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Comment by luckylion | Hacker News Reader

> So, how to we get out of this trap?

Let it hurt. Unless investors feel it (and they only feel via the value of their investment), nothing will change, ever. Of course, you'll get plenty of people saying that it's unfair that this time they really have to live with the consequences of their risk management and that we should totally do that, starting tomorrow. But then you'll get the next cries next week when they've done it again.

Mind you, I'm not talking about some restaurant that's more or less getting by without generating large profits, but every company that spent their money on stock buybacks will now have to do the reverse: issue more shares to recapitalize.

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I think that I agree with this ideologically, but the reason nobody lets that happen is because cumulatively, "retirement accounts" are the single largest "investor" on the stock markets.

So in this case "screwing investors" basically amounts to destroying the life savings of the elderly.

I don't know whether they're also the most risk-seeking investors, but they'd likely be (strongly) affected, yeah.

I don't see an alternative short of massive regulation (that essentially removes them from the stock market completely and move them into a government service; that'll still be done when they've burned down), because I see it more like a slow moving infection that starts in a toe. We've missed the right moment to amputate and only lose that toe, we've missed the moments for all the other toes on that foot as well, and the whole foot is beyond saving now.

It sucks to lose a foot, but waiting and consuming massive amounts of pain killers to be able to hobble along just means that it's going to be the whole leg next year. The best time to interfere was on the first try to socialize the losses. The second best time is now.

Oh, I thought we were in search of a solution that obviates the need to socialize the losses. Socializing the losses is what we're doing now. I mean, sure, we could move them all to a government program, or we could just keep letting the government do what it's doing, as post-QE, the stock market basically is a federal program.

I guess my sincere question here would be whether or not you'd be opposed to bailing out social security if it were in the same boat for whatever reason.

I understand your point but it feels like it's not addressing the actual issue: Why did the elderly put their life savings into the S&P 500? And why does everybody encourage pumping all your life savings into stocks?

A possible answer is that people still believe risk-free 5%+ YoY returns is perfectly normal because of purely historical reasons and disregarding the current economic realities (growth rates) of the world. Considering the current demographics in many developed economies it's just not going to happen! How about bailing out their pensions instead of the companies?

> So in this case "screwing investors" basically amounts to destroying the life savings of the elderly.

Equity markets are not supposed to be so timid that they hide behind the skirts of grandma and cling to grandpa's legs. The picture is more like they're holding a gun to your grandparents' heads. I'd look into a one-time stimulus program that recaps just those elderly's retirement accounts to decouple equity markets' hostage-taking of a vulnerable section of the population, move the interest rate to a level that re-kindles the bond market's retirement linkage, and let the capitalists sort out a real capital market.

I'm done with so many companies boasting they're uber-capitalists, but multiple times in my life they avail themselves of taxpayer-backed funding for loan terms I'd never in my dreams get as a private individual or small business. And they just did it again.

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