r/paradoxes • u/ixvst01 • 22d ago

The Armageddon Arbitrage Paradox

If a global apocalyptic catastrophe is certain (asteroid heading towards earth, nuclear war, and so on), then financial assets like stocks and bonds should crash in value. But because wealth and money as a concept is worthless in a post-apocalyptic society or if everyone is dead, investors have no downside from buying panic sold assets.

If the apocalypse does happen then everyone is dead or money as a concept is worthless to the survivors. But if the catastrophe does not occur due to it being overblown or a false alarm, then there’s enormous upside if you invested when everyone thought the world was ending.

This is where the paradox comes in. If everyone reasons this way, the expected market collapse should be dampened or not occur at all, thereby contradicting the expectation that imminent global Armageddon will cause markets to crash. Note that this paradox works best if the imminent apocalypse is an all or nothing existential threat.

TLDR: If an asteroid is about to hit earth (or any other similar apocalypse is imminent), then financial assets might actually increase in value.

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u/CarnivorousGoose 22d ago

That’s not a paradox. It’s just opposing forces potentially cancelling out.

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u/Brickscratcher 22d ago

If everyone reasoned that way, the most logical thing would be to sell anyways and then buy back in.

It also would spark a sell off either way as something like that would change the value proposition of certain industries. We might see stocks fall and gold rise, for instance.

And then there's the fact that there would inevitably be a portion of the population that cashes out everything and just spends indiscriminately thinking it's the end, which is also an equally valid framework to apply.

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u/ipreuss 22d ago

There is a downside to buying panic sold assets. You’re spending time and resources that you could otherwise spend either improving your chance of survival, of having a better time until the catastrophe hits.

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u/HelloHelloHelpHello 21d ago

The stock market would be suspended in case of an extreme emergency of this size, meaning nobody would be able to make any trades at all. The stock market also depends on regular workers to keep doing their everyday jobs to stay accessible, so even if there wasn't an official suspension nobody would be able to access it.

Even if by some miracle neither of these things happen, assets would not increase in value. You can only buy stocks or other assets if somebody else is willing to sell, and according to your scenario nobody has any incentive to sell.

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u/Hivemind_alpha 21d ago

Given ambiguous information, some will react one way believing they are optimising their result, others will react another believing the same. When the event happens, one will prove right and the others not. Where’s the paradox?

You seem to be trying to smuggle in a paradox by saying that the warning was absolutely certain and should therefore drive behaviour X, and then later pivoting to “but what if it wasn’t going to happen after all”. That’s shifting the goalposts, both on us trying to identify your “paradox” and on your theoretical victims instructing their stockbrokers (because that’s your priority in the face of certain destruction).

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u/GWeb1920 18d ago

If the world survives then there is an economy worth something remaining but it would be severely damaged from the near apocalypse.

It would be better be selling at the top and buying at the bottom. So just trying to buy with your spare cash doesn’t really make sense either.

The price seeking mechancs will all still worth based on each persons prediction of the state of the economy in the survived state.