For anyone curious the K breaks at if you own real assets for the most part. Which i believe is at most generous at top 20% but probably closer to top 10%. Most people are struggling and its not getting better
The threshold is probably somewhere around owning 2x or more your annual income + annual expenses in traditional investment assets (stocks/real estate).
Those assets will presumably grow to at least match inflation.
Your expenses likewise would probably grow to match inflation.
Your annual income may or may not depending on your employer.
But owning 2x(Annual Expenses + Annual Income) should keep you on the upward fork of the "K" since the asset growth would exceed the expense increase and income erosion from inflation.
What good is having a modest portfolio of assets if you can't generate cash flow to service the debt needed to acquire them? Even the 3% mortgage winners still need to make their nut on the monthly, and with no end in sight on the crashing job market, there's going to be either a whole lot of inventory coming up for sale or a lot of rentals lol
Why cant you with assets? If you invested for the past 5 years vs paying down mortgage debt youre way ahead and likely could accelerate the mortgage pay down if you wish.
It’s in the range of 20-30% of US households if you’re including 401k and IRAs. That’s about 26-40 million households in the US, which sounds about right. So many earnings reports on spending am showing that the upper middle class cohort is growing and their spending is overshadowing the lower 70%. It also makes sense that their growth trajectory continues as their wealth compounds exponentially. Munger was right.
> The threshold is probably somewhere around owning 2x or more your annual income + annual expenses in traditional investment assets (stocks/real estate).
Does refer to real estate equity?
Say income + expenses is 100k + 50k and you own a 300k house with 30k equity. Does this person pass the test or fail by 270k?
I could easily see it being the top 20% if not more. Approximately 2/3rds of American households own their home if that is what is meant by real assets.
I think there is still a big split between consumers saying they are struggling (i.e. consumer sentiment data) and any actual pull back in spending for the majority of middle and high income households. We’ve seen some evidence of consumers “trading down” but they are still spending. Consumer debt also has been increasing, indicating that households are continuing to spend regardless of their financial condition.
The million dollar question is when will the consumer finally tap out (recession), and so far we have just seen the K slowly growing
This. The 2/3rds that owned homes werent nearly as affected by the 25-30% increase in rental prices during the biden admin and likely only experienced around 10-15% inflation (even less if they didnt buy a car) but complained like they were a pig being slaughtered.
Our current long term trajectory seems to be towards a kind of feudalism-like future where a minority of asset owners have all the wealth and resources and the rest are effectively surfs scraping by with wages that have been mostly inflated away... or perhaps even worse off then that, if automation should reach the point that their labor is no longer needed at all. I suspect the window to move between those classes may be closing soon. If you don't own enough assets to support yourself by the time the wealth of the asset owners has pulled away and the window has closed, you'll be left behind with little hope.
And the crazy part is that this was totally optional. Voters chose this future, even if they may not have understood what they were choosing.
Dude 1000% were already entering the period of techno-feudalism. Where some of these ultra wealthy people are "chosen by god" to have this extreme amount of wealth. Yes some of these guys have worked very hard and some had really good ideas but its definitely not "earned" they were lucky and most of them arent some kind of super genius.
Im not convinced we're beyond the pale just yet. Im curious to see what happens as this wave of right wing ideology starts to fade and if a real grassroots for the people movement can happen. History says we're cooked but I never lose hope. Rebellions are built on hope
The home ownership rate is 65%. 40% of homes have no mortgage. The 35% who are renters are the most exposed to housing inflation. Reddit is disproportionately renters so the perception is skewed. It looks like 40% of Gen X is going to retire comfortably assuming they have Social Security without the 20% reduction. It’s too soon to say for Millennials.
It fluctuates. In 1940, 55% had no mortgage. In 1980, 35% had no mortgage. 33% in 2010. The home ownership rate has been fairly stable since 1980 so before then isn’t a good comparison. In 1940, there was a much higher percentage of renters.
This is what I don't like about the "K shaped" terminology. In the letter K the break is roughly at the middle, or lower than that for lower case, so calling it "K shaped" implies that about half of the people are doing well, and half aren't, when that is very much not the case.
There isn't really one that fits the shape. Closest I can think of is a P or an r, where all the wealth is trapped at the top and there isn't any left over for the rest.
That's a good point. I think the reality is that we had a 'K shaped' recovery, or continuation, of the economy when Covid hit. That really was closer to half at the time. Now it's a K that evolves from the upper arm of the original K.
