Inside today’s Daily Journal…

This summer, the price of a Forever stamp will go to 82 cents.

When the Forever stamp was introduced in 2007, it cost 41 cents. That’s a 100% increase.

Over the same period, the government’s official inflation measure – the consumer price index (“CPI”) – rose 55%.

Read that again. The cost of mailing a letter doubled. The government says prices only went up by half. Someone is lying. And it’s not the U.S. Post Office.

The Forever stamp was sold as a hedge – buy now, mail forever, never worry about price hikes again. But, of course, inflation continues to push prices in the real economy higher. There have been more than a dozen hikes to the price of a stamp since 2007.

The things you actually have to buy – postage, insurance, healthcare, utilities, rent, food – are rising at rates that bear no resemblance to the tidy 2% to 3% the Federal Reserve claims. The CPI is political fiction. It uses “hedonic adjustments” and substitution effects to sand down the rough edges of what’s actually happening to your cost of living. (That happens mainly with a made-up number called “owner-equivalent rent” that makes up 40% of the index value.)

Real life isn’t adjusted. Neither is the cost of delivering the mail. And those costs have doubled in 19 years. So have yours, I’d bet. And I’m just as sure that the interest on your savings and increases to wages won’t protect you.

The government is stealing from you. Slowly. Legally. Every single year.

And, if you’re an investor, it gets worse. Because the tools professionals use to protect investors don’t work anymore.

In 2022, the S&P 500 dropped 18.2%.

That’s bad. But it’s not the important part. The important part is what happened to bonds that year. The Bloomberg U.S. Aggregate Bond Index fell 13% – the worst annual loss since 1976. The Vanguard Total Bond Market Index Fund posted its worst year in its entire history.

Bonds are not supposed to do that. The whole point of owning bonds is to protect you when stocks fall. That’s the promise of the 60/40 portfolio – 60% stocks for growth, 40% bonds for safety. But, in 2022, both sides of the portfolio bled at the same time!

The Vanguard Balanced Index Fund (VBIAX) – one of the most popular 60/40 funds in the world – lost 16.9% in 2022. That was its worst calendar year in 30 years of existence. Morningstar reported that 2022 was the only year – ever – where a 60/40 portfolio lost more than an all-stock portfolio in a bear market.

That isn’t just bad luck. Or a bad year. That’s a regime change in process.

Ray Dalio’s All Weather strategy at Bridgewater Associates – the gold standard of “risk parity” investing, the approach built by the world’s largest hedge fund to perform in any economic environment – lost 21.6% during the 2022 bear market. And it took All Weather nearly four years to recover!

Why did everything fail at once? One word: inflation.