Healthy Body, Healthy Portfolio

He who has health has hope; and he who has hope has everything. – Arabian Proverb

Just like you need to be healthy in your body, you have to be healthy in your portfolio. How are these analogous you ask? Well, simple. In both you have to be proactive, not reactive. For your health you eat properly, stay hydrated and get plenty of exercise (or so we hope!), the same goes for your portfolio. You plan and diversify to ensure that, should one day an event cause a bit of “sickness,” both you and your portfolio, will have the strength and fortitude to regain health quickly.

Watch for more of this month’s discussion in finding some strength and peace of mind in uncertainty.


Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

So, my face is very red and you might notice that.  It looks all splotchy, but I am completely healthy.  I’m 51 years old, very fair skinned and I have a lot of accumulated years of skin damage.  Every six months my doctor uses that liquid nitrogen and zaps out those precancerous cells.  When I went there two or three months ago he said “Mike, I’m going to have to dunk your whole head in a liquid nitrogen or we can do twice a day Fluorouracil ointment on your face. It is basically a chemical that will cause your face to get red and it will peel off, but then new healthy skin will emerge.”  So believe it or not it’s been a week since I stopped taking it and now I’m in the healing phase.  Hopefully I’ll be looking even younger when my face completely heals.  But I just wanted to let you know I’m using my productive time of isolation at home to the best that I can.  Those of you who are reading this now I’ve given you a reason to watch at least the first minute of the video.

It’s been a couple of weeks since we’ve spoken and since I’ve given a video but I want to give a little update of what’s been going on. Then I want to equate your portfolio investments to reaching your financial goals to your body and to being healthy because I think that’s a good analogy and a good way to think about things.

I’m going to put a chart up on the screen and this is a multiple year, multiple decade chart.  What you can see is from where we were on the S&P 500 which is an unmanaged stock market index to where we are now is dramatic.  The last two to three weeks have been a nice rebound from the lows that we tested two or three weeks ago.  This is great.  Remember, go back and watch my videos.  This is my eleventh video since February 1 and what I talk about is that the economy and the stock market are tied together but they are not necessarily lockstep.  Sometimes you can overshoot so the stock market is forward thinking.  Therefore, it can sometimes overshoot what that mark is or what it believes in the future.  You’re going to see up there that from a time point of view we’ve given up a year’s worth of gain, but it’s not like we’ve given up 12 years’ worth of gain.  Quite the opposite and that’s why it is important to have investments, at least in my particular opinion.

S&P 500 at inflection points

I’m going to put another sheet up on the screen and what you’re going to see is all the pullbacks since the financial crisis of 2008.  It’s like the old adage that every general is fighting Vietnam or every analogy to any kind of skirmish that we’re ever in is equated to Vietnam.  Well it feels like every pullback that we’ve had has been equated to the 2008 crisis which was quite dramatic and probably the biggest one in all of our lives.  But they have all recovered and you can see that, and this one is no different.

Market volatility

What I want to talk about today is the philosophy and how to have a healthy portfolio or a healthy mindset because I believe that our attitude is very important in some of the fundamentals.

Let’s talk about our body.  I had a great conversation with a doctor client of mine 6 to 12 months ago and he said something I thought was really poignant and I’m remembering it now.  He said “Mike, the body in general if you just leave it alone it’s going to be fine.  As a doctor it’s first do no harm and that’s what the doctor said.“ Now it’s Mike Brady talking and I have to tell you that I grew up with that philosophy.  My parents believed that in general you leave the body to handle most of its stuff for 90-95 percent of it.  Of course you need to see a doctor, but not every time you get a little tiny cut or a cough or a sneeze.  Well, your portfolio is very similar to your body.

Prior to getting sick you need to eat well, you need to exercise, you need to watch your weight.  There are certain fundamental things that you need to do to be a healthy human being.  You need to have multiple types of exercise.  If you’re only doing one you might have an overtraining problem and that might lead to an issue down the road.  If you’re an active person, you eat well, you eat different types of food so that when you become sick – which you know that you will become sick.  You will get a cough or a cold or even the flu at some point and you will be well prepared for that situation.  Now, if you spend all of your time in conversation of “gosh, I wonder when I’m going to get the cold.  Gosh, I wonder when I’m going to get the flu.”  Or you situate your whole life to avoid a cough or a cold or the flu, that’s not a very exciting life and I don’t think that it’s very helpful.

It’s the same way with portfolio.  It’s important to be well diversified in advance and to have a healthy portfolio and understand that you will have a cold or a sneeze or a cough or even the flu at certain points in time.  While it might be interesting to say “gosh, I wonder when the market is going to have a correction”, I don’t believe that’s very helpful.  If you were healthy and you were doing everything that you can to have a healthy portfolio like you do everything you can to have a healthy body, it doesn’t really matter.  It’s going to happen.  That’s wasted energy–that’s wasted effort.  If you do everything  you can to avoid that portfolio correction or the market going down or to have any short-term loss, you haven’t really lived in your portfolio.  I think you’re going to hurt yourself long term. That’s in my opinion.

Of course, there are lots of hypochondriacs out there in your life and for them every cough and cold is immediately to the worst case scenario.  It’s no different with our media and with certain investors as well. Avoid that–avoid that tendency.  If I have just described to you when it comes to the portfolio that every single cough or sneeze is all of a sudden the absolute worst case and you sit there and worry yourself needlessly.  You might say to yourself “yes Mike, but this is different. Flu can sometimes kill you.  Maybe your analogy doesn’t really work.”  My answer is you’re right, it is not a perfect analogy.

