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How Much Wealth an AI Stock Market Crash Could Destroy

economist.com

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Re: How Much Wealth an AI Stock Market Crash Could Destroy

#81

Post by alecco »

brentm wrote: post #42
blitzar wrote: post #6

It would be like SVB all over again. Small governemnt, anti bailout, pull yourselves up by your bootstraps tech CEOs on TV crying and begging for someone to cover their losses.

I don't think that is likely this time. Injecting capital to cover losses doesn't bring back the forward looking valuations so stock prices would remain down anyway. Gov isn't going to fund losses for like Microsoft.

The top 10% will not be left holding the bag. They will get a bailout by the taxpayer in some form or another, like quantitative easing (Fed purchasing) or some national security plan spending trillions. Note almost all members of US Congress, both parties, invests in these stocks heavily.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#82

Post by IAmBroom »

sanex wrote: post #5

I'm hopeful that the AI bubble popping would bring back money flowing to other industries. If you're not an AI company right now it takes a lot to get investor cash flowing in.

This is real.

I have a buddy who has been an entrepeneur all his life. He renamed his first company to Name-Dot-Com just before the Dot-Com Crash; a short jump in investment followed by a period where he couldn't get his calls returned, and he was forced to sell.

So my point is: "angel investors" in startups seem to be a really "ADHD", shiny-distraction-oriented bunch. And that has a huge impact for smaller companies.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#83

Post by mitthrowaway2 »

smallmancontrov wrote: post #50
vanschelven wrote: post #15

I've never felt right about the framing of "destroying wealth" when stock prices go to some new number. If anything, the word "reflecting" seems more applicable?

Also: "The stock market is the only market where people complain when things go on sale." -Warren Buffet If you're in a "selling stock" part of your life I understand, but if you're in a "buying stock" part of your life it's worth reflecting on the quote until you can shake the "recent price action IS investor psychology" out of your head.

That's very witty, but not really accurate. I think in any market where you're the seller, you will complain (or at least be grumpy) when your competitors slash prices. Especially when you're not sure the sale is temporary, and the market price is now below your cost basis on your inventory. And especially if your accountants are forced to write down your inventory value to the new, lower price.

Even when people are only buying with no intent to sell, they'll often complain if prices fall right after they've bought an item, and ask for a rebate for the difference, because they feel they deserve the new lower price. Many retailers are aware of this psychology and do offer some sort of forward-looking price match, both to help buyers overcome that hesitation, and to avoid going through the paperwork of returning and refunding a used item just to sell the same thing again anyway. But the stock market offers no such buyer protections.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#84

Post by kiba »

toomuchtodo wrote: post #60
kiba wrote: post #55

Earlier quoted context omitted.

Land prices are subject to speculative bubbles as well. The only way to get rid of speculation in the real estate market is to drive the price of land down to zero by taxing it. You also need a lot of money to purchase land, so this effectively allows banks to make a lot of money on overly inflated price of land. Land by itself doesn't generate wealth, only improvements on top of it does. Only problem is that we tax…

We're getting into the weeds, but the goal is usually to own your home free and clear by the time you retire, reducing your income needs from retirement to death by not having a non discretionary housing payment. The wealth in most homes cannot be tapped until sold, death, or stripping the equity (HELOC or reverse mortgage) and hoping you die with zero. You can sort of think of a house as an I bond you can live in [1…

Drive down the price of land to zero via taxation and you cannot use that home to reduce your income need from retirement. It will force them to sell the property to make way for further development, since the cost of land is no longer so high that you need to borrow money from the bank to purchase land, only to pay the ongoing taxes.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#85

Post by koakuma-chan »

toomuchtodo wrote: post #72
czbond wrote: post #69

Earlier quoted context omitted.

