“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” – Warren Buffett
Right now, no one knows how the financial markets are going to completely react to the Coronavirus epidemic and with this recent and most particularly painful downswing it is helpful to take a step back and refocus on the long-term. It’s moments like this that remind us why we keep diversified portfolios and that we shouldn’t make short-term decisions based on long-term goals.
Mike Brady here. I am recording this on midday Tuesday, March 10. I’m going to get this out to you as quickly as I can get it through compliance. I’m going to continue with regular updates to you because no matter where I am in the world I’m always working and I’m always paying attention to things. You can tell that I’m in a hotel room right now as I spoke at a conference earlier this morning.
Very spectacular news. It’s kind of hard to miss it. It’s sort of like driving to the airport or being on a plane. Accidents happen all the time in a car so that’s a great risk to you, but what really makes the news is the spectacular nature of an airplane crash. In the last two-and-a-half weeks we’ve had quite the spectacular news – very huge volatility. In the world that is volatility risk adverse it’s really quite painful. Those that have a short-term vision or have a long-term plan but then see things through a short-term viewfinder, that’s not very comfortable. We can’t be that way.
You’ve heard me and I feel like I repeat many of the same messages over and over, but the better way to approach things is to look at things from okay, I’ve just given up and now I’m back to where I might have been ten months ago, eight months ago, a year ago, et cetera. But my path is for the next 10, 20, 30 years. My path is for the next five years, et cetera. That’s why you have diversified portfolios. Because things do happen in a three steps forward, one step back and sometimes two steps back. If there is no belief that things will be better in the future then you shouldn’t have investments to begin with.
When the market goes down that is many times for some people a buying opportunity. What’s interesting is that I’ve been doing this for almost 30 years and I hear so much of the same thing over and over again. That’s one of the unique situations that I find myself in is that I get to speak with investors and clients and professionals all the time and so I’m always listening to different perspectives. When the Dow Jones which is an unmanaged stock market index was at 10,000 points I heard that oh, no way will it go up to 12,000. Or when it was at 18, they’re like well, when it gets to 20 that’s going to be at a top or aren’t you concerned it’s feeling pretty much at a high, it’s pretty obvious. Or when it was at 21 or 22 or 23 it’s always at a top. Yes, we went all the way up past 29,000 and now it has had a pretty spectacular in a relatively short amount of time a decline.
That does not mean that we then go the other way and say well, it’s obviously going to go all the way back down. That’s why we have diversified portfolios. That’s why we have a long-term vision, a long-term plan, et cetera. Because on the way up we were always worried about it getting too high. Then it goes up, it goes down. Now we think it’s all going to go down and neither of them are true.
About three out of four years are positive. That means one out of four are negative. The question you might have is what’s my bias? Is my bias to be an optimistic person or a negative person? And optimism, in my opinion, is in your favor. Why have investments if you don’t believe that it’s going to be higher in the future. Why have investments if you need the money in the short term. You shouldn’t have it in the short term. You should make short-term decisions based on long-term goals and plans and things of that nature.
I was just talking this morning as part of the conference to this man who’s an ultrarunner. He’s about to do the Leadville 100 which is a 100 mile race. One of the things that was interesting about our conversation is he was saying hey listen, if I have a bad five miles I don’t give up the race. I’ve got a 100 mile race that I’ve got to run. If I’m 40, 50, 60 miles into it, no. If all of a sudden I start slowing and I walk, I don’t go backwards, I continue plodding along toward my goal. And I couldn’t help but think wow, that’s a good way to think about it because we are actually in a long marathon, a long ultra-run and not every mile goes the way we would like. Sometimes we stop and we take a little rest. Sometimes we might walk instead of run, but we always go toward our goal and it’s no different than what is happening right now.