I’m going to put a chart up on the screen and since 1950 a diversified portfolio, a 50 percent unmanaged stock market mix, 50 percent unmanaged bond index.  A diversified portfolio has always recovered within five years.  It could be different in the future.  Does the flu kill people?  Absolutely, it does.  I heard a statistic and you know this because of everything that we’re going through, killed 60,000, 70,000, 80,000 people in the United States last year. “Mike, isn’t that very similar to a portfolio.  We’ve got to make sure that we don’t kill ourselves.”  Yes, that’s why you have to go into it very healthy.  You can reduce that probability of that happening of dying from the flu, but you can’t eliminate it.

Time, diversification and the volatility of returns

What if I told you that at least historically a portfolio has always come back.  It has always come back.  And in order for you to die, everybody else has to have died as well.  Unlike the flu when it would be just you, if you have a diversified portfolio you might get sick and everybody around you might get sick. But in order for you to die then everybody dies and then what’s the whole purpose.  It’s the same way with a portfolio.  In order for your portfolio to go down to zero, if you’re diversified with hundreds of stocks, maybe thousands of stocks within a mutual fund or bonds or various investments, marketable securities, all of them have to go down to zero and everybody that you know, everyone around would have gone down and we are in a real Armageddon situation.

Please, I recommend that you look at my last video.  Do you arrange your entire life, your whole portfolio, around the absolutely worst case scenario of everything going down to zero in that incredibly unlikely, but possible, situation?  My answer would be absolutely not.  And, if so, I’m probably not your guy because I think that makes no reasonable sense.

Just like you need to be healthy in your body, you need to be forward thinking – you have to be healthy in your portfolio.  Some people are not.  Some people just never think about it.  They don’t care what they eat, they don’t care about exercise.  When they get sick they load their body up with lots of chemicals. They’re very reactionary.  That’s not the way I think things should be.  It’s very similar to a portfolio. They’re reactionary and they’re freaked out and they’re doing all kinds of crazy things in the midst of all their emotions.  They’re thinking with their stomach, not with their head.  Those of us who are thinking with our heads have already thought about it.  We know it’s going to happen. Great.  I don’t know how long it’s going to last just like I might not know how long my cold or my sneeze or my flu is going to last.  But I have high confidence because I’m healthy going into it that I will emerge from it and then move on with my life.  It’s no different with a portfolio.

Mike Brady, Generosity Wealth Management, 303-747-6455.  You have a great day.  Bye bye.

What, Why, When

“By three methods we may learn wisdom:  First, by reflection, which noblest, Second, by imitation, which is easiest, and third by experience, which is the bitterest”  – Confucius


We’re all under strict stay-at-home restrictions now and trying to make predictions about an unpredictable situation, which is impossible. In today’s video we take a look at what we are seeing in the market and the economic factors at play; when we might see a rebound and; why we are seeing such a strong impact as a result of an unprecedented health situation.

As you watch, I want you to remember what I say in every video, please stay calm and let’s do our best to look towards the horizon and keep our eyes set on better days.



Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

As you can see from the backdrop I am under a stay at home order just like you are so I’m recording this from my home office.  This is my ninth video in the last two months because there’s been an awful lot going on. I’m recording this on Sunday, March 29, in the afternoon.  Normally I wait until the quarter is over to record the video and get the newsletter out to you but frankly, I want to be a couple of days in advance so that I have the recording and the video so that I can get it out to you right away as the quarter ends.

I want to talk today about what, why and when.  Before I do that I just want to share with you a personal anecdote about some of my current thoughts not related necessarily to the market.  I’ve only been out two times in the last week and both times have been to a restaurant.  There’s a number of restaurants that I like here in Boulder and I want them to do well.  While I have lots of food here at home I want to go out and support them so I’ve gone and picked up my food from the takeaway.  When I go in there it’s just really sad.  I go in and all the chairs are up and in both restaurants all the tables were pushed to the side.  I’m not sure if they’re doing deep cleaning or what they are, but it was just so very sad.  Boulder is completely empty.  When I see the photos of New York City and some of the other big cities – San Francisco, Los Angeles, et cetera, it just really makes me sad and it’s just a bizarre time that we’re living in.

But what it does also do is remind me of all the goodness that is in my life.  The fact that I can stay at home and have a wonderful place in the mountains of North Boulder with a wife and dog that I love and I’m safe.  I don’t have to worry about that.  Most of the people that I associate with, the fact that my clients are doing well, I know because frankly, I have a small microcosm.  To be my client you have to be either on your way to reaching your financial goals or have reached them and want to continue to maintain them.  There’s a lot of people who are not in that situation.  The restaurant workers, the servers, all the blue collars, the people with only a high school degree, those with very little college.  There’s a lot of people who are going to be hurt by this.  The small businesses.  This is just really painful and we’re not really sure how this is all going to play out going forward.

The fact that we can have a fridge full of food and a pantry is a great thing.  There’s a lot of people in much of the world who don’t have that option whether you’re in India or Africa or many other places where you have to go and get food every day.  I just can’t help but think about how blessed I am even in a situation that if I allow it, I allow it to get down and it gives me a little bit of perspective.

