* Humility — the market doesn’t care what you think
* Knowledge — If you do action A, is B the outcome?
I hope you click on my video and watch–I try to make it the best 3 to 5 minutes of your week. Okay, maybe that’s stretching it, but worthwhile nonetheless.
TRANSCRIPT:
Hi there, Mike Brady with Generosity Wealth Management, and this week I’m going to talk about two or three different things, one is conviction, the second is humility and another is just knowing what… oh, the answers to everything, which I guess kind of gets down to humility as well.
I last did a video about a week and a half ago and at that time I said “Gosh, I hope you’re not hearing from me every day”, that means things have calmed down just a little bit. And what has happened in the last week and a half is we’ve had, mainly, some one percent days plus or minus. Which in an environment where it is three to five percent in a day, that actually seems quite calm. But we’d have one percent, one percent, one percent, and then a big three percent drop. What’s very interesting is that although that three percent drop might just give away what you’ve gained over the last three days it seems so dramatic, so huge, when in fact if had been less one percent, less one percent, a slow dribble, it’s not quite as shocking to the system.
And this kind of gets down to a little bit of humility and kind of knowing everything. The market is a very complicated organism, OK? And the only people who understand exactly what is going to happen, there are some people like that, they’re called analysts and journalists, OK? And it is my belief that, many different factors go into what happens on a given day, a given week, a given month, into the particular market.
Let me just step back for a minute and talk about my philosophy in general; about the chaos theory. Things are very complicated- and sometimes things just happen. If A happens B does not necessarily happen. And sometimes B happens and there are a number of things that lined up for B to happen. The market is no different.
In an economy, or a country, let’s just say, in order for it to go from a developing country to a developed country, there are a lot of things that have to happen; you have to have an educated work force, you’ve got to have good governance, and confidence in the judicial system, you’ve got to have an economic system that is free and fair… There’s a number of different things that have to happen in order for a country to really move forward. And if one or two of them are happening, but not all the others, then you’re really not hitting all the cylinders. And so, it kind of gets to my belief in investing that you’ve got to have a conviction.
What do you believe in? Do you believe that the United States is what your bet is long term; whether it’s one year, five years, ten, thirty years. If not, you know, then I might question whether all of my discussions about the stock market are really for you. And if that’s the case we can talk about it, and give me a call; because there might be other non-equity, non-U.S. things that you should gravitate towards. What do you believe in? If you believe in nothing you’re going to be pulled one way or the other and all of these journalists who give you exact answers, which is what we wish that we would have about why a certain event happens. You’re going to be persuaded by one over the other, left and right, etc.
That boils down to my last topic- which is really humility. We have to understand that sometimes things just happen and what we believe is going to happen doesn’t always turn out the way we want it.
You know, I still have a conviction that this a market that I want to participate in but I’m still diversified. I still have some hedging positions. And the last three or four weeks, I have to absolutely admit it is much more drastic that what I had, you know, forecast four weeks ago. But that being said, the conviction is the same but I also have to remember that the market doesn’t really care what Mike Brady thinks; doesn’t care what Generosity Wealth Management thinks; doesn’t really care what you think. So therefore, we have to continue to change our beliefs. And so I have made some changes in the last three or four weeks. I’ve shared them with you over the video as things have progressed. But we also have to have conviction, but we also have to have some humility and also understand that sometimes things, and particularly on some of these days just knee-jerk happens. And so we have to kind of help smooth those things out, try to keep them out of our mind and not let them completely throw us off base.
I’m recording this on a Friday morning, Bernanke just spoke a little while ago and the market knee-jerked down then knee-jerked back up. And so, you know, those things are going to happen, it’s just part of it and we have to stay true to what we believe.
Going forward, I mentioned this at a previous video, that I’m going to have dynamic asset allocation as one of my offerings for my clients and my management system because I do believe that there’s a way that we can keep to our conviction, stay invested most of the time and strategically choose one sector over another. And it’s something that I’m very excited about. It’s something I’ve been working on for a very long time and I’m just about to kind of, offer it to all of my clients.
Anyway, Mike Brady, Generosity Wealth Management, 303.747.6455.
Eeeh, I’m supposed to smile! My mom tells me that I don’t smile enough in these videos but you know, I take this stuff very seriously, and so maybe that seriousness comes out in my lack of smiling here. But anyway, I hope you have a wonderful weekend and we’ll talk to you later bye bye.