It's the hangover from the pandemic-era's massive quantitative easing. The wealthy and financially comfortable rode the expected wave of inflation by socking the money into hard assets. Their net worth inflated with everything else. The poor and working class just get to pay more without the benefit of an appreciating asset. Printing money has long term societal consequences, and in this case it has exacerbated wealth inequality.
Capitalism without proper effective government regulation/taxation/execution creates and exacerbates inequality.
>Interest rates when rates are high? MAAAM/S&P500/billionaires/top20% will win.
The rich were bagging tons of money with their cash. Buffet's BRK cash horde at 5% was making more money then entire S&P500 companies did with their operations. Apple and other MAG7 were raking in money. The 8 big banks were hiking rates.
>Interest rates when rates are mid? MAAAM/S&P500/billionaires/top20% will win.
They were winning from 2016-20219, winning in the 90s, winning in 2005-07, and winning now. No matter what rate a small biz or regular person gets it won't be as good as the billionaire or S&P500 company.
>Interest rates when rates are low? MAAAM/S&P500/billionaires/top20% will win.
Then the borrow and leverage up on cheap debt to buy assets. Buy backs, real estate, stocks, etcetcetc. The billionaires dodge taxes by paying interest on loans rather than selling and paying cap gains.
>Inflation? MAAAM/S&P500/billionaires/top20% will win.
>Deflation? MAAAM/S&P500/billionaires/top20% will win.
>Stagflation? MAAAM/S&P500/billionaires/top20% will win.
The rich and powerful will win in ANY environment because they have economies of scale, more resources, better employees that work for them, teams of accountants/lawyers to fight for them, have the laws written for them or the resources to lobby/campaigndonate/fund, trainers/teachers that train them from childhood, etcetcetc. They have EVERY advantage in life given to them down to their DNA and parents who are subjectively if not objectively better quality partners (hot models, physically impressive athletes, shrewd politicians, entrepreneurial businessmen, intelligent academics, etcetcetc).
K-shape isn't ABNORMAL. It is the natural state of things for most of civilization like how life in nature works with Darwinist competition.
The V-Shape we had during 2020-2023 was the ABNORMAL part. It had strong government support, upward mobility, working employees getting more support, attempts to crack down on tech monopolies, fighting big mergers, and everyone won (the rich just saw less RELATIVE gains to the explosive gains the bottom got).
Americans however don't know how good they had it and voted that away on vibes or a lady laughing funny.
Median income in an average state (#25 by median income, Wisconsin for example) is less than $80k/year for an entire household.
I'd imagine a lot of redditors (likely to be educated professionals & college students) probably come from or manage a household in the top 33% (the upswing of the K) and even more in the top 50% (stagnation to mild upswing)
That's a bit of a generalization no? Most folks with the free time to hang out on r/economics on a Monday morning are more likely to be on the upper half if not upper 3rd.
It's not a midpoint break but you only need to be in the top 10% to benefit, with even the top 25% doing pretty well. Tens of millions of people are winners in the K-shaped economy, and probably a substantial portion of the readers here.
Let me guess, no war but the class war? Everyone is working class unless they’re part of the owner class? Everyone is one missed paycheck away from being homeless?
It is one of the strangest things about redditors: no accusation makes them recoil as hard as being accused of being financially successful. Heaven forfend you be seen as - *gasp* - rich.
I see it on my end as well, even as a fairly "middle class" young 30year old. I have a house and dual income. Neither me nor my partner make a ton of money, but I already feel like I'm leaving my non home owning friends behind. My mortgage is not much more than their rent and yet my quality of life is significantly higher. The bulk of my savings are all for my retirement and fun things while they are still scrounging every penny for a down payment.
I didn't even purchase a house early or at an extremely low rate, so I can imagine it's an even bigger swing for those who did, even with modest incomes. It's not just a straight line K, it's two exponential lines in opposite directions.
Anyone who bought pre covid is living a much better life than almost anyone post COVID. I’m a layoff + 1 year from being able to keep up my standard of living
I am just barely in the top 10% in household income based on the various tables posted on reddit. My comp has been stagnant for awhile so I feel the inflationary pressures. Everything feels (and is) more expensive than in the recent past. Property tax surged by $8k for 2026 so somehow I need to find that within my income so bye bye that much discretionary spending for the economy.