Let’s talk a little bit about the what has happened over the last couple of months.  I’m going to put up on the screen a chart – the percentage change of an unmanaged stock market index, the Dow Jones industrial average.  What you’re going to see is that it went significantly down since the middle of February all the way up until Monday of this past week and then it had a nice rally this past week as well.  It hit a low on Monday and then by Tuesday, Wednesday, Thursday it started to come back, but it is still over 20 percent down for the year as of Sunday, March 29.

Let me put another chart up on the screen.  This is the S&P 500 which is also an unmanaged stock market index.  You can see that I put a line to where it is right now and that it’s given up a couple of years’ worth of gain.  We worked really hard for all those gains and I’m very happy with all of the gains over the last 10 to 12 years.  We’ve given up a few of those years right there as you can see.  That’s the red line that we’ve got, that horizontal line.

S&P 500 at Inflection Points

The next chart that I’m putting up on the screen are bonds and general bond indexes, unmanaged bond indexes or treasuries and various particular categories of bonds.  They’re doing what they should do which is go positive when the stocks re going negative.  That usually is what happens.  Not always.  Many times they do the same thing if everyone is rushing toward cash.  They are positive for the year and a return that a diversified portfolio will have is dependent upon how much bond, stock – what that allocation is between the two.  If you’re very aggressive and have a high percentage in stocks or equities then, of course, you’re going to be lower now.  You were higher last year.  You’re going to be lower this year.  More volatile.  If you had lots of bonds then, of course, last year in general a diversified portfolio was probably not as high as a stock portfolio, and it’s not as down this year.  That’s really the what has happened so far this year.  And this is just talking about the stock market.  This is not talking about the economy because frankly, that is still to come.

Fixed Income Yields and Returns

Just a few days ago we had the weekly unemployment numbers and they were huge compared to 100,000 or 125,000 it was three million.  Just an absolutely unprecedented number and more is to come.  One of the things that I would say and I’m going to repeat this by the end of the video is I would argue that the stock market and the economy are even more complicated or at least as equally complicated with the number of variables and moving pieces as a pandemic, a virus and how that might move.  Think about how many experts are giving various opinions and they’re not really sure because it’s about the future and nobody knows the future.  We put a huge stock on the economy and that’s going to have some big impacts for quite some time.

Let’s talk about the why.  Well, the why is this virus and the response to it.  Let’s talk about what it wasn’t.  It wasn’t because of an oil embargo.  Quite the opposite.  Oil was at an all time low.  Not an all time low but the lowest we’ve seen in decades.  It’s not because of a tech bubble.  It’s not because of a financial crisis or real estate.  No, this happened because we flipped the switch.  We pretty much put a halt on much of the economy worldwide and this is something that we have not seen before.  The stock market is forward thinking. The stock market is saying how is this going to impact.  And sometimes we get it right and sometimes we get it wrong.  Sometimes we being the stock market and investors.  Sometimes there’s an overreaction, a belief that it might be worse than it is.  Maybe it’s priced it in already.  Time is yet to tell on this.

I want to put up on the screen the price of oil.  You’ll see I’ve circled it.  That’s what I’m talking about.  On the far right hand side is the price of oil and it’s under $25 a barrel.  The demand has completely dried up because we’re all staying at home.  I’ve never filled up my truck as little as I have this month because I’ve only put 10 or 15 miles on it in the last two weeks.  There’s also an awful lot of oil out there.  This video is not about oil, but oil is at a huge decline.

Oil Markets

The next graph that I’ve just put up there is unemployment coming into this particular situation was also at historic lows.  The top line are those without high school education and those are the ones who are going to be the hardest hit.  Not everybody could just work at home.  Not everybody is a white collar worker who can do something like that – a tech or other types of financial workers.  A lot of people have to interact with others and those are the ones who are going to be hardest hit. It’s good for us to know why, but also why not.  I mean let’s talk about before I get into the when because that’s really the big question.  Coming into this situation we were actually in a pretty good spot and we still are for many companies, particularly the large corporations.  When you look at Apple with over $200 billion in cash, when you have Amazon hiring over 100,000 new employees to meet demand.  When you look at some of the other companies – Microsoft with over $100 billion, with Alphabet which is the parent company of Google.  Much of silicon and technology and pharmaceuticals and big companies are going to come through this okay or at least they’re coming into it in a strong position unlike where things were at the last financial crisis which was 2008.

Employment and Income by Education

It’s really good to remember that there’s a lot of reasons to be optimistic because we came into this with a reasonable, many of those companies reasonably over the last ten years said we want to be ready for the next big shock.  Some companies are ready and some aren’t.  One of the things that a situation like this shows are those companies whose balance sheets are not good, and this goes from the big companies, the middle companies all the way down to the small.  What we’re going to see in my opinion in many of our communities is a lot of businesses go out of business whether that’s restaurants or service businesses, et cetera.  Those that were either highly leveraged with lots of debt or they have profit margins that were extremely low and they just couldn’t handle something like this.  So it’s important to always have a good balance sheet and to have strength when the unexpected happens.

The big question – let me pivot now to the when because isn’t that really what we’re always talking about.  If the market loses 20 percent on Monday and comes back on Tuesday, Monday night was really horrible.  But most of the time people don’t mind.  I mean people move on.  They quickly forget.  It’s really how long you are under and the longer from a stock market point of view or portfolio that you’re negative, the longer that timeframe goes, the less comfortable you become because you’re always remembering where it used to be. We call it a high water mark sort of like water in a tub.  You can see the ring and where it used to be and that’s your new base for where you believe that you should be.