I believe that a lot of what’s happening is computer driven. I think that once the big boys come back in, those people who are individuals handling billions and trillions of dollars, that’s when we will see the bottom of this particular market. I don’t know if that’s going to be tomorrow. I don’t know if that’s going to be next month, next year. Anyone who will say that they know how the Corona virus fear or concerns, preparedness, virus, et cetera, is going to turn out is lying to you. Anyone who says that they know how the financial market is going to react and the oil and this and that, all these things are going to play out the variables in the long equation are lying to you as well. Don’t listen to them. Don’t listen to the people on the news because most of the people who know something aren’t saying anything and those that are saying something don’t know anything. That’s just my belief.
Relax. That’s why we have a long-term strategy for you and these things happen. They happen periodically. This happens to be a particularly painful one and particularly spectacular very quick on the down, but these things do happen. I’m not sure that I would jump out the window yet.
My number is 303-747-6455, Mike Brady. You have a wonderful day. I will continue to update you as things go through over the days and weeks ahead. Thank you. Bye bye.
“Worry does not empty tomorrow of its sorrow, it empties today of its strength.” – Corrie Ten Boom
There’s an old adage that says that the market takes the stairs up and the elevator down. And what that means is that there are sometimes in history spectacular events that have become noticeable that become memorable like this past week or so when we’ve seen some double digit declines. But stay calm, your long-term investment strategy should remain unshakeable.
Hi there. Mike Brady with Generosity Wealth Management; a comprehensive full service financial services firm headquartered right here in Boulder Colorado. I’m recording this Friday afternoon after a pretty eventful week. A very interesting week hence the reason why I’m doing this video. If you look at the background it’s not my normal one, I happen to be at a conference so this is my hotel room, but it was so important I felt to get to you as quickly as possible that I decided to do it right here in my hotel room. Fortunately, the way I look at it I’m never working and I’m always working. When you love what you do you never work a day so I love what I do.
So, there’s an old adage that says that the market takes the stairs up and the elevator down. And what that means is that there are sometimes in history spectacular events that have become noticeable that become memorable like this past week or so. The market has pretty much every day this week had very memorable, you know, the Dow, which is an unmanaged stock market index, decline of the hundreds if not even over a thousand points. And what that has done is brought us back to where we were eight months ago. I mean let’s remember that this doesn’t mean you lose all your money that you can market has gone down to nothing, this is back to the beginning of June.
I’m going to put a chart up on the screen. One of the reasons why I continually talk, both in these videos and with my one on one client meetings, is that if your time horizon is six months, 18 months you should have nothing in the market. One of the problems with big events like this is it really brings people’s attention to it and they start to question in a one week’s time what a two, five, 20, 30 year goal is, which makes no sense to me. The reasons why you have investments is because you don’t need it in the short-term after a one week, one month, 18 months, two years, et cetera. And even when we look at, I’m going to put a chart up on the screen in just a second, even when we look at the absolute worst time on most of our lives history back to 2008 your breakeven point was depending on whether you were 40 percent stock and 60 percent bond, indexes, that would have been a two-year breakeven or three years if you were 60 percent stock index and 40 percent bond index you would be three years or 100 percent in the stocks your breakeven is five years. Now, that doesn’t mean that the five years is necessarily pleasant or the two years or the three depending on what the mix is, but we can have investments that are short-term. I mean just like when we look back to where we were about eight months ago most of us were feeling great we’re like oh my gosh this is wonderful the market I even heard some people say it must be at a top, it must be at a top, whereas here we are eight months later saying oh my God it’s Armageddon. And neither of them are true, they are both points in time along the path of the multiple year strategy.
If someone is only now paying attention that’s less helpful. There’s another adage that says that worry doesn’t change the future and worries the present and so that’s not very helpful. The reason why we continually talk about in our professional meetings and conversations hopefully if we’re talking to ourselves as investors is hey I’ve got this point in the future that I need to go to and that I want to get to for my financial goals and it’s not next week, it’s not hopefully today. If so you’ve certainly shouldn’t of had any money in the market.
