2019 Half-Year Report

2019 Half-Year Report

“Finance is not merely about making money. It’s about achieving our deep goals and protecting the fruits of our labor. It’s about stewardship and, therefore, about achieving the good society.” – Robert J. Shiller

This has been an incredible year so far. Pretty much every month in the unmanaged stock market indexes has been positive.
If you remember, last year 2018 was negative and some people have a tendency to allow themselves to get real negative, they extrapolate negative news into “it’s going to be negative forever” or “I told you that it was going to be horrible”  particularly if you have a negative bias. Going back all the way until the 1920s, three out of four years were actually positive, so historically the strong majority is up.  What we have to do is check our first biases; are we a negatively biased person or positively, and is that helping or hurting yourself?
Watch my latest video for a recap of what we’ve seen so far in 2019.

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Transcript

Hi there.  Mike Brady with Generosity Wealth Management; a comprehensive full service financial services firm headquartered right here in Boulder Colorado and here today is actually up in Wyoming.  This is 4th July.  I wanted to record my video.  I’m up here at my cabin.  Hopefully you’re doing something wonderful for Independence Day.  If you were wondering if I’m in front of a green screen and that’s a picture behind me, the answer is no.  That is actually the picture out of the front of my cabin.  That’s what I get to look at all day long up here in Dubois Wyoming and frankly I’m working all week because I’ve got a lot of stuff I’ve got to get done.  But I want to give you the year to date video and the rest of the year preview and going into next year election year.

So, this has been an incredible year so far.  Pretty much every month in the unmanaged stock market indexes has been positive except for the month of May.  If you remember last year 2018 was negative and people have a tendency to get real negative, they extrapolate negative news into it’s going to be negative forever or I told you that it was going to be horrible, particularly if you have a negative bias. Going back all the way until the 1920s three out of four years are actually positive so there is a strong probability of the markets going up, but sometimes it does go down.  And so, what we have to do is kind of check our first biases; are we a negatively biased person or positively.

I’m going to do a video next month actually talking about election years and what are the probabilities of the year before an election, the year of an election, et cetera, and how politics may or may not affect the stock market.  Because the economy and the stock market are also two different things, which I’ll do it in a video going forward.

But let’s talk about 2019.  It came roaring back the first quarter of this year, wiped away in general in the unmanaged stock market indexes in one quarter what we had lost last year in 2018.  We were looking good in April of this past quarter and then May we gave some up.  We never went negative in the unmanaged stock market indexes and all of the losses in May were wiped away in June and then some.  So now, with the unmanaged stock market indexes we are at all time high so people might say to themselves yeah but aren’t you really worried that the market is at a high?  And the answer is if you believe the market is going to go up then it’s always at highs, I mean that’s the point is that you should hope that there’s going to be new highs.  Just because it hits a high doesn’t mean that it’s a ceiling and it can’t go any further, as a matter of fact if you truly believe that why do you have investments at all?  That means that where you are today it’s not going to be higher in the future, which makes no sense.  Why would you have investments if you don’t believe that it’s going to be higher in the future?

So far this year we are in double digit positive returns for those unmanaged stock market indexes.  May was a single digit declines with the S&P 500, which is one of those indexes I talk about, about seven percent decline in the month of May, which we made back up in June.  It is normal for there to be double digit declines.  Most years have double digit declines and we haven’t even seen that.  In 2018 last year we did, we had some real sharp declines.  But that was only one out of the last four or five years where we had those double digit declines, so we have had an unusually unvolatile timeframe in the last two/three/four years.  So, let’s remember that because if you’re investing for the long-term why make any decisions based on short-term trends?

I’m going to put a couple of charts up there.  The first one I want to put up is the earnings per share for the S&P 500 continue to look really nice.  Bonds are up as well for this year, single digits but between five and ten percent depending on what area of the bond market that you are invested in.  So, stocks are up, bonds are up, unemployment is down, earnings per share is up.  I mean if you are a negative person you can try to find something to be negative about, but I would argue that doesn’t serve you any good.