> (the vast majority of wealth for the non wealthy in the US is someone's primary residence real estate) But this is not solely on the top 10% to be maligned. We should force everyone to save.... even $5-10/month adds up for the least privileged over time. We force everyone to immediately pay taxes because the money would not be there year end - we should do the same for saving because it is easier than changing huma…

60% of Americans cannot meet their basic needs on their income. They simply do not have enough income and cashflow to get exposure to the capital markets. No amount of education fixes a system structured to extract. We took pensions away saying they were unaffordable (they weren't, those contributions just go to shareholders now), took wages away through globalization and more corporate power, and then blame the huma…

But what is it that they can't afford? They don't have a job? Rent is too expensive?

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#86

Post by poisonborz »

Stock market crash? I believe less and less a 1929 style crash is possible. Tesla, Uber, hell, look at GameStop still... The market is rigged. The US and the upper class needs numbers go up, the numbers will go up.

The only way an adjustment to such stock prices would come is if US power and dollar vanes. There is a chance now this will happen, but I guess it will still take a long time.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#87

Post by jghn »

poisonborz wrote: post #86

Stock market crash? I believe less and less a 1929 style crash is possible. Tesla, Uber, hell, look at GameStop still... The market is rigged. The US and the upper class needs numbers go up, the numbers will go up. The only way an adjustment to such stock prices would come is if US power and dollar vanes. There is a chance now this will happen, but I guess it will still take a long time.

> The US and the upper class needs numbers go up, the numbers will go up.

You don't think anyone had ever tried that prior to past crashes?

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#88

Post by toomuchtodo »

kiba wrote: post #84
toomuchtodo wrote: post #60

Earlier quoted context omitted.

We're getting into the weeds, but the goal is usually to own your home free and clear by the time you retire, reducing your income needs from retirement to death by not having a non discretionary housing payment. The wealth in most homes cannot be tapped until sold, death, or stripping the equity (HELOC or reverse mortgage) and hoping you die with zero. You can sort of think of a house as an I bond you can live in [1…

Drive down the price of land to zero via taxation and you cannot use that home to reduce your income need from retirement. It will force them to sell the property to make way for further development, since the cost of land is no longer so high that you need to borrow money from the bank to purchase land, only to pay the ongoing taxes.

Do you believe this is likely to happen? If so, when? 5 years? 10 years?

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#89

Post by smallmancontrov »

mitthrowaway2 wrote: post #83
smallmancontrov wrote: post #50

Earlier quoted context omitted.

Also: "The stock market is the only market where people complain when things go on sale." -Warren Buffet If you're in a "selling stock" part of your life I understand, but if you're in a "buying stock" part of your life it's worth reflecting on the quote until you can shake the "recent price action IS investor psychology" out of your head.

That's very witty, but not really accurate. I think in any market where you're the seller, you will complain (or at least be grumpy) when your competitors slash prices. Especially when you're not sure the sale is temporary, and the market price is now below your cost basis on your inventory. And especially if your accountants are forced to write down your inventory value to the new, lower price. Even when people are…

The numbers in your brokerage account invite you to pretend that you are a seller at times when you are not. It's a nice fiction when prices are going up and a dark story when prices are going down but it's just as illusory either way. We are in violent agreement that price action is psychology, the point of the quote is to fight the loss aversion bias that was calibrated for hunting animals in the savannah not trading stocks. It's a point of fact that if you're a net buyer, gaining the option to buy at a low price outweighs losing the option to sell at a high price, and if you let the latter psych you into not taking advantage of the former you are doing yourself a very common, very human disservice.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#90

Post by barbazoo »

JKCalhoun wrote: post #14
barbazoo wrote: post #4

Im sure the wealthy find a way to socialize these “losses”. Also what a shit headline. There’s no wealth destroyed, it’s all just numbers go up and down. But until you sell you haven’t lost any money, have you?

Maybe a distinction without a difference. If my "numbers go down" it follows that so does my spending, investing, etc.

You're right. I guess it depends on many variables. If you're income depends on dividends and gradually selling offs of your portfolio, I can see now how that would affect my behavior. Same with being someone close to retirement but then, financial planning should have pulled out high volatile stocks from a portfolio that needs to get converted to cash shortly.

If you're a normal person, planning on buying and holding broad market ETFs for the next 20 years, we're just gonna ride it out, right? Right?

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