* There are some BEAR signs in the market I’m concerned about
* What does the market really care about (hint: recession and Europe)
* Why so much volatility last week?
* What should you (or me if I’m your adviser) be doing?
* Dynamic Asset Allocation management coming your way….
If this week is calmer than last week, then I may not do a video 2 or 3 times. For all our sakes, let’s hope that’s the case!
TRANSCRIPT:
Hi there, Mike Brady with Generosity Wealth Management,
and recording this on a Monday morning, August 15th, and hopefully
you are getting this in your e-mail on Monday afternoon. With every day being
so very important and news-worthy, I want to get this out as quickly as
possible.
Last week, I mean big swings; 400 plus or minus and just
unbelievable. The volatility on Friday and so far today is starting to tamper
down: which is great. I think that anyone who believes in efficient market
theory is,,,, I’m just not there. I’m not on the bandwagon with them. That
really says that the available public information is factored into the market.
And when you are seeing huge swings like that I think you’re seeing a lot of
emotionality. You’re also seeing a lot of short covering and you’re also seeing
some programmed trading- people who have got losses in there or various
triggers at various points; just starting to execute automatically. I make no
judgments about any of those techniques or reasons, it’s just; they are what
they are.
Right now, I think what we need to ask ourselves and what
the market is asking itself is; are we in a recession? And; is the Euro going
to survive? Because Europe and the Euro is going to be a big driver going
forward in the next quarter or two. I think we’re seeing a year and a half of,
if you’ve been watching my videos, it’s starting to implode. And so it’s
starting to slow up,… sorry, it’s starting to speed up and some major decisions
are being made at this point in time.
Are we in a recession? I think we are in a recession. We’re
going to look back three to six months from now and say, “gosh, we were in a
recession then.” Even if the numbers don’t say so right now.
There are some bearish indications that have me
concerned. One of them is four months of down months. If August is a down month
in the market, that is definitely a clear sign that we are in a recession.
Sorry, I’m just looking at my notes here.
Second is just the market volatility- you don’t see this
kind of volatility in a bull market. You see this kind of stuff in a bear
market.
Third is just the sentiment of the investors. It is
really quite negative. That’s also a bear signal.
Fourth is the Fed. At the end of the day when you look in
between the lines of what the Fed is saying, the Fed is saying that we’re in a
recession by the tones that, and overtures that they’re giving.
There are a couple of things that I think you need to do.
Kind of getting back to some practicality here; look at your portfolio and
rebalance. You probably have various mutual funds, ETF’s, stocks, ect. And make
sure that you’re not completely out of whack. If you used to be ten per cent
this and now you’re fifteen or twenty and you really don’t want that. Now is
the time to evaluate it.
The second is, for your particular categories, let’s say
that you want a certain per cent in large cap or small cap or internationals or
whatever it might be, make sure you’ve got the best in class. When’s the last
time you reviewed the particular mutual fund, ETF, index, etc., to insure that
it is performing the way that you think it should perform.
In the last couple of years we’ve had, mainly, kind of a
nice bull market and so it’s… now we’ve had a couple of weeks of down, and so the
question is: did it perform the way it is supposed to? So is there any change
within that category that you need to make.
I still believe that internationals are something that
you ought to have a very small, if any, position in. I do have some
international exposure but it is extremely small. And, because, getting back to
what I said earlier, I think that is going to be one of the major drivers going
forward.
The last thing you can do is look at your municipals. I
have a friend of mine, and we spoke last week and he, I think, pretty much
thinks I’m crazy in some of my pessimisms with municipals. That’s OK. At the
end of the day I could be completely wrong and municipals could do fine going forward
and maybe even have a little rally, that’s fine. But the question is, I think, the
risk is too great out there- I mean your down-side versus your upside? With the
yield between one and four per cent for these municipals, sorry that is just
not very exciting to me for the risk that you’re going to take. And I think the
risk on the downside, if we have some defaults, is just greater than what the
upside potential is. That’s just my analysis, I could be completely wrong as it
relates to municipals but it is just the risk reward ratio is not there for me.
That is what I’m thinking about right now. One thing that
I’m going to let you know is, I’ve been working very hard for a number of
months now on some dynamic asset allocation models. I’ll be talking about that
more individually with my clients, and also writing about it in my newsletter,
etc. It is just another investment management strategy that I want to
compliment some of the other things that I’m doing with my clients and
offerings for prospective clients. So I’ll be talking about that in the coming
weeks.
