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Comment by iepathos | Hacker News Reader

Ironically, it's probably best to buy stocks and crypto when they are in valleys like this rather than at peaks. The unemployment rate is still only 3.5% in the US, so anyone getting laid off is being hired back almost immediately with very little slack. The Fed would actually prefer to see higher unemployment around 6% to better manage inflation so they'll keep interest rates high until they see that happen.

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> Ironically, it's probably best to buy stocks and crypto when they are in valleys like this rather than at peaks.

Is this actually a "valley" though? I'm not sure about that. It could be the worst of this recession is yet to come for both types of assets.

Buying at the bottom is a great idea, but the hard part is knowing where the bottom actually is.

Dollar-Cost Averaging is the way to go. It doesn't matter whether the stock market is up or down.

Until it drops enough that the DCA crowd gets scared. People have been told by reddit that there's an easy way to riches, by just blindly DCAing every month, and most people have blindly accepted this gospel. It just has to go low enough for the spell to break.

It's as if not everyone can be rich with this one simple trick of dumping your hard earned cash into buying whatever Blackrock is dumping on you every month till eternity.

DCA into Vanguard may be ok. Things are on sale now, if you believe in USA over next 20 years.

I'd wager anyone doing that for 30 years will do quite well. It's when people get impatient and take crazy risks that they get in trouble.

> buying whatever Blackrock is dumping

The amount of money it would take to move the price of the S&P 500 is incredible.

Usually a great strategy. However, 2020-2021 were an artificially created equity bubble. I don't think we will see this coming back anytime soon. https://i.imgur.com/MsIGcSo.png

Everyone said the same thing in 2008.

i really hope this is true because im holding

You are right no one knowns anything in trading.

...until you're laid off at the bottom of the market (or nearer to the bottom that all the times tou were averaging)

Well, it’s a much better time to buy stocks than anytime last year when tech stocks were at an all time high and everyone was telling everyone else to invest in the stock markets.

Stocks? Sure. But there is no reason crypto couldn’t go all the way to zero.

What a novel and original argument.

Actually Bitcoin and Ethereum have a known supply and limited inflation (Ethereum is actually deflationary now) so best suited to not go to zero. The USD on the other hand…

https://fred.stlouisfed.org/series/M2SL

https://ultrasound.money/

With stocks, you're purchasing future profits. That puts a floor under things. With crypto you're purchasing??? There's no floor. It has limited utility.

The floor denominated in dollars can still go to zero.

The utility of Bitcoin is its global payment network.

The floor of dollars is the might of the US military. If you haven’t noticed it’s prettttty strong these days.

The military has the power to stop hyperinflation?

Yes. It’s cringe but a war in the right circumstances could stop price growth in the US

I keep hearing this repeated, but the link between military and the strength of the dollar is tenuous at best.

Oil priced in dollars. Countries forced to buy/hold dollars. Country tries to use another currency to buy their oil, they end up like Saddam or Gaddafi c/o the US military.

Brazil, India, China might be too much for US military. Or at least two of those.

But, the floor of profits for a company is not denominated in dollars. It is shit you put in your mouth and eat or a useful product like a refrigerator which you can put things which allow you to not die.

Bitcoin, on the other hand, is some electricity, and arguably a waste of it.

>It is shit you put in your mouth and eat

/happy gilmore

> The utility of Bitcoin is its global payment network.

So zero then?

No, if dollars suffer hyperinflation, companies are still worth the present value of future cash flows. They'll suffer like everyone else in a tough environment, but they won't go to zero unless the company goes bankrupt. Bitcoin, on the other hand, has next to no utility and no profits. It can go to zero.

Future profits of a public company can't go to zero? Bankruptcy is a thing, after all.

How much are Pan Am, Enron, Lehman Brothers worth today?

I've had stocks go all the way to zero.

And crypto go all the way to zero. I'm not sure what your point is. Companies can go bankrupt. So can coins. That's neither here nor there.

> I'm not sure what your point is.

See the bit about the "floor" in your post.

Profits are the floor, as I mentioned. Negative profits in the absence of growth means the floor is 0 and the company may go under. That a stock can go to zero does not mean there's no floor under the price, but it depends on the company as to what that is.

Crypto has not gone all the way to zero. It went from $3T mcap to ~$800 billion. Despite over a decade of people predicting Bitcoin would go to zero, it's still $20K+ per BTC. Yes, down from the $68K euphoric highs of 2021, but substantially higher than its average price for most of its history, and on par or better than many stocks have performed this year.

