Just reviewing some of my investments last night, a good variety of stocks and funds. Some balances are approaching what they were about a year ago, but only because I've continuously fed money into them. Valuations are still down. Same is true for some of the very solid companies I'm invested in. All their profit margins, revenue, financials are great, but valuations are still way down. In short, we haven't recovered, but I haven't even rebuilt total balances.
It all had me reflecting, as I'm nearing retirement. Things are much worse than what my balances show. In the past 3 years, now approaching 4, the dollar has lost so much purchasing power. We lost over 30% of purchasing power on wages, which is why so many are struggling day to day now just with the cost of living. However, for those older workers, we've also lost over 30% of purchasing power on lifetimes of savings.
For example, I bought a share of “A Good Company” 3 years ago for $100. In 3 years, I've lost over 30% of purchasing power on the dollar. That means that investment, if I traded back for USDs to buy food or electricity or pay a doctor bill, only has $70 in purchasing power. However, what really happened when the Fed jacked rates is that $100 lost valuation too. If I traded back for USDs right now, I'd get $70 actual USDs with each having 70% of the purchasing power it had when I invested. That means I now have $49 in purchasing power on the original $100 investment. I'm down over 50%. Those are rough numbers, but quite representative of my entire portfolio right now. So multiply that times 1,000,000 (or whatever the average balance people have in retirement funds) and multiply that times millions of people approaching retirement. The bottom line is we have a LONG way to go before we're made whole again. Hopefully, we'll soon see the companies hiring back as fast as they were laying folks off.
Leave a Reply