The funny thing about people who say it’s not a bubble because AI has value is that the asset category having value doesn’t prevent valuation bubbles from forming.
Houses have value: you can live in them. Yet there was a housing bubble.
The internet has value: you can watch cat videos on it. Yet there was a dot com bubble.
Tulip bulbs have value: you can grow pretty flowers with them. Yet there was a tulip bulb bubble.
In my experience, whenever you start reading news stories asking if something is a bubble and quoting investment bankers say, “no, it’s not a bubble,” well, usually it’s a bubble.
The entire US economy has been running off of an asset megabubble that demands global dollar recycling via Wall St. and property for decades now. This is much worse than 2008 as there is no cushioning. We will see what 20+ of doubling down looks like in the end.
Houses have value: you can live in them. Yet there was a housing bubble.
Was?
There is again, but there was, too.
NVIDIA really out here selling shovels in the gold Rush
Nvidia are very smart in that regard, ethics aside. Very early on they decided that selling cards to gamers will not give them the infinite growth everyone so desperately desire, so they started looking for what does, and they were consistent at it ever since. Every tech bubble of the recent history is powered by Nvidia cards. How much they contributed to the hype (and damage) is not entirely clear, but that’s not zero for sure
Hold up everyone. It’s not a bubble.
“So it is true that valuations are high but, in our view, generally not at levels that are as high as are typically seen at the height of a financial bubble,” said Goldman Sachs strategist Peter Oppenheimer.
He’s from GOLDMAN SACHS LOLOLOLO I THINK THEY WOULD RECOGNIZE A BUBBLE LOL ah fuck me our economy is gonna splode
I mean, what’s he gonna say?
Give me exit liquidity so I can buy the dip?
just short the companies that’ll be the most affected. probably nvidia is a good choice to short right about now.
I wish it were safer to make these sorts of sweeping gambles. Shorting Nvidia right now is like a pretty obvious bet but getting the timing right is the difference between generational wealth and a lifetime of poverty and debt.
right? I just figured the “it’s not a bubble, guuuuys” crowd could find someone a tiny bit more credible lol
I wonder what the people over at Bear Stearns think oh wait they gone.
this made me chortle into my cereal ty
There is definitely a bubble. But also what Nvidia is doing is smart. They have boatloads of cash. They are investing that cash in the companies that are using their products to create money making services. If one of them can create a killer app or viable service this will create demand for their products and they will have an ownership stake in it. Is this guaranteed or even likely? Probably not. We have reached the point where we were in 1996 where the chairman of the fed came out and said we are in a period of “irrational exuberance.” That bubble took four more years to pop. This one may end quicker, but it is impossible to tell when it will end or what will come out of it from where we sit today.
Why should it pop sooner? US money can’t go anywhere else with the same profit margins. It‘ll run out if something more profitable comes around. Maybe a war or so.
It’s objectively a bad thing when a country’s entire economy is being propped up by seven companies and the vast majority of consumer spending is concentrated in the top 1%.
The most optimistic take I’ve seen: AI is a drain on the entire economy that sucks up all investment and this is why the rest of the economy is basically in a recession. Once the bubble pops, investors will flood back into the real economy and correct the problem.
I’m not optimistic.
I’ll play devil’s advocate here: agreed that the rest of the (US) economy seems to be slowing or shrinking but remains buoyed by AI / Mag 7 stocks. That said, a lot of the investment reflected above is in data centers and hardware (Nvidia, Coreweave, Oracle, Microsoft).
The bubble pop will hinge on whether there is value in this data center buildup beyond AI. Unless everyone starts paying fistfulls of cash for AI chat, these companies may be able to find another use for all that compute and avoid a total crash. That could be a target for all that investment you mention.
The hardware is specialized for chatbots, it’s not just something they can plug-and-play for other use cases. That means using it for other computing tasks is even less efficient per kWh and per litre of water, which will make it hard to justify the resource requirements.
Surely some of this hardware can find new life, but assets will be stranded.
