April 2019: First Quarter Review

Apr 4, 2019 | Uncategorized

Wealth is the ability to fully experience life. –Henry David Thoreau

2018 is but a distant memory as 2019 has come in fast and furious! In a very short amount of time we wiped away all of 2018’s losses in the unmanaged stock market indexes. This is a quarter that investors and financial advisors dream of, however now more than ever it is time to keep a level head. You hear me say the same thing over and over, and for good reason. Investing is a commitment and in this commitment you need to stay calm.

In the video I discuss humility and bias. Why? Because none of us can predict the future, we do our best to try by watching the news and this forecast and that one, however these media reports consistently report to stretch either negativity or positivity. Middle of the road, even newscasts don’t make headlines, so it’s our job to take everything with a grain of salt.

Watch my short video or read the transcript below and I give a quick breakdown of what we’ve seen so far in 2019.

________________________________________________________________________________________

Transcript

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

First quarter is over of 2019 and it was a banner year.  These are the types of quarters that investors and financial advisors, frankly, live for.  In a very short amount of time we wiped away all of 2018’s losses in the unmanaged stock market indexes.

April 2019: First Quarter Review Chart 1 Today I want to talk about humility and bias because I think that they’re very important.  I mean just three, four, five months ago there was so much things are horrible and the stock market has continued to go down.  A lot of pessimism.  And then there was lots of optimism in January and February followed by, just three or four weeks ago I was reading an awful lot of pessimism. And the reason why I bring this up is humility.  I don’t know the future any more than you know the future and definitely not any more than those that you see on TV or writing those newsletters or those magazine articles. I mean just take it with a grain of salt, okay, because I think that it’s important for us to have a long-term plan, stick with it and not get too deviated by their particular biases.

And so now I want to kind of shift into bias.  The bias of those in the media is not to be even-keeled.  It is to be sensational either to pump things on the upside and be overly enthusiastic or to be very negative. Just to say oh my April 2019: First Quarter Review Chart 2 god, the world is about to end.  Because both of them get headlines.  Both of them run the viewership up into record digits.  Saying “oh, everything’s all fine.  Let’s just do the middle way” doesn’t really fly.  And so you’ve got to read or listen to your news that way with that particular filter.  I would actually argue that’s a good way to go through life because what is your personal bias?  Is your personal bias to be optimistic or to be pessimistic?  Right now I’m just telling you that going back to 1929, three out of four years is positive.  One out of four has been negative in the unmanaged stock market indexes.  So that means if you’re pessimistic you’re really only right one out of four times.  Being pessimistic might serve you well if you are in a bad neighborhood, to keep your guard up, to be fearful. But it doesn’t really serve you very well, frankly, in your investments.

So think about it even from a relationship point of view.  If you are afraid of being disappointed in friendships is the answer to have no friends?  No.  The answer is why don’t I look at myself and see if I can moderate my reaction to my disappointments when a friend might disappoint me.  That’s the more logical way I would argue in your relationship or friend relationships but also as it relates to investments.  Is the better way to be overly optimistic, overly pessimistic or to take your news with a filter but look for the even way?  To understand that hey, my bias might be pessimistic but wait a second, is this the real truth?

April 2019: First Quarter Review Chart 3 Recently and before I end today’s newsletter there’s been a lot of talk about the inverted yield curve and I wanted to talk about that for a second. The economy is not the stock market. That’s very important to make that differentiation.  The inverted yield curve and we can talk about the difference between the ten year and the two year (maybe I’ll do that in an instructional video next month), but when you see that yes, that has led eventually or at least predicted most of the time to a recession.  But it’s been a huge differential between seven months and nineteen months.  And during that time as I look back over the last – I’m going to put a graph up there on the screen – there’s been some nice April 2019: First Quarter Review Chart 4 stock markets during that timeframe and some nice times to be invested.

