4 ms·

We're in this weird situation where: 1) the average American is heavily dependent on equities in their 401k for retirement, 2) so the stock market has to go u

We're in this weird situation where: 1) the average American is heavily dependent on equities in their 401k for retirement, 2) so the stock market has to go up, 3) but the stock market is already at record valuations and it's difficult to see how forecasted growth levels justify the current valuation let alone an increased valuation, 4) without revenue growth, the only way for companies to sustain EPS growth is massive reduction in costs, 5) labor is the primary cost for most companies, 6) in come the AI folks telling CEOs that "AI can replace most of their workforce", 7) and so as the article states, everyone goes all in and "America is one big bet on AI" That leaves us with only 2 possibilities - AI either replaces a significant part of the workforce or it does not. If it does not, the bubble bursts and the economy crashes. If it does, the economy still crashes because consumer spending is 70% of GDP and if the majority of the population becomes unemployed then spending collapses. I don't think people have realized the latter (or at least they're deliberately choosing to ignore it). That said, I believe the former is more likely (AI not replacing the majority of the workforce in the near future). Either way, buckle up.

realusername 1y ago
I have the exact same opinion. And I should add that all these companies "firing people to replace them by AI" are in reality just firing people because the economy isn't great, of course that sounds way worse for investors if they told the truth.
- danans 1y ago
  > firing people to replace them by AI" are in reality just firing people because the economy isn't great More concretely, they can use this situation to squeeze more productivity out of those who remain employed. With the consumer tapped out of discretionary time, attention and spending power, the remaining way to grow profits is to lower overhead.
sdenton4 1y ago
Option 3, nothing changes: people (and institutions) still have income they need to put /somewhere/, and continue putting it in 401ks and index funds because that's the system. Stonks continue to go up, completely unmoored from any behavior in the actual world.
- surgical_fire 1y ago
  "I know the game is rigged, but it's the only game in town"
- DebtDeflation 1y ago
  That sounds a lot like the "everyone has to live somewhere and historically house prices never decrease" argument circa 2006-2007. Equities are not the only asset class in existence and in any market people can sell just as easily as they can buy. Not to mention, in addition to the GFC, it took the stock market until 1954 to recover the 1929 highs and in Japan it took until 2024 to recover from the 1989 crash, so there are clear examples where the stock market doesn't always go up for very long periods of time.
  - pas 1y ago
    ... and let me recommend this blog post about how the housing bubble was exaggerated, and it the bubble is real, the money manifesting as demand for housing is really there (of course coming from the economic growth and brutal amounts of wealth transfer from will-be-owners to was-owners) https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl... housing related supply-side problems are simply very hard to address whereas everybody and their dog is pumping money into the market (cheap loans to help families, singles, poor people, cheap loans to developers, and anyone who wants, because it's low risk anyway, and companies are doing CoL adjustments, and then there are spillover effects from big metro areas, and foreign investors ...) and US population was growing, and construction starts were and are still low (historically but compared to the "pent up" demand) https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST of course the problem is that simply pouring money into housing without transportation infrastructure just leads to even more problems, so it's really a problems bubble! (always has been.)
zzzeek 1y ago
> That leaves us with only 2 possibilities - AI either replaces a significant part of the workforce or it does not. If it does not, the bubble bursts and the economy crashes. If it does, the economy still crashes because consumer spending is 70% of GDP and if the majority of the population becomes unemployed close, but you see, part of the plan is also that immigration is basically shut off. so the majority of the population laid off from their office jobs will have plenty of work to do in the fields and food processing plants if they want to eat.
- marmarama 1y ago
  > the majority of the population laid off from their office jobs will have plenty of work to do in the fields and food processing plants if they want to eat. Indeed. The destination is agricultural serfdom, with current billionaires or their descendants as Lords of the manor.
peteyPete 1y ago
Couldn't agree more. I've been voicing this for the past decade. Its crazy how the system is setup for eventual failure. Its a race to the top, or bottom, depending on who's looking, but for most, the bottom. Companies have to either consolidate by buying all their competitors, and customers, or find a way to deliver the same goods/services for less. Its always less. At some point, not everything can be made with love and good intentions... You can't cut all corners without destroying the integrity of the original product. You can't outsource all the manufacturing without affecting job markets. Manufacturing is already mostly outsourced, now they're going to outsource a lot of the cognitive labor to AI. The never ending chase for consistent quarterly growth numbers has really messed us up and they're not really planning for whats to come. Not that they could plan for AI progressing as quick as it is and replacing jobs as quick as they are, but they're not ready. We're already seeing governments shaming and gaslighting their citizens as they try to find ways to pay for programs to support as many as possible, saying they don't want to work anymore, they're lazy and have to be given everything, pre-chewed.... When you make it nearly impossible for humans to find worth and purpose by exchanging labor for pay, you devalue any contributions they could have and are racing to a future where most of what humans have to give, outside of original creative thought, and art, which AI can do too so it depend on others willing to find value in it, then you're not left with a whole lot. Most of the population aren't self starting entrepreneurs with an infinite drive for wealth and who want to sacrifice everything for a job. Many just seek stability and want to find something they can be at least ok at and can repeat and provide for themselves and their family. By making jobs that much harder to get, you're adding barriers for most to find work. Many countries have been spoiled by stability for so long, their populations don't view survival as a "fight", maybe a struggle, but not a fight for life. Soon it'll be a fight, if not all out war, and almost no one will be ready for that. IF the economy and government (under whatever system and name you want to call it) was setup to provide for all, knowing all the wealth was centralized and they had a mandate to redistribute resources so all could be comfortable, it would be a different story, and even then, but its not the case. A time is coming soon where companies will start losing customers because customer's spending power will disappear. Companies will have optimized themselves out of a path for future growth by destroying their customer base. Younger generations are already looking at a future vastly different from the one we saw or thought we'd see. Most things older generations took for granted are literally out of reach. Some older people literally expect younger people to just toughen up and just work hard and make it happen, since they did. Easy to say when their education cost them a couple summers worth of income + maybe a side job. The next generation paid their student loans over years, then decades, some pretty much for life. Now its not just education, owning a home is now out of reach of a lot of people. So now if you have the guts to take on an education, you're dealing with potentially decades of student loans, average homes in the US have gone from around $140,000 to $500,000 over the past 20 years, while incomes adjusted for inflation has grown roughly 12.7% between 2003 and 2023, or roughly 0.6% a year. Add on to that the extra cost of other new necessities the picture is looking very different. Life is more and more equating to financial slavery. Used to be any job enabled you to provide necessities for a family, now unless you live in the middle of nowhere, its harder and harder to even get started. AI is already causing cuts to entry level lobs, thinning out the pipeline for future senior employees.. Its going to be fun they said... Its going to be glorious they said... One thing for sure, its the people who will pay the price during the adjustment period.
McAlpine5892 1y ago
> 1) the average American is heavily dependent on equities in their 401k for retirement, > 2) so the stock market has to go up This is why I've come to despise 401k's replacing old-school pensions. Yes, pensions had their problems but with 401k's workers must fleece themselves to have any sort of retirement opportunity. Want a shot at retirement? Now we all have to run ourselves into the ground to make number go up. It's insane.
- camel_Snake 1y ago
  Where do you think pensions were storing the money? These are two sides of the same coin.