Hahaha this is fine, I am fine with this, what could possibly go wrong
Yep it’s such a fragile situation
People need housing, no one needs this AI crap. Even in boring engineering jobs using tools that solved problems decades ago, we are getting AI shoveled in left and right in places no one needs or wants it. And calling old features “AI” is also another problem.
And now these stupid “barking bears attacking fat sleeping people” videos are everywhere, and people seem to think they’re real.
We should focus on natural intelligence first, that is to say each other, and education…
Oh and the headline should read “Every day”, “everyday” is an adjective, like an everyday occurence.
Ai will be the best tool to keep the masses stupid since television.
This doesn’t really tell me anything, I’d have to compare it with other charts. E.g. what does the chart for agriculture look like? Airplane manufacturing? Internet in early 2000s?
I know right? It’s not a bubble if there are transactions between the different companies in an industry. Nothing here shows that these investments are self-supporting circular, nor that all of this is propping up the economy.
Circle != bubble
All the economy is a big circle if you draw the circle big enough.
Actually scratch that. There is an economy that is not just one big circle jerk, such as the development of new technologies or the terraforming of deserts into fertile land; as neither of these things ends the way it started; it brought lasting change, and that is true progress.
Actually did you see my presentation that i made about this recently?
The point is to convince the americans to invest in new technologies.
To all those who say that human spaceflight is impossible:
There is no good economic reason to colonize other planets. We have plenty of space here on earth, with conditions already much more hospitable than that of mars - deserts, for example. The resources needed to turn these into habitable land is so much less than the resources required to make even a tiny part of Mars inhabitable (i.e. establish a colony that relies on life support systems) it’s insane to go for Mars first. The reason colonizing Mars is talked about at all is because a rich white dude wants to go to Mars, since deserts are too boring for his spoiled ass.
I actually agree that it would be cool if we went to Mars, not to colonize it but just to be there. But comparing it to white pillaging of the Americas is just incorrect. Mars is not inhabitable by humans, the Americas very much were. The external resources needed to colonize America were zero, in fact pillaging local lands meant a lot of resources for the Empire. Mars is going to be a much more expensive and much less profitable endeavor.
Actually I replied to you before, pointing out the very same fallacy: https://lemmy.ml/post/33824723/20134917
deserts, for example.
floating ocean platforms as well
Only slightly better than mars, frankly speaking the ocean is about as hostile as you can get without going to space. Maintenance alone would be a fucking nightmare, look at cruise ships or oil rigs for example and you can get a pretty good idea. Unless you are talking about artificial islands since we’ve been doing that for millenia.
I think it’s hard to definitely call something a bubble until it pops.
The definition of a bubble goes something along the lines of market prices exceeding the intrinsic value of the investment they represent, which may be true here?
If you want to read more about this the rough name for these companies was “the magnificent seven” a year or so ago when I last looked at this. A quick Google suggests represent about a third of the SNP 500’s value now and have a cape ratio (cyclicly adjusted price to earnings) of ~37 compared to 15-20 being normal.
Edit: the above baseline is incorrect; see sugar_in_tea’s comment for a more accurate baseline and some interesting counterpoints
I can’t find a good numerical source for the correlated risk within this group, and I suspect analyzing it is very difficult. Given they all used to be a lot more diversified in the past but now a large % of their valuation is predicated on AI historical correlation analysis probably fails. But the diagram linked here suggests it’s probably bad to put all your money in these companies. (Or even a 3rd if you are in an s&p 500 index tracker 😶)
Like, none of this definitively says this is a bubble, since if it were possible to divine that the bubble would immediately pop, but it does suggest there is a strong likelihood we are seeing a bubble.
~37 compared to 15-20 being normal.
15-20 was normal for the 100 years ending 40-50 years ago. But of we look at the last 40 years or so, the CAPE has been higher, suggesting that we don’t know how what “normal” looks like going forward. More people are buying stocks than ever before due to retirement plans and poor bond yields, which pushes up the PE.
So whether ~40 is high for a PE going forward isn’t clear. The CAPE hit ~45 in the 2000 crash, and reverted to ~20 after the crash, yet the 2008 crash only hit ~26 and crashed down to ~14 and quickly bounced back to ~20. The 2008 had little to do with CAPE and more to do with corruption in the banking industry, whereas 2000 was almost purely oversized hype in the burgeoning tech market.
