You don’t have a loss until you sell.
I am reminded of that during the current tech wreck.
I have a retirement account, which for a while was worth over $1 million. It’s worth just two-thirds of that now.
But that’s OK. Because the account includes about $140,000 in cash. I can buy some stocks. I don’t have to sell any. I can wait out the bear market.
The stocks I own are all in real companies, most of them profitable. I have some dogs that may not come back, like Cloudflare and Upstart. But Amazon will rise again. So will Google, Microsoft, and Nvidia. Bitcoin won’t come back (I hope), nor the rest of the cryptotrash. There’s still almost $1.22 trillion locked in that garbage. There are losses still to come.
What we’re going through is called “multiple compression.” It’s caused by a global recession, by China’s lockdowns, Russia’s war, India’s heat wave. The winner in all this is cash, the U.S. dollar.
You may not know this but the dollar index, the value of the U.S. dollar against other currencies, is near an all time high at over 104. That means it can buy 128 Japanese yen or 6.78 Chinese Yuan. A British pound costs just $1.22, a Euro just $1.04. That’s deflation coming. Add in the natural deflation of the cloud, and it’s clear that America’s economy remains the healthiest in the world. We have the tools to whip inflation now.
Investors are selling out of stocks, especially tech stocks, believing the Federal Reserve interest rate hikes, combined with world events, are bringing on a recession. They might be right. But assuming Vladimir Putin doesn’t blow up the world on his way out, it will likely be brief, and the U.S. will lead the world out. Not China. The U.S. We have the technology to not only win the war, but to save the world. We just need to get serious about deploying it.
The lesson is that you should save your money and keep some cash around for rainy days like today. I know this is hard to read if you’re living paycheck to paycheck. But unemployment is still low, and there are still more jobs around than people who want to fill them. Take advantage, be frugal, try to put something away, and when you’re my age you’ll thank me for it. No matter what the economy’s doing.