Also, if you don’t get another video from me this week-
this is a good thing! Not that you don’t hear from me or that I don’t have to
do another video. It just means that maybe things have settled down a little bit.
You don’t have to say, every single day, “Oh my gosh! What’s
going on? What does this actually mean? What does this mean for me over at
Generosity Wealth management?” So if you don’t get a video from me maybe it
means, whooo, maybe things have settled down a bit. We’re not quite on the
ledge that we were a couple of weeks ago.
Anyway, Mike Brady. Generosity Wealth Management, 303.747.6455.
And you have a wonderful day and maybe a wonderful week. Bye bye now.
The volatility of the markets in the past 1.5 weeks has caused a lot of consternation in a lot of people. 400+ point moves every day is enough to get the juices flowing.
Historically, so far this correction is very mild and short. The above chart shows where are right now.
Does this mean we have further to decline?
That is always the big question. I put very little emphasis on reversion to a mean, so what has happened in the past and where we are currently means very little to me.
We have to look to other analysis to make our determination whether this is the first leg of a declining market or a short term event.
Hopefully you’ve been listening to my videos to gauge where I am on this question
Here are my current thoughts after 2 volatile days
TRANSCRIPT:
Hi there, Mike Brady with Generosity Wealth Management, I am recording this on a Tuesday afternoon, kind of late Tuesday afternoon. I promised that I would communicate as much as possible to share with you some of my thoughts and that’s the purpose for this video.
Yesterday’s video was about 13 ½ minutes, and I definitely am going to make today’s much shorter and pithier, I think, as much as I can.
Monday was a very bad day and we can’t isolate that day and say every day afterwards is going to be horrible. Just like today, Tuesday, the market, it was the best day, single percentage gain since May of 2010. We can’t sit here and say, “OK, everything going forward is going to be perfect; hunkey-dorey, roses all over the place.”
I think what we’re seeing, we’re seeing, kind of a tug-of-war between people covering their short positions; people who are panicking and trying to get out, with those that have money on the sidelines wanting to poor back in, saying, “Wow! These stocks are a bargain now! I think that the market is undervalued!” And so I think we are having that tug-of-war. Which one’s going to win out? I’m not sure exactly. But we’re going to continue to see some volatility I believe, in the next week to two weeks, as we go forward.
I believe that what some people are, what is causing some of this market uncertainty is actually uncertainty in the markets, in the, you know, the United States, about the economy. That the gains we have made, are you know, back sliding on it.
I know that there’s been an awful lot of focus on the indebtedness of our country and the S & P down grading, etc. Frankly, none of that was a surprise. But what was I think, brought to people’s attention were the GDP numbers which were really horrible, some of the unemployment issues, the continuing unemployment issues. And I think that’s really causing a level of pessimism that is not helpful in the market going forward.
I have looked every single client’s portfolio, if you’re one of my clients, and want to let you know you are where I think you ought to be.
Let me just look at my notes here, there are a couple of things I wanted to address real quickly.
I believe that international is something that should have a very minor position in your portfolio. Just to kind of reiterate how some of the other countries have done, I mean we call them the BRIC countries; Brazil, Russia, India, China, they’re down, their indexes are down between 20 and 33 percent. So they’ve done very poorly.
I said yesterday that I thought municipals would be downgraded at some point. Today there were a significant number of municipals that were downgraded. This is just kind of the start, I believe of, kind of the downward slope of some of the government securities.
Gold is continuing to do quite well. I do believe that that makes sense to have in some of your portfolio.
Let’s see, I think that’s it for right now. I’m going to continue to watch things on a daily basis. I will probably do a video tomorrow or the next day- just to kind of let you know what I’m reading and how I’m interpreting some of the data as it’s played out.
I want you to call me if there are any concerns you might have, 303.747.6455, I’m Mike Brady with Generosity Wealth Management.
And you know, I’m here, I’m here to assist you, for us to get to your goals, for you to achieve your goals with some assistance.
I am a comprehensive, integrative wealth management firm. Mike Brady is my name, 303.747.6455. And we will talk to you again soon, bye, bye now.