So is the normal range 20-30? Idk. Maybe 20 is actually low going forward, it’s unclear. Either way, 40 isn’t as outlandish as it was in the 2000s, and that pushed up to 45 before crashing.
there is a strong likelihood we are seeing a bubble.
Agreed. But if you drop out of the market and invest in other stuff, you would miss whatever the rest of the runup will do before it bursts, which could leave you worse off than someone just investing in the entire market by market cap. Ot could continue to run for 10-20 years, or it could pop this year, it’s impossible to know since it relies heavily on investors continuing to believe the hype and companies continuing to have something to back up that hype.
Valid, I got 15-20 from a Google search, but further research puts your numbers as more reasonable, I will edit the patent post.
I don’t think anyone should trust my numbers either. Here’s the CAPE data, make your own decision as to whether the CAPE ratio makes sense going forward.
CAPE is a weird measure in that it looks at last 10 years of earnings for PE ratio. It is not especially relevant in that a fair expectation for next year’s earnings is this year’s earnings. It is intriguing that there wasn’t significant earnings growth levels in the past, though, which because PE based on this year’s earnings would have high CAPE if high recent growth.
But of we look at the last 40 years or so, the CAPE has been higher, suggesting that we don’t know how what “normal” looks like going forward.
As you listed, crashes lead to sub 20 PEs. Mag7 PEs is not representative of Russel 2000 PEs. High PEs expect high growth for long period. Reality checks usually happen, but PE’s are not universally high. Just with the oligarchs with White House guest passes.
crashes lead to sub 20 PEs
The 2000 crash didn’t though, it was just over 20 at the trough. Jan 2003 was 21. That was almost as high as the peak in the 60s, and higher than the moment before Black Monday. So the market reverted to a mean that would be considered a peak just 20-30 years prior. 15 used to be a good marker for “average,” and now that’s the marker for the Great Recession.
Crashes used to lead to sub-10s, and now they crash to 15-20. The market has fundamentally changed with 401ks and IRAs.
Great point.
Looks more like the dot com bubble to me.
Is it just me, or are the bubbles coming closer together these days?
But what will be left after it bursts? At least in cause of the housing bubble - the houses existed physically - what will be after the AI crash? Lots of spare gear sold for cheap?
The s&p 500 tanks a ton and banks call on loans from these AI hyped companies using the price of the stocks as collateral (previously expected to rise). Credit crunch and now companies tighten the belts even further so higher unemployment again. Federal funds rate gets slashed and those that can manage steady good work during the recovery years will be fine. Everyone else will be struggle busing as usual
Can you elaborate on managing “steady good work”?
If you have a stable job with good pay or good upward mobility in the company potential and don’t have periods of unemployment, if it has a 401k, you’re 401k is being invested while the market is down. When unemployment is high, the Federal Reserve sets the federal funds rate much lower to try and stimulate the economy. That results in lower rates for consumer loans. So people that have stable jobs that pay well enough can take out loans and/or refinance their current loans to do better than they were.
When the market recovers, you’ve had years of experience that you can now use for job hopping at more senior level roles when the job market recovers. Also a lot of late career people end up consulting for companies large and small with inexperienced staff. Those that didn’t fare well in a career during a market downturn, it’s either stagnation or hardship after hardship
It doesn’t necessarily have to be office/lab work. I know people that grinded the past decade+ in restaurants until an owner would trust them to manage a restaurant including all the supplies and payroll and then trust them enough to partner on a another restaurant and then that be their ticket to financial security. Some in their 30s, some 40s, some 50s. It’s a grind but at least they didn’t end up drug addicts and alcoholics like so many others
This is a really odd take.
you’re 401k is being invested while the market is down
Sure but you just lost half your 401k, including half of what was invested while the market was overpriced.
When unemployment is high, […] That results in lower rates for consumer loans. So people that have stable jobs […] can take out loans
Yes, but lenders also tighten their criteria during these times because even a stable job is dramatically less stable during a recession or depression. It’s very difficult to borrow money in an economic downturn.