One thing that the stock market does is it continually gives us daily prices, and our house we don’t get daily prices because we don’t sell our house every day or other people aren’t buying exactly the same house.  We might have an estimate but we don’t have daily pricing.  The same thing with the economy.  We do not have daily, minute, by the second pricing and so as this dribbles out over the coming months we’re going to have a better and better picture.

I remember back in 2000, 2001, 2002 all the way up to about March 2003 so it was really about March 2000 to about March 2003.  It was a three year timeframe from the last big tech bubble.  It was bad.  Didn’t like it at all.  It was uncomfortable, but it was the length of that where I saw people after a couple of years start to say to themselves wow, maybe this isn’t for me.  I mean really almost the exact time when it was the perfect time to buy, it was that length and that loss of confidence in the plan.

It’s important to remember that when you do a financial plan or some kind of a what do you need in order to meet your financial goals, it’s an average rate of return.  Let’s say it was five percent.  That doesn’t mean that every year you make five percent.  By the way I’m just making up that number.  It means that 50 percent of the years you’re above five percent and 50 percent of the years you’re below five percent.  If one year you had positive 20 (I meant to say negative 20), maybe another year you had negative 15.  It was the average of five and that’s what’s real important is to keep that in mind because you can’t just focus on the negative 15 in my particular example here.

I’m going to a chart up on the screen of some bear markets and subsequent bull runs.  You can see all the way back to 1928 some of those huge declines. And that red line up there at the top is a 20 percent market decline.  What you’ll see is not necessarily just on this chart but I’ve shown other charts that about every year we have a ten percent decline in the market.  About every four years we have a 20 percent decline in the market.  And about every ten years we have a 40 percent or more.  One thing that has been consistent is it has always come back but not always in the timeframe that we would like.  We would like it to come back the next day.  It just doesn’t quite work that way.

Bear markets and subsequent bull runs

I’m going to focus in now, I’m going to zoom in on the bottom left hand side where that circle is.  You’re going to see the last four major corrections and the last one there is the one that we’re in right now.  That number, that duration, the number of months.  Right now we’re one month into it.  See that number one.  The last one was 17 months.  Thirty months, three months in the 1987 crash.  The average was a couple of years.

Bear markets and subsequent bull runs

I’m going to put another chart up on the screen.  You’ve see this before because I keep using this chart over and over again.  If you’re not paying attention well, shame on you.  Pay attention.  If you were 100 percent in the S&P 500, the unmanaged stock market index, it took you five years give or take to break even from the last financial crisis.  It took you either two or three years depending on the allocation of 60/40 stocks or bonds or 40/60 stocks or bonds.  It has always come back not when we want it to, but sometimes it takes a little bit longer than what we would like.  It’s the when that is going to determine your happiness.  And so that’s why I have repeatedly over the last eight, and I say it here again in the number nine, the ninth video in the last two months that it’s the timeframe and the time horizon and your discipline to stay with what you spent years developing and becoming comfortable with.  Know that these things happen.  When it does happen you still stick with your plan.  The people who are going to be, in my opinion, the happiest five and ten years from now are those that look back and say it was absolutely horrible, it was a lesson I wish that I didn’t have to go through but I’m actually wiser because of it and I believe my outcome is better because of it as well.

Diversification and the average investor

I’m going to continue to do the videos throughout the month of April.  Why?  Because lots of stuff happens and I think that this is a great medium in order for you to get clear and concise information from me.  Hopefully non-emotional, non-sensational like you get on TV.  I’m going to try to be as up front and blunt with you as I can.

Mike Brady, Generosity Wealth Management, 303-747-6455.  Thank you.  Have a great day.  Bye.

March 23, 2020 Market Update: Fear

“Alcohol: the cause of, and the solution to, all of life’s problems.” – Homer Simpson

One thing we hear, especially during challenging times like these is, “I just don’t want to lose it all. I’m fearful of losing all of my portfolio.” In a diversified portfolio you are invested in hundreds to thousands of various things whether it be stocks or bonds. Whether you have a conservative portfolio or an aggressive, it should be diversified. So let’s unpack the fear of “losing it all.” What exactly does that mean and is it something that could actually happen? How does one then walk out of that fear and what action is needed to overcome?



Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

You can see from the backdrop that I’m still self-isolated at Generosity Wealth North Boulder Headquarters which is also known as my home office.  Hopefully all of you are doing well.  I have some random thoughts today and the first one is something that I periodically hear from prospective clients over my last 30 years which is I want to be invested but I just don’t want to lose it all.  I’m fearful of losing all of my portfolio.  Let’s deconstruct that and talk about that as a fear or as a concern.

In a diversified portfolio, and you should have a diversified portfolio, you’re invested in hundreds if not thousands of various issues.  Whether or not that’s stocks or bonds or whatever that particular portfolio is whether it’s conservative, moderate, aggressive. It’s invested in hundreds like I said, or thousands.  In order for that portfolio, that pool of investments, to go down to zero all of them would have to go down to zero.  All of the manufacturing companies, all the technology, all of the oil, all of the service.  They’d have to go down to absolutely zero.