There’s an argument that some people say is like hey better too early than too late in most things.  Because it’s looking so good I should move out because I’ll avoid negative things in the future.  My answer would be no that doesn’t help you because I have seen in my 28 years of doing this since 1991 that getting out might be one thing, but if it continues to go up you never get back in, or if it goes down you have such a propensity to preserve that it’s also when do you get back in?  And so, no, if you’re in this for the long-term, five, 10, 20 years then stay invested, have your plan and stick with it.  If you’re going to have investments for a short-term, you know, one month, six months, 18 months why should you have any money in the markets?  I mean that’s not even a full market cycle.  So, if you judge long-term investments based on short-term trends that’s a recipe for disaster.

The economy, as I mentioned earlier, is not the stock market even though the economy is doing great.  Now, you wouldn’t know that necessarily by watching the news.  If you are getting whipsawed in your emotions by the 24/7 news cycle I would say don’t do that because if you like that, hey great, that’s wonderful, but don’t make any decisions on it and don’t listen to what they have to say about the economy and the stock market because that is going to cause you lots of angst.  For the rest of the year continue to be bullish.  You’ve heard me for the last my gosh five/ten years be bullish and that has served us well.  I see no reason not to be bullish going forward.  As a matter of fact, once again, you’ve got to watch my video next month, but 90 percent, going back to the early 30s of the year before an election, 90 percent of them have been positive and strongly positive.  And so, that doesn’t mean that we should be invested because of that, but all the ingredients are there.

That’s it for right now.  The rest of the year I never answered that thought I never completed that thought.  I don’t know what’s going to happen.  I don’t know any more than you do.  Unlike all those pendants on TV to who say with very little humility that they know what the future is.  You don’t know the future and I don’t know the future, but fortunately we’re not investing for the next six months.  If you are you shouldn’t have investments.  We’re invested for the long-term and I’m going to make the bet that going forward, even if the next six months are down, even if the next two years are down, history has shown that going back to 1950 there’s never been in a diversified portfolio a five year time horizon when you have lost money and so therefore that is a bet that I am willing to take.  Even though it’s possible, absolutely, the future is uncertain.  However, we can’t live our lives running away from things, we have to live our lives and our investments and the future based on the best data that we have and how we feel we’re going to be best served long-term, not short-term but long-term and so that’s what I think going forward.

Stay tune for that video next month.  I have a couple good ones coming forward and I really hope that you watch those and that you have a wonderful – that you had because by the time you get this 4 the July weekend will be over, but anyway hopefully you’re doing well.  Mike Brady; Generosity Wealth Management; 303-747-6455.  Have a wonderful day.  Thanks.  Bye bye.

May 2019: Making Sense of the Market

May 2019: Making Sense of the Market

“Being rich is having money; being wealthy is having time.” –Margaret Bonnano

It is important to take a macro versus micro approach to investments, meaning we have to take a very big, long-term view in order to start to make some sense of the stock market. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.

Listen for more on how to keep perspective when looking at the market.

Watch my short video or read the transcript below.

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Transcript

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 making sense of things. I was meeting with a client a week or two ago and he said Mike, it doesn’t make any sense in the stock market. It’s something that I don’t understand. It goes up high one day and down the next day for a reason that I can’t understand. And my answer to him was stop trying to understand it. Stop trying to understand it on a daily basis, a weekly basis, even a monthly basis because I don’t know the future, you don’t know the future and for us to try to guess the emotions, the intents, the actions of millions of other people is very difficult.

We have to take a very big, long-term view in order to start to make some sense of the stock market. If we’re looking at it from a daily basis, one day if you listen to the newscasters or read some article they always have some reason why it went up like they know definitively what millions of people are thinking. The next day it might completely reverse and then they give a different answer that might be very similar. No, not that many people change from day to day. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.