When the market recovers, you’ve had years of experience
Sure but if the market didn’t collapse you would still have those years of experience. During a collapse fewer people will have consistent employment.
It’s a grind but at least they didn’t end up drug addicts and alcoholics like so many others
Not sure where you were going with this part.
The universal economic truth is, in times of economic uncertainty the working class does the heavy lifting.
Used GPUs
Annoyingly the current Gen that’s used for ai is basically useless for gaming
deleted by creator
AI is where former cryptocurrency companies pivoted when mining cryptocurrency stopped being profitable. There’s nothing left to pivot back to. Even those who have drunk the blockchain Koolaid don’t think there’s money in mining. Just gambling by investing with real money and hoping someone will give you more real money than you bought it with.
What was left after the cryptocurrency crash? A whole lot of GPUs that got repurposed for AI. They’ll just get repurposed for whatever extremely computationally intensive thing some computer engineer comes up with. Until that bubble bursts, rinse and repeat. What’s happening is project managers are selling the next big thing to make a lot of capital really quickly to a board of directors.
They’ll just get repurposed for whatever extremely computationally intensive thing some computer engineer comes up with.
these are for AI, purpose built bespoke solutions to LLM problems. they’ll age like fine piss.
they can probably be repurposed as general purpose matrix math accelerators
large market there
Except it’s 17x larger & will take the entire US GDP with it.
The GDP issue is not because of the AI bubble, it’s because of tariffs and the complete destruction of US soft power abroad
And I would almost bet the crash will be about the time the Dems take power, just so the Republicans can whine about the situation they created and blame the Democrats for it.
GOP without fail always wrecks the economy, in what gets forecasted as the last time they will ever be trusted with power again. Dems just get 51% of votes anyway.
Is “US soft power” a euphemism for sowing destruction and proxy wars everywhere? Or do you mean things like the awful show NCIS being barely disguised pro-Israel pro-war propaganda? Like that?
I won’t touch the entertainement / Hollywood reference to soft power as that deserves a discussion in its own right.
But as someone who works with … or used to work with US diplomats abroad on a daily basis, I would urge you to educate yourself and people around you about the myriad of activities that US diplomats are engaged in. Contrary to conventional ‘wisdom’, US foreign policy consists of a lot more than bombing the Middle East and supporting Israel. Nobody talks or knows about all of the other things but I can tell you for a fact that American diplomats were (and in some cases still are) helping a lot of people in Eastern Europe. We were helping a lot of people. Shelters for the homeless, schools and museums for kids, whole new campuses for universities, orphanages, adn the list goes on, and on. There’s a reason why over 75% of state department employees working abroad are not republicans. They are not the people most think they are.
We were doing good work with the Americans here. We were helping children, we were exposing corrupt oligarchs. We were in this fight together, not just in Eastern Europe but all over the world. Yes, even the US Marines stationed at Constanza and Novo Selo, ready to fight should the Russkies anything, deserve respect. As one marine told me recently “Don’t worry, come what may, we will stay and fight with you”.
Then everything changed this year. My old American friends were replaced with incompetent political commissars sent by the new idiocratic regime in DC.
The US marines are still here though, and they are still ready to die. I’m just not sure if its worth it anymore.
TLDR: Educate yourself and resist the temptation to parrot oversimplified narratives. Just because you only know about the bad and don’t care to learn about the good, doesn’t mean the latter doesn’t exist.
Edit: in an attempt to preempt incoming windmills: I detest Trump, Netanyahu and imperialism in general. But that does not mean anything American (or whatever nationality) should be presented as black and white. There are 340 million Americans. Each one of them here is proof that America is not black and white, and neither are its citizens.
helping a lot of people in Eastern Europe
to support Israel and war on Russia
Soft power is always more effective than hard threats, because the corrupt CIA stooges pillaging their economies and contributing to destruction of humanity do so with the dignity that threats and bribes are secret and unobvious sycophancy to the US empire. Soft power means that your pawns are not explicitly exposed as your owned pawns.
