Comment by Havoc
9 hours ago
US economy in general is starting to make me nervous.
Quite hard to diversify away though because that means missing out on AI boom and if the US shits the bed then chance are everything else gets sucked down with it
9 hours ago
US economy in general is starting to make me nervous.
Quite hard to diversify away though because that means missing out on AI boom and if the US shits the bed then chance are everything else gets sucked down with it
Too big to fail, nation state edition?
But yeah. I looked at how my pension funds are invested, and it's like 70% in the US. Even more than the sovereign wealth fund, which is apparently around 50% (if a quick AI search can be trusted).
Thing is, I'm not sure I will like the world where OpenAI and co. are as wildly successful as their valuation suggests either. So maybe I should invest in them, so that if it comes to pass, I at least have money?
> if it comes to pass, I at least have money?
I bet 20 GBP that Brexit would happen for that reason. Ended up with around 100 GBP to drown my sorrows :(
> Thing is, I'm not sure I will like the world where OpenAI and co. are as wildly successful as their valuation suggests either. So maybe I should invest in them, so that if it comes to pass, I at least have money?
I think their current valuation isn't suggestive of a world that's going to change very much.
If investors were taking seriously the idea that this could be "it" with AI enabling even full automation — not superhuman AI, not even a fast learner, just AI that can fully automate everything we've currently got and not be limited to the subset of desk jobs that LLMs can do OK — it would allow the economy to double in size in whatever wall-clock time period it takes for the AI to gather enough training data by simply observing human workers doing the things the AI has not yet learned to do.
If self-driving cars are a good example in this regard, that observation time may quite large:
Current AI has not yet mastered full self-driving of cars in general conditions, despite all the cameras on cars gathering data about how all the other (human-driven) cars around them behave in real conditions. To take a somewhat arbitrary cut-off points for the sake of illustration, going from the 2007 DARPA Grand Challenge to today in self-driving cars, would suggest a growth of 3.9%/year.
Global GDP growth of 3.9%/year would be worth a much higher valuation than the AI companies are getting, and yet still be slow change.
>Current AI has not yet mastered full self-driving of cars in general conditions.
I am inclined to agree but Waymo seems to provide a counterpoint? Is this because they have a good system for keeping human managers in the loop?
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> f investors were taking seriously the idea that this could be "it" with AI enabling even full automation — not superhuman AI, not even a fast learner, just AI that can fully automate everything we've currently got and not be limited to the subset of desk jobs that LLMs can do OK — it would allow the economy to double in size in whatever wall-clock time period it takes for the AI to gather enough training data by simply observing human workers doing the things the AI has not yet learned to do.
This assumes that the economy and the governments will happily suffer the electricity and financial demands that Sam and co would give and the world would accept. Even if Sam's words were true, it is still a leap of faith because there is no data backing those words.
My take in late 2023 was that GPT-5 would either further push transformers into the "there is still a real chance transformers might be IT" or will become the unquestionable sign that transformers have peaked as a general technology. My take in 2024 was that the AI bubble was going to be noticed. My take in 2025 is that AI companies (other than the big ones like OpenAI) are going to struggle getting funding.
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> just AI that can fully automate everything we've currently got and not be limited to the subset of desk jobs that LLMs can do OK — it would allow the economy to double in size in whatever wall-clock time period it takes for the AI to gather enough training data by simply observing human workers doing the things the AI has not yet learned to do.
That would nuke the economy, as it currently exists. What's any modern American business following McKinsey "best practices" going to do to the people whose jobs it can automate? It'll fire them all, ASAP (except maybe one or two left to do supervision and monitoring, if it's not totally brain dead). Then the entire mass-consumer-driven economy would collapse and wither, due to mass unemployment.
But the stock would go up this quarter, so it's a win that must be pursued.
That would happen even with UBI, because it's not like they'd replace your salary with free money. You'd have to shrink your lifestyle to live like the bottom quintile. You'd get just enough so you'd not be desperate enough to topple the system that no longer values you, and not a penny more.
And I think none of that's going to stop anyone. If AI gets to the point you described, our current economy will be destroyed, most people will be left behind, and the economy will reorient into a weird thing chiefly concerned with satisfying the whims of the riches billionaires.
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You can't invest directly in OpenAI because it's privately held. Many investors have been putting their money into OpenAI's suppliers such as Nvidia.
Clearly you just need to invest in any company open ai might express interest in as they all go up 20% on public announcements
I wouldn’t worry about being 70% of the US, especially since you have that 30% not in the US.
