Why do ppl think the market will crash >60%?

[fastlanedoll]

I read somewhere that the top 10% own over 85% of stocks. These are ppl less likely to be affected by inflation / rising interest rates / slower economic growth etc. etc. because they actually have money to invest & aren't heavily dependant on stimulus checks / income from a job etc.

Given the wealth gap only widens & a larger proportion of stocks are owned by truly wealthy ppl, shouldn't crashes be seen less & less often, and crash to a smaller magnitude? If anything, it should become even more robust, and the rate of growth should increase overtime.

I understand that I might be looking at this too simply, but what would cause the market to crash by that margin if the above is true?

 

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[doster.zach]

but what would cause the market to crash by that margin if the above is true

I think currently, the straying from value fundamentals.

With a lot of these "Day 1" companies (focused on growth not profits), they use past data from older companies to make projections that may not be relevant today.

So they might be equating customer growth of 50% in a quarter as a good thing even though they are currently operating at a loss.

"Day 2" companies (focused on growing the bottom line) are less likely to stray from fundamentals because they don't need to paint a picture of future profits and growth, they are working on what they are doing right now.

But all this can be thrown out the window if the stock market is truly just manipulated by all the top 10 hedge funds.

 

[Guest-5ty5s4]

I think currently, the straying from value fundamentals.

With a lot of these "Day 1" companies (focused on growth not profits), they use past data from older companies to make projections that may not be relevant today.

So they might be equating customer growth of 50% in a quarter as a good thing even though they are currently operating at a loss.

"Day 2" companies (focused on growing the bottom line) are less likely to stray from fundamentals because they don't need to paint a picture of future profits and growth, they are working on what they are doing right now.

But all this can be thrown out the window if the stock market is truly just manipulated by all the top 10 hedge funds.

This, but it’s manipulated by policy and the Fed, not just hedge funds.

 

[David Fitz]

It's been going good for a long time now. Last crash was in 2008, expect another one to come in this decade. It's part of business and life. They come and go, you won't be able to avoid them but you should be getting yourself ready for it when it does come.

 

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[Jobless]

One or more big economic powers could default on their debt. For example a big bank leveraged to the ceiling that fails to secure a bailout, or a whole nation state that cannot afford interest on national debt.

That may lead to an isolated collapse, but more likely is that the global economy will start restructuring in different ways. Since asset inflation has been going on for a good while, maybe there will come a time of more austerity, high interest rates, asset deflation. The initial shock of this could easily lead to a financial crash of the magnitude you describe.

Consider also that if a stock market crashes 25% in nominal terms, it could in reality be a crash of 50% in real terms, as central banks can cushion drops with money printing / quantitative easing / bail-outs / bail-ins etc. if they get a few months to do it.

COVlD was one scenario, but what if a large war breaks out? Or several civil wars? Or the US fails to uphold trust in the USD, the world's reserve currency? Or central banks collude to stop decentralized cryptocurrency by creating their own centralized global cryptocurrency and forces it on people? Or an important resource like oil or rare earth metals become scarce? Or a repeat of the housing market crash in GFC? Or a repeat of dot-com bubble crash where faith is lost in all tech companies?

Do you trust Alphabet and Meta? Do you trust the USD? Do you trust governments to handle fiscal crisis better than they did the pandemic?

Even if many super wealthy would be affected together with the rest of us, as long as they are not overleveraged or lack asset diversification, they should be fine. For some, it becomes an enormous opportunity if they are able to 'predict' the turning point (for example if you know when fiscal stimulus will start or end) or if they have spare capital to buy when there is 'blood in the streets' à la Nathan Rothchild.

 

[Kevin88660]

I read somewhere that the top 10% own over 85% of stocks. These are ppl less likely to be affected by inflation / rising interest rates / slower economic growth etc. etc. because they actually have money to invest & aren't heavily dependant on stimulus checks / income from a job etc.

Given the wealth gap only widens & a larger proportion of stocks are owned by truly wealthy ppl, shouldn't crashes be seen less & less often, and crash to a smaller magnitude? If anything, it should become even more robust, and the rate of growth should increase overtime.

I understand that I might be looking at this too simply, but what would cause the market to crash by that margin if the above is true?

It is rather unlikely. Surely there can be dips or sharp corrections but when things could seem go wrong the gov can always turn on the printing press. Remember how scary the market was for the short run when covid hit, and after a few months everything is back to business as usual.

 

[Guest-5ty5s4]

It is rather unlikely. Surely there can be dips or sharp corrections but when things could seem go wrong the gov can always turn on the printing press. Remember how scary the market was for the short run when C0VlD hit, and after a few months everything is back to business as usual.

It only took the steepest increase in the M2 money supply in US history!

edit: OH, and they "discontinued" the graph for this one too, because it's shocking how vertical it went.

 

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[Cameraman]

I read somewhere that the top 10% own over 85% of stocks. These are ppl less likely to be affected by inflation / rising interest rates / slower economic growth etc. etc. because they actually have money to invest & aren't heavily dependant on stimulus checks / income from a job etc.

Given the wealth gap only widens & a larger proportion of stocks are owned by truly wealthy ppl, shouldn't crashes be seen less & less often, and crash to a smaller magnitude? If anything, it should become even more robust, and the rate of growth should increase overtime.

I understand that I might be looking at this too simply, but what would cause the market to crash by that margin if the above is true?

It's not who holds the shares that determines the price/if there is a market crash, it's the trades taking place. If more people are selling a share than want to buy it then the price is marked down and vice versa. If no one was selling a particular share there was a shortage and the price would rise. The entire market is just an index of this activity for the shares that make it up.

There are though a few more things that drive the market index. There will always be people needing to sell to raise money. There are people selling shorting shares by selling what they don't own. There are day traders buying and selling. There are people lending their shares to the short sellers to make money (they get paid for that loan) as well as Options and other derivatives. Then there are corporate results and economic figures followed by money printing by central banks. Governments buying votes and then trying to inflate the debt away.

Now add to that people's behaviours, beliefs and anxieties as that will drive the market in an irrational way. If you have £10m in shares and the market takes a dive, it can be hard not to panic and sell, especially if you have never invested through a large scale crash or you don't have the right "insurance" in place. Most people treat investing like a casino and so become scared out of the market, often losing money to the professional investor. When everyone is panicking (for whatever reason) it can be hard to keep your head.

The media will feed the frenzy and then heard behaviour will kick in. It happens like clockwork with different cycles all adding to each other.

 

[Agent X]

This, but it’s manipulated by policy and the Fed, not just hedge funds.

Fed manipulation. Current federal policy. Malinvestment. Unsound money. Expect more often, worse, and longer-term crashes with MMT.