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These prices are set by the top 30% employees of the big tech firms. Unless there are massive layoffs there (e.g. 250k employees are let go) and this situation

These prices are set by the top 30% employees of the big tech firms. Unless there are massive layoffs there (e.g. 250k employees are let go) and this situation lasts for a few years (they have savings for 3-5 years usually), I wouldn't expect the prices to move.

qqqwerty 7y ago
Stock options and RSU's are a big part of the compensation packages for that group. So lower stock prices are essentially pay cuts. And unlike 2008, many of these companies are more mature and much more exposed to the broader economy. Cloud computing, Ads, GSuite, etc... There are a handful tech companies that will probably thrive (Netflix, Zoom, etc...), but most of them are probably going to see big drops in revenue. And considering that most of these companies have plenty of fat to trim (how many Alphabet moonshots are bringing in meaningful revenue, let alone profits?), I don't see how declining revenues won't result in some belt tightening. And when that starts happening, how many of the top 30% are going to be buying $2M-3M homes. The mortgages on those things are like ~$15k a month, and CA unemployment maxes out at ~$2k. It is certainly possible that Bay area real estate weathers the storm just fine. But I really don't see a compelling case for it. Salaries can, and likely will go down. And bay area real estate is at all-time highs relative to incomes.
- aeyes 7y ago
  Why are lower stock prices pay cuts? Strike price is rarely fixed, usually it is some percantage of current stock price. So if stock price falls you get more shares. You have no way of knowing what the price might be when you are able to exercise your options. You also don't have to exercise them, it's your choice. Equity compensation is always a gamble.
  - agrajag 7y ago
    Because most (all?) of the large companies issue RSUs now, not options, with the quantity of RSUs determined at issue time.
- dchyrdvh 7y ago
  They live in 700K houses with 3K a month payments. Mortgages will be suspended: banks don't want foreclosures. Again, the tech bros are in the top 5% by income and assets. If they sink, then 95% will have been underwater already.
  - qqqwerty 7y ago
    Are we talking about the same people and same area? You mentioned the top 30% of tech companies. Those folks aren't living in the far flung suburbs in the East Bay. They are living in SF and on the Peninsula, where median home prices have been well over $1M for a while now[1]. There are certainly some tech people that managed to buy real estate back in 2010-2012 at the bottom of the market, and who have been saving plenty of money for rainy days. Those folks will probably be fine. But there are plenty of others who took on large loans to buy expensive houses with incomes that were heavily based on stock based compensation. [1] https://www.zillow.com/san-francisco-ca/home-values/ https://www.zillow.com/san-francisco-ca/home-values/
kirktrue 7y ago
Just to make sure I am understanding you, are you stating that the top 30% of employees have 3-5 years of savings socked away that they can get to easily? If that’s true, well, I guess I am not in the top 30% of employees of big tech firms.
- AdrianB1 7y ago
  Statistics based on a sample size of one are not a good example.
- temp20160423 7y ago
  It also depends on if you include retirement accounts. It seems nuts to have 3-5 years of savings as cash in taxable accounts. But this is easily doable if you include retirement accounts, which you would start withdrawing from if things were really bad and the choice is to lose your house or withdraw early from 401K/IRA.

qqqwerty 7y ago

Stock options and RSU's are a big part of the compensation packages for that group. So lower stock prices are essentially pay cuts. And unlike 2008, many of these companies are more mature and much more exposed to the broader economy. Cloud computing, Ads, GSuite, etc... There are a handful tech companies that will probably thrive (Netflix, Zoom, etc...), but most of them are probably going to see big drops in revenue. And considering that most of these companies have plenty of fat to trim (how many Alphabet moonshots are bringing in meaningful revenue, let alone profits?), I don't see how declining revenues won't result in some belt tightening. And when that starts happening, how many of the top 30% are going to be buying $2M-3M homes. The mortgages on those things are like ~$15k a month, and CA unemployment maxes out at ~$2k. It is certainly possible that Bay area real estate weathers the storm just fine. But I really don't see a compelling case for it. Salaries can, and likely will go down. And bay area real estate is at all-time highs relative to incomes.

aeyes 7y ago
Why are lower stock prices pay cuts? Strike price is rarely fixed, usually it is some percantage of current stock price. So if stock price falls you get more shares. You have no way of knowing what the price might be when you are able to exercise your options. You also don't have to exercise them, it's your choice. Equity compensation is always a gamble.
- agrajag 7y ago
  Because most (all?) of the large companies issue RSUs now, not options, with the quantity of RSUs determined at issue time.
dchyrdvh 7y ago
They live in 700K houses with 3K a month payments. Mortgages will be suspended: banks don't want foreclosures. Again, the tech bros are in the top 5% by income and assets. If they sink, then 95% will have been underwater already.
- qqqwerty 7y ago
  Are we talking about the same people and same area? You mentioned the top 30% of tech companies. Those folks aren't living in the far flung suburbs in the East Bay. They are living in SF and on the Peninsula, where median home prices have been well over $1M for a while now[1]. There are certainly some tech people that managed to buy real estate back in 2010-2012 at the bottom of the market, and who have been saving plenty of money for rainy days. Those folks will probably be fine. But there are plenty of others who took on large loans to buy expensive houses with incomes that were heavily based on stock based compensation. [1] https://www.zillow.com/san-francisco-ca/home-values/ https://www.zillow.com/san-francisco-ca/home-values/

kirktrue 7y ago

Just to make sure I am understanding you, are you stating that the top 30% of employees have 3-5 years of savings socked away that they can get to easily? If that’s true, well, I guess I am not in the top 30% of employees of big tech firms.

AdrianB1 7y ago
Statistics based on a sample size of one are not a good example.
temp20160423 7y ago
It also depends on if you include retirement accounts. It seems nuts to have 3-5 years of savings as cash in taxable accounts. But this is easily doable if you include retirement accounts, which you would start withdrawing from if things were really bad and the choice is to lose your house or withdraw early from 401K/IRA.