Many corporations are listed in the US even if they do a lot/most/all of their business overseas. Heck, there are Chinese companies that sell nothing in the USA listed on the US stock exchanges like XPENG.
Yeah, I really don't know what scenario leads to the US economy not dragging down the rest with it.
Is there an argument that other economies would recover better than the US, in the long term? But at that point, one could just diversify during/after the crash.
Unfortunately, that seems to be happening already.
YTD, US equities have underperformed most other equity indexes.
The argument is that a weakened dollar, political / economic unpredictability, politicization of the fed, and big spending bills are starting to weigh on investors’ minds.
Personally, I don’t think a dramatic “crash” is the most likely outcome. I think it would look more like a slow erosion of US growth and dominance compared with other economies.
https://www.bloomberg.com/news/articles/2025-10-11/a-great-y...
> I don’t think a dramatic “crash” is the most likely outcome.
There's lots of crashes, but they're over-predicted. A quote I can't remember perfectly, "we predicted 10 of the last 3 stock market crashes".
That said, if the levers of power in the USA stop being independent, if they all become bound to the will of the President, there's a strong risk of someone — could be the President who ends their independence, could be a successor — crashing it all very hard. If whoever is in charge at the time hates intellectuals, I mean it can be Pol Pot hard; but even if the leader at that point tries to do it all right and listens to sane advisors, it can still crash as hard as the Chinese famine resulting from the Four Pests campaign.
The USA isn't there yet. That's the direction of motion, but even with the current speed of change, there's enough independence that it's not even close to that bad yet.
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Yeah I kinda regretted writing "crash".
Your comment lines up with my sentiment, though I don't put a ton of stock (pun somewhat intended) in mine due to "amateur" status.
But I guess the "if not US, where?" question remains for me. Diversity "everywhere", try to be smartly selective?
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Which economy would you bet on, though? To recover in the long-term. In my mind they all give me reason for pause for various reasons
No idea, personally.
My question in the second paragraph was definitely not rhetorical. :)
Not investing advice.
I diversified away from the US to international equities VTI -> VSUX starting at the beginning of the year. My thesis is that trade is rearranging due to US trade policy. If you look at the S&P500, growth has been flat since 2022 for anything that isn't Big Tech AI bubble. Therefore, I believe that between go forward US economic policy and global trade reconfiguration, non US will outperform the US over the next five years.
I also adjusted some towards VXUS which was a great move in hindsight from fx alone. I bought property in the EU a couple years ago which is also benefiting from fx moves.
With that said, the biggest US companies are pretty exposed internationally already. I'm not sure someone needs to or it would be prudent to say dump VOO and move to VXUS 100%.
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Maybe not investing advice but reasonable-sounding nonetheless.
The thing is, if you accept the Trump Tariffmania (and the associated move to balance trade and export more), then the dollar would have to continue lower, so you (as a US investor) would benefit just on that thesis alone.
It's the reverse for EU investors, where you have to now accept pretty big currency risks to ride the A.I train (If you add in the EUR/USD rally I think you're flat to negative on your SP500 as an EU investor for example).
> Quite hard to diversify away though because that means missing out on AI boom
I find it easier to live with lower/no gains than in constant FOMO
Yes, though a couple 100% lucky gains sure can accelerate the journey.
I leave most of it in an Index fund. I rise and fall with everyone else.
It's either that, or I try to compete with professionals, that have tools I do not have, info I do not have, algos that I do not have, and the ability to cheat the market with dark pools, which I do not have.
As an alternative to diversification, I'm running fairly tight stops on my positions. If the market really shifts, or my positions shift, that'll trigger a sell, and then I reevaluate the positions and the market before buying back in.
You can hedge with PUTS, move into precious metals, put your money in CHF, etc. There are all kinds of ways of maneuvering financial turmoil (albeit, sometimes with non-productive assets), but it really depends on your risk outlook, and as we all know, we're bad at predicting the future.
>You can hedge with PUTS
Alas can't - employer prohibits any use of derivatives.
Plus my last adventure down that lane didn't go great. (Some big wins, some big losses and a realisation that I better leave things I don't fully understand alone - like the options greeks).
Of course you have to do whatever makes sense for you, but nothing is stopping you (or anyone) from spinning up a Fidelity account and hedging against whatever is driving your 401k, etc. Portfolios don't have to exist as monoliths.