So you have to look at yourself and your own emotions and say wow, am I going to allow myself to be whipsawed from day to day, from week to week, or am I going to take the long-term view. And your bias is very important to know. If you’re a naturally optimistic person I would argue that history has shown you to be a winner in this because three out of four years going back to 1929 the market has been positive. One out of four years have been negative. That doesn’t mean the future is going to be that way. All I can really say is that historically that has been the average when we look at many multiple years, many five-year, ten-year and twenty-year time horizons. Those that are pessimistic and are trying to time the market are worse off than those that say hey listen, I’m going to take a long-term view. On average I am going to be the winner. Sort of like going to a casino and you get to be the house. You don’t get to win every single hand but over time you certainly are the winners.

And so the future is never certain. It could be different in the future but this is what I think would be a better approach for most people.

Mike Brady, Generosity Wealth Management, 303-747-6455. I’m always here if you want to talk. Thank you. Bye bye.

January 2019: Market Reversal

January 2019: Market Reversal

“Money is only a tool. It will take you wherever you wish, but it will not
replace you as the driver.” -Ayn Rand

From a horrendous 4th quarter in 2018, to a complete 180 in merely the first month of 2019 it’s still important to keep your sights on the big picture.

It’s easy to be optimistic when the market is going up.  It’s harder when the market is going down and all those reporters on TV are giving you all the reasons to be negative.  That’s why we have to look at the underlying valuations, the underlying data, the money flow, the money velocity, the corporate earnings to look at what’s the real truth here.  What’s the true story?

Watch my video and/or read the transcript.  It’s a quick one, under 5 minutes and I continue to illustrate why it’s critical to keep your emotions in check.

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Transcript

Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered right here in Boulder, Colorado.  Recording this on Wednesday, January 30.  It was right here a month ago that I recorded my year end video and at that time I was talking about what a horrendous December and fourth quarter of 2018 we had.  I talked about how 2017 had very little volatility and was strongly up for the unmanaged stock market indexes.  In contrast it was followed by 2018 which had all kinds of volatility and was negative with, well the fourth quarter in December really going downward very sharply with huge volatility.

Generosity Wealth January 2019 Market Reversal 1 year DJIA

1 Year DJIA

So far in 2019 the month of January has shown another reversal.  What great examples that every year is different.  I’m going to show you a graph that shows the last 12 months and what you’ll see is so far this year we’ve made back much of what we lost in December and the fourth quarter of last year.

Generosity Wealth January 2019 Market Reversal 5 year DJIA

5 Year DJIA

It is important to have a diversified portfolio.  It is important to keep the big picture, the long view in mind.  Here is a five year graph and you can start to see how one year is not the entire picture.  It’s just one piece of the puzzle.  And if you only look at the one piece of the puzzle it doesn’t really make sense. Like a mosaic you have to step back and have some perspective for how the pieces, how the years add up toward reaching your 5, 10, 20 year goals.

If you’re older in life you might say wait a second, I don’t have a long view.  No, even if you’re retired you don’t want to outlive your money.  So whether you’re in the accumulation phase or whether the withdrawal phase of your life with your portfolio having 5, 10 and 20 year points of view is very important.

I believe that there continue to be reasons to be optimistic.  It’s easy to be optimistic when the market is going up.  It’s harder when the market is going down and all those reporters on TV are giving you all the reasons to be negative.  That’s why we have to look at the underlying valuations, the underlying data, the money flow, the money velocity, the corporate earnings to look at what’s the real truth here.  What’s the true story?

Let’s say that I am wrong.  Let’s say that we continue in the unmanaged stock market indexes to have downward and maybe more volatility as well.  That’s the reason why we have diversified portfolios which doesn’t guarantee against losses in declining markets.  That’s why we have though a long term view.

So what I would say is let’s get out of our own way.  Let’s keep our emotions in check.  The mind has a tendency to have a bias toward making patterns where there might not be a bias.  We lay on the grass on a nice summer day, look up at the clouds and we’re finding hey, there’s a dog, there’s a building, there’s this famous person right there in the clouds and we are certain that’s what it looks like when, in fact, our mind is creating patterns where there is no pattern.  Let’s not do the same thing in other areas of our lives including our portfolios and in the markets.

