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Old 09-26-2013, 01:14 PM   #691
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from the article you posted, "...And we shouldn’t forget that many of the wealthy got where they are through the privilege and advantage that comes from familial wealth rather than their own merit."
While I'm not disputing this - I've seen some conflicting numbers. I didn't see any data supporting this (again, I don't doubt that it's true...but data certainly helps when making such a strong claim).
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Old 09-26-2013, 02:10 PM   #692
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While I'm not disputing this - I've seen some conflicting numbers. I didn't see any data supporting this (again, I don't doubt that it's true...but data certainly helps when making such a strong claim).
If what you've seen are numbers showing that most fortunes in the US are self-made rather than inherited, that is (to my knowledge) true. But there are massively important advantages that a wealthy upbringing brings to future wealth, other than directly inherited fortunes. I, for instance, don't expect to inherit buckets of money from my parents. But they could afford to live in areas with strong schools that really helped to foster a strong motivation in me that I might not have gotten otherwise. I am just theorizing here, but I think that growing up in an area where people grow up and make money, rather than being continually trapped in poverty, helps to demonstrate what can be done to make money, and incentivize doing those things. So I absolutely think that the upper-middle class lifestyle that my parents are able to afford will help me "inherit" in a less direct sense. And it's kind of sad that things work that way.
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Old 09-26-2013, 03:18 PM   #693
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If what you've seen are numbers showing that most fortunes in the US are self-made rather than inherited, that is (to my knowledge) true. But there are massively important advantages that a wealthy upbringing brings to future wealth, other than directly inherited fortunes. I, for instance, don't expect to inherit buckets of money from my parents. But they could afford to live in areas with strong schools that really helped to foster a strong motivation in me that I might not have gotten otherwise. I am just theorizing here, but I think that growing up in an area where people grow up and make money, rather than being continually trapped in poverty, helps to demonstrate what can be done to make money, and incentivize doing those things. So I absolutely think that the upper-middle class lifestyle that my parents are able to afford will help me "inherit" in a less direct sense. And it's kind of sad that things work that way.
Yes, this is more or less what I usually see - that most of the wealthy did not directly inherit their wealth, but they did grow up in an environment that nurtured a "wealthy" mindset.

Perhaps this is where much of the anger is coming from - especially those that grew up in the middle class and checked off all the "middle class" requirements to at least stay in the middle class (if not move up into the upper middle class) - only to find that it's much more difficult for them than for their parents.

In my case, like you, I grew up in what many would consider the upper-middle class. After some military service (in which I remain a Reserve Officer) to "break free" from my parents I went to school (eventually earned a degree in Management of Information Systems and then an MBA), and actively pursued jobs that built my resume. Yet - after all of that, I still don't own a home even though my wife and I make just over $250,000 per year - which even in Orange County is in the top 2-3% of household incomes according to irs.gov. Why? Because the price of a home compared to average income is SO FAR out of whack I refuse to pay it (even though my wife REALLY wants us to buy). But I do have a neighbor that somehow bought a million dollar home next to us working as a maintenance man at COSTCO.

Now, I'm not saying I deserve the house more than my neighbor. What I'm saying is that he used a credit scheme to get into his first home and "traded up" when he got some equity from the boom like so many others. The problem is - with everyone using funky credit schemes to get an asset, that asset will artificially inflate (just like college). If/when we return to conventional measures of price to income - I should be able to "afford" a home priced in the top 2-3% of my area (of course I'm conservative and would still choose something more modest than the top 2-3%, but I don't have that choice).

And here'e the thing - let's say I just bite the bullet and buy something well within my means based on my income - let's say a $500,000 house - I just know it will tank 50% when prices return to the historical baseline - which would be 1999 prices plus inflation adjustment.

Happy wife or not - I just can't afford to throw $250,000 away...hence, I'm a "2 percenter" that can't "afford" a home.