So, the question is how do short-term events impact long-term strategy? And the answer should be not at all. That’s why you do it in advance. That’s why my example of perhaps a fire in a house that’s why you have fire drills in a school, in a house, in a building beforehand because if fire is actually happening it’s too late. And so, we hit certain themes, we being financial advisers, me as your financial advisor, the professionals who was doing this for years and for decades of experiences of seeing this we say this is going to happen.
I’m going to put a chart up on the screen.What you’re going to see is those numbers, double-digit declines, are the normal. The actual unique event is that we haven’t really had many of them in the last two, three, four years. Now, it usually doesn’t happen in one week. That’s interesting. That’s a very newsworthy event, but that’s actually the normal is for there to be double-digit declines intra-year within the year. So, what we’re seeing here I don’t know what next week will bring, but I do know that the strategies that were sound two weeks ago are still ones that are sound today. And so, rest easy knowing that we’re here on this path of two steps forward maybe one step back, but we don’t have the two step forward without periodically having the steps back as well.
Mike Brady; Generosity Wealth Management; 303-747-6455. Have a great weekend. Bye bye.
“By staying calm, you increase your resistance against any kind of storms.” – Mehmet Murat Ildan
Every single year there is some kind of market volatility. It is normal for there to be ups and downs. Therefore, preparing ourselves for it early on is the key. We know it’s going to happen, so we will have a multiple year strategy in mind at all times. And if there are any concerns, of course, you’ll call your favorite financial advisor Mike Brady!
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered right here in Boulder, Colorado.
Last month I did the year end review and it was a little bit longer so this time I thought I would talk shortly about a topic that I know is going to happen in 2020 which is volatility. I’m big into setting up expectations. I’m big into controlling our emotions and having a plan. The reason why I bring that up is in 2020 like every single year there is some kind of volatility. It is normal for there to be drops in the market. There are ups, there are downs.
I’m going to put a chart up on the screen which shows the market going back decades, and you’ll see on the bottom below the axis there are red numbers. Those are the intra-year declines and it is normal for there to be intra-year, within the year, declines in the stock market, the unmanaged stock market indexes, of double digits or more, 10 percent or more.
I’m recording this at the very end of January and, of course, you’ll get it the first part of February and nothing has happened so far this year. However, we have 11 more months. We have an election. We have many different things. We have a global economy that’s very complex. But one thing that I can almost guarantee is that the market will go up and down at various times. And our reaction to it is going to be much more impactful to reaching our financial goals than that actual event of the ups and the downs. That’s my opinion at least.
Therefore, setting ourselves up now and saying okay, great. I know it’s going to happen. I’m going to be cool. I’m going to have my multiple year strategy in my mind at all times. And if I ever have any concerns, of course, I’ll call my favorite financial advisor Mike Brady.
That’s what I want to talk about this year so when it happens don’t be surprised. With the market as high as it is right now, hundreds of points on the unmanaged stock market index, the Dow Jones Industrial Average doesn’t mean as much as it used to frankly, 5, 10 and 20, 30 years ago. We look at the percentages, we know it’s going to happen but we keep the long term vision in mind. What I believe is one of the key ingredients to long term success is keeping our emotions in check, keeping the big picture in mind and really looking at how are we going to reach our financial goals not only with our investments but with all the financial decisions that are going on in our lives.
Mike Brady, Generosity Wealth Management, 303-747-6455. Thanks. Bye bye. Have a wonderful week, a wonderful month. We’ll talk to you in a month. Bye bye.
“Finance is not merely about making money. It’s about achieving our deep goals and protecting the fruits of our labor. It’s about stewardship and, therefore, about achieving the good society.” – Robert J. Shiller
This has been an incredible year so far. Pretty much every month in the unmanaged stock market indexes has been positive.
If you remember, last year 2018 was negative and some people have a tendency to allow themselves to get real negative, they extrapolate negative news into “it’s going to be negative forever” or “I told you that it was going to be horrible” particularly if you have a negative bias. Going back all the way until the 1920s, three out of four years were actually positive, so historically the strong majority is up. What we have to do is check our first biases; are we a negatively biased person or positively, and is that helping or hurting yourself?