Mike Brady, Generosity Wealth Management, 303-747-6455.  Call me at any time.  I’m here to talk about how this is relevant to what you’re doing in your specific financial goals.  Here at any time.  Thank you. Bye bye.

December 2018: Big Market Declines

December 2018: Big Market Declines

“I have a lot of things to prove to myself.  One is that I can live my life fearlessly.” – Oprah Winfrey

There has been a lot of volatility this year, and in the past few months, almost all of it down.

While I routinely send out a quarterly newsletter and video, due to the extent of the news and conditions right now, I’ve been sending more frequent updates with my current thoughts and advice.

I highly encourage you to listen to my most recent newsletter video (it’s a little over 5 minutes).

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Transcript

Hi there, Mike Brady with Generosity Wealth Management; a comprehensive financial firm right here in Boulder Colorado.  So I’m recording this on the morning of December 24, Christmas Eve.  I want to talk about what happened last week the week before Christmas and frankly this entire year because this is going to be a trifecta when we look at negative stock market probably for 2018, unless there’s some miracle in the next couple of days with the unmanaged stock market indexes.  Same thing with the indexes for the bond markets and for the international markets in general, kind of your developed market international.  It’s kind of a trifecta everywhere things were negative for 2018.

I think it’s very natural for people to say why, why did this happen?  And just like 2017, which was a very, very good year, people assume that it will continue.  Many people thought okay great, 2018 is going to continue just like 2017.  That was wrong.  2018 does not mean that 2019 will be negative, it just doesn’t work that way.  As a matter of fact going back historically one out of every four years is negative and yes sometimes when the stock market is down the bond market is down as well. That does happen.  But the way I like to think of it, and I did this great video, which I might provide a link to, where I say that life is more like poker than it is chess, you’ve got to make sure you get the right lessons from it.  Chess is completely strategic, you know, X leads to Y I mean that just is it.  At the end of the day the better player will always win at the conclusion of a chess game.  Poker is not that way there’s an element of things outside of our control.

The reason why I bring that up is we’ve got to have the right lesson.  Just because things are negative doesn’t mean that there was either a mistake or that we should change our particular strategy.  If you go through a red light and you’re not hit by another car that doesn’t mean that going through red lights is good.  Or if you go through a green light and you are hit doesn’t mean that going through green lights is bad.  It just doesn’t work that way.  And so when we look at the long-term we have to make sure that we don’t make short-term decisions based on long-term goals.  That’s very, very keen.  As a matter of fact that’s one of the mistakes that investors have a tendency to make is they let their emotions, I’ve already acknowledged that being scared and disappointed is a very natural thing; we’re emotional human beings.  The question is what do we do with it from there?  Do we act on those things or do we say I created a plan that allows me to stick with it knowing that there will be highs and that there will be lows.  And I believe that there will be more highs than there will be lows and over time historically diversified portfolios.  Not those in just one sector like technology, not those just in emerging markets or some place very non-diversified, but in a diversified market historically that has been the case.

When we look back at diversified portfolio going all the way back to 1950 of 50 percent stock market index 50 percent bonds, there’s actually never been a five-year time horizon where we haven’t at least broken even or made just a little bit of money.  I’m going to put that chart up there on the screen so that you can see it for yourself.  Have there been one, two and three years?  Absolutely.  As a matter of fact just in the last 15 years we’ve had a couple of those, we’ve had 2000, 2001 and 2002; those years were negative for the stock market followed by a very nice 2004, ‘05, ’06.  And then in 2008 it went down again.  Very painful.  If you had a diversified portfolio your break even was two to three years.  These things do happen.  These things are things that are hard to see and people who say well I saw it and it was so obvious and maybe even they say I moved to cash because I knew it was going to happen, my experience over the last 27 almost 28 years is those people who say that probably moved out a little too early and they don’t get back in.  Yes they might feel all good and all happy with themselves that they moved out, but the better strategy, as I see it, is to stick with the strategy that you have, which was for a long-term. If you need the money next month that’s a problem, you shouldn’t have investments to begin with.  However, we look at our life like a business and we have to make decisions, not emotionally, as it relates to things as well.