I would argue that since there’s a huge variance there of delay and some false positives that it’s not as good of an indicator as you would be led to believe. But even then it’s an indicator of the economy.  The economy is not the stock market.  It’s very important to remember that.  If you look back at the early 90’s there was an indicator of a recession which did happen.  However, does that mean that you shouldn’t have investments?  No way.  The 90’s were one of the best ten year timeframes ever and I certainly wouldn’t take that as an indicator.  The last ten years has been a relatively moderate recovery from the Great Recession when you look at all the underlying GDP numbers versus the averages.  However, this last ten years I’m certainly proud that many people invested in the markets and kept their investments over the last ten years.  The unmanaged stock market indexes have been very favorable even if the economy was not as ripping and roaring as they have in prior decades.

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

2018 3rd Quarter Review

Oct 12, 2018 | Reviews

“Learn from yesterday, live for today, hope for tomorrow.” – Albert Einstein

The third quarter of 2018 has already come to a close and as we look forward to the end of the year, I see no reasons to be concerned.  While the first half of the year was a little shaky depending on your investment plan, we’ve seen some very positive rebounds that have served as a great reminder to stay the course.

In this edition of my video blog, I discuss the newest piece of the puzzle and why it’s important to remain calm in regards to your financial plan. You don’t want to make short-term decisions for a long-term goal. Keep the big picture in mind, here’s why:

2018 1st Quarter Review

Apr 5, 2018 | Reviews

“Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do, so throw off the bowlines, sail away from safe harbor, catch the trade winds in your sails. Explore, dream, discover.” – Mark Twain

The 1st quarter of 2018 is already over and it was an interesting 3 months to say the least. If we look at 2017, the fact that we had only a little bit of volatility is the exception. Most years there’s over ten percent declines at some point during the year. Which is something we’ve about hit already this year. That’s the normal and not anything to be freaked out about – listen to find out why.

Transcript of the video:

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

I’m here to talk about the first quarter review and the rest of the year preview.  Charles Dickens in a Tale of Two Cities started off by saying it was the best of times and it was the worst of times.  I suppose maybe we could start off that way with the first quarter as well.  January for the unmanaged stock market indexes was a continuation of a strong upward movement that we saw in 2017 with very little volatility.  That’s really one of the big stories as far as I’m concerned is that 2017 was so low volatile and that was the unique situation.  All the way up to about January 26 of this year when volatility decided to come back.  And so we definitely saw that in February.  March looked like it was starting to come back up again and then we gave it away in the third week of March.  And so the quarter ended a nine out of the eleven major S&P sectors, 9 of them were negative and two of them were positive.  And those two that were positive was actually information technology and consumer discretionary.  And so that’s kind of interesting. 

Of the indexes, pretty much all of them were negative except for emerging markets and actually the NASDAQ.  The NASDAQ unmanaged stock market index was positive.  But even those that were negative in the U.S. here, not counting – I mean when you look at Japan and you look at some of the others abroad they were actually down quite a lot at negative seven percent or so.  We were down one-and-a-half to two-and-a-half percent.  That’s really breakeven in my mind, particularly when you can make a one percent move in a day which we definitely had some more one percent moves this past quarter than we had in quite some time in the last couple of years.    

So it’s good to put this in perspective.  The way I look at investments is that it’s three steps forward, one step back and maybe sometimes it’s two steps back.  And if you focus so much on the negatives, on the steps back, then you’re never going to have the steps forward as well.  And so when all this volatility is happening and let’s look at that chart that I have up on the screen.  So you’re back to where you were three-and-a-half months ago. This is not that you’re back to where you were ten years ago.   

Let’s put everything in perspective.  As a matter of fact, it is normal for there to be volatility.  It is normal for there to be declines.  And with the number, the DOW being 25,000 and 26,000, 500 and 1,000 point movements are less significant as a percentage.  So we have to look at things in percentages.  I remember back in 1987, you know, I’m 49 years old right now and at that time I was a freshman in college when the October 1987 crash happened and that was 500 points.  Well that was 20 to 25 percent of the whole market.  Well, 500 points on 25,000 is not that statistically significant like it was 20 to 30 years ago.  So the numbers get magnified just like our portfolios.  The larger the numbers, of course, a percentage change one way or the other can be thousands, tens of thousands, maybe hundreds of thousands of dollars.  And so we have to keep it in perspective from a percentage point of view. 

I continue to be optimistic and that means not that I guarantee it, absolutely not.  There’s no guarantees in this world.  Life is not a guarantee.  Investments are not a guarantee.  I’m actually going to do a follow up video to this about how investing is like poker, not chess.   

