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Comment by exabrial | Hacker News Reader

If you see this as a problem to be solved, please don't do anything. This is how the normal healthy market works. Leave it alone.

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What's your proposal for the people who lose their retirement?

> What's your proposal for the people who lose their retirement?

You would only lose your retirement if 100% of your savings was invested in company(s) that eventually went to zero.

Even if you're 100% equities, and concentrated in (e.g.) the S&P 500, that would mean that the five hundred largest companies in the US would have to go to zero before you would "lose" your retirement.

One could also go for a total US market fund (Russell 3000, $VTI) or total world market fund ($VT). Further, having a bit of bonds (10-20%) would allow you to be cushioned for things like the '00s, where the S&P 500 returned 0% for the decade:

* https://www.forbes.com/sites/advisor/2010/09/13/its-not-real...

Historically, even if you only invested lump sums just before crashes, you would have done fine as long as you stuck with it:

* https://awealthofcommonsense.com/2014/02/worlds-worst-market...

The stock market is basically the anti-casino: the longer you participate the better your chances of coming out ahead:

* https://awealthofcommonsense.com/2023/05/the-stock-market-is...

The problem is AI stock valuations effects the valuation of the market as a whole. If 10% of your stocks are AI and AI flopped to 0, you wouldn't just lose 10% of your investment because nearly every other stock is going to drop a significant portion along with it.

> If 10% of your stocks are AI and AI flopped to 0, you wouldn't just lose 10% of your investment because nearly every other stock is going to drop a significant portion along with it.

And? This has happened before and it will happen again:

* https://awealthofcommonsense.com/2014/02/worlds-worst-market...

If you're worried about drops risking your financial goals (retirement or otherwise), diversify: international equities, bonds, etc. As the time one needs liquidity more than growth approaches, decreasing risk is a standard strategy:

* https://www.kitces.com/blog/managing-portfolio-size-effect-w...

AI is no different than any other new technology over the last three centuries:

* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...

also the currency the stock prices are measured in would become less valuable, since a big part of its value comes from foreign countries investing in American stock markets.

I mean you're right but also not right.

If your retirement savings went down by 20% and you had to put off retirement by 5 years, but then you died after 5 years, you've lost your retirement!

You also wouldn't need your entire retirement sum.

Checkmate.

I'm assuming the death is a surprise.

If you have advance knowledge of the future, you wouldn't need retirement savings either. you'd simply get on kalshi and make all of your money sports betting.

You literally cannot outsmart common sense.

Ideally, they should be allowed to withdraw their funds and invest them as they wish. The root issue here is people not being in control of their investments.

Assuming you're talking about people who are actively retired, or who are close to retirement, one would hope they have planned a proper asset allocation and not be so exposed to stocks. Otherwise you have to trust that history will continue to repeat itself and all losses will come back and then some.

Even if you're retiring tomorrow, you're not going to be pulling everything out at once. The stock market going down isn't anyone "losing their retirement". They still own all the same stocks they did.

Excepting shares of bankrupt companies, of course.

Isn't that what indexing solves?

It doesn’t insulate you in a crash or bear market.

I would propose not being an idiot.

The literal advice repeated everywhere is "diversify". If you did the opposite, congratulations on being a case study.

Financial bubbles can take years to "pop". It's usually not an instantaneous thing. Tech stocks have taken a beating lately, but is this the start of a long deflation or just a blip on the way to new highs? Savings haven't been wiped out yet and people who are invested in the tech sector need to remember that stocks can go down as well as up. As an individual investor, nobody owes you a thing if you choose stocks that go down.

Of course, if a public pension fund is run this poorly, they will almost inevitably be bailed out at the cost of younger generations. Betting it all on one sector and refusing to blink when it looks like a bubble might be popping is not what I'd call competent management. That's just too much risk in the mix for a fund that needs to be there. If pension funds are overly exposed to one volatile sector, some really dumb people are about to lose their jobs, and rightfully so.

Government bailout. It was a "conspiracy theory" three months ago, now they're on CNBC saying "of course we have to do a bailout, unless you want to be ruled by China."

will it (be allowed to) work as intended? the sector becomes/is too big to fail and is deemed a national security concern - we might see backstopping in that case, also it's really the only thing keeping the economy from contracting. i expect the downturn, if it comes, to be more like a megafire that burns white hot through fuel rather than the controlled burn we need, so I don't know that leaving it alone solves anything, given how many actors are actively meddling.

Maybe a normal healthy market isn't normal or healthy for people?

Why are we assuming a market is an inherent good and its needs are to be prioritized?

If a bunch of people might be reduced to poverty in old age and that's a sign of a healthy market, then I'm not super sold on this healthy market pitch...

Except bailouts.

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