realusername 1y ago

I have the exact same opinion. And I should add that all these companies "firing people to replace them by AI" are in reality just firing people because the economy isn't great, of course that sounds way worse for investors if they told the truth.

danans 1y ago
> firing people to replace them by AI" are in reality just firing people because the economy isn't great More concretely, they can use this situation to squeeze more productivity out of those who remain employed. With the consumer tapped out of discretionary time, attention and spending power, the remaining way to grow profits is to lower overhead.

sdenton4 1y ago

Option 3, nothing changes: people (and institutions) still have income they need to put /somewhere/, and continue putting it in 401ks and index funds because that's the system. Stonks continue to go up, completely unmoored from any behavior in the actual world.

surgical_fire 1y ago
"I know the game is rigged, but it's the only game in town"
DebtDeflation 1y ago
That sounds a lot like the "everyone has to live somewhere and historically house prices never decrease" argument circa 2006-2007. Equities are not the only asset class in existence and in any market people can sell just as easily as they can buy. Not to mention, in addition to the GFC, it took the stock market until 1954 to recover the 1929 highs and in Japan it took until 2024 to recover from the 1989 crash, so there are clear examples where the stock market doesn't always go up for very long periods of time.
- pas 1y ago
  ... and let me recommend this blog post about how the housing bubble was exaggerated, and it the bubble is real, the money manifesting as demand for housing is really there (of course coming from the economic growth and brutal amounts of wealth transfer from will-be-owners to was-owners) https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl... housing related supply-side problems are simply very hard to address whereas everybody and their dog is pumping money into the market (cheap loans to help families, singles, poor people, cheap loans to developers, and anyone who wants, because it's low risk anyway, and companies are doing CoL adjustments, and then there are spillover effects from big metro areas, and foreign investors ...) and US population was growing, and construction starts were and are still low (historically but compared to the "pent up" demand) https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST of course the problem is that simply pouring money into housing without transportation infrastructure just leads to even more problems, so it's really a problems bubble! (always has been.)

