Lehman’s collapse was a full year before the financial crisis of 2008, and it’s very probable the full impact of Europe imploding won’t be felt for some time.
We, as investors, need to stay informed and ready to react.
Please continue to read my newsletters and blogs, and have my number in your speed dial. 303.747.6455
CLICK FOR FULL ARTICLE – EUROPE ECHOES OF LEHMAN
I’ve had a relatively low position in stocks for clients for quite some time, but I’ve decided to lower it even further. I’m quite concerned about the correlation between Europe and the US, emotion/news driven volatility, and the uncertainty about what the Fed will do.
The risk just doesn’t warrant having as high a percentage as I’ve had.
On the flip side, profitability, efficiency, and cash balances have all been rising in the firms that comprise the S&P 500.
Is the return worth the risk?
Click on video to hear more.
TRANSCRIPT:
Hi there, Mike Brady with Generosity Wealth Management, here in Boulder, Colorado and the question is “where do we go from here?” And we’re getting a lot of conflicting information. In the last month or so we’ve had huge volatility. We’re basically in a trading range, we have been for the last three or four weeks, but it’s been a trading range that’s extremely volatile. And we’re talking a half percent to one percent up over a few days and then “Boom!” a negative two, three, four percent.
We’ve seen the correlations between the European markets and the U.S. and Asia; very high. And as we look back, five, ten, twenty years, the correlations for the international market have become increasingly correlated. We’re a global market now. And so what happens in Europe is, irritatingly, affecting our situation here today.
We’re also seeing a lot of emotions. And we’re seeing a lot of news driven markets- which just absolutely irritate the heck out of me. We as a market, as investors, keep waiting for some bail out, some news from the government: and that just absolutely distorting things.
Philosophically, I’m going to go off on a kind of a slight tangent here. I understand that the government will always be a part of our free market system. It’s never been 100% free. However, the interaction we’re having now, it’s like this 900 pound gorilla in the room; that makes things kind of difficult.
Kind of on the flip side, as we’re looking at some of the positive things. We’ve got almost all of the S&P 500 have done their earnings for their second quarter. And year over year growth is about 12% over the previous year. And if we take out some of the financials, we’re talking almost 20% earnings, net earnings growth.
You’ve got net margins, back in 2008, that’s efficiency of almost 6%. Now we’re going all the way up to 9.27. So when you look at companies, at balance sheets, Apple’s got 76 billion dollars in cash. I mean a lot of these companies have cash on the side-lines, they have been very efficient. Unfortunately, the negative effect of that is they have trimmed their work forces. But as you’re looking at some of the larger companies, the S&P 500, they’ve become very efficient over the last three or four years. They’ve kind of trimmed, as they see it, the fat, and they’re sitting on huge sums of investable assets that they can redeploy at some point. They’re just not redeploying it right now. And so that’s very frustrating.
I am, long term, when I say long term, we’re talking three to five years, bullish on the market. I think that, you know, we’re set up for that. But on the flip side, I mean, I hear all the arguments about how Europe is imploding- which it is. How that’s going to drag our financial system down. What’s going to happen with the EU and the Euro is anybody’s guess. And so, there’s a lot of reasons right now where it could go either way. I mean I just want to sit here and admit that.
What I’m doing, in my portfolio, is I am decreasing some of the equity positions that I have. I’m absolutely going to continue to have some. But from the very conservative to the very aggressive models that I have for clients, I am decreasing the equity positions. Most recently, most likely in the next week or two, we’re going to hear what, if anything Bernanke and the Fed is going to do. We’ve been talking about a little bit about this twist where they buy a bunch of medium to long duration treasuries- to shore up…, well to keep interest rates low.
So, you know, there’s a lot of things in play but I’m just telling you that right now I’m going to decrease my equity position. The market could go up. Once again, I’m going to be happy three to five years from now. But right now, it’s kind of hard to analyze which way it’s going to go. And in that particular case, are you getting the return for the risk that you’re taking and right now I’m questioning that. So I’m going to reduce some of my equity positions and decrease the percentage, of course still stay in the game.
Anyway, Mike Brady, Generosity Wealth Management, here in Boulder, Colorado, my phone number is 303.747.6455.
I have a new blog on my web site, www.generositywealth.com. And I highly encourage you to go there and look at it. I’m going to have archives going back a number of years. And I think it hopefully will be, I think it will be very helpful and very interesting as you go back maybe two years of weekly or every other week, videos like this or other things that I’ve found interesting and (some) analysis. So you can go and get a flavor of what I’ve been talking about for the last couple of years.
I am taking new clients I would love it if you gave me a call or passed this video along to someone who might be interested in a comprehensive wealth management firm, Generosity Wealth Management, that’s me. You have a wonderful week, we’ll talk to you later, bye, bye.
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.
Debt Ceiling, Greek and European debt issues, bad global recession…..
Should you freak out? Time to move the cash to the mattress? I don’t think so.
Here are my current thoughts……..
TRANSCRIPT:
Hi! Welcome to the Generosity Wealth Management weekly Video/ Newsletter.
And this is the last week of July and what is really hot topic in the news right now is the debt ceiling negotiations; you know, should you panic, should you freak out, should you change your portfolio? And I have to tell you that I am actually more optimistic than pessimistic; which is in favor right now. That is kind of the easy thing to do. I mean we joke in our industry that economists have predicted ten of the last two recessions, and I don’t want to be that guy.