I’m always here.  Mike Brady; Generositywealth.com.  Please go and watch some of my other videos.  I’m going to provide some links to them as well, but Generositywealth.com; Mike Brady; 303-747-6455.  Hope you had a wonderful Christmas.  You’re probably receiving this after Christmas to a happy new year.  Thank you.  Bye bye.

December 2018: Market Performance Updates

December 2018: Market Performance Updates

“The big picture doesn’t just come from distance; it also comes from time.” – Simon Sinek

When we look at the news, when we look at the markets we might get all worked up. We might have the same perception that everything is going down the tube, particularly when it might happen to us, but I’m here to remind you to stay calm and remember the big picture.

 

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Transcript

Hi There.  Mike Brady with Generosity Wealth Management; a comprehensive full service financial services firm headquarters right here in Boulder Colorado.  So I want to talk a little bit about non-market stuff first, but it is relevant and I think you’ll find it interesting.  With all the news about handgun violence in Chicago or mass shootings, if you were to ask most people are we in a more violent America today than we were 25 or 30 years ago?  I’m going to make a statement that most people would say yes.  But the reality is that’s just not true.

I’m going to put a chart up there and you’re going to see that one of the biggest successes that we’ve had over the last 20 or 30 years is our decrease in violent crime.  And, of course, we want it down to zero don’t get me wrong, but that is one of the trends that has been kind of missed when you’re watching news on a daily basis.  What about property crime?  Are you more susceptible to property crime?  Actually no.  I’m going to put a chart up there on the screen and you’re going to see that same kind of a trend, we actually are living in a less violent America than we were 25 years ago than we are today, even though you might not feel it.  Property crime is the same type of thing, you’re actually safer and your valuables, et cetera, than you were 25 or 30 years ago, even though you might not feel it.  And I would say when it happens to you it certainly becomes personal and it certainly doesn’t feel like when I throw a chart up there you’re like wait a second, but I was impacted dramatically by it on a personal basis.

The reason why I bring this up is when we look at the news, when we look at the markets we might get all worked up, we might have the same perception that everything is going down the tube, particularly when it might happen to us, we’re like oh my gosh I used to have X amount and now I have a little bit less from whatever point that you particularly pick.  And many times I would say that you pick a point that’s pretty short.  You have long-term goals yet you pick a point, a high point, that’s short-term, which in my mind makes no sense.

Remember 2017? It was just a year ago.  Market went up pretty much, the unmanaged stock market indexes went up almost every week and pretty much every single month and if you were invested in that most people saw a portfolio that went up that way as well.  If you look back at my videos 10/11 months ago I would say that’s real unique.  That’s the exception, not the norm.  So you might say wow the market has gone down spectacularly in the last couple of weeks.  It’s been very volatile this year.  My answer would be yes it has.  Yes that’s true and if you need the money next month that might be a problem.  Of course right now as I’m recording this on a Monday morning we’re right back, at least from a Dow, the unmanaged stock market index, is back to where it was maybe 12 months ago.  Definitely up for where it was two years ago, definitely up from where it was five and ten years ago.  The future could be different.  I think that’s what people are always worried about they’re like wait a second is this a new trend?  It’s different this time.  I don’t know how many times in the last 27 years I’ve heard that it’s different this time and every reason for why it’s different seems to be different.  That’s the only thing that changes, and then it’s not.

So what I would say is when the market goes up, an unmanaged stock market index just for illustrative purposes, 100 points over four days or over two weeks let’s say and then gives up 300 or 400 in one day, only one of them gets the news.  So far this year we are negative 2018 and I don’t know where the year is going to end.  That’s actually kind of the big mystery for this year, what’s going to happen between today and the end of the year?  But the end of the year is just one point, I mean that’s the one interesting point is that if decisions are made based on an arbitrary date on a long-term vision that you have for yourself that makes absolutely no sense to me.