If I am an upper-middle class employed citizen with a post-graduate degree and 20 years of solid professional experience having these complaints - it must be horrendously difficult for a young person with that newly minted degree expecting to step right into the middle class life that was promised. Of course - if they're willing to take on a mountain of debt and pay double the price - then they can actually "finance the dream" - at least for awhile.
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Old 09-26-2013, 03:22 PM   #694
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If what you've seen are numbers showing that most fortunes in the US are self-made rather than inherited, that is (to my knowledge) true. But there are massively important advantages that a wealthy upbringing brings to future wealth, other than directly inherited fortunes. I, for instance, don't expect to inherit buckets of money from my parents. But they could afford to live in areas with strong schools that really helped to foster a strong motivation in me that I might not have gotten otherwise. I am just theorizing here, but I think that growing up in an area where people grow up and make money, rather than being continually trapped in poverty, helps to demonstrate what can be done to make money, and incentivize doing those things. So I absolutely think that the upper-middle class lifestyle that my parents are able to afford will help me "inherit" in a less direct sense. And it's kind of sad that things work that way.

this is absolutely true.

there's no question that people from all sorts of circumstance can and do succeed. however, it's false to say that "anyone" can succeed, or even that smart, ambitious people always do succeed. often, they don't.

and taking it one step further, we'd all like to believe in a just world. we want to believe the good are rewarded and the bad are punished. we want to believe that if we make good decisions and work hard that things will work out for us. sometimes, that isn't the case. and when we repeat the mantra that people rise and fall solely on their own merit we're really alleviating our own insecurities and attempting to exert some sort of control on a universe that has no interest in fairness or justice.

so it's up to use to make it a little bit more fair, a little bit more just, and to remind ourselves of our common humanity, and common vulnerability.
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Old 09-26-2013, 03:29 PM   #695
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And here'e the thing - let's say I just bite the bullet and buy something well within my means based on my income - let's say a $500,000 house - I just know it will tank 50% when prices return to the historical baseline - which would be 1999 prices plus inflation adjustment.

Happy wife or not - I just can't afford to throw $250,000 away...hence, I'm a "2 percenter" that can't "afford" a home.


i certainly don't know any more than the info you've given us, but i can't think that California real estate, particularly in the OC, is a bad investment. i can't imagine it's going to crash again to that extent.
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Old 09-26-2013, 04:09 PM   #696
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i certainly don't know any more than the info you've given us, but i can't think that California real estate, particularly in the OC, is a bad investment. i can't imagine it's going to crash again to that extent.
I don't see how it can sustain these levels with such high unemployment and low wages. This isn't exactly Silicon Valley (as far as employment goes...)

Maybe everything will ride the inflation wave - and incomes and prices will return to their normal ratio.

I do understand that CA will always cost more than most places, especially OC. But it is still way off the historical trend.

In the end, my wife may win...I'm just ticked that that I have to pay almost 10 times more than my dad did if I wanted to live in the same house in Irvine (or equivalent) - even though he made about 1/2 what I make now.
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Old 09-26-2013, 04:32 PM   #697
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there's no question that people from all sorts of circumstance can and do succeed. however, it's false to say that "anyone" can succeed, or even that smart, ambitious people always do succeed. often, they don't.
Sometimes success can really be about luck and knowing the right people, especially today when networking is more vital than ever. This could be why older generations can't grasp the idea of not anyone can succeed, because they had it easier
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Old 09-26-2013, 04:45 PM   #698
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This could be why older generations can't grasp the idea of not anyone can succeed, because they had it easier
Right on the money there. Just like it said in the "blue collar aristocracy" article...
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Old 09-26-2013, 04:58 PM   #699
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Right on the money there. Just like it said in the "blue collar aristocracy" article...
Hey, even I had it easier when I graduated college in 2004. I got my first real world job simply by submitting my resume. When I tried to do the same when I got my MA in 2008, I got nowhere because the way you go about getting even an interview has completely changed. Some of it is technology, some of it economical, and others. I'm still trying to adjust to the whole networking, social media, innovation methods that are needed to have anyone glance at your resume. When people ask me how I got my first job (which was at a major news outlet), I literally say, "the old fashioned way".
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Old 09-26-2013, 06:32 PM   #700
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Perhaps this is where much of the anger is coming from - especially those that grew up in the middle class and checked off all the "middle class" requirements to at least stay in the middle class (if not move up into the upper middle class) - only to find that it's much more difficult for them than for their parents.
That's definitely true.