This AI Boom? https://www.scottishfinancialnews.com/articles/imf-and-bank-...
Avoiding it seems wise.
You'd be crazy not to be nervous about it from what I've heard, seen and read in the last 6 months.
>from what I've heard, seen and read in the last 6 months.
Except they've been saying that for the last 2-3 years.
I have lunch with a friend every 2-3 weeks, and he self-manages his retirement, and he's retired. It was ~2.5 years ago that he said "A lot of the financial news guys I follow say there's going to be a crash in the next 3-6 months."
At every lunch we've been following up on that, and it just hasn't crashed yet.
I'm not saying it won't, I'm not saying it's risky, but just getting out of the market is not an ideal solution either.
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Why do people persist in repeating this dumb meme? Tyler Cowen, who should really know better, does it too. To be profitable shorting, you have to not only be right about the direction of the market but you have to time it precisely. Shorting is not 'I think the market is going to decline at some point in the future', or else we'd all do it.
You're borrowing to short, and your broker can call your loan at any time for any reason or no reason at all, including 'our risk algos felt nervous this afternoon'. If you try to short a stock or ETF and the market surges in a dead cat bounce before declining, you get completely wiped out even if you're going to be eventually right
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There’s no such thing as an easy short. Going short doesn’t mean predicting a downturn, it means being precise in your predictions about when that downturn will happen. Look at the last few major stock market drops and try to retrospectively time when they would happen from the moment all of the underlying causes of the upcoming crash became apparent: in most cases you get a huge range of values.
As John Maynard Keynes supposedly said, and I've seen play out over the past quarter century, "Markets can remain irrational longer than you can remain solvent."
Cheap shot. Going long is easy, going short is very risky even if you get the general trend right.
John Maynard Keynes — 'Markets can remain irrational longer than you can remain solvent.'
"Nervous" does not equal "sure that it's going to go down".
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Cash is safe. Gold is at a record high for a reason. There are still some companies worth owning.
In general, the thing to look at is the level of liquidity in the market. The liquidity is there, but the problem is there's too much uncertainty for many companies to be able/willing to invest, so it mimics a lack of liquidity.
The dollar has really taken a beating though. It has fallen ~11% this year and is predicted to fall another 10% next year. If you're in cash, you're basically betting the market is going to fall over 20% between the beginning of 2025 and the end of 2026.
Cash is absolutely not safe. Between the fx risk and inflation risk out there, cash is losing purchasing power daily.
Gold is interesting because it was a hedge for a long time, but with the recent run up I wonder if it's entering meme territory. Now that it's moving, people are jumping into it.
Real estate outside the US is going to be reasonably predictable for a while yet. That's only going to get truly shaky after the baby boomers head into nursing homes in a big way and population decline sets in (the market is absolutely not ready for a glut of supply IMO).
It would be difficult to lose money on Manhattan or coastal Californian property as well.
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Gold is at a record high for a reason.
Generally, ‘this asset is at a record high’ is not a reason to get into it.
OTOH, USD cash is almost always at a record low in real terms since at least the 70s.
Cash is safe only if you ignore inflation or foreign exchange.
Don’t spread this kind of financial illiteracy.
Cash is worse than even the worst observed scenarios of stock market investing.
E.g., cash is worse than if you had bought your whole portfolio with the worst timing possible like right before the 2008 crash.
I calculated this out comparing typical savings account APY with S&P 500 and the break even recovery of the S&P account is 2013, with annualized returns at 7.4% for your investments versus 2% APY for cash. That means your cash account is less than half the size of your investment account by 2024. And this is the worst case scenario with a massive market crash and the entire portfolio purchased at the exact wrong time - very unlikely, most people invest continually over time.
The only purpose of cash is for immediate liquidity.
People who invest in the stock market expect large fluctuations including major market crashes. That risk is baked in to the expectation of long-term reward.
If you need to stabilize your portfolio to prepare to withdraw from it soon and preserve its value, talk to a professional if you don’t know what you’re doing. They probably won’t recommend 100% cash deposits unless you’re literally spending it all this year.
> US economy in general is starting to make me nervous.
There's a little restructuring going on, so it' bound to be a bit bumpy which would make some folks nervous, but you have nothing to fear. The end result will be a stronger economy than we've had in decades, and the entire world will be better for it.
I wish I had your confidence in this current plan leading to certain stronger economy
That seems airily optimistic. What is your factual basis for claiming this is true? What is your logic?