That your job makes the colonization mission more effective, all glory to hypno Trump, is a cheaper and more direct path to complete capitulation by the colonial “governor generals”.
I think you are just repeating the same old talking points and conspiracy theories that we’re all well-familiar with without actually adding anything of substance or factology to the conversation.
Just defining what soft power means. Soft extortion and bribery just as bad as extortion and bribery.
Let me guess though, Russia doing the same things is just pure evil or propaganda. Because guess what? Countries don’t do any of the things you mention out of Christian charity, they do it for power and control.
GTFOH with your soft pedaling of this bullshit.
Russia does not do the same. In fact, it does the exact opposite. It would be fantastic if Russia actually supported human rights and the rule of law instead of bombing children’s hospitals like Israel does.
God damn it, if the US collapses who will supply weapons to all its peaceful democratic allies in the world? I’m super fucking pissed off about this.
doesn’t look a goddamn thing like the housing bubble
but the circles
Can confirm, circles look like bubbles.
Got em
I suppose similar in the sense that the housing bubble involved a bunch of rich idiots speculating on bad debt that had been vaguely washed to make it look good and now we have a bunch of rich idiots speculating on AI based on vague promises that it’ll be good.
More like the .com bubble but much worse.
But where is Palantir on this? Because they’re discernibly connected to several of these orgs, and that displays the character of what this is actually about.
From the entry for “zaibatsu” on Wikipedia:
Under the Allied occupation after the surrender of Japan, a partially successful attempt was made to dissolve the zaibatsu. Many of the economic advisors accompanying the SCAP administration had experience with the New Deal and were highly suspicious of monopolies and restrictive business practices, which they felt to be both inefficient, and to be a form of corporatocracy (and thus inherently anti-democratic).
The only difference? The zaibatsu actually diversified their operations.
And that is why Yamaha makes everything from musical instruments to motorcycles
Unpopular opinion but this will not as bad as housing bubble and we’re way past bubbles actually popping in contemporary economy. Even China corrected for its massive ghost city housing bubble just recently and that was actually worse than ai tech overvaluation.
Can you explain how we’re beyond bubbles like I’m 5? Is it that there are gentler market corrections now?
Yes, contemporary economy and free markets are so imaginary now that cascading effects and bubble pops like 2008 are very unlikely. American stock market in particular is so far off reality (even before AI boom) that it’s basically a video game with no actual relevancy to true gross product. While China/Russia is a dictatorship with no representation of reality at all and can easily hide the burden of bad economic policies in the obedient peasant class.
So we have dictatorship with imaginary worlds vs “free markets” living in their own imaginary simulation. Economy is all made up now and cascades are basically impossible because that requires rationality.
I’ve been saying the same thing.
The 2008 housing bubble was predicated on cheap lending. It was all debt. It was massive amounts of toxic debt sold around Wall Street, like using Trump Coin or counterfeit cash used to buy a house.
The vast majority of what’s happening here is not debt. Sure, some, but very little. Even the OpenAI AMD stock swap thing is swapping a gamble on stocks worth real money, not debt.
IMO the first sub-bubble to pop will be all the time and effort wasted on “Startups” that are nothing more than a couple people acting as a wrapper for an AI agent. That’s not really going to impact the economy too much on its face, but suddenly a lot of people are going to go from being “entrepreneurs” to being truly unemployed.
Edit: Also, just saw this gem, and THIS is how you get a supercharged 2008 repeat, bank deregulation and $2.6 trillion in lending. Which is exactly how we got to 2008’s subprime lending.
Idk if ghost city thing was a bubble tho.
China used planned infrastructure and bunch of confused journalists in US were like “what kind of government plans for housing of their citizens”
I mean even if it was planned the amount of excess given falling birthrates, doesn’t check out either.
Ah yes “the stoopit west har har” propaganda lol
I was mostly going for “modern journalism is is sad and biased towards clickbait” ngl. Especially now they have AI edited articles.
So how dangerous is that really? I assume one day we’ll finally see investors saying, “Nah, that’s a bubble. I’m not gonna see any returns from those companies - I’m selling.” Then stock prices will fall, and some investors will lose money by selling for less than they bought. After that, AI unicorns will start to lose funding and close their businesses, laying off people.
