanaged stock market index. The bond is the middle one, that blue one. The gray is 50/50 unmanaged stock market index and unmanaged bond index shoved together. What’s important is when you look at the 5, 10 and 20 year how the highs go down and the lows come up. We’ve had a 50/50 blended portfolio. There actually has never been a five year time horizon going back 73 years where you haven’t at least broken even and even made one percent. So, that’s what we’ve got to keep in mind. Has there been one year where a blended portfolio has lost money? Absolutely. We can see that by those bars on the lefthand side. If we blend them together we start to have at least historically something that has the worst has not been that bad so that’s what we’ve got to keep in mind.