The 2nd Quarter 2011 is over and I have a slightly longer video this week because I include my preview for the 3rd quarter.
I talk about what I think of the current economic environment, bucking the trend on some of the pessimism I hear and read about so much anymore.
I send my newsletter and videos on a weekly basis, so if you watch only a few througout the year, at least watch my more comprehensive quarterly videos.
Click to watch
TRANSCRIPT:
Hi! Welcome to the Generosity Wealth Management Video.
This video is the second quarter review and the third quarter review. I’m going to try to spend most of my time on the preview because no matter what we do, we can’t relive the second quarter. Hopefully we can learn from it but we can’t redo it.
The second quarter for the stock market indexes- if we were, if the quarter had ended a couple of weeks earlier then we’d be saying “oh man, what a horrible quarter!” But well, it ends on June 30th. And the last week of June was a nice pop-up in the equity markets. All of April was pretty good, going into May, and then we just hit a big slide. For about six weeks all through May and June, except for this last week in June; relatively low volume though, on the exchanges. Bonds were just kind of chugging along through the quarter until the last week and the last week was a really bad week for the bonds. I think what was happening, is with Quantitative Easing ending, a big buyer of bonds, that bond holders were like, “wait a second! I don’t want to be the greater fool, holding these bonds. The demand for these bonds is going to be less and so I’d better get rid of them now.” And so, they got out of them and moved into equities.
Now let’s talk about the third quarter for just a second. I want to tell a little bit of a story about emotionality. There were mythical creatures called Sirens. And they lived, this is a Greek story, with Ulysses and the Sirens. And the Sirens lived on these islands and they had this beautiful music, sailors would become enthralled with the music, want to go toward the Sirens with their boats, where the rocks were, they’d hit the rocks and get a big hole and the boat would sink. OK, bad stuff. But Ulysses, he really understood this, but he really wanted to hear the beautiful melodies that he’d heard so much about. So what he did is he gave wax to the sailors on the boat that he was on, and said “put this in your ears and tie me to this pole” (that was on the boat,) “and no matter what I do, don’t untie me.” So they got close to the island, Ulysses was able to hear the beautiful melodies, he went stark raving mad, but because the sailors had the wax in their ears they didn’t hear it. They sailed away and they were just fine.
Now, Ulysses’ plan saved his life and the lives of all those around him because he had a plan and his foresight and his non-emotionality about it was, is really kind of something to be admired; and kind of the lesson in the story.
So why do I say that? Right now, it is very fashionable to be “bearish;” to be down, you know, on the economy and the recession and investments and the world is going to end. I mean I’m on a significant number of blogs and things that I read, and it’s very fashionable to say “You know what? Armageddon is right around the corner!” And I was just, two – three nights ago, at you know, a social gathering and it wasn’t “is it going to happen?” but “when is it going to happen?” They are actually trying to argue and pinpoint the actual month that the 2008 crisis is going to hit again.
You know, I listen to all that data. I look at yield curves, both in the U.S. and in others countries. I look at the various data that keeps coming out. I look at the balance sheets of companies to find out what their cash balances are and what their profit abilities are.
I listen to what’s happening over in Greece. Which, if you’re not paying attention to that whole Greece debt and austerity plan, and then, kind of, the bail-out, you’re missing good stuff! I mean that is just fascinating- it is better than any Jerry Springer show you could imagine.
So I have to talk all the stuff into consideration and I have not moved from my analysis six months ago, that this will be a positive year, 2011, for the equity markets and for the bond markets. And how positive it’s going to be? I don’t know. But you know what; I am still going to have a position in the equity markets. I am still going to be modestly positive in my outlook for this year.
When I look at the yield curves of the kind of, the other countries, you know; the Brazil, and Russia and India and China, some of the not quite developing countries; but not quite the been-on –the-world –stage –for a very long time like Japan, Europe and the United States; I, they have a curve that is going from normal to flat, to inverted. They are about flat right now. And that causes me concern. That will not bode well for them so I want to be more U.S. If we are relying on an awful lot of the growth going forward on these various countries, and so if they start to go towards a recession, then that’s impact us, and, here in the United States. But that being said, I think that we’re more willing and ready and able to handle that.
