“You can’t always control what goes on outside. But you can
always control what goes on inside.” – Wayne Dyer
There are no absolutes in life. When you find yourself making absolute statements, check yourself – are you experiencing a bias or do you need to have some humility about what you’re saying? Then take the next step, which is questioning, is this bias helping hurting me and is it true?
There are so many instances that I can point to where the “experts” firmly believed in the absolutes they predicted, to the point they were blind to any other option to the detriment of those they were providing guidance to. Each one with mixed results, but none on par with the black and white thinking.
Rather than a steadfast absolute, hold tight to the uncertainty, it’s not a negative- it merely means we’re not sure how things will go, but we are sure that no matter what comes our way, we’ll be able to handle it.
Hi there. Mike Brady with Generosity Wealth Management; a comprehensive full service financial services firm headquartered right here in Boulder Colorado.
About once a year I do a video on humility and, well, today is the humility video for this year. Because I think that it is so important that we remain humble as investors, as people trying to reach our financial goals, as people, in just so many different aspects of our lives. Right now the market is doing great. I love that. That’s wonderful. What’s amazing is when I look back at the people that I read, that I talked to, that are friends, that are clients, that are other professionals, whenever they talk in absolutes it’s a certainty that I’m going to react to it because I don’t believe that there are any absolutes in the world. I mean you want to be a good parent, you want to support your child but you don’t want to smother them. The world is filled with all kinds of dichotomies like that. You want to be a good manager and keep on top of things but you don’t want to micromanage, I mean the world is filled with them.
And the reason why I bring this up is the sense of humility about the future, I don’t know the future, you don’t know the future and certainly that guy writing the newsletter or your next-door neighbor or your brother-in-law, et cetera, doesn’t know the future either. And so, when you find yourself making absolute statements maybe check yourself say wow maybe I’m having a bias here or maybe I need to have some humility about what it is I’m saying and then take the next step, which is hey, is this bias is this helping me or hurting me and is it true? Maybe give me a call, give somebody who might have a real sensitivity to this. Some examples of this are about six months ago someone said well we know that after 2018 and 2019 and years going forward are going to be all kinds of volatile, I mean we know when things are going to be volatile. No not really. I’m going to put a chart up there as of September 30th you’re going to see that 2019 has been like 2017 an unbelievably low below average volatile as defined by movements of one percent or more.
I had clients that when after the last presidential election say well the market is definitely going to go down negative. That’s just not true. And on the flipside I had people 12 years ago when another president from the other party came in, you know, Obama said oh yeah this is going to be horrible and the market is going to continue to plummet. And the answer is no that didn’t happen. I mean there’s just so many instances that I can point to, particularly in the investing world, where supposed experts, supposed people who called the 2008 decline and financial crisis now say it’s the time to move into all your cash into gold or all your money into cash or to gold or whatever.
And I’m going to put a chart up there right now it just came out a couple of days ago where some supposed big-name experts called it completely wrong and how people who would have listened to them would be drastically worse off by sometimes over 50 percent of missed opportunity gained. These experts I’m sure believed in what they were saying, but they unfortunately started to believe with absolute certainty what they believed in without any kind of reservation or humility so that’s where things really become a problem.
I’m a believer that if we’re going to have a bias the bias ought to be being fully invested in the market. And the reason why is I’m not looking at one year, five years, ten, I’m looking at decades upon decades. And you’ve heard me talk about this in all of my videos going back multiple years about historically that has been the winning strategy. The future, absolutely could be different. Once again, I don’t know the future and you don’t know the future, however, what I do know is that the instances of our emotions causing us to do one thing over another, those are the things that have caused us to have problems. When we look back at, and I even look back at my anecdotal, okay I’ll even admit it anecdotal conversations with people throughout my 28 years of doing this when someone is so certain about something many times it’s the opportunity that the possibility might be that they’re absolutely wrong. In the late ‘90s, a great example, if you weren’t all 100 percent in tech you were a fool right before the technology bust. Real estate never loses money right until it does at the end of 2000s. So, having the humility, being invested, even with what I’m saying here today that’s why I believe in a diversified portfolio for clients and investors as you reach your goals you’ve got to have that humility and it’s one of the big lessons that 50 year old Mike would tell 20 year old Mike if I could have that conversation.
Mike Brady; Generosity Wealth Management; 303-747-6455. You have a wonderful day. Thank you. Bye bye.
““It’s good to have money and the things that money can buy, but it’s good, too, to check up once in a while and make sure that you haven’t lost the things that money can’t buy.” —George Lorimer
Each of us has an emotional and a logical side- in investments the emotional side can present biases in our thinking. As we get into the thick of things in terms of elections and leadership, I hear more and more political biases crop up with clients, investors and friends. No matter what side of the aisle they sit, they believe “my” person needs to win for the market to go up, or if “my” person loses it will go down. However the stats all illustrate there is no correlation between that political bias and reality. Let me show you:
Hi there. Mike Brady with Generosity Wealth Management; a comprehensive financial services firm in Boulder Colorado. Today though I’m recording this video from as I call it Generosity Wealth North, which is in Dubois Wyoming. This is where I like to spend a lot of time over the summer. It allows me the opportunity to get away from the hustle and bustle, focus on the business, what are my values, what are my beliefs, what are my core tenants of the business, of who I am as a person, how I interact with clients, all of these various things. And right behind me is the view from the south, so this is actually out of our bedroom, which is our cabin is right behind the camera. You’re going to see this is a ranch, a guest ranch and there’s a, well you probably can’t see it but there’s a little pond over there and our good friends the Prines have been there for five generations. We’ve had this cabin here for, my wife has had it for 45 years; her father got it in the early ‘70s, so almost 50 years.
