I think the definition of middle class itself is changing. I was told by a techie who works at Microsoft that a family making $400k per year is merely middle-middle class in Silicon Valley and a family making $1M per year is upper middle class!
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So those staying in RBA are middle class while the rest of BA is ⌠Upper class are in Atherton, Hillsborough and certain neighborhoods of PA and LA.
That does seem to be the case. People buying in Mountain View, Sunnyvale, Cupertino etc are still middle class, while making $500k or more in income. The rich who make several million per year are buying in the exclusive towns like Atherton, Los Altos etc.
Rest of BA is then ??
Sunnyvale has a healthy mix of demographics across various neighborhoods. But, Cupertino is an interesting case. Either it is going to join the group of other rich cities like Saratoga and Los Altos. Or Return to neighboring Cambell, San Jose, or Sunnyvale/Santa Clara.
Measuring a familyâs income (or cash flow for that matter) is a bad barometer for measuring âmiddle classâ vs âupper classâ. Plenty of upper class people purposely minimize the cash flow (and by proxy, their taxable income).
Minimize earned taxable income while have plenty of cash flow to fund their luxurious lifestyle.
I think government is rejigging the tax game. Recent news of higher fixed salary, coupled with creation of super roth ira, I think government (the dems) want people (usually the middle class) to pay more taxes. Could govenment be wanting companies to to move away from paying through RSU/Options just as they did away with 1099 in gig companies like Uber ?
Donât wish for that. Many growth stocks would tumble to oblivion. Is also very hard for startups to attract talents. House prices in SV would dive. There go our way of life.
Interest Rates will cause growth stocks to tumble to oblivion soon enoughâŚ
Once we have a tech bust, weâll see house prices decline too.
âThe most important item over time in valuation is obviously interest rates. Low interest rates make any stream of earnings from investments worth more money. Any investment is worth all the cash youâre going to get out between now and Judgment Day, discounted back. Well, the discounting back is affected by which interest rates you use.â - Warren Buffet (2017)
Looking forward to âreversion to the mean.â
Basically, you are expecting that because the Fed will raise interest rates, the US dollar will strengthen against all other assets like stocks, real estate, crypto etc. Cash will be king once again.
Could be, but Fed has this nasty little habit of drastically reducing interest rates and printing money whenever there is a recession. And all that asset deflation that you are hoping for will inevitably lead to a recession, followed by money printing, low rates etc.
So, just buy assets whenever you can, and hold. Donât worry about timing the marketâŚ
The problem is like one person said: buying fake diamonds with counterfeited coins.
This may be true for crypto. But I think real estate, esp in prime places like RBA, is not a fake diamond
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More complex than that simple summary summary ---- Hard assets are good in inflationary environments, but trying to rely on the Fed to be predictable and reduce rates in a recession only makes sense if:
- One hasnât lived through the 1970s as an adult
- If the solution for the recession is to address of lack of liquidity in the system.
What has worked, Fed-wise, for the past 30 years may not work again⌠and regarding âfake diamondsâ / real estate â the value of real estate can be measured, among other things:
- Economic Health of the local region (i.e. jobs available)
- Desirability of geographical features (ocean, weather, mountains, climate, earthquakes, tornadoes, etc.)
- The cash flow that the asset returns.
Just observations from an older guy that has been through some economic cyclesâŚ
BTW - âtiming the marketâ agreed is undesirable. That said, one must make a distinction between âtiming the marketâ and purchasing equities / assets at values close to or below intrinsic value. One is more macro. The other is micro. People always confuse the two.
As well âasset deflationâ and the wild swings / macro-ness that this phrase implies is also very different from individual assetsâ pricing changing to reflect intrinsic valueâŚ
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Sell your LA properties.
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