Particularly, since when you look at the cash positions of corporations it’s actually quite large. When you look at the profitability of corporations right now, they’ve gotten rid of, kind of, the “fluff;” kind of the efficiency. Now when I say “fluff” please don’t call and e-mail me with bad things saying “oh, wait a second, they got rid of a lot of people, that’s not fluff!” No. They did get lean and so that’s a good thing going forward even if there might have been short term, some pain, that they might have done in their own austerity measures. And so, I am continuing to be kind of mildly bullish, when most people that I have around me that I talk to are from mild-bear to full-blown “Armageddon is right around the corner!” I’m just not in that camp.
I still feel that bio-tech is going to be the next big thing in the next ten years. I continue to think that gold is something to be considered. And so, if I’m wrong, I believe that gold will dampen that wrongness. Because at the end of the day, nobody knows the future; I certainly don’t know the future. So what I’m going to do is I’m going to try to have a wise diversification, not a naive diversification; transparency, and of course communicate and keep the expenses as low as possible; because they can, of course, can drag down any kind of a portfolio if you have too high of expenses.
Anyway, I am not making any major changes for the third quarter. I’ve had an opportunity to go through all of the statements for clients. They were actually mailed out on Saturday. So hopefully clients have gotten them already either; Tuesday, Wednesday or Thursday of this week. But I’m not making any huge, major changes.
I will continue to have my video so that you know what I’m thinking about because if the data changes, you know what, my opinion might change. I have an opinion more than just once a quarter when I do my quarterly review and preview.
Anyway that is where I am right this second. I encourage you to give me a call if you would like or an e-mail with any thoughts or refutation of my conclusions. I am, my business is growing- I’m actually very proud of that, and so if you know of somebody you feel I should speak to who would like some guidance, you know, I’d love to talk with them, 303.747.6455. My name is Mike Brady. I am the President of Generosity Wealth Management. And I have a couple of disclaimers here at the end that you should definitely stay tuned for. But in the meantime I hope you have a wonderful week, I hope you have a wonderful quarter and I’ll do another video in a week. Talk to you later, bye bye now.
I’ve been talking about the problems with the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) for over a year now. Greece in particular has been very prominent in the news recently.
Has this been a slow train wreck? Yes. Has our investment markets continued to go up during that time frame? Yes. Will our markets continue to go up? That’s always the question, and a harder one to answer. One of the things I’m trying to do is guide you and my clients to that answer, knowing of course the future is unknown.
Anyway, this week I discuss what I believe is another bubble ready to burst–China. I’ll be following up over the summer with technical reasons why structurally and euphorically (if that’s even a word), China is someplace to be cautious.
TRANSCRIPT:
Hi Clients and Friends, Mike Brady here.
This week I’m thinking about some of the similarities between China, right now, and the U.S. right before our stock market crash in the late 20s, frankly. So does that mean that I think that China is going to have this huge implosion? No. Do I think that China is a bubble? The answer is absolutely yes. Tread lightly, as it relates to China.
One similarity is just a massive disparity between, in income, and in wealth, and in education; China now, the United States back in the late 1920s.
There’s the rapid industrialization; huge boom in the last 10 to 15 years in China, very similar to the rapid industrialization in the United States.
Opaque and misleading economic data and fiscal data- very big similarity. Massive buildup of leverage amongst the rising class. Credit and leverage is, has, had increase significant in China just like we had in the 1920’s.
And kind of the last thing, is bubbles, in both residential real estate and infrastructure. What they have done, they being China, in the last fifteen to twenty years is just unbelievable. But this has also led to an incredible infrastructure bubble and real estate bubble over in China. And when that thing bursts, we just saw it back in 2008; it can have some pretty dramatic effects on the economy and on the stock market. And that’s what I’m greatly concerned about right now.
I haven’t really thrown out a bunch of statistics and reasons for why I’ve come to these conclusions. But if you want to give me a call and I’d be happy to talk to you about them, 303.747.6455. My name is Mike Brady; my company is Generosity Wealth Management.
The reason why it’s called Generosity Wealth Management is I believe that if we put together some of your investments, and your tax and your retirement, and your estate planning; all these kinds of silos together that you can start to be generous with yourself, your family and the causes you believe in. I want to help you learn to be generous. So I am a registered representative with Cambridge Investment Research. And you have a wonderful, wonderful week and I’ll talk to you later. Bye bye.
