3rd Quarter Preview – Heading into the Election

The 2nd quarter distinguished itself by significantly increased volatility and ultimately seeing the unmanaged stock market indexes down.

Those same market indexes are still up for the year, and it’s my belief they will end the year positive, but with continued volatility.

November is the big election here in the United States, and regardless for whom you feel is better and hope will win, the market likes a reduction in uncertainty. At that point, at least some semblance of planning can be done for a few years by the private sector as it analyzes the tax and regulatory environment it may find itself.

Europe is unwinding, unemployment is still high, and Asia is slowing down. Profitability is high in our largest companies, cash balances on large multi-national corporations are huge, and creative destruction is in full bloom.

All adds up to some volatility.

Watch my video for a more detailed discussion



Happy 4th of July to you! Mike Brady speaking to you from Generosity Wealth Management here in Boulder, Colorado; and happy summer to you. Here for the second quarter review and the third quarter pre-view. Second quarter was a difficult quarter, okay? I don’t want to minimize that impact. May was just an absolutely brutal month. June recovered from some of that but not enough to make the unmanaged stock market indexes positive for the second quarter.

If you look back three months ago, one thing that I said is that I believed that volatility was going to increase, and it did. It did in fact increase; we saw a much more erratic market in the second quarter than we did in the first quarter. The unmanaged stock market indexes are still positive for the year. Three months ago, six months ago, I said that I believed 2012 was going to end as a positive year for those stock market indexes and I still believe that is true today. That does not mean you should not have a well-diversified long term strategy in your portfolio- you absolutely should. I think that’s important for every client.

Now as I look forward to the third quarter, there’s going to be a lot going on, particularly as we lead up into the election. The election is, of course, the first week of November, so we’ve got the third quarter leading up to it with the convention and all kinds of hype. But we also have, if you’re looking for things to be negative about; you’ve got the looming Iran crisis; you continue to have Europe problems with Spain and Italy; you’ve got China showing a slow-down and many analysts saying they’re going to have a huge correction at some point in the future; (who knows if it’s going to be third quarter or not.) But the you also have, not this quarter but in December, you’ve got the expiration of Bush Era tax rate cuts. And so they’ve been extended and now it’s come due again and it’s going to be in that after-the-election-but-before-the-inauguration and that’s kind of a big thing going on this year, between now and the end of the year.

On the flip side though, companies have huge cash balances, companies have been very successful at reducing their costs. So one of the positives of being very lean and mean and efficient from a company point of view is some of their fixed costs, like a decline in oil in the gas prices, can have a major impact on their profitability. And so I believe that’s a positive trend for these companies. Plus, they’re dealing with lower expectations. There’s a lot of bearish sentiment out there, so that’s lower expectations that they have to meet. One of the most recent studies has shown that potentially the housing crisis has hit a bottom, the prices. And so I think that it’s going to kind of stoke the stock market a little bit more.

I do continue to believe that the end of the year is going to be volatile, but it is going to end positive. You’ve got to remain diversified. I believe you should meet with your advisor and hopefully that’s me if you’re one of my clients, to find a portfolio that works well for you, that meets your long-term goals. I’ve said this time and time again, that one of the best things that you can do, and hopefully you can do that with your advisor, is figure out, you’re at point “A”, where is point “B”? How do you get there? What plan works for your risk level? With all the variables, so that you can have the life style that you want upon retirement. Or if you’re already in retirement, that you can not out-live your money. All the kinds of variables add up together. If you do have a long term strategy, frankly, month-by-month, quarter-by-quarter, these things are just data points and so I hope that you are sleeping well at night because someone is worrying about it on your behalf.

You are always welcome to give me a call, Mike Brady, 303.747.6455. My e-mail is mike@generositywealth.com www.generositywealth.com is my web site, I’d love for you to go see that. Hope you have a wonderful 4th of July. Not sure exactly when this video is going out, hopefully it is going out Monday afternoon, maybe it’s going Tuesday, I’m not sure but I’m recording it Monday, July 2nd. And like I said, I hope you have a wonderful 4th of July. We will talk to you later, bye, bye now!











Winners and Losers for the 2nd Quarter 2012

Much of the unmanaged stock market index gain for 2012 was in January, April, and June. May was brutal.

In my opinion, you must have a well diversified, long term strategy for your portfolio and for reaching your financial goals.

Do you have a plan and strategy you’re comfortable with? If the answer is “no” in any form, I encourage you to call me so we can discuss what needs to happen in order for you to emphatically answer “yes!” to that question.

Full Article on Winners and Losers for the 2nd quarter at the link below.

