Too big to bail.

The short answer is more capital consolidation at the top. The few companies that survive will gobble up everyone else, and a bunch of people will lose all their savings in the process.

The entire stock market is propped up by the “Magnificent 7”, and without their outperformance over the last 2 years the market would be flat. And all of the gains to the Mag 7 stocks have come from increasing AI infrastructure. They’re essentially forced to keep spending more or investors will lose confidence and trigger a downward spiral. Of course they will eventually have to show revenue from that investment or the whole thing collapses. To put into context just how much large Nvidia has gotten since ChatGPT was unveiled - its market cap is now larger than GDP of EVERY nation aside from the US, China and Japan. And that’s from selling the chips that the hyperscalers (Microsoft, Alphabet, Meta, Amazon, Apple, Tesla) need for their AI. We are at dystopian sci-fi levels of concentration in the economy now.

we all end up holding the bag

This bubble is massive enough to where it could bankrupt the entire lower and middle income brackets.

At that point, the Buckies come out and hopefully the people do some -TIME, instead of targeting each other.

Yeah, it’s beyond “too big to fail”. They’re gonna bail them out like crazy.

Seems like expropriating the middle class is one of the last (relatively) untapped sources of profit available to the system. There are still a decent number of retired office-workers with maybe $1M in a 401k and maybe half that in home equity. Add in the small business owners and small-time landlords. A lot of the economy is based around siphoning a couple percent here and there out of this group, but at some point they’ll get desperate and find a way to take it all at once.

That’s the nature of capitalist boom/bust cycles. Each one results in a wealth transfer to the top because majority of people end up having to let go of their assets to make ends meet. In this way assets get freed up for the top percent to gobble them up. So, when the economy stabilizes the majority of the population ends up on thinner margins and less able to absorb the next crash. Eventually, enough people get pushed off the cliff so that the whole house of cards falls apart.

It’s important to keep in mind that a lot of jobs are ultimately bullshit jobs that simply exist to make companies look more valuable to investors. The selection pressures in the current environment favor building Potemkin villages to convince investors to give them money as opposed to actually being profitable in any way.

Incidentally, have a personal anecdote on the subject I can share. I worked for a startup a few years back, and when I was hired it had around 60 people. The app they were making was incredible simple, and in no way justified the size of the company. They were around for about half a decade already, yet they made very little actual revenue with most of the money coming from VC funding. Then the Silicon Valley Bank crashed, and all of a sudden funding started to dry up. As a result, they were forced to shift their business strategy towards being solvent. The company ended up letting go of most people cutting down to around 10 or so which was the realistic number of people needed to develop the product. They’re still around today, but their product architecture is much simpler and the size of the company is still much smaller.

I expect we’ll see a lot of this happening when the AI bubble pops. Companies will either figure out ways to actually be profitable, or they will simply go under. I expect the latter will be the case for the vast majority because they don’t have a viable business model. The crash will result in a huge reserve army of labor being created and the few surviving companies will have little trouble hiring people back. In fact, I expect that the dynamic will significantly shift in favor of the employers are a result.

Consider if you had done just that this January after seeing this post. You would have missed out on ~14.5% gains in the S&P 500, and still be waiting for the bubble to burst.

Everyone would love to be the guy who sold right before the great recession and bought at absolute rock bottom, but then again everyone would love to be the guy who went all in on NVIDIA in 2016–only, very few of us luck into being that guy. For the rest of us, time in the market beats timing the market.

If you’re worried about an impending correction you might want to shift your allocations towards bonds instead of equities. The exact proportions would depend on your overall retirement plan.

Cash will depreciate with inflation, especially now that the Fed is going to raise rates again. The usual play is to buy gold, which has been going way up for awhile now.

Cash is considered a safe-haven asset though, and it is the most liquid. Other safe-haven assets are government bonds, defensive stocks.

Also I don’t really know what I’m talking about.

It’s fairly common and simple to exit the market when the price goes below it’s 200 day moving average, and re-enter when it goes back above. It will incur losses if the market keeps bobbing up and down around the average though, but the rule keeps you out during the big crashes and keeps you in during the big bull runs. Some also require a rising unemployment rate to reduce false positives. We are currently way above the 200 day moving average. If I remember correctly, long term returns are slightly worse than simple buy and hold, but portfolio volatility is reduced a lot, because bear markets are more volatile. You will never know how high it can go at the top or how low it can go at the bottom.

If I had money to gamble with and no conscience I would put it in arms manufacturing. It seems pretty obvious that our toilets leaders have chosen that to be the growth sector for the foreseeable future.

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Nvidia, meta, google?