But will I - a person who does not work in the AI industry and has not invested in AI companies - be affected by this?
One reason it’s dangerous is that the rest of the economy sucks, so AI is masking bigger problems which will become evident and tumble out of control when the money has nowhere left to go.
Yes, you absolutely will be effected.
In a general way, the plebs always do the heavy lifting - a universal truth since the dawn of time.
More specifically, your pension / 401k will lose a heap of money.
As the economy contracts there will be lay offs.
That means loan defaults, et cetera.
Pensions in the stock market are the hostage, and are being used as an excuse against regulations.
Fuck all of that.
I don’t know the answer, but during 2008 onwards (seems like the economy didn’t fully recover until the end of Obama’s presidency), every industry slowed down. Was hard for me to get a fast food job or consistent minimum wage assembly line work through temp agencies. Things can go into vicious positive feedback loops during downturns (investors afraid to invest due to bad economic outlook -> factories and such don’t get built or expanded -> unemployment rises -> people spend less -> companies start laying off -> economic outlook worsens -> investors selling and moving to "safer’ assets -> …). The entire banking system pretty much imploded during 2008; I don’t know how much exposure banks have to AI (commercial real estate is another thing to worry about though). With any luck the AI crash would be more like the dot-com crash, which mostly just hurt one industry (but I remember my father talking about factory layoffs during that too).
One thing people didn’t mention is that I’m pretty sure the top 10% of Americans by income make up 50% of consumption because of the heavily K shaped revovery that has happened. These Americans have a large percentage of their wealth in stocks, and if the stock market crashes, they will feel less wealthy and less willing to spend, decreasing their spending, tanking the US economy.
Boo hoo. Rich people become less rich.
And the poors lose their jobs but who cares lmao they should just eat cake
You are white knighting the poor to protect your own ass(ets).
Trickle down economics is bullshit
No, actually when people stop buying things and companies close down, I’m pretty sure the employees of said companies lose their jobs.
It sucks but that’s capitalism for you.
But if AI pops then that doesn’t mean that people will stop buying things.
Very few people are employed by the AI industry. Most people’s income won’t change. Most people’s consumption won’t change.
Poor people don’t have money to spend on much else than food and housing. Anyone with money is going to have stocks in these companies.
Also the AI industry is Microsoft, Meta, Google, Nvidia, AMD and a few others. They employ quite a few people.
You do realise that if 50% of consumption disappears then a lot of people from that 90% will loose their jobs as well. I don’t care about the 10%, I also think the income inequality in the US is insane, but the fact is that if AI stocks tank right now, poor people will feel it as well (much more so than rich people, because they can’t survive without a job and don’t have wealth as a safety net)
You are talking yourself into trickle down economics. There is now plenty of evidence that this isn’t true.
There is no need to protect rich people’s wealth so that the poor don’t suffer
I don’t understand what your point is? I’m merely expanding on OP’s question and stating the fact that the way things are currently, when the AI bubble bursts poor people will feel it the most. Trickle down economics doesn’t work because if you give 100 bucks to a rich person, they’ll spend like 5 of it. If you give it to a poor person, they’ll spend all of it. But that has nothing to do with the fact that if the bubble bursts right now, poor people aren’t going to somehow get any of that money. They will loose their jobs, because the economy slowed down and nobody is buying anything and their jobs aren’t needed anymore. They will just suffer more and rich people will buy up their houses that they now have to sell at bargain prices.
They will loose their jobs, because the economy slowed down and nobody is buying anything and their jobs aren’t needed anymore
No.
The AI debt creation and investment is not of any benefit to the working class (except for a few construction workers). These data centers don’t create 1000s of jobs. Windsurf has 250 employees. Cursor has 30.
This AI bubble is not affecting general income, only assets. As it doesn’t hit income, it doesn’t hit consumption. Poor people earn and consume. They are asset poor.
A pop in the AI bubble will damage the billionaires, but not the poor.