Let’s get down to business. It’s my belief that we have a logical side and an emotional side in our lives and the way that we approach decisions and so, the problem is when one gets out of whack. So, if we’re all emotion then we’re going to be – I think we all know somebody like that who makes every decision on emotions and they’re just going through life in that regard. We know some other people who are all logic. We’ve got to have a combination of the two and I’m going to expand upon this in a future video; I’m not going to really talk too much about it today. But, it’s important for us to know what our biases are. That’s the emotional side of our investing. I would actually say that the logical side, the mathematics is pretty good from an investing point of view. Not good, it’s the easy part. The hard part is our emotions. We’re human beings.
What I’m hearing right now is a lot of political bias from various clients. And I’ve been doing this for 28 years. As a matter of fact, I got my licenses in August of 1991 so this is exactly my 28thyear of meeting with clients. And what I hear from people on both sides of the aisle, whether Democrats, Republicans, et cetera, is your rooting for your guy, which is fine or your party, you know, your political view, but you’re extrapolating that into what the market is going to do. So, if your guy wins or gal, your person wins, then the market is going to go up or the other person wins then the market is going to go way down. And I’m here to say that historically speaking that has not been the case. I don’t know the future any more than you do so when I look at some percentages I think it’s important for us to acknowledge that it could be different in the future. All we’re saying is what has happened historically.
Up on the screen what I’m putting up there is the election cycle years going back 82 years. Historically speaking the worst has been the year after the election and at 52 percent of those years have been positive going back to 1933 all the way up to 2015. And if we were to include 2017 that was actually a positive year. That was the year after the most recent election, but this is the graph that I have. When we go into the pre-election year, which is that second bar graph over the third one over, is 90 percent of the years, I like it, this year have been positive, with an average return of 16 percent, which is pretty remarkable, pretty remarkable when you think about it. The election year, which would be something like next year, 2016, 2012, 2008, et cetera, 70 percent of them have been positive and, of course, 30 percent negative with an average return of about 4.9 percent.
Let’s go over to the next graph that I’ve got on there. What you’ll see is pre-election years, like we are having right now, the worst going back 82 years has been a few percent loss.
Election years like next year we’re going to see, that’s the next graph on there, the vast majority of them, 70 percent of them have been positive, you can see some have been negative, usually single digits, except for 2008; that was the financial crisis. I would argue that that had very little to do with the political, it just happen to be in an election year cycle. It could have happened in 2007 or 2009, it just happened to happen in 2008. So, the fact that it was an election year or any kind of a stamp on the current president at that point I just don’t believe. I think that the logic, the data is there to say that it was going to happen one way or the other no matter who the president was.
Post-election years is the next graph that I have up there. You’re going to see the majority of them are positive, 52 percent of them. Which when we really look at all of the years together I mean it kind of makes sense that most of the years are positive because you’ve heard me on previous videos that say that three out of four years historically have been positive and so we ought to have that mindset, assuming that we believe in the markets, we believe in the United States and in the world and that this is the best place for our money, why else would you have money in the markets if you didn’t think it was going to go up long-term.
So, I think that it’s important to remember that you can see that from a correlation point of view, whether or not let’s go back to the post-election year whether or not it was a democrat or a republican you can sit here and cherry pick whether or not you think that your guy or gal was the reason for that or your particular party.
It’s just not it.
One thing that I hear as well is a lot of people saying well in the last two/three years have been incredible for the stock market, which it has. Hey, listen, it’s been a real good run. I have to say that there were people in 2016 that said if Trump was to win the market is just going to plunge. Well you know what, the exact opposite happened; 2017 was a very non-volatile year and very positive for the markets. 2018 more volatility. 2019 so far this year, very little volatility historically speaking and a very nice positive year. So, we’ve had two of the years so far positive, one year not so good. But here is a graph that I’m putting up on the screen, which will show the top graphic is how many months after the election for Obama. The bottom one is how many months after the election for President Trump. Listen, I don’t want to take away from anything that President Trump has done, but I’m just saying that we have to keep these things in perspective that Obama, from a market point of view, really had a tough time at the beginning of 2009. I would argue not his problem not his fault, that was a continuation of the bad 2008, but then it really kind of rallied through ’09, ’10, ’11, ’12. I mean remember were you there paying attention? I know I was. Nobody wanted to invest in equities. I mean everyone was so negative so negative that was the time to be positive and those that invested in ’09 heavy were the ones who were the big winners.
For Trump over the last couple of years you can see those years it’s been positive. Great. I want to say that that has proven that those people who said it was going to be negative because of him and a volatile person, individual, et cetera, no that’s not true. You can say maybe it was because it was a continuation of Obama. Okay. Whatever. But the fact is that it is positive but it hasn’t been as great as all of those who give all the credit to Trump or those who say no it should have gone negative it actually went positive. What you’re seeing here is a lot of not duplicity, a lot of hey, this is what is going to happen, lack of humility and the opposite happened many, many times, or there’s no correlation. If you’re looking for a pattern, our brains have a tendency to do that, you’ll find a pattern. I’m saying I don’t believe that there’s a pattern and this is how I view the world.
Mike Brady; Generosity Wealth Management; (303) 747-6455. Give me a call anytime or an email. Frankly, you won’t know if I’m there in Boulder or I’m up here in Dubois because I am all electronic up here with no problems. I’m going to end it with a little pan of the rest of the valley. You have a great day.