Three out of four years historically have been positive, which means one out of four have been a negative.  And being a few percent negative causes someone to change a long-term strategy, you’re going to be worse off for it.  That would be my opinion going forward.  You don’t know the future and I don’t know the future.  The only thing that really changes when the market goes real volatile or goes down is that everybody seems to know on the news exactly what’s going to happen.  All of a sudden the confidence level that everything is horrible and crappy just went up by two or maybe three.  And of course, the people coming out saying I knew it all along comes out as well, which of course is ridiculous.  I’m sorry that’s the reason why I personally don’t watch CNBC or some of the other news programs because when have you ever turned on the news, the local news and said everything is okay, everything is great.  Wow, things are going just fine.  That just doesn’t work that way.  In order to be successful you have to understand that long-term the market has gone up, long-term diversified portfolios have gone up even though the future could be different.  If you’re not willing to take some risk in a down year, in this year if it’s going to be down a few percent that’s part of the game.  We’ve talked about this if you go back every year I’ve been doing videos for ten years now, almost 200 of them, it’s always the three steps forward two steps back and if you focus on the two steps back then you’re never going to have the three steps forward.  That’s just the way investing works.

Am I rattled by all this?  No.  Should a strategy change the market – I’m going to move this over just a little bit because the sun is hitting my eyes.  When the market first hit 24,000 and it went up to 26 and now it’s back down to 24,000 the unmanaged stock market index, did you change your strategy?  No. Did you change it when it first hit 24?  No.  What I have seen over the last couple of years, my goodness why am I saying that, over the last 27 years, when the market hit 20,000 people were like well it’s obviously at a top.  And then it went up to 22 and people were like well it’s obviously pretty toppy, pretty much at a high, that’s obvious.  That was a year and a half ago.  Then it went up to 23, 24, 25, 26, 26 and a half and now it’s back at 24, now it’s in the 23 for the unmanaged stock market indexes.

If you bought at 26, great, that’s not so great.  But the reason why you bought it is you assume, and history has shown, that in the long-term it’s higher, the long-term being three, four, five, six years.  However, if you bought it at 20, 15, 16, you know what, that’s why you have long-term.  And long-term where was it?  It was just a few years ago; we’re not talking decades ago.  So you’ve got to keep the big picture in mind, particularly when you’re looking.  I’m going to throw up on the chart there what it looks like.  That’s what its looked like over a one, a two, a five and a ten-year time horizon.  If you only focus on the short-term like a mosaic real close to your face, you’re never going to see the big picture.  It does become personal.  It does become personal when it’s your portfolio, that’s why you have to perhaps be even more cool and listen to maybe someone like me who is saying don’t listen to the guy on the news because he’s going to try to get you excitable.  Is it exciting to go to the barbecue and have everyone say yeah everything’s great?  No.  People are either fearful or they’re greedy.  When the market is going up all they want to do is talk about their winners.  When it’s going down it’s oh my God everything is horrible.  Who can I blame for this horribleness?  Don’t fall into that trap.  That’s all I have to say.

I’m always here if you need to talk with me.  303–747–6455; Mike Brady; Generosity Wealth Management. Bye bye.

October 2018: Market Performance Updates

October 2018: Market Performance Updates

“Never cut a tree down in the wintertime. Never make a negative decision in the low time. Never make your most important decisions when you are in your worst moods. Wait. Be patient. The storm will pass. The spring will come.” – Robert H. Schuller

In response to the recent Dow drop of 1200 points I address recency bias and why it is critical to remain cool as a cucumber in regards to your investment strategy. Piggybacking off my 2018 3rd Quarter Review, I feel it is important to reiterate that it is not a great idea to make short-term changes on a long-term strategy, here’s why: