“There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self.” – Ernest Hemingway
The market took a deep dive as the Coronavirus pandemic broke loose, but contrary to what many pundits believe would happen, the market is rebounding quite well so far. We have regained a significant amount of what was given up at that time. Let’s take a look at the math, it’s important to know how it works. And we’ll also talk humility – the future; it is inherently unknowable.
Transcript
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.
It’s about five or six weeks into our stay at home order. Hopefully you’re doing well. I like short hair and my hair is feeling long to me, but other than that I’m doing well and I certainly hope that you’re doing well as well. I am going to make this a relatively short video I just want to talk about where things are currently, what’s kind of happened in the last couple weeks since I last spoke with you. A little bit of humility speaking about the importance of humility and then we’ll kind of wrap things up for today.
So, up on the screen is a chart as of today and what you’re going to see is in the last month, you know, four/five weeks ago we were at our lowest for the year and at that time there were lots of pundits who were saying that the market is going to continue to go down and down and down and, of course, they were wrong. We’ve regained very quickly a significant amount of what was given up at that time. I think I mentioned if you go back to my video at the end of March and the beginning of April I talked about that when things are the most uncomfortable is when some of the most successful investors invest; Warren Buffett says to be greedy when others are fearful. And at the end of March was a very fearful time and really, at least so far from what we’re seeing in that on my stock market index, a great time for you to have bought in.
From a math point of view it is important to know kind of how the math works. If you have $100 and you lose 50 percent, that’s $50 left. In order to get back to you even you have to make 100 percent, $50 on the $50, just to break even. If you lose 20 percent, in order to break even to go back up you have to make a 25 percent. This is important because we went down almost 40 percent. It’s going to take quite a number of percentages if you’re just adding the percentages per day in order to break even. We are definitely on the right track. The momentum is there. There’s been an awful lot of reasons given in the last month for the market to recover how nicely how it has done. None of them are exactly right and none of them are exactly wrong so this really leads into my conversation around humility.
I watch the news all day long, I mean on the screen, I don’t watch it on a TV I watch it and I read it. And the headlines and the reasons I see them change all day long every single day and because of that I’m cynical that anyone has exactly the answer. If we went back I could sit here and show you day by day how the market is up because of renewed optimism and then the next day the market might go down a little bit and it’s like renewed pessimism. I mean really all in the same day? Within a day or two? That’s ridiculous. I think that it is more important to stick to the plan, have that long-term and get out of the way than it is to have an exact reason or an exact answer for why something went one way or the other. When you’re investing for a week or a month or even a quarter you’ve got to be right. You’ve got to call that thing correctly. When you’re investing for multiple years, five years, ten years, 20 you don’t have to be quite as accurate in the short-term. Of course it’s better to have good luck and get it at the bottom and the low and that adds to it, don’t get me wrong. But it’s important to be invested in it as well, particularly when you look back from two, three, five, 20 years from now.
So, having humility is very important. If I was to say exactly what the weather is going to be like next week you would say “Mike you might have a good idea but you’re crazy.” Why? Because I’ve seen weathermen be wrong so many times before. Well, I’m just telling you that people who tell you exactly what’s going to happen are also like the weathermen who profess to know with great confidence exactly what the future holds. I’m just saying I don’t buy into that and hopefully you never hear that from me as well. I always hedge my language by saying this is what I believe, here’s what I think and that kind, but it’s about the future; it is inherently unknowable.
Mike Brady, Generosity Wealth Management, www.Generositywealth.com. Have any questions any concerns give me a call.
I will send another video out in a week or two or if something really big happens. Always stay tuned because if something momentous happens I want to be there in order to explain it and kind of get through all of the noise of the TV and all that chaos to say this is what it really means and this is why it may or may not be important. Thank you. You have a wonderful day. Bye bye.
“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.