Can individual sectors go down at certain points?  Absolutely.  Can individual stocks go from something to bankruptcy?  The answer is absolutely.  That’s why you shouldn’t have a portfolio comprised of only an individual stock or just a few stocks or just some specific sectors.  It just doesn’t make sense to be that undiversified.  Having a diversified portfolio does not guarantee against having market ups and downs, and right now we’re seeing some of those market downs.  It does not protect you fully from that, but in order for it to go down to zero all of the underlying investments that comprise that portfolio which would be hundreds and thousands and the most common names and common stocks and companies out there would all have to go bankrupt and down to zero.  Hopefully you can see this is not very probable. If that was to happen we truly would have an Armageddon here in the United States.

The economy and the market are not necessarily the same thing.  In March of 2009, March 9 to be exact, was the absolute low for the stock market.  At that point if I was to say to you over the next eight years we’re going to have two presidential terms, two four-year terms, for the very first time where an economy that’s going to have a sluggish recovery and never be greater in any of those eight years a GDP growth of over three percent. It never happened before.  Two-four year terms for a presidency where the GDP didn’t grow more than three percent.  And it’s not Obama’s fault.  This is not about Obama.  I’m just using that as a benchmark that the economy is going to be sluggish and it’s never going to be over three percent and oh, by the way, the best thing that you can do is invest in the stock market.  You’d say that’s crazy.  The economy is – really, you’re telling me the economy was sluggish and the stock market is going to be great?  The answer is that’s exactly what happened. It was almost a tripling from March 2009, almost a 300 percent increase during the next eight years.  The stock market, the buy market, those unmanaged stock market indexes, the S&P, the Dow Jones, et cetera, they’re what we call forward thinking. What investors believe is going to happen in the future.  And sometimes they get it right and sometimes they get it wrong.

In 2008-2009 I would say that it was oversold because you can see that what they thought was going to happen, that the economy was going to be even worse.  And then they realized wow, we overshot this thing.  We overshot and then it was a buying opportunity.

If I was to ask the person on the street, if I was to ask you who the best investor of all time is most people would say Warren Buffett. I mean Warren Buffett of course.  If you have some longevity in the markets you might remember Peter Lynch who retired about 25 years ago.  You might say Peter Lynch.  He worked at a big mutual fund company.  Both of them believe that, and this is a direct quite from Warren Buffett, “Be greedy when others are fearful, fearful when others are greedy.”  So, I wonder what did they know?  What do I know that they don’t  know if I do the opposite of what they say.

They’re very smart investors.  They believe, and I do as well, that you make decisions with your head and not with your stomach because the stomach when you do that in the midst of difficult decisions you make bad decisions.  That’s why you have a multiyear plan that you stick with that I’ve talked about in some of my previous videos.

It’s just very important that the economy is not necessarily completely indicative of what the stock market’s going to do and that we make decisions with our head and not with our stomach because that leads us down the wrong path.

If we knew, if we had perfect foresight we would know what to do, but none of us have perfect foresight.  I have had it in my mind I’ve thought about that there’s two different types of people in the world and this applies to so many different areas.  When I talk with people about unintended consequences and potential consequences there’s one type of person who says hey, I’m not going to actually do anything until I know it’s going to have a positive outcome.  I want to know not 100 percent but I want to have a pretty high probability that the action I’m going to take is going to have the positive outcome that I want.

There’s a second type of person who says I’ve got to do something.  If it has an unintended consequence and it might even be negative, well at least I’m moving forward.  At least I’m taking action.  And not taking action, particularly when we don’t know the consequences of that action is sometimes the most difficult thing to do is to not do something just so that we can feel that we’re doing something.

If there is an action that someone wants to take it’s a systematic rebalancing.  The problem with that meaning that maybe your stocks or equities have gone down, it’s increasing the equity exposure.  Doing the exact opposite of what your emotions might actually be telling you at this particular time.

So, if there’s some action to do it’s actually to reevaluate.  Maybe my stock and equity portion has gone down.  Maybe it’s time to rebalance to buy more of that.  That is a question that should be asked that you can think of.

I’ve said for many years as part of my random thoughts here I’m just going to go that some of the most difficult times to talk with an investor to make investment decisions is when you’ve made lots of money and you’ve lost lots of money.  It has everything to do with your mindset and the behavior that you’re bringing to the decision.  If you’ve made lots of money you might have just been lucky, but you have overconfidence in yourself, in your decisions.  If you’ve lost lots of money it’s the opposite.  There’s a fear that’s always the way it works and it just doesn’t work that way.

Most years have a 10 percent decline.  I’ve thrown up on the screen not now but in previous videos that you’ll see that’s the normal.  There is a correction of 10 percent I most years.  There is a 20 percent bear market about one out of every four years.  There is a large correction of 30 percent and 40 percent, let’s just kind of look back.  In 1973-74, in 2000-2001-2002, in 2008-2009, that time and then right now.  When we look at all that we’re talking about once a decade.  The 70s, the early 2000s, the late 2000s and now.  About once every decade and in every single time it has recovered.  Maybe not exactly when we wanted it to.  Of course we want it to go away next week, next quarter, next year.  And it might.  I doubt it’s going to happen tomorrow, but it has always come back and it’s about once every 10-15 years.

You’ll notice that I didn’t say 1987 because 1987 was actually a positive year for the unmanaged stock market indexes.  Everyone thinks that it was this, it’s because it happened very quickly.  It just wiped away a years’ worth of gain, but actually ended the year positive.  And then the years after that the next couple of years were positive as well.