* There are some BEAR signs in the market I’m concerned about
* What does the market really care about (hint: recession and Europe)
* Why so much volatility last week?
* What should you (or me if I’m your adviser) be doing?
* Dynamic Asset Allocation management coming your way….
If this week is calmer than last week, then I may not do a video 2 or 3 times. For all our sakes, let’s hope that’s the case!
TRANSCRIPT:
Hi there, Mike Brady with Generosity Wealth Management,
and recording this on a Monday morning, August 15th, and hopefully
you are getting this in your e-mail on Monday afternoon. With every day being
so very important and news-worthy, I want to get this out as quickly as
possible.
Last week, I mean big swings; 400 plus or minus and just
unbelievable. The volatility on Friday and so far today is starting to tamper
down: which is great. I think that anyone who believes in efficient market
theory is,,,, I’m just not there. I’m not on the bandwagon with them. That
really says that the available public information is factored into the market.
And when you are seeing huge swings like that I think you’re seeing a lot of
emotionality. You’re also seeing a lot of short covering and you’re also seeing
some programmed trading- people who have got losses in there or various
triggers at various points; just starting to execute automatically. I make no
judgments about any of those techniques or reasons, it’s just; they are what
they are.
Right now, I think what we need to ask ourselves and what
the market is asking itself is; are we in a recession? And; is the Euro going
to survive? Because Europe and the Euro is going to be a big driver going
forward in the next quarter or two. I think we’re seeing a year and a half of,
if you’ve been watching my videos, it’s starting to implode. And so it’s
starting to slow up,… sorry, it’s starting to speed up and some major decisions
are being made at this point in time.
Are we in a recession? I think we are in a recession. We’re
going to look back three to six months from now and say, “gosh, we were in a
recession then.” Even if the numbers don’t say so right now.
There are some bearish indications that have me
concerned. One of them is four months of down months. If August is a down month
in the market, that is definitely a clear sign that we are in a recession.
Sorry, I’m just looking at my notes here.
Second is just the market volatility- you don’t see this
kind of volatility in a bull market. You see this kind of stuff in a bear
market.
Third is just the sentiment of the investors. It is
really quite negative. That’s also a bear signal.
Fourth is the Fed. At the end of the day when you look in
between the lines of what the Fed is saying, the Fed is saying that we’re in a
recession by the tones that, and overtures that they’re giving.
There are a couple of things that I think you need to do.
Kind of getting back to some practicality here; look at your portfolio and
rebalance. You probably have various mutual funds, ETF’s, stocks, ect. And make
sure that you’re not completely out of whack. If you used to be ten per cent
this and now you’re fifteen or twenty and you really don’t want that. Now is
the time to evaluate it.
The second is, for your particular categories, let’s say
that you want a certain per cent in large cap or small cap or internationals or
whatever it might be, make sure you’ve got the best in class. When’s the last
time you reviewed the particular mutual fund, ETF, index, etc., to insure that
it is performing the way that you think it should perform.
In the last couple of years we’ve had, mainly, kind of a
nice bull market and so it’s… now we’ve had a couple of weeks of down, and so the
question is: did it perform the way it is supposed to? So is there any change
within that category that you need to make.
I still believe that internationals are something that
you ought to have a very small, if any, position in. I do have some
international exposure but it is extremely small. And, because, getting back to
what I said earlier, I think that is going to be one of the major drivers going
forward.
The last thing you can do is look at your municipals. I
have a friend of mine, and we spoke last week and he, I think, pretty much
thinks I’m crazy in some of my pessimisms with municipals. That’s OK. At the
end of the day I could be completely wrong and municipals could do fine going forward
and maybe even have a little rally, that’s fine. But the question is, I think, the
risk is too great out there- I mean your down-side versus your upside? With the
yield between one and four per cent for these municipals, sorry that is just
not very exciting to me for the risk that you’re going to take. And I think the
risk on the downside, if we have some defaults, is just greater than what the
upside potential is. That’s just my analysis, I could be completely wrong as it
relates to municipals but it is just the risk reward ratio is not there for me.
That is what I’m thinking about right now. One thing that
I’m going to let you know is, I’ve been working very hard for a number of
months now on some dynamic asset allocation models. I’ll be talking about that
more individually with my clients, and also writing about it in my newsletter,
etc. It is just another investment management strategy that I want to
compliment some of the other things that I’m doing with my clients and
offerings for prospective clients. So I’ll be talking about that in the coming
weeks.