Regarding real estate, I do think that your situation is either somewhat of an anomaly, or perhaps the worst example exemplifying a pattern. I do share your fear that real estate prices are getting questionably high given economic fundamentals at the moment.

And college... good God, that's insane. I am incredibly lucky to be going to a school with inexpensive tuition, and to be paying for the vast majority of my expenses with scholarship money, and to be getting a worthwhile degree from it. But so many have none of those three blessings, and that is part of what scares me about what economic shape my generation is getting stuck in.
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Old 09-27-2013, 01:50 PM   #701
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Regarding real estate, I do think that your situation is either somewhat of an anomaly, or perhaps the worst example exemplifying a pattern. I do share your fear that real estate prices are getting questionably high given economic fundamentals at the moment.
This came out today...

ALBERT EDWARDS: The Fed Is Inflating A Housing Bubble To Hide A Destabilizing Economic Problem

Some interesting bits...

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Hence, while governments preside over economic policies that make the very rich even richer, national consumption needs to be boosted in some way to avoid under- consumption ending in outright deflation. In addition, the middle classes also need to be thrown a sop to disguise the fact they are not benefiting at all from economic growth. This is where central banks have played their pernicious part.
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Investors should make no mistake. The anger of the 99% will ultimately not be bought off by yet another central bank inspired housing bubble, engineered to pacify them and divert their attention as their real incomes fall and inequality continues to grow.

The current bubble will burst, despite the Fed postponing the event by climbing to ever higher diving boards. All the time rising inequality is draining the swimming pool dry and the crunch when it comes will be ugly...
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Old 09-27-2013, 10:39 PM   #702
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Regarding real estate, I do think that your situation is either somewhat of an anomaly, or perhaps the worst example exemplifying a pattern.
It's definitely not an anomaly - there are a number of urban areas in North America where what INDY describes holds true. People who live in the heartland of the US or in other cheaper areas have no concept of what real estate costs in some of the cities we inhabit.
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Old 09-27-2013, 10:48 PM   #703
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It's definitely not an anomaly - there are a number of urban areas in North America where what INDY describes holds true. People who live in the heartland of the US or in other cheaper areas have no concept of what real estate costs in some of the cities we inhabit.
I know it's bad. I spent an astronomical sum to live in New York this summer. What I do think is an anomaly is the circumstance where people in the top 2-3% of income for an area are unable to own a home.
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Old 09-27-2013, 11:00 PM   #704
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Just realized that I said INDY when I meant AEON - sorry about that.

I also don't think that really holds true. People in the top 2-3% can buy homes everywhere. AEON chooses not to. But he can afford it, he just doesn't want to have the debt load.
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Old 09-28-2013, 01:42 AM   #705
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But he can afford it, he just doesn't want to have the debt load.
Especially a debt load for something I think is overpriced by at least 30% - maybe more.

Financially, if you crunch the numbers, buying a home is a less than optimal investment even in more stable times. That measly tax credit does little to off set the costs of 30 years of interest payments, maintenance, taxes, upgrades...etc.

Now, if you buy at a "peak" - things are even worse, because you may be underwater on your mortgage for 10 years or more (unable to sell without a loss, no home equity to borrow against in case of emergency).

However, you do have to pay to live somewhere - and I will eventually buy a modest home when prices return to sane levels, but put as much down as I can and pay it off as early as possible.

Debt is slavery - and the more I can avoid it, the better.
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