Real Wealth vs Perceived Wealth
“Why is there a fundamental mismatch between stock market performance as reported in financial headlines – and the actual retirement behavior of the many millions of Americans who own those stocks in their portfolios?
Using 15 years of stock market performance data and the type of analysis tools used by sophisticated wealth management professionals, we will solve that mystery in this research-based tutorial. The results may come as a major surprise, even for well read and financially literate investors who have been buying stocks for decades.
On the one hand, stocks have been in a sustained rally, with the markets recovering from the depths of 2008 and 2009 and finally moving on to all new highs. This should have created enormous wealth for tens of millions of long-term retirement investors who have stock-heavy investment portfolios in their retirement accounts.
Yet at the very same time, according to recently released government data as reported in Bloomberg and the Washington Post, the fastest growing group of workers in the United States is older than age 65, up 67% in 10 years, and their average weekly pay has climbed from $502 to $825 over that time.
Over a decade, there has been a three-part change in behavior among those aged 65 and older, with a reduction in the percentage of those retiring, an increase in full time work rather than part time work, and incomes that are higher than those of all workers on average. So people with higher wages than the rest of the population are not only not retiring, they are increasingly not slowing down either, but are continuing full time jobs.
Now where the mystery comes in, is that people who are older than 65 with successful careers and good incomes are the exact same people who would be expected to have substantial stock portfolios in their retirement accounts. So if stocks have in fact been creating so much wealth in recent years, why is it that the same segment of the population that owns the largest amount of those stocks are in practice the same group that is changing their retirement behavior in order to prolong their careers and keep their full income coming in?
The explanation of the mystery can be found in the graph above, which is based upon historical performance of the Standard & Poor’s 500 index from the end of 1997 through the end of the 2012, as well as official US government inflation statistics for those same 15 years. As such, the graph should act as a reasonable proxy for the real world long term performance results achieved by tens of millions of American investors during those years.
Based on an assumed starting portfolio value of $100,000, the blue bar reflects expectations for the compounding of wealth through stock investment. It assumes an 8% average return – which has been a quite common assumption, particularly 15 years ago.
The red bar shows actual real-world performance on a total return basis, with price movements in the S&P 500 index, dividend payments and the reinvestment of dividend payments. It is much lower than expectations, but still substantially positive.
The purple bar shows what really matters – the purchasing power of average stock market investments on an after-tax and after-inflation basis. As shown above, in the real world for many millions of investors, the purchasing power of long term stock market profits has been virtually non-existent. If we compare what really matters – which is what money will buy for us on an after-tax basis – then real gains are a mere 7% of expected wealth gains.
The purple bar is what reconciles the mystery, and explains the divergence between the headline illusion of major profits and the reality of actual after-tax purchasing power in retirement that is currently driving the behavior of millions of investors.
As we will explore, the ultimate bottom line number of what our investments will buy for us after we’ve paid our taxes has been dominated by something that few average individual investors fully understand, which is the powerful and deceptive relationship between inflation and taxes.
What may come as a particular surprise is that these dramatic results are entirely based upon the officially reported 2.42% average rate of inflation over the 15 years. If our personal experience …..”
Comments »Everything’s Fixed, Everything’s Great!
“A brief summary of everything that’s been fixed.
Much to the amazement of doom-and-gloomers, everything’s been fixed and as a result, everything’s great. The list is impressive: China: fixed. Japan: fixed. Europe: fixed. U.S. healthcare: fixed. Africa: fixed. Mideast: well, not fixed, but no worse than a month ago, and that qualifies as fixed.
Let’s scroll through a brief summary of everything that’s been fixed.
1. China’s economy. It was slowing down, which would have been bad for the global economy. But the recent PMI (preliminary made-up indicator) readings have been the strongest since the Great Leap Forward.
The basic story here is China needs a million more of everything…”
Comments »You Gotta Laugh Every Now and Then
[youtube://http://www.youtube.com/watch?v=kS2TpW7dnPo 450 300]
Comments »“I Believe You Must Know What I Know as President”
“West Coast of North America to Be Hit Hard by Fukushima Radiation
Posted on August 20, 2013 by WashingtonsBlog
Radiation Levels Will Concentrate in Pockets In Baja California and Other West Coast Locations
An ocean current called the North Pacific Gyre is bringing Japanese radiation to the West Coast of North America:
The leg of the Gyre closest to Japan – the Kuroshio current – begins right next to Fukushima:
While many people assume that the ocean will dilute the Fukushima radiation, a previously-secret 1955 U.S. government report concluded that the ocean may not adequately dilute radiation from nuclear accidents, and there could be “pockets” and “streams” of highly-concentrated radiation.