Also, if you don’t get another video from me this week-
this is a good thing! Not that you don’t hear from me or that I don’t have to
do another video. It just means that maybe things have settled down a little bit.
You don’t have to say, every single day, “Oh my gosh! What’s
going on? What does this actually mean? What does this mean for me over at
Generosity Wealth management?” So if you don’t get a video from me maybe it
means, whooo, maybe things have settled down a bit. We’re not quite on the
ledge that we were a couple of weeks ago.
Anyway, Mike Brady. Generosity Wealth Management, 303.747.6455.
And you have a wonderful day and maybe a wonderful week. Bye bye now.
The volatility of the markets in the past 1.5 weeks has caused a lot of consternation in a lot of people. 400+ point moves every day is enough to get the juices flowing.
Historically, so far this correction is very mild and short. The above chart shows where are right now.
Does this mean we have further to decline?
That is always the big question. I put very little emphasis on reversion to a mean, so what has happened in the past and where we are currently means very little to me.
We have to look to other analysis to make our determination whether this is the first leg of a declining market or a short term event.
Hopefully you’ve been listening to my videos to gauge where I am on this question
FORTUNE — “There is no comparison between fear and greed,” Warren Buffett is telling me over the phone from Omaha. “Fear is instant, pervasive and intense. Greed is slower. Fear hits,” he exclaims.
I am NOT recommending a wholesale purchase of equities, but rather use this quote from the article below as a reminder how the professional investors think. You have to keep your emotions in check to the best of your ability.
Here are my current thoughts after 2 volatile days
TRANSCRIPT:
Hi there, Mike Brady with Generosity Wealth Management, I am recording this on a Tuesday afternoon, kind of late Tuesday afternoon. I promised that I would communicate as much as possible to share with you some of my thoughts and that’s the purpose for this video.
Yesterday’s video was about 13 ½ minutes, and I definitely am going to make today’s much shorter and pithier, I think, as much as I can.
Monday was a very bad day and we can’t isolate that day and say every day afterwards is going to be horrible. Just like today, Tuesday, the market, it was the best day, single percentage gain since May of 2010. We can’t sit here and say, “OK, everything going forward is going to be perfect; hunkey-dorey, roses all over the place.”
I think what we’re seeing, we’re seeing, kind of a tug-of-war between people covering their short positions; people who are panicking and trying to get out, with those that have money on the sidelines wanting to poor back in, saying, “Wow! These stocks are a bargain now! I think that the market is undervalued!” And so I think we are having that tug-of-war. Which one’s going to win out? I’m not sure exactly. But we’re going to continue to see some volatility I believe, in the next week to two weeks, as we go forward.
I believe that what some people are, what is causing some of this market uncertainty is actually uncertainty in the markets, in the, you know, the United States, about the economy. That the gains we have made, are you know, back sliding on it.
I know that there’s been an awful lot of focus on the indebtedness of our country and the S & P down grading, etc. Frankly, none of that was a surprise. But what was I think, brought to people’s attention were the GDP numbers which were really horrible, some of the unemployment issues, the continuing unemployment issues. And I think that’s really causing a level of pessimism that is not helpful in the market going forward.
I have looked every single client’s portfolio, if you’re one of my clients, and want to let you know you are where I think you ought to be.
Let me just look at my notes here, there are a couple of things I wanted to address real quickly.
I believe that international is something that should have a very minor position in your portfolio. Just to kind of reiterate how some of the other countries have done, I mean we call them the BRIC countries; Brazil, Russia, India, China, they’re down, their indexes are down between 20 and 33 percent. So they’ve done very poorly.
I said yesterday that I thought municipals would be downgraded at some point. Today there were a significant number of municipals that were downgraded. This is just kind of the start, I believe of, kind of the downward slope of some of the government securities.
Gold is continuing to do quite well. I do believe that that makes sense to have in some of your portfolio.
Let’s see, I think that’s it for right now. I’m going to continue to watch things on a daily basis. I will probably do a video tomorrow or the next day- just to kind of let you know what I’m reading and how I’m interpreting some of the data as it’s played out.
I want you to call me if there are any concerns you might have, 303.747.6455, I’m Mike Brady with Generosity Wealth Management.
And you know, I’m here, I’m here to assist you, for us to get to your goals, for you to achieve your goals with some assistance.
I am a comprehensive, integrative wealth management firm. Mike Brady is my name, 303.747.6455. And we will talk to you again soon, bye, bye now.