So, it’s good to keep everything in perspective.  That’s why I’m always talking about a long term vision.  I said something in my last video about Point A to Point B an the reason why I bring that up is Point B is not retirement.  It’s not outliving  your money. or not outliving your money, you and your significant other’s money.  You might just happen to have a retirement event inside there.  If you’re 60 years old, I’m just arbitrarily picking 60 years old, your point is not 65 years old.  It’s for the rest of your life because you don’t want to outlive your money.  But during that timeframe you just might have some life events that happen – your retirement, perhaps the loss of your spouse or significant other.  There’s lots of major things that happen during your life expectancy or when you add in your spouse or significant other, both of your lives.

It really does boil down to having longer time horizons even when we’re close or already in retirement.  That’s why it’s good to say we had multiyear strategies, it’s good to keep that in mind.  That’s why you do all the work before something like what we’ve seen in this past month which has been very bad, not good at all.  You do it before that happens.  Steel yourself for those decisions and five and ten  years from now you’ll say it absolutely was horrible while I lived through it.  I sure am glad it’s over.  It was a painful lesson.  I hate that. You know what?  The best thing that I did was I did nothing at that point.

Call me at any time, 303-747-6455.  You have a wonderful day.  Bye bye.



March 22 Market Update

“There are decades where nothing happens; 
and there are weeks when decades happen.” 
– Vladimir Lenin


It’s been another tumultuous week with what looked like a healthcare crisis, rapidly bleeding into what could be a serious financial crisis. From our last video not even 7 days ago, things within our economy have come to a screeching halt and rebounding from this could present another challenge in itself. This is what you’ll see me discuss in the latest video in this growing saga:




Hi there.  Mike Brady with Generosity Wealth Management, a comprehensive, full service financial services firm headquartered right here in Boulder, Colorado.

It’s been another tumultuous week.  Remember how two or three weeks ago I said that we’d been lulled over the last three to four years with low volatility. We became accustomed to that thinking that was the normal.  Frankly, I would love some of those days. Every day is an adventure and a bad adventure at that.  I also said in my last video that this is a healthcare crisis and not a financial crisis and I’m here to say that it’s definitely looking more like the healthcare crisis over time could turn into that financial crisis. That’s absolutely disturbing to me just the way that we have stopped.  Even from my last video not seven days ago our economy is screeching to a halt.  And so to just restart something like that at all levels is going to be very difficult so I want to talk about that here today.

I want to put up on the screen a chart.  This is the Dow Jones Industrial Average which is an unmanaged stock market index. You’re going to see that it’s about 30 percent down. I’m going to put another chart up on the screen and this right here is multiple years, multiple decades of the S&P 500.  What you’re going to see is we’ve given up a couple of years’ worth of gain that we’ve worked very hard for, very frustratingly, very hard for had been given up in a relatively short amount of time.  One thing that you’ll see in that particular chart there are times where it appears like it’s going to continue going up forever or going down forever and neither of them are the truth.  It is not a linear equation. Things that go up don’t go up forever.  Things that go down don’t go down forever either.  That’s why I stress continually the multiple year.

Dow Jones Industrial Average Chart

S&P 500 at Inflection Points

I’m going to put up on the screen a chart that you’ve seen from me before. What you’re going to see on the first three bars there are one year since 1950.  That’s 70 years’ worth of an unmanaged stock market index, an unmanaged bond index and then a combination of the two.  The first year you can see huge ups and huge downs as we go out 5 years, 10, years, 20 years the lows get closer to the breakeven point.  The highs come down as well.  Those are rolling like a rolling five year, like the very best and the very worst five years and that range in between.

Time, diversification, and the volatility of returns

What you’re gong to see is a diversified portfolio has actually never lost money although it could in the future.  That’s one of the reasons why we have a diversified portfolio that although it does not guarantee against market declines I believe that a diversified portfolio makes sense because it might increase our probability of what you’re seeing right there which is what has happened over the last 70 years.

Five, 10, 20, if you were in your 60s or 70s I’m hoping that you’re going to live, statistically speaking you’re going to live more than five years, hopefully even more than ten years and even into the 15 and the 20.  It’s not just you but it’s also your significant other, your spouse or whoever that significant other might be.  We think that we might have a short time horizon and yes, as we get older our life expectancy naturally through the natural process of aging and mortality does get shorter, but it is still not like hey, my timeframe is next year.  If that’s the case you should never have any money in the markets and you’ve heard that from me time and time again and every time you ever talked on the phone about additional money.

I’m going to put another chart up on the screen.  What you’re going to see is 2008.  You’re going to see there was a 50 percent decline give or take a few percent back in 2008.  So we are not at that.  Also, after that decline to all the way back up to breakeven was about five years for the S&P 500.  It was about two or three years if you had a diversified portfolio.  Of course you didn’t go down like the 50 percent either.  So it was a lower down and a quicker back up.  That’s one of the reasons why you have a diversified portfolio.

Diversification and the average investor

You’ve heard me talk for many years about the completely logical and rational response to 2008 that are big companies.  And when I say big companies, big public companies.  They kept lots of cash on their books.  They would from some people’s point of view hoard it.  Why don’t they distribute it to us.  As an example when Apple gets over $100 billion or other companies have billions and billions of dollars in cash.  They were fortifying themselves from an absolutely horrible situation so that they did not get into a cash crunch like they did 12 years ago.