Watch my latest video for a recap of what we’ve seen so far in 2019.
Hi there. Mike Brady with Generosity Wealth Management; a comprehensive full service financial services firm headquartered right here in Boulder Colorado and here today is actually up in Wyoming. This is 4th July. I wanted to record my video. I’m up here at my cabin. Hopefully you’re doing something wonderful for Independence Day. If you were wondering if I’m in front of a green screen and that’s a picture behind me, the answer is no. That is actually the picture out of the front of my cabin. That’s what I get to look at all day long up here in Dubois Wyoming and frankly I’m working all week because I’ve got a lot of stuff I’ve got to get done. But I want to give you the year to date video and the rest of the year preview and going into next year election year.
So, this has been an incredible year so far. Pretty much every month in the unmanaged stock market indexes has been positive except for the month of May. If you remember last year 2018 was negative and people have a tendency to get real negative, they extrapolate negative news into it’s going to be negative forever or I told you that it was going to be horrible, particularly if you have a negative bias. Going back all the way until the 1920s three out of four years are actually positive so there is a strong probability of the markets going up, but sometimes it does go down. And so, what we have to do is kind of check our first biases; are we a negatively biased person or positively.
I’m going to do a video next month actually talking about election years and what are the probabilities of the year before an election, the year of an election, et cetera, and how politics may or may not affect the stock market. Because the economy and the stock market are also two different things, which I’ll do it in a video going forward.
But let’s talk about 2019. It came roaring back the first quarter of this year, wiped away in general in the unmanaged stock market indexes in one quarter what we had lost last year in 2018. We were looking good in April of this past quarter and then May we gave some up. We never went negative in the unmanaged stock market indexes and all of the losses in May were wiped away in June and then some. So now, with the unmanaged stock market indexes we are at all time high so people might say to themselves yeah but aren’t you really worried that the market is at a high? And the answer is if you believe the market is going to go up then it’s always at highs, I mean that’s the point is that you should hope that there’s going to be new highs. Just because it hits a high doesn’t mean that it’s a ceiling and it can’t go any further, as a matter of fact if you truly believe that why do you have investments at all? That means that where you are today it’s not going to be higher in the future, which makes no sense. Why would you have investments if you don’t believe that it’s going to be higher in the future?
So far this year we are in double digit positive returns for those unmanaged stock market indexes. May was a single digit declines with the S&P 500, which is one of those indexes I talk about, about seven percent decline in the month of May, which we made back up in June. It is normal for there to be double digit declines. Most years have double digit declines and we haven’t even seen that. In 2018 last year we did, we had some real sharp declines. But that was only one out of the last four or five years where we had those double digit declines, so we have had an unusually unvolatile timeframe in the last two/three/four years. So, let’s remember that because if you’re investing for the long-term why make any decisions based on short-term trends?
I’m going to put a couple of charts up there. The first one I want to put up is the earnings per share for the S&P 500 continue to look really nice. Bonds are up as well for this year, single digits but between five and ten percent depending on what area of the bond market that you are invested in. So, stocks are up, bonds are up, unemployment is down, earnings per share is up. I mean if you are a negative person you can try to find something to be negative about, but I would argue that doesn’t serve you any good.
There’s an argument that some people say is like hey better too early than too late in most things. Because it’s looking so good I should move out because I’ll avoid negative things in the future. My answer would be no that doesn’t help you because I have seen in my 28 years of doing this since 1991 that getting out might be one thing, but if it continues to go up you never get back in, or if it goes down you have such a propensity to preserve that it’s also when do you get back in? And so, no, if you’re in this for the long-term, five, 10, 20 years then stay invested, have your plan and stick with it. If you’re going to have investments for a short-term, you know, one month, six months, 18 months why should you have any money in the markets? I mean that’s not even a full market cycle. So, if you judge long-term investments based on short-term trends that’s a recipe for disaster.