zzzeek 1y ago

> That leaves us with only 2 possibilities - AI either replaces a significant part of the workforce or it does not. If it does not, the bubble bursts and the economy crashes. If it does, the economy still crashes because consumer spending is 70% of GDP and if the majority of the population becomes unemployed close, but you see, part of the plan is also that immigration is basically shut off. so the majority of the population laid off from their office jobs will have plenty of work to do in the fields and food processing plants if they want to eat.

marmarama 1y ago
> the majority of the population laid off from their office jobs will have plenty of work to do in the fields and food processing plants if they want to eat. Indeed. The destination is agricultural serfdom, with current billionaires or their descendants as Lords of the manor.

peteyPete 1y ago

Couldn't agree more. I've been voicing this for the past decade. Its crazy how the system is setup for eventual failure. Its a race to the top, or bottom, depending on who's looking, but for most, the bottom. Companies have to either consolidate by buying all their competitors, and customers, or find a way to deliver the same goods/services for less. Its always less. At some point, not everything can be made with love and good intentions... You can't cut all corners without destroying the integrity of the original product. You can't outsource all the manufacturing without affecting job markets. Manufacturing is already mostly outsourced, now they're going to outsource a lot of the cognitive labor to AI. The never ending chase for consistent quarterly growth numbers has really messed us up and they're not really planning for whats to come. Not that they could plan for AI progressing as quick as it is and replacing jobs as quick as they are, but they're not ready. We're already seeing governments shaming and gaslighting their citizens as they try to find ways to pay for programs to support as many as possible, saying they don't want to work anymore, they're lazy and have to be given everything, pre-chewed.... When you make it nearly impossible for humans to find worth and purpose by exchanging labor for pay, you devalue any contributions they could have and are racing to a future where most of what humans have to give, outside of original creative thought, and art, which AI can do too so it depend on others willing to find value in it, then you're not left with a whole lot. Most of the population aren't self starting entrepreneurs with an infinite drive for wealth and who want to sacrifice everything for a job. Many just seek stability and want to find something they can be at least ok at and can repeat and provide for themselves and their family. By making jobs that much harder to get, you're adding barriers for most to find work. Many countries have been spoiled by stability for so long, their populations don't view survival as a "fight", maybe a struggle, but not a fight for life. Soon it'll be a fight, if not all out war, and almost no one will be ready for that. IF the economy and government (under whatever system and name you want to call it) was setup to provide for all, knowing all the wealth was centralized and they had a mandate to redistribute resources so all could be comfortable, it would be a different story, and even then, but its not the case. A time is coming soon where companies will start losing customers because customer's spending power will disappear. Companies will have optimized themselves out of a path for future growth by destroying their customer base. Younger generations are already looking at a future vastly different from the one we saw or thought we'd see. Most things older generations took for granted are literally out of reach. Some older people literally expect younger people to just toughen up and just work hard and make it happen, since they did. Easy to say when their education cost them a couple summers worth of income + maybe a side job. The next generation paid their student loans over years, then decades, some pretty much for life. Now its not just education, owning a home is now out of reach of a lot of people. So now if you have the guts to take on an education, you're dealing with potentially decades of student loans, average homes in the US have gone from around $140,000 to $500,000 over the past 20 years, while incomes adjusted for inflation has grown roughly 12.7% between 2003 and 2023, or roughly 0.6% a year. Add on to that the extra cost of other new necessities the picture is looking very different. Life is more and more equating to financial slavery. Used to be any job enabled you to provide necessities for a family, now unless you live in the middle of nowhere, its harder and harder to even get started. AI is already causing cuts to entry level lobs, thinning out the pipeline for future senior employees.. Its going to be fun they said... Its going to be glorious they said... One thing for sure, its the people who will pay the price during the adjustment period.

McAlpine5892 1y ago

> 1) the average American is heavily dependent on equities in their 401k for retirement, > 2) so the stock market has to go up This is why I've come to despise 401k's replacing old-school pensions. Yes, pensions had their problems but with 401k's workers must fleece themselves to have any sort of retirement opportunity. Want a shot at retirement? Now we all have to run ourselves into the ground to make number go up. It's insane.

camel_Snake 1y ago
Where do you think pensions were storing the money? These are two sides of the same coin.