A week ago I mentioned at the beginning of this video that it was a financial crisis 12 years ago where the banks were in trouble.  Today they’re coming into to a month ago in good financial situation.  Big companies are still in a good financial situation.  It’s only been a relatively short amount of time.  But that doesn’t mean that it’s going to stay that way.  The people that they sell their goods and services to might be okay for the first week or two.  It’s almost like a vacation. This goes on for a month, two through the rest of the year which there are ranges all over the place about how long this could last.  That’s a problem and it’s a problem long term.  Nobody, me included, knows exactly what the impact of that will be.

What do we do here as investors?  What do we do?  Many of the managers have increased their cash over the number of weeks.  However, I would say almost everybody has been negatively impacted by this and so whether it’s in your personal life, in your financial life, in so many different areas this has not been a good time whatsoever.

One of the things that you’ve heard me say before is it’s easy to be – I use a friendship as a great example.  It’s easy when things are going well and easy to remain friends.  A true friend and you know the depth of their conviction, the depth of their values as a person and their principles is when things are rocky who’s standing right there next to you.

I used an analogy about week and a half ago about an airplane ride.  You’re going from Point A to Point B and you’re inside that plane.  Now, of course, if it was a really short ride you shouldn’t be in the plan to begin with. That’s why you drive the car or you walk or you take a bicycle.  But you’re in a plane and you’re going from Point A to Point B and it’s very rare in today’s world for there to be huge turbulence, not like there was 50 years ago in different types of planes.  Technology allows us to have lower turbulence, but it sometimes happens. You don’t get out of the plane.  You stay in the plane until you land at Point B.  And so the way that we approach our particular financial goals is no different.  We’re going from Point A to Point B.  We have unexpected, unpleasant turbulence that we wish that we did not have. And if we could wish it away we would. But it’s there, nonetheless.  What do we do?  Do we scream?  Do we shout?  No, we sit right there, wait for it to get over so that we can get to our Point B.

Mike Brady, Generosity Wealth Management, 303-747-6455.  I’ll check in with you again later this week or frankly, more often if something big is happening I’m here to communicate with you.  Thank you.  Bye bye.

Longer Economic Discussion

“Bear Markets are periods when stocks are transferred from weak to strong hands, as does wealth when recoveries occur.” 
– Buckingham Strategic Partners


I promised in my last video (March 12th) to have a longer discussion about the current economic and financial situation.  You’ve got it right here!  And with graphs!

Watch our video to hear more!



Hi clients and friends. Mike Brady here with Generosity Wealth Management, a comprehensive full service financial services firm headquartered right here in Boulder, Colorado. As you can see from the backdrop I am back in my office here in Boulder. The last two videos I did from Orlando. I’m going to make today’s video a little bit longer. When I’m traveling it doesn’t matter with today’s technology except when you want to do a newsletter with big video files and transfer, et cetera, and that gets a little irritating I assure you.

Lots going on in the world and in the markets and I want to talk about some of the implications. Let’s first put up on the screen a graph. On the left hand side that is the unmanaged stock market index, the Dow Jones Industrial average. The left access is percentage rate of return. And what you’ll see is for the first one-and-a-half months of this year it was positive, and then it took a huge sharp downward over the last three weeks or so. It is rebounded slightly because of the nice Friday that we had. However, it is definitely near the bear territory. It dipped into it which means a negative 20 percent decline. So it dipped below and then it’s kind of popped back up, but it is right there at that cusp of what we technically call the bear. Not good at all.


One thing that is important, we always talk about from a military engagement point of view that everyone’s always fighting the last war. Every general is fighting the last war or it seems since the Vietnam War everything is always compared to Vietnam. Well, we now seem to compare everything to the 1987 decline and the 2008 decline. I’m going to talk here in a few minutes about why it’s not 2008.

Before we move on though I want to talk a little bit about bonds. Bonds have done well. I’m going to put another chart up on the screen. What you will see is they have done what they’re supposed to do which is go up when stocks go down. The correlation meaning it’s very highly correlated if they do the same thing as the stock market. It is negatively correlated if it does the opposite. And what you’ll see is a portfolio of stocks and bonds. The stocks have gone down but the bonds have gone up. And whether or not a particular portfolio has gone up or down is how much of the mix you have. I’ve said in previous videos that over the long term it’s my belief that you’ll be happier over ten years the more aggressive that you are, but that doesn’t mean on a short-term basis whether that’s months. In this case it’s been weeks, even days frankly, but on a year-by-year basis you’ll be unhappy because the volatility increases.

2 -Copy Fixed Yields and Returns

I’m going to put one more chart up there. The third chart is over the last 20-30 years.It is since 1980 and what you’ll see is the bottom numbers or the red numbers, those are the intra-year declines, the declines that happen within the year. And then you’ll see that the gray number,I’m not sure how it’s going to show up on the screen, is what it is the year and the data. And, of course we’re just starting off the year not even three months in. One thing that’s important to note is 1987 which people talk about all the time that actually was a positive year. Most people think that it was some huge negative year for the stock market when it actually had made lots of money through the first two-and-a-half quarters and then it gave it all up in a spectacular fashion over a day or two. But it actually ended the year positive.