The University of Hawaii’s International Pacific Research Center created a graphic showing the projected dispersion of debris from Japan:…”
Documentary: Surviving Progress
[youtube://http://www.youtube.com/watch?v=RT9FfECB8A8 450 300] [youtube://http://www.youtube.com/watch?v=sMmTkKz60W8 450 300]
Comments »On the Matter of Summers Running for Fed Chair
Joy Camp’s Pre-Game Show to Syria
[youtube://http://www.youtube.com/watch?v=qF0YaSh4NXk 450 300]
Comments »Case Closed
A Word From Nigel Farage
[youtube://http://www.youtube.com/watch?v=MjruPuo1KgU 450 300]
Comments »Graham: Nuke Strike in S.C. Could Be Coming, Military Source Leaks Black Ops Movement
[youtube://http://www.youtube.com/watch?v=9-QgMMIa_sk 450 300]
“GOOSE CREEK, S.C. (CBS Charlotte/AP) — South Carolina U.S. Sen. Lindsey Graham says he’s convinced that Syrian President Assad used chemical weapons on his own people.
Graham told reporters in Goose Creek on Tuesday that taking action against Syria in response to the situation is not a question of yes or no, but rather a question of bad or worse choices.
He says if there is no U.S. response, Iran will not believe America’s resolve to block Iran from developing nuclear weapons. Graham also says those nuclear weapons in the hands of terrorists could result in a bomb coming to Charleston Harbor.
He says he’s working to convince South Carolinians weary of war that the situations in Syria and Iran are linked. Graham says Syria could destabilize the entire Middle East…..”
Comments »Echoes of Darkness
[youtube://http://www.youtube.com/watch?v=5PY_qM28rnA 450 300]
Comments »Reality Check
[youtube://http://www.youtube.com/watch?v=A7tSfwkKaUo 450 300] [youtube://http://www.youtube.com/watch?v=ef-SK_nN8Ko 450 300]
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In Plane Sight
[youtube://http://www.youtube.com/watch?v=igX7Z8VstN4 450 300] Comments »
In Response to the President’s Speech on Syria ~ 9.10.13
[youtube://http://www.youtube.com/watch?v=x2GTP1pe2c4 450 300] [youtube://http://www.youtube.com/watch?v=ZujiHZN6UXI 450 300] [youtube://http://www.youtube.com/watch?v=RNi_1pbSqGY 450 300] [youtube://http://www.youtube.com/watch?v=xQcCWaLXXJI 450 300]
Comments »Tick Tock: Is It 11:59pm On the Petrodollar Clock ?
Claims have been made that our war of aggression in the middle east is in part over control of the petrodollar. After all, it was Saddam Hussein who started the notion of trading oil in Euros and other currencies over the dollar.
Qaddafi was in the process of creating a gold backed currency to trade oil and other goods specifically to avoid use of the dollar.
Iran has also sought to create a Bursa to trade oil in any currency other than the dollar.
Putting speculation aside, i remember reading and posting articles on the perils the dollar faces from developing current events; here is a summation of some of those articles.
[youtube://http://www.youtube.com/watch?v=pcqDwxAXV0k 450 300]
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An Open Message to Congress
[youtube://http://www.youtube.com/watch?v=LAi9Y-Gf_-o&feature=c4-overview&list=UUEHsSWvrGVSIA63OV3J6vhA 450 300] [youtube://http://www.youtube.com/watch?v=cWPulhqUyTY 450 300] [youtube://http://www.youtube.com/watch?v=185PB5qDHaQ 450 300]
Comments »The Truth About Lobbing Tomahawks On Syria
[youtube://http://www.youtube.com/watch?v=J-NIOthWsjk 450 300]
Comments »Rick Hanauer: “Rich People Do Not Create Jobs”
[youtube://http://www.youtube.com/watch?v=CKCvf8E7V1g 450 300]
Comments »Documentary: Psywar
[youtube://http://www.youtube.com/watch?v=UIjqZauZNC4 450 300] [youtube://http://www.youtube.com/watch?v=v4HeY1Krw-Y 450 300]
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