The entire US economy is currently being propped up by growth in the AI/tech sector. And I am convinced that LLMs are fundamentally incapable of delivering on the promises being made by the AI CEOs. That means there is a massive bubble that will eventually burst, probably taking the whole US economy with it.
Let’s say, for sake of argument, that I am a typical American. I work a job for a wage, but I’m mostly living paycheck to paycheck. I have maybe a little savings, and a retirement account with a little bit in it, but certainly not enough that I can retire anytime in the near future.
To what extent is it possible for someone like me, who doesn’t buy into the AI hype, to insulate themselves from the negative impact of the eventual collapse?
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.
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.
If someone is absolutely certain that a crash is coming, then now’s the perfect time to sell while we’re still at all-time highs - and buy the dip once the crash finally hits.
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.
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.