Not sure we can really compare to prior crashes, there's more at stake now.
Who's fucked in retirement today? Where does all the printed money have to go?
People with defined benefits. Social Security, Pensions, etc.
The market realized defined benefit was retarded on a fiat standard, the few institutions that stayed with defined benefits like gov employees or some unions are on a treadmill they can never get off of.
Everyone else went defined contribution, which is 401ks... defined contribution is the standard now and has been for awhile.
If stonks go down, everyone's retirement is cooked. It's worse than that, the wealth effect slows down the economy more generally.
Stocks reached a record share of families’ financial assets overall (~59%)
Fed Survey of Consumer Finances (SCF) data shows roughly 58% of U.S. households owned stocks (directly or indirectly, including through mutual funds and retirement accounts) in 2022. That was a record, above the prior high of about 53% in 2007 (just before the GFC) and the levels seen during the dot-com period.
The population is also now older than it's been in the past
The 65+ share is substantially higher than in 2008, and baby boomers have largely moved into or near retirement.
Trump accounts are also another signal that stonks are the money, all the chips are in equities. Dollars are just utility tokens for buying equity.
So, the consequences of a 40% drawdown have never been higher.
This would imply we'd see a defense of equities like never before because the only thing more politically dangerous than runaway inflation is runaway deflation.
So, if stonks do drop 40%, everything else will be on sale too so your purchasing power is largely unaffected. Bitcoin would dump too, but probably lead the climb out once the printer has to turn on to save equities.
There's no escape because the only other choice is to be sidelined. All you can do is not get liquidated by vol, becoming a forced seller. A year of runway in cash equivalents might be one way to do this, a year is long enough to ride out the bottom.
Not sure we can really compare to prior crashes, there's more at stake now.
Who's fucked in retirement today? Where does all the printed money have to go?
People with defined benefits. Social Security, Pensions, etc.
The market realized defined benefit was retarded on a fiat standard, the few institutions that stayed with defined benefits like gov employees or some unions are on a treadmill they can never get off of.
Everyone else went defined contribution, which is 401ks... defined contribution is the standard now and has been for awhile.
If stonks go down, everyone's retirement is cooked. It's worse than that, the wealth effect slows down the economy more generally.
The population is also now older than it's been in the past
Trump accounts are also another signal that stonks are the money, all the chips are in equities. Dollars are just utility tokens for buying equity.
So, the consequences of a 40% drawdown have never been higher.
This would imply we'd see a defense of equities like never before because the only thing more politically dangerous than runaway inflation is runaway deflation.
So, if stonks do drop 40%, everything else will be on sale too so your purchasing power is largely unaffected. Bitcoin would dump too, but probably lead the climb out once the printer has to turn on to save equities.
There's no escape because the only other choice is to be sidelined. All you can do is not get liquidated by vol, becoming a forced seller. A year of runway in cash equivalents might be one way to do this, a year is long enough to ride out the bottom.