10. Young People Should Pray for a Crash

10. Young People Should Pray for a Crash

A crash is your best friend. Let me ask you a simple question: if housing prices fell 90% tomorrow, would you be happy? If you are a young person who hasn’t yet bought a home — of course you’d be happy: a housing crash means you finally have a chance to buy your first home cheaply. And if stock prices fell 90% tomorrow? If you are young, still working, with monthly salary still going into the market — the answer should be exactly the same: happy. But most people’s reaction is the opposite: cheer when housing falls, panic when stocks fall. This self-contradictory response exposes a fundamental misunderstanding of investing. Housing prices and stock prices are no different in essence — both are asset prices, both are what you will keep buying in the future. The lower the price, the more the same amount buys. If you plan to keep buying the NASDAQ-100 for the next 30 years, then a market crash for you is a grand discount sale: where $1,000 used to buy you 2 shares of QQQ, now $1,000 buys 5 or even 10. The same money accumulates more shares, and when the market recovers, those extra shares multiply your gains. For young people still in the accumulation phase, a crash is not a disaster; a crash is a gift.

Every Historic Crash Was a Golden Pit in Hindsight

• 2000–2002 dot-com bust: S&P 500 down ~50% cumulatively. Almost everyone thought the market was over. But those who kept buying regularly through it earned astonishing returns in the bull market that followed.

• 2008 financial crisis: S&P down 57% from peak. From the March 2009 bottom of 666 began an 11-year super bull, up more than 400%. The average first-year rebound after an S&P 500 bottom is ~46%; 2009’s actual rebound was even higher.

• 2020 pandemic circuit-breakers + 2022 rate-hike crash: each story is the same — everyone says “this time is different, this time it really is over”; the market comes back every time, often faster than expected. This is not luck — it is because human economic development has fundamental drivers: technological progress, efficiency gains, demand expansion. These long-term structural forces do not evaporate because of one crisis.

What About Retirees? Retirees have no salary to buy the dips. Isn’t a crash a loss for them? Answer: use stock pledging. We never sell — daily expenses in retirement are paid by pledge-borrowing. When the market drops, your stock’s market value shrinks, but you have not sold, you have not realized a loss; you continue to hold, continue to pledge, continue to live. When the market rebounds (and it will), your stock’s market value comes back. The one discipline is: pledge ratio ≤ 20% — even if the market drops 70% short-term, your maintenance ratio is still safe. See §11, §13, §22.

Who Should Fear a Crash? Not the prepared investor. The four kinds who should truly fear:

• People with no emergency cash;
• People with excessive pledge ratios;
• People who borrowed money they shouldn’t have to invest (margin);
• People who put short-term-needed money in stocks. The crash is not the enemy. Lack of preparation is.

Key Points

One, young people cheer a 90% housing crash and panic at a 90% stock crash — that is a cognitive contradiction. For young people still in accumulation, a crash is a discount sale; the same capital buys more shares. Two, 2000–2002, 2008, 2020, 2022 — every crash was a golden pit in hindsight. The average first-year rebound after an S&P 500 bottom is ~46%. The risk of leaving the market and missing the rebound is far greater than the risk of staying in and weathering the drop. Three, retirees handle drawdowns via pledging (≤ 20%) — they don’t sell at the bottom. The ones who should really fear a crash are those without preparation. The crash isn’t the enemy. Lack of preparation is.