We’ve spent the last ten weeks downgrading the S&P 500, earning expectations, and we’ve heard from about 2/3 of the S&P 500, for the second quarter and surprise- 75% of them have exceeded those pretty low expectations. Right now companies have a huge amount of cash that they’ve been hording. Cash is ridiculously cheap right now. You’ve got earnings, their efficiencies are good. I continue to be somewhat optimistic about the second half of the year. I said that three weeks ago and I have not changed my opinion that we’re looking at some big abyss, some crevasse that’s going to hit us. I just don’t see that.
We’ve got three things that I’m really kind of paying attention to; we’ve got the GDP that’s coming out this Friday; we’ve got more earnings estimates that are coming out; and then we’ve got this debt ceiling.
If I have to guess on the debt ceiling-we’re going to kick the can down the road for a bit. It’s going to be relatively short to mid-term increase in the debt. Just enough to keep the newspapers in business with headlines. You know we’re going to be hearing about this for the next six to twelve months, irritatingly. But it is what it is.
The market as a whole is pretty much back to where it was in April before this correction. And with all these other things it’s actually surprisingly held its own. And as I mentioned we’re going to be looking at the GDP, we’re going to be looking at the debt, we’re going to be looking at the earnings. The earnings are looking good. The debt, I think, when the world doesn’t end on August 2nd, is going to be less of an event than what you’ve been led to believe.
And then going back to the GDP estimate, which is not really sure what. It’s been having some bad numbers, frankly, in the last couple of months. But the others are looking good.
Plus, I mean, the opportunities, just abysmal opportunities in bonds, kind of leads me to, and all the cash that been kind of on the side lines, kind of leads me to believe that this is going to be a good thing for August, September- not necessarily a bad thing.
So I’m going back to feeling good about my assessment at the beginning of the quarter.
Anyway, my name is Mike Brady. I am an integrated, holistic, comprehensive wealth management firm, here in Boulder, Colorado, but I have clients throughout the United States. My phone number; 303.747.6455. You have a wonderful week, and I’ll talk to you later.
The stock markets have been making some headlines recently. Last Friday, the DOW declined below 12,000.
Should you freak out? Is this the beginning of the end?
I also address whether I feel the gold rally will continue. Does it make sense to be a part of your portfolio?
TRANSCRIPT:
Hi Clients and Friends, Mike Brady here.
Just a quick video just to let you know what I’m thinking about this week. And this week I’m thinking about, sort of, the news headlines about the kind of, the steady erosion in the Dow and the stock markets, the equity markets, over the last week and a half to two weeks. The momentum has certainly slowed, but is this something you should freak out about, and completely sell all your stocks, and this is the beginning of the end? I don’t believe so. An official correction in the market is when you hit ten percent, and we have not hit that.
As of the recording of this video it’s down about six and a half percent from its high. And you have to ask yourself if this is, you know, completely impacting your portfolio, maybe you have too much in equities and stocks. So this is a good time to evaluate whether or not you are getting the full force of that, the extent of that decline. And if so, then you probably have too much in your in your, too much equities in your portfolio.
I do believe that diversification is a very key ingredient. The last couple of years we’ve had a pretty strong, upwardly mobile market with a couple of declines here and there; and most notably last summer in July. But pretty much it’s been up, up, up. And so something like this makes great news headlines.
I’ve been asked in the past if I think that gold is a good compliment to your portfolio- and the answer is yes. Gold has had a huge rally over the last few years. And one of the reasons why, there’s three reasons why I think it’s going to continue to be attractive and a nice hedge, a nice part (a relatively small part) but a part of your portfolio.
Number one is I think low real interest rates world-wide still make it attractive. I mean, real interest rate means what you are getting after inflation. So if your rate of return is five percent and inflation is four, then your real rate of return is the difference which is one percent.
The second reason why gold is going to be attractive is some fiscal concerns, highlighted in you know, continued fiscal deficits. And so, I think this is something that is a real concern and what makes gold a little bit more attractive.
The third thing is just emerging market economics. It becomes, as emerging markets world-wide, globally, people…, it becomes commodity driven, and people in those areas do want some gold and some inflationary…some protection against inflationary pressures.
I think of, whenever you’re looking at which asset class to go towards, whether or not it’s stocks or bonds or gold, or whatever it might be; it’s like a beauty contest. It’s not always what you think is the most beautiful but you have to think about what everyone else thinks is the most beautiful. And I do think that gold is something that everyone finds very attractive. And so we always have to evaluate do they still think it’s attractive? And we have to be smarter than them about that.
It’s the same way with the momentum of the equity markets, the bond markets, whatever it might be. And so, I think that this summer it is going to be choppy as it relates to the equity and the stock markets. We’ll continue to evaluate that. Do people, getting back to my analogy of the beauty contest, do people still think that it’s attractive? But I think, you know, some of the profitability of the underlying balance sheets of corporations etc., make it attractive to me, and I have to continue to watch to make sure that it’s attractive for other people, to other people, if they are seeing it the same way that I’m seeing it.
So anyway, that’s, those are my thoughts. That’s it for this week. My name is Mike Brady, my company is Generosity Wealth Management. I am a, kind of a holistic comprehensive approach with clients, with their financial well-being. Give me a call, 303.747.6455. I am a registered representative with Cambridge Investment Research. You have a wonderful week and I’ll talk to you next week. Bye bye now.