Just to give you a little preview of that.  There are unforeseen things in poker and there is a certain amount of luck involved in poker whereas chess is all strategy.  The better person should always win whereas that’s not the case in poker and that’s not the case in investments and that’s not the case in life.  There are things that are unforeseen, things that we can do the best that we can.  We can increase our probabilities of success.  And so as I look towards the rest of the year I see lots of profitability with companies, I see lots of technical change continued.  I believe that the tax change that just happened was a very favorable thing, at least in the short run and the short run being the next one to three to four years or so as cash comes back I’m sure, and we reinvest some of that cash as well.  Other people might have a different point of view and that’s absolutely fine.  That’s what’s great about America is that we can have different points of view.   

You have to remember though that from a long term point of view which is the way we have to look at it, things are complicated.  There’s many different variables that determine this.  And so you might place a higher value on the variability of chaos as you might see it.  You might place a higher value on tariffs and say wow, this is a bad thing.  I don’t place that as high of a concern but maybe I’m wrong.  Maybe you’re right, maybe you’re wrong.  Maybe you get it.  I just read this morning how Elizabeth Warren is in favor of the tariffs in China just like President Trump.  I never thought the two of them would agree but there we go.   

So it’s very interesting that there’s all these different variables.  We have to remain long term investors because I can go back 25 years, I’ve been doing this 27 years, and go back my entire career and there’s always been a reason to be pessimistic.  There’s always reasons to be optimistic and so the question is over a longer term – three years, five years, ten years, et cetera, what’s in your best favor because it’s very hard to read the tea leaves on a shorter term basis.   

I’m optimistic.  I continue to be so.  I believe that there’s a greater than 50 percent probability that things are going to continue to work out fine.  Maybe there’s going to be some increased volatility which is normal.  The fact that we had only a little bit of volatility last year is the exception.  Most years there’s over ten percent declines at some point during the year.  And so we about hit that this year.  So that’s the normal and not anything to be freaked out about. 

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

 

 

2017 2nd Quarter Review

Jul 13, 2017 | Reviews

“If you think in terms of a year, plant a seed; if in terms of ten years, plant trees; if in terms of 100 years, teach the people” – Confucius

 

The 2nd quarter of 2017 is over, and it was a good one.

 

Practically every non-managed stock market index was up, in almost every sector. The markets perform in one of three ways — up, down, and sideways. After a few years of a sideways market, since the election we’ve seen a fairly steady and consistent up market, reaching new highs almost daily.

Periodically I hear “the market is at highs and it can’t possibly go any higher”. Hmmm, I’ve heard that every year for the past 26 years, so let’s step back and think about it.

 

If you believe that long term the market will go up (and you must, otherwise why have money invested in it) then market highs are a good thing and something to celebrate. Even if the market only made 1% per year (hypothetically for discussion purposes), then every year it has reached a new high.  So new highs are normal, and a good thing. If you’re trying to wait for it to fall and then invest, you could be waiting a long time and miss the upward in the meantime.

 

Anyway, watch my video above.

 

In my 2nd quarter review, I include my anecdotal “5 traits of successful clients”, and you’ll find they all have to do with behavior.

 

It’s my belief that an investor’s mental attitude (discipline, control of emotions, etc.) trumps almost everything else. Because of these “soft” but simple traits, it leads to making the right decisions at the right time.

 

Check out my video above.  It’s my favorite one I’ve done since my last video.  🙂



Read more from the 2017 Second Quarter Review Newsletter

First Quarter Review / Current Thoughts

Apr 22, 2015 | Estate Planning, Financial Planning, Market Commentary, Videos

The first quarter was a great reaffirmation that diversification can be your friend. US Large company indexes lagged, but middle and small companies did better. US Bonds did well (in general), as did international stocks.

While diversification does not guarantee a positive return in a generally declining market, my experience is that it does tend to “buffer” some of the returns so you can stay with the plan that works for you.

In my video, I review the past quarter and continue my theme about what I’m watching to come to a “health” conclusion on the markets. Okay, I’m still bullish, but why you may ask? Click on the video for my thoughts and analysis.