
Ask HN: What will make the market collapse? - ThomPete
The market keeps going up it&#x27;s almost impossible to see what would make it collapse beside a complete distrust in the US or Chinese economy.<p>What could make it collapse?
======
AnimalMuppet
It depends on how real you feel the current values are. Or rather, on how real
everyone else feels the current values are.

If everyone thinks that the values are fake (not solidly based on company
fundamentals), then everyone is trying to make as much money as they can while
the market goes up. But they're all ready to run for the exits at the
slightest thing. In this scenario, what will make the market collapse?
Anything. Any little event that makes some people sell, which makes the price
dip, which makes more people sell, which makes the price dip further...

If everyone thinks that the values are solid, then the market could go up for
a long time. It will go up for long enough, and reliably enough, that people
will borrow money to buy stocks (especially at these interest rates). That
borrowed money will make stocks rise, so more people will see the stocks as a
source of sure profits, and will buy more stocks with more borrowed money.
This is the start of a real bubble. (I can't comment on whether the market is
currently in this state - does anyone know of a measure of how much borrowed
money is in the market?) This goes on until the banks aren't willing to lend
any more money to buy stocks with, and _then_ the first little thing causes
everyone to run for the exits. Except in this situation, they run even
_faster_ , because as the market goes down, they can lose even more than they
invested. So the market crashes very hard and very fast, and a lot of people
lose money, and even some of the banks lose money, which can cause real
problems for the larger economy.

