Now I am Become GE, the Destroyer of Wealth
There was an article in the Wall Street Journal last month about a gentleman by the name of Gary Zabroski. Mr. Zabroski was a lifer at GE, putting in 40 years at the company and retiring as a punch press operator in 2016. He walked out with a comfortable $85,000 per year pension and over $280,000 in GE stock. Two years later and his shares have lost most of their value as GE stock has accelerated a decline that started almost 20 years ago. According to Fortune, GE hit its peak in August of 2000, with a market cap of $601 billion. Today, the company is only worth one-fifth of that after destroying $477 billion in wealth. What makes matters worse is GE’s pension is currently underfunded to the tune of $31 billion.
Now, with a dwindled retirement and an uncertain pension, Mr. Zabroski is cutting his retirement short and looking for work at a time when the only company he’s ever known is eliminating jobs. This is why I always advise clients to limit investing in the companies they work for. So much of your financial well-being is already tied to the company. This can have a devastating impact on someone whose employer hits a rough patch — or worse, goes bankrupt. Imagine losing both your job and a significant portion of your wealth at the same time.
I get it, people are comfortable with what they know and unfamiliar situations can evoke fear in an investor. This is called familiarity bias and also explains why investors often shy away from foreign investments, or why doctors tend to overweight healthcare stocks. But this can result in a lack of proper diversification, the dangers of which Mr. Zabroski unfortunately learned the hard way.