The economy, as I mentioned earlier, is not the stock market even though the economy is doing great. Now, you wouldn’t know that necessarily by watching the news. If you are getting whipsawed in your emotions by the 24/7 news cycle I would say don’t do that because if you like that, hey great, that’s wonderful, but don’t make any decisions on it and don’t listen to what they have to say about the economy and the stock market because that is going to cause you lots of angst. For the rest of the year continue to be bullish. You’ve heard me for the last my gosh five/ten years be bullish and that has served us well. I see no reason not to be bullish going forward. As a matter of fact, once again, you’ve got to watch my video next month, but 90 percent, going back to the early 30s of the year before an election, 90 percent of them have been positive and strongly positive. And so, that doesn’t mean that we should be invested because of that, but all the ingredients are there.
That’s it for right now. The rest of the year I never answered that thought I never completed that thought. I don’t know what’s going to happen. I don’t know any more than you do. Unlike all those pendants on TV to who say with very little humility that they know what the future is. You don’t know the future and I don’t know the future, but fortunately we’re not investing for the next six months. If you are you shouldn’t have investments. We’re invested for the long-term and I’m going to make the bet that going forward, even if the next six months are down, even if the next two years are down, history has shown that going back to 1950 there’s never been in a diversified portfolio a five year time horizon when you have lost money and so therefore that is a bet that I am willing to take. Even though it’s possible, absolutely, the future is uncertain. However, we can’t live our lives running away from things, we have to live our lives and our investments and the future based on the best data that we have and how we feel we’re going to be best served long-term, not short-term but long-term and so that’s what I think going forward.
Stay tune for that video next month. I have a couple good ones coming forward and I really hope that you watch those and that you have a wonderful – that you had because by the time you get this 4 the July weekend will be over, but anyway hopefully you’re doing well. Mike Brady; Generosity Wealth Management; 303-747-6455. Have a wonderful day. Thanks. Bye bye.
“Being rich is having money; being wealthy is having time.” –Margaret Bonnano
It is important to take a macro versus micro approach to investments, meaning we have to take a very big, long-term view in order to start to make some sense of the stock market. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.
Listen for more on how to keep perspective when looking at the market.
Watch my short video or read the transcript below.
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered right here in Boulder, Colorado.
Today I want to talk about making sense of things. I was meeting with a client a week or two ago and he said Mike, it doesn’t make any sense in the stock market. It’s something that I don’t understand. It goes up high one day and down the next day for a reason that I can’t understand. And my answer to him was stop trying to understand it. Stop trying to understand it on a daily basis, a weekly basis, even a monthly basis because I don’t know the future, you don’t know the future and for us to try to guess the emotions, the intents, the actions of millions of other people is very difficult.
We have to take a very big, long-term view in order to start to make some sense of the stock market. If we’re looking at it from a daily basis, one day if you listen to the newscasters or read some article they always have some reason why it went up like they know definitively what millions of people are thinking. The next day it might completely reverse and then they give a different answer that might be very similar. No, not that many people change from day to day. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.
So you have to look at yourself and your own emotions and say wow, am I going to allow myself to be whipsawed from day to day, from week to week, or am I going to take the long-term view. And your bias is very important to know. If you’re a naturally optimistic person I would argue that history has shown you to be a winner in this because three out of four years going back to 1929 the market has been positive. One out of four years have been negative. That doesn’t mean the future is going to be that way. All I can really say is that historically that has been the average when we look at many multiple years, many five-year, ten-year and twenty-year time horizons. Those that are pessimistic and are trying to time the market are worse off than those that say hey listen, I’m going to take a long-term view. On average I am going to be the winner. Sort of like going to a casino and you get to be the house. You don’t get to win every single hand but over time you certainly are the winners.
And so the future is never certain. It could be different in the future but this is what I think would be a better approach for most people.
Mike Brady, Generosity Wealth Management, 303-747-6455. I’m always here if you want to talk. Thank you. Bye bye.
