What would cause the tech companies to move out of the Bay Area? (San Jose: middle-class, 2014)

[Opus One]

Originally Posted by artillery77

For the original poster. Ending Direct Investment. According to Wikipedia, Silicon Valley received 46% of all US investment dollars in 2012. When half of a country's total investment is stuffed into a 50 mile radius area, things are bound to go nuts, and when success is measured in getting funded as opposed to making money a whole host of new factors pop up.

Detroit in its day had the key innovation of the century both in terms of product and manufacturing prowess, but they also had financial backing to do it. If incoming venture capital dries up, the local economy will implode as a lot of these companies are making great products, but not necessarily great profits.

When I first started following stocks, technology firms would trade with single digit P/E ratios. The reasoning was that their products would be obsolete in only a couple of years, and you needed to place value on the firm's engineering capability to continue to innovate. It was generally considered smarter to miss out on a couple bright years for a company, and see if they ever established a product line that would maintain.

Wall Street now has an opposite outlook on tech and risk. As long as Wall Street values being part of the next big thing over the risk of funding something that is not the next big thing, Silicon Valley will thrive. When/if they change their minds, 2009 will replay, but without a bottom until the next big thing gets valuable again. Our economy now requires significant capital inputs merely to maintain, and we've created fixed structural costs in all levels of the state and local government that assume those inputs will never go away. We better have a Facebook, LinkedIn...someone, anyone going public...and the wealth trickles down from there.

So now we do the tech dance. Frankly, we have no other choice unless someone thinks there's another way of getting almost half of the country's investment to come to our doorsteps for longshot odds on a company ever making a profit.

We won't have Detroitification. We'll have a feudal system...and wonderful weather.

Gotta love the weather.

What part of the feudal system am I in as a permanent live-at-home lodger?

[NewbieHere]

Originally Posted by Opus One

What happens if they are no longer friends? What mortgage company would agree to this?

Yes, it was legit, back in the 70s. Of course the mortgage company agreed to it, they provide the mortgage. This is a family situation, people moved out and they took their portion out. If this is the friend situation, you buy out the other person. I had friends who bought a house with his friend, when he got married, one decide to buy the other out.

[NewbieHere]

Originally Posted by Opus One

What part of the feudal system am I in as a permanent live-at-home lodger?

It's only permanent because you want it. It's easier to go online and complain.

[Opus One]

Originally Posted by NewbieHere

Yes, it was legit, back in the 70s. Of course the mortgage company agreed to it, they provide the mortgage. This is a family situation, people moved out and they took their portion out. If this is the friend situation, you buy out the other person. I had friends who bought a house with his friend, when he got married, one decide to buy the other out.

WAS <- that's a keyword.

[Opus One]

Originally Posted by NewbieHere

It's only permanent because you want it. It's easier to go online and complain.

You didn't answer the question. So you're saying if I work really hard... time will start reversing itself?

[NewbieHere]

Originally Posted by artillery77

For the original poster. Ending Direct Investment. According to Wikipedia, Silicon Valley received 46% of all US investment dollars in 2012. When half of a country's total investment is stuffed into a 50 mile radius area, things are bound to go nuts, and when success is measured in getting funded as opposed to making money a whole host of new factors pop up.

Detroit in its day had the key innovation of the century both in terms of product and manufacturing prowess, but they also had financial backing to do it. If incoming venture capital dries up, the local economy will implode as a lot of these companies are making great products, but not necessarily great profits.

When I first started following stocks, technology firms would trade with single digit P/E ratios. The reasoning was that their products would be obsolete in only a couple of years, and you needed to place value on the firm's engineering capability to continue to innovate. It was generally considered smarter to miss out on a couple bright years for a company, and see if they ever established a product line that would maintain.

