Comment on Is there any way the average American can insulate themselves from the AI bubble bursting?
Perspectivist@feddit.uk 3 days ago
How did you handle previous stock market crashes, and why do you expect this time to be different? I’m heavily invested in the market, yet I’m not losing any sleep over the possibility of a crash - meanwhile, people who don’t even seem to invest are the ones worrying about it. I can’t help but wonder why that is.
Maybe because saving to invest is hard, sometimes? And finance knowledge/attention is finite? Some folks are at risk of drawing from investments after a crash?
And not everyone here was invested during the 2008 crash, and may have only experienced the ultra-bizzare COVID rebound.
I don’t mean to be rude, but there are a lot of legit reasons most of Lemmy is probably not into ultra long buy-and-hold.
The Japanese stock market crash of 1987 only recovered in 2020. That’s nearly 30 years.
If that happened in the US, the average american who invested in the stock market and is relying on a 401k to retire would be screwed.
I would say Japan never recovered. The yen is weak, the cost of living is skyrocketing, and Japanese people have said in large-scale national polls that they struggle more to make ends meet than they ever have. Also, the rich are getting richer, and there are far fewer permanent jobs than there were two decades ago.
The main issue in Japan during the 90s was that the government refused to acknowledge the reality of the situation and let the market crash. Instead of allowing bankruptcies and bad loans to clear, they propped up banks and corporations for years - freezing growth and causing decades of deflation and stagnation. The real lesson from Japan isn’t about the crash itself, but about the response: avoiding short-term pain led to long-term paralysis.
If an AI bubble bursts, it would probably resemble the dot-com crash more than Japan’s experience. Central banks act much faster now, bad debt gets cleared out instead of buried, and the global economy isn’t built entirely on AI speculation. So even if valuations take a hard hit, a decades-long depression like Japan’s is very unlikely.
I’m 54 and expect this to be the first depression of my life. It’ll be like nothing we’ve seen since October of 1929.
You would have been prime working age for 2008 financial collapse. Though not an economic depression it hit peoples retirements and work prospects like a hammer. And then what happened? If you stuck it out and didn’t paper hands you would be extremely well off now.
Asafum@feddit.nl 3 days ago
If I had to guess it’s probably because those people, like OP and myself, have very limited funds so losing that investment is losing “everything” and putting them back to having nothing.
Having a very inadequate income makes losing your investments tremendously impactful as you know it will take many many many years just to get close to whatever level of investment you had before. We’re counting on years of growth to make it something worthwhile, but if we get kicked back to nothing then by the time we catch back up to where we were the amount of time left to invest and grow is so much shorter.
Perspectivist@feddit.uk 3 days ago
If you’re not invested in the stock market, you don’t lose anything when it crashes - and if you are invested, you only lose if you sell at a loss. I understand the anxiety around economic uncertainty after a crash, but I get the sense that many people don’t really understand how “losing one’s investments” actually works.
brucethemoose@lemmy.world 3 days ago
They certainly do if they have to draw cash at a loss after they, say, lose a job from a crash. Or draw because of inflation like we’re at a huge risk of now.
Other times, it’s big funds (like retirement funds) folks are “automatically” invested in that make some bad forced decisions during a crash.
You’re right, there is an unfortunate tendency to panic withdraw during a crash (that’s the idea, right?), but it’s not always a choice.
fodor@lemmy.zip 2 days ago
Of course a massive stock market collapse would affect regular non-investing Americans. When companies go out of business, when inflation kicks into high gear, that affects entire communities.
But exactly how, that’s the question. If you know the answer to how, then you can easily prepare for it. Still, pretending that it won’t hurt you because you’re poor seems to be at odds with the past.