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