Wall Street now has an opposite outlook on tech and risk. As long as Wall Street values being part of the next big thing over the risk of funding something that is not the next big thing, Silicon Valley will thrive. When/if they change their minds, 2009 will replay, but without a bottom until the next big thing gets valuable again. Our economy now requires significant capital inputs merely to maintain, and we've created fixed structural costs in all levels of the state and local government that assume those inputs will never go away. We better have a Facebook, LinkedIn...someone, anyone going public...and the wealth trickles down from there.

So now we do the tech dance. Frankly, we have no other choice unless someone thinks there's another way of getting almost half of the country's investment to come to our doorsteps for longshot odds on a company ever making a profit.

We won't have Detroitification. We'll have a feudal system...and wonderful weather.

Gotta love the weather.

I pray that hi tech jobs continue because when it dried up like in the early 2000s, all the smart students who wanted high paying jobs went to work at Wall Street, and you know disaster close to a Depression happened in 2008-2009.

[Opus One]

Originally Posted by NewbieHere

I pray that hi tech jobs continue because when it dried up like in the early 2000s, all the smart students who wanted high paying jobs went to work at Wall Street, and you know disaster close to a Depression happened in 2008-2009.

But housing dropped to 200k. It wasn't stupid expensive anymore.
The venture bubble will pop soon with stupid market caps like 70b for uber.

[NewbieHere]

Originally Posted by Opus One

You didn't answer the question. So you're saying if I work really hard... time will start reversing itself?

Work hard at your attitude and mindset.

[artillery77]

Opus. I don't know enough about you to make that call. If you no longer need to sell your labor, you'll obviously be safer than someone that does, but it will depend on what your income stream consists of.

If the money stops, jobs will become scarcer and a degree that is much larger than other areas because of the years of investment that have supported the area. When jobs are scarce, hiring of friends and relatives goes up as opposed to merit based hiring. This doesn't just hurt the otherwise qualified job seeker, it hurts anyone that utilizes the product/service being provided by that position. It amazes me how many of our family's friends come up and ask for a job already. Often I'll have no idea what they do and they aren't specifying....are you looking for a (insert title). Simply, can you get me a job with your company? I mean, the economy is good right now, if it gets bad, I'm sure that will increase.

So your feudal hierarchy in terms of labor would be bank-business owner-hiring manager-employee.

For commercial properties, they will have to worry about their tenant companies going bust. Most are 75% financed with 5 year renewals. So, in 2009, when commercial values sank 50% in San Jose, anyone that had bought in the previous financing cycle was now underwater. Unlike a residential mortgage that is fine unless you stop paying, these need to be renewed every 5 years. Maybe they could afford the payment, but, but if they bought a building for $10M and financed $7.5M, and are now facing renewal only that $10M is now only $5M....and that $7.5M debt is down to $7.1M...they've done nothing wrong, except they now need to pony up enough money to get that $7.1M debt down to 75% of $5M all at a time where tenants are weak. If the building forecloses nobody gets to lease there. If the bank decides to "extend and pretend" then the building owner might be safe for a bit, but will still need to compete in a tough marketplace with higher rents than what another building may be able to offer. If a banker has a friend that wants that building, that might override on the decision.

So you feudal hierarchy in terms of land would be bank-loan officer-land owner/borrowers (current and prospective)-renters(businesses/NFPs/NGOs).

Now you may be retired and sitting in your owned home and not care if your friends and neighbors get foreclosed upon. Maybe you have enough cash and are looking for a golden schadenfreud moment. It should be fine until an unqualified nurse that can't measure medicine properly overdoses you, or your neighborhood becomes one of section 8 housing. The one eyed man does reign supreme amongst blindness. But why would that be appealing?

[NewbieHere]

Originally Posted by Opus One

But housing dropped to 200k. It wasn't stupid expensive anymore.
The venture bubble will pop soon with stupid market caps like 70b for uber.

Just so you know, back in 2000 when the tech bursted, house price only dropped 20% in my area, in 2008-2009, it didn't even drop.
While I don't disagree that Uber and some other companies have high evaluation, but even if they went popped, valuation down to zero there will be other companies. High tech companies have deep pocket now. They have billions in cash.