But I’m not saying the jobs lost by AI companies collapsing is gonna cause a recession, I’m saying the AI bubble collapsing, bringing down the stock market with it, will cause a recession and loss of jobs. 35% of the S&P is made up of stocks in the top 7 US tech firms. The stock market is extremely skewed towards these 7 firms, and a large part of their current evaulation is made up from speculation of potential AI returns. When the bubble bursts, everyone who is invested in these firms will feel it. As I said, the top 10% of Americans make up 50% of consumption, can’t find a confirmation but I think that’s the highest in modern history. If this 10% suddenly looses 30-40% of their wealth because a stock market crash, this consumption will be severely affected. They won’t buy as many fancy goods, won’t go on expensive vacations, in general will do much less. We can argue whether having a class of people like that benefits the economy or not, I’d say it doesn’t, but the fact of the matter is that if the stock market were to crash because of AI companies, everyone is affected, because of how much money the 10% spend.
Your pension is tied to these companies stocks. I can pretty much guarantee that “your” pension fund owns quite a few of these stocks.
But, and this is the important part, that isn’t your pension. It is the pension for those that are retired right now. There is no saved stack of money that you earned during your life thats waiting for you. Unless there is an equal amount of tax paying workers by the time you retire, you wont be getting that pension.
pension
I’m not sure how old you think most of us are, but I don’t think pensions are a common retirement vehicle anymore, and haven’t been for a while. 401k would probably be the modern equivalent, and it’s still running on the stock market for the majority of its life prior to beginning to withdraw.
Pension is the correct English term. 401k doesn’t mean anything unless you’re american.
Pension is the correct English term
I don’t think it is.
A pension implies benefits are distributed to the person in retirement, usually with some fixed amount per month. My understanding is that in the UK, defined contribution plans are required to be invested largely in annuities by retirement, which satisfies that, whereas in the US, 401ks don’t have such restrictions. So a 401k could be depleated well before death, or be passed on to children as inheritance, unlike an annuity. There are required minimum distributions, but they don’t kick in until your 70s.
If 401ks switched to a defined benefit plan at retirement, I could see calling it a pension. But since they’re not, I think that’s misleading, and employer sponsored plan makes more sense.
Not true of UK defined contribution, you can do what you want just like a 401k, though it may be disadvantagous for tax purposes.
It’s pretty normal in British English to use pension as a synonym for retirement account, though I can see why you don’t like that.
Really? This is what I see with a simple search:
When you’re able to take your pension, you can choose how and when you want the money. This usually includes the option of taking up to 25% as a tax-free lump sum and using the rest to get a guaranteed or variable income.
Looking more into it, I guess it’s similar?
The 401k typically doesn’t offer the guaranteed income, though I suppose some plans could offer annuities. You can choose to take fixed payments though, but there’s no guarantee how long that will last. I don’t know what the options are in the UK, but in the US, you can do whatever you like, as long as you withdraw the minimum (percentage of assets based on your age, starting at 73).
I see a pension as having some kind of guaranteed benefit. A 401k doesn’t have that, so it doesn’t count.
Yeah, again this is just semantics, a 401k in British English is 100% a pension. A UK defined contribution “workplace pension” is just a tax sheltered retirement account until it is annuitized, which is common and sensible but not necessary. The annuity is technically a totally different product, offered by life insurance companies (who interestingly with reference to above conversation would typically hold very little equity exposure backing it). Brits also call the equivalent to the social security retirement benefit the “state pension”. It’s a catch all for assets you use in retirement. Whether that’s used to fund an investment drawdown product or a life annuity or just taken out and splurged on a Ferrari makes no difference.
About half of the US population is enrolled in a pension even today…
Pension funds are to a large extent exposed to the stock indices. Since these companies grow and grow in valuation, a larger portion of pension funds are exposed to these companies. The so-called “magnificent seven” make up about 35% of the US stock market now. A lot of people will see a large portion of their pension savings affected by this. If you are not a US citizen, you sre still likely exposed to these companies.
Were you affected by the dotcom bubble?
Maybe the remaining tech companies, such as Microsoft and Nvidia, might raise prices of their products to cover the losses.
nvidia cards would cost as much as a good used car.
They already do.