Ordinary crypto currencies like BTC & ETH can't go bankrupt. They never had any liabilities to begin with. The majors such as BTC & ETH have deep, global, 24/7 liquidity. If you can find a way to make all the liquidity pools dry up for crypto around the world, I suppose it will go to zero. Good luck with that.

The entire stock market has also not gone to zero. You're comparing apples to oranges. Individual coins have gone to zero, as have individual stocks. It's irrelevant to the argument I made.

"With stocks, you're purchasing future profits. That puts a floor under things."

There is no floor for stocks.

You don't get finance.

Technically, with crypto there's always the less than legal or privacy oriented stuff. Unless you're expecting all that to suddenly disappear there's still utility to back its value there, even if not to maintain its value at the rather overinflated values cryptocurrencies like Bitcoin have (which are less practical for such purposes compared to say, Monero).

Plus, for the value to completely zero out you'd need lots of large organizations who have lots of money (be it ones who've borrowed it or ones who are 'holding' it for others) to not only run out of said money but also be unable to pull in new people with get-rich-quick schemes. Miners and stakers would also need to completely lose trust in cryptocurrency.

So, to zero it out, you would need a global economic crisis so large that it educates pretty much every 'sucker' out there, which is pretty unlikely to happen right now.

It’s nonsense to argue Bitcoin or Ethereum aren’t subject to inflation when their price in dollars has been, at best, flat, while the latter experiences record inflation.

I argue that inflation is an increasing lack of purchasing power. We're off roughly a third of the BTC peak last year, so would that not be 300% inflation looking at BTC alone?

> We're off roughly a third of the BTC peak last year, so would that not be 300% inflation looking at BTC alone?

Yes. I was trying to be generous.

I daren't think of the number of stocks I've held which have gone all the way to zero over the years.

Just buy VOO

The people on Robinhood arent the people buying VOO!

VOOG was the main thing I invested in when I used Robinhood

I still use Robinhood and VOO is the bulk of what I buy. I doubt I'm that unusual.

No need to guess! You can see what people are trading on Robinhood: https://stonks.news/top-100/robinhood

Most of it isnt index. They are popular names, meme names, volatile stocks, and YOLOs

Neat! VOO is number 22 on the list. I wasn't too far off after all.

A lot of crypto projects have literally vaporized. At least you can be reasonably sure the S&P companies will still be around in 30 years.

> it's probably best to buy stocks and crypto when they are in valleys like this rather than at peaks

Robinhood was not optimised for investors. It was built to resemble a slot machine.

Stocks don't lose value, they just go on sale ;)

>> Ironically, it's probably best to buy stocks and crypto when they are in valleys like this rather than at peaks.

Half the people in this Robinhood cohort are writing weekly leveraged (non-cash secured) puts and/or put spreads or long calls. With that popular strategy, one big market move and you're wiped out.

Dow is 10% higher than pre-lockdowns Feb 2020 and I hear at least since 2017 that stocks are overvalued.

There has been close to 20% inflation since then.

Looks like closer to 15%.

Tech is still overvalued by any standard metric. We're not deep enough in the valley yet.

The unemployment rate was 3.5% months ago, there is a lag in government reporting. The rate can also vary greatly by industry, a laidoff software engineer is not going to be looking for McDonalds jobs.

Depends. Not everyone needs leet code programmers.

The problem is that many people has less money to go around due to cost of goods and interest rates rising, so it's harder than ever to take advantage of lower stock market prices.

Average down and buy the dip are real.

Someone I know kept averaging down and put in everything that he had as the dotcom bubble was bursting.

And did they hold a couple more years? Or for some reason they sold at bottom after averaging down?

Most dot-com stocks went to 0. There's a famous "99 percent club" of stocks that became wallpaper.

but if you followed the advice of modern portfolio theory, you would've purchased a diversified set of stocks (cap weighted) during the dotcom bubble, including companies such as google, amazon, and apple.

I think even if 99% of the purchases went to zero, you'd probably still be ahead if you're diversified properly.

Google went public in 2004.

The problem is that right now it's not a valley. It's a downhill slope. Once it reaches a valley, I agree that it's probably a good place to buy, but we're not there yet!

Time that market.

You can cost dollar average without timing anything. Essentially you discover after the fact what was the best time to invest.

Which is surprisingly hard to pull off long term as most people are forced to take money out when they run into financial issues which then correlates with down markets.

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