Click for Full Article


Don’t Buy on Hype

I have no idea what Facebook stock will do over the next 2 to 10 years. I hope it does great.

That being said, the above chart is the reason you don’t buy on hype or let your emotions lead your investment mind.

Be the smart money. Do your homework. Know why you buy a stock, under what conditions you’ll sell it, and be sure it’s part of a long term diversified strategy.


Active Management – Market Timing?

I’m asked periodically what I think of “market timing” or “active management” versus a straight buy and hold philosophy.

My first response is usually to ask for a definition of those terms. While it may be obvious to the person asking the question, if you ask 3 people you’ll get 3 different answers.

In this week’s video, I propose some definitions, but also share that while I think active management is preferable over your traditional buy & hold, market timing is great in theory but hard to execute in the real world.

Click to watch my video.


Good morning! Mike Brady with Generosity Wealth Management and today I want to talk about active management; and what’s the role of that, what’s the place in someone’s portfolio; and frankly can “timing” be done, and done successfully?

Let me just tell you that in a previous life, a different company that I was involved in the late 90’s and early 2000’s, we were known as the market timing firm. And we were extremely successful at that. And so, I know first-hand that market timing, with the right players and in the right environment, can be very successful. However, most people cannot market time on their own. And market timing, traditionally is meant to be when to go in and out of the market, whether it’s short term; meaning a day or two or a week or even longer term; month, quarter or year; going between stocks and bonds and cash, etc. whether that’s with mutual funds, etc. That’s kind of a traditional discussion of market timing. You know, I think that those that can successfully market time are very small. But I do believe it can be done it’s just very, very difficult. And it is extremely difficult for an individual investor to do it on their own, on their own portfolio. I use an example, whenever I need some legal work done, if I try to do it myself, I’m not going to be successful. Does that mean that legal work  is not successful? No. I have to go to a lawyer, someone who is trained and is unemotional about the particular problem or issue that I might have. But, as Mark Twain said, “A lawyer who represents himself has a fool for a client.” Well, what he’s really saying is a lawyer should not represent himself. So it’s very difficult when you’re emotional about an issue to handle it on your own. That’s why I think a professional adviser makes sense even if that person is doing some market timing.

I do allocations within sectors. And I’m usually almost always invested but I’m trying to weight, kind of tilt, one sector over another; whether it’s large cap, small cap, or mid-cap. What I don’t do is go 100% stock one day and 100% cash the next day, or even week by week. I think that that is a skill that is extremely hard to do and a lot of times it just isn’t very successful. I’m not sure that the environment today is the same environment that it was ten and twenty years ago.

Unfortunately, the statistics out there show that investors who try to time the market on their own are 20% less successful than if they had just done a “buy-and-hold.” (Source: Barry Mendelson, CIMA, CMC EResearch, “Dangers of Market Timing,” 4/29/2008.) And once investors become active, this study that I just read a week or two ago, says that 40% admit that they’re probably too active and that they’ve hurt themselves. (Source: Helen Modly, CFP, CWPA, Focus Wealth Management, Ltd., “How the Wealthy Avoid Behavioral Bias: 7 Strategies,” 2/13/2012.) So, I do, … I’m kind of giving a “waffle-y” answer here; I do believe it’s possible, it is extremely difficult. I believe that a better solution is probably to be well diversified and to tilt particular sectors one way or the other and be very well diversified. I do work with some good managers that I’m very pleased with their particular approach and I’d be happy to talk with you about them and the way that they manage money, not in a market timing situation but in a good active management situation where it’s deciding what are the “tilts” and the “weights” of that particular diversification.

Hopefully this video made sense and clarified things a little bit; either way, give me a call if you’d like to talk about it. I just absolutely love hearing from you and hearing from your friends. So pass it on to someone if you think that they could have some value from this video. 303-747-6455, my name is Mike Brady, here in Boulder, Colorado. You have a wonderful, wonderful week. Thanks! Bye, bye.

Defeating the Myth You Must Win on Every Trade

If you’ve been following my newsletters over the years, you know I believe in diversification and that one of the key ingredients to reaching your goals is to avoid catastrophic financial events.

It’s important to note, as the table above illustrates, that not every investment has to make money. Limiting the size and number of the losses is important, and if avoiding any kind of loss at any time is your strategy, then you’ll always be on the sidelines.

Risk management is key, and with that it is understanding some investments will do different things at different times, and not all will be winners in each time frame. Keeping your eye on both winners and losers and replacing them when necessary is a standard ingredient in prudent portfolio management.