1-1: Annual Returns and intrayear declines

1-2: Annual Returns and intrayear declines

1-3: Annual Returns and intrayear declines

So far this year we’ve had a very dramatic three weeks. That does not, of course, mean that the entire year is for naught. This is a little bit different than 2008 for the simple fact that we started the year in a very high economic and positive nature. Unemployment – I’m going to put a graph up on the screen and what you will see is that unemployment was at an all time low and we had incredible labor force participation with wages rising in the last year or so. Just absolutely wonderful.

3: employment and income by educational attainment

This is not a financial crisis. This is a healthcare crisis. Healthcare crises we’ve had before. This is a particularly bad one. We have survived the SARS. We’ve survived some of the other, the Ebola scare and other things in the last 10 to 20 years. But we haven’t seen anything like this and particularly the concern and the scare. I’m not an expert on how this crisis will play out as it relates from a healthcare point of view. There’s enough experts on Facebook that you can watch who are all your friends who used to be experts in something else. Now they’re experts in this. I admit that I don’t know and I know that there are many scientists who admit that they don’t know as well. They have models which are projections which might have some degree of probability, but this is a healthcare crisis, not a financial crisis.

Our banks were not in a strong position back in 2007 and 2008. Now they are in a very good position on strong holding. I’m going to put a chart up on the screen.What you’re going to see is interest rates. The Fed and interest rates are very high. Sorry, are very low. And the projected, that one higher number was what they projected that they would raise interest rates. Now it has been adjusted so that we will have some interest rate declines which is a good thing. That pumps money into the economy. This is a good thing. It will help governments, consumers and corporations refinance debt with lower debt burdens with those sectors of the economy.

4: The Fed and interest rates

I’m going to put up on the screen another chart which is oil prices. You’re going to see a collapsing of oil prices which is effectively a big tax cut for consumers and companies that are heavy energy users like airlines and things of that nature. This is bad for oil producers. There’s going to be winners and losers in pretty much anything that happens in the economy, but this is a “huge tax cut” if you want to say. I’m doing air quotes if you’re watching the video for the consumer. And so this is a good thing unlike what the price was back in 2008 which was significantly higher than what it is today.

6: Oil Markets

The U.S. has the highest – I’m going to throw another chart up on the screen. We are less dependent than many other countries on our imports and exports. I’m going to put up on the screen a list of all the companies, their imports and their exports as a percentage of their GPD. So that means that as a percentage of what they produce when you add up all the goods and services within a country what percentage of imports and exports as a percentage of what they produce both like I said goods and services. You’re going to see that when we flip through that first screen and a second screen you’re going to see I’ve just highlighted what the world average is. The U.S. is near the very bottom. That is because we are actually a pretty well contained goods and services producer and user. There are many countries that are in a world of hurt if the global imports and exports and trade dramatically change. We’re at the very, very bottom and in comparison to the rest of the world that is a good thing. It is not however, good for us because we are, I mean completely good for us. Everything is relative. When the global economy slows down we slow down as well.


And I am just as worried about our local businesses. We’ve talked about the health of our citizens, our fellow man, our fellow woman, our fellow person and we should be concerned about that. Don’t get me wrong. But just as concerning to me are those people who are from an economic point of view more vulnerable than others. Not all of us can work at home. I mean I’m very fortunate that I get to. I’m in a white collar job. There’s an awful lot of blue collar people out there. Your servers, people who are in the service industry or in manufacturing that you can’t work from home. We should be worried about them as well. And so from a good point of view today versus where we were back in 2008, the consumer debt is much, much lower.

I’ve got the screen here and I’m going to put it up on the screen. The consumer debt is significantly lower. I’m going to put it up there on the screen and what you’re going to see is consumer debt is significantly lower than where it was. Household debt service is at 9.7 and not at 13.2 where it was back in 2007 and 2008. This is a good thing that we have much less debt from a consumer point of view than where we were back in 2008.

5: Consumer finances

I was having a conversation with someone at my particular gym, my dojo, and they were talking about hey, wait a second. I’m in my 60s, I’m in my 70s.  Will I have enough time, we talk about the longevity in the markets and the answer is I would hope so. I’m going to put up on the screen and particularly on the left side is the probability of reaching ages 80 and 90. If you are 65 years old you still have, particularly if you’re a couple, you have a 90 percent probability that one of you will reach age 80. You have a 50 percent probability that you will reach age 90. Yes, five and ten year time horizons even if you’re 75 and 80, particularly if you’re a couple. Now let’s say that you’re single. I would hope that you’re not going to die next year or the year after. Longevity is still something that you have to keep in mind. And so just throwing it into a mattress, throwing it into a money market or a savings account will almost guarantee you that you won’t reach some of your goals if you need income from it. And so we need to watch out for the longevity. We don’t know. Every person is individual in their particular portfolio and that’s why when I throw a word guarantee it’s if you have a certain rate of return that you have to achieve then there’s a balance between having the safety that you desire by not participating in something and then, of course, along that spectrum of where can I stay with my particular plan and reach those percentage rates of return that I’m hoping from the long term. And we’ve got to be in this for the long term.

7: life expectancy and retirement

There’s a quote that I read in an article and I want to make sure that I get it right. “Bear markets are periods when stocks are transferred from weak to strong hands as does wealth when recoveries occur. We’ve recovered from every past crisis which we tend to experience with great frequency about every two or three years there’s something that causes some dis-ease and right now there is some and a lot, but we too will recover from this.”

Mike Brady. Generosity Wealth Management, 303-747-6455. Give me a call at any time. Thank you. Bye bye.