All this doesnt seem like news - rich get richer when assets go up. Poor dont have those assets so they dont benefit.
On the other side, I am in my 50’s so well on my way to retirement. Networth is around 15-17x household income. In past three years retirement savings networth increased $1M. So even if I am not sure how to address the $8k annual shortfall, my networth goes up and down daily by more than that.
At the grocery store but also while on vacation I think about how the vast majority of people spending what I am spending but not everyone has a few million growing long term at about 10%. The rates of return have seemed wild the past few years, but I have averaged about that over past 25 years.
"Currently, higher-income households – that's the top third of households by income – their growth in spending is around 2.6% year-over-year, but for lower-income households, it's only at 0.6%," Tinsley noted. "That's quite a big gap."
i don't think they know how to draw a K... It would suggest growth on top and decline on the bottom. In this case there is growth on both top and bottom, just slower growth on the bottom..
This K shaped economy non sense emerged post COVID. Anyone who owns assets has always been at an advantage it’s nothing new or something that needs to be studied.
Comfortable-Web9763 | 4 hours ago
For anyone curious the K breaks at if you own real assets for the most part. Which i believe is at most generous at top 20% but probably closer to top 10%. Most people are struggling and its not getting better
[OP] laxnut90 | 4 hours ago
The threshold is probably somewhere around owning 2x or more your annual income + annual expenses in traditional investment assets (stocks/real estate).
Those assets will presumably grow to at least match inflation.
Your expenses likewise would probably grow to match inflation.
Your annual income may or may not depending on your employer.
But owning 2x(Annual Expenses + Annual Income) should keep you on the upward fork of the "K" since the asset growth would exceed the expense increase and income erosion from inflation.
PhilosophyEasy71 | 3 hours ago
What good is having a modest portfolio of assets if you can't generate cash flow to service the debt needed to acquire them? Even the 3% mortgage winners still need to make their nut on the monthly, and with no end in sight on the crashing job market, there's going to be either a whole lot of inventory coming up for sale or a lot of rentals lol
HumorAccomplished611 | 3 hours ago
Why cant you with assets? If you invested for the past 5 years vs paying down mortgage debt youre way ahead and likely could accelerate the mortgage pay down if you wish.
bigGoatCoin | 2 hours ago
gotta live somewhere, this is why i tell people if you have an amazing rent deal (like a family rental) INVESTING THE MONEY REEEEEE
dfiner | 21 minutes ago
I’m probably being dense, but if you have a sub 3% mortgage, why would you ever pay it down and not just invest instead? Obviously pay the minimum…
ensui67 | 2 hours ago
It’s in the range of 20-30% of US households if you’re including 401k and IRAs. That’s about 26-40 million households in the US, which sounds about right. So many earnings reports on spending am showing that the upper middle class cohort is growing and their spending is overshadowing the lower 70%. It also makes sense that their growth trajectory continues as their wealth compounds exponentially. Munger was right.
daweinah | an hour ago
> The threshold is probably somewhere around owning 2x or more your annual income + annual expenses in traditional investment assets (stocks/real estate).
Does refer to real estate equity?
Say income + expenses is 100k + 50k and you own a 300k house with 30k equity. Does this person pass the test or fail by 270k?
patrickisnotawesome | 4 hours ago
I could easily see it being the top 20% if not more. Approximately 2/3rds of American households own their home if that is what is meant by real assets.
I think there is still a big split between consumers saying they are struggling (i.e. consumer sentiment data) and any actual pull back in spending for the majority of middle and high income households. We’ve seen some evidence of consumers “trading down” but they are still spending. Consumer debt also has been increasing, indicating that households are continuing to spend regardless of their financial condition.
The million dollar question is when will the consumer finally tap out (recession), and so far we have just seen the K slowly growing
HumorAccomplished611 | 3 hours ago
This. The 2/3rds that owned homes werent nearly as affected by the 25-30% increase in rental prices during the biden admin and likely only experienced around 10-15% inflation (even less if they didnt buy a car) but complained like they were a pig being slaughtered.
OmicronNine | 2 hours ago
Our current long term trajectory seems to be towards a kind of feudalism-like future where a minority of asset owners have all the wealth and resources and the rest are effectively surfs scraping by with wages that have been mostly inflated away... or perhaps even worse off then that, if automation should reach the point that their labor is no longer needed at all. I suspect the window to move between those classes may be closing soon. If you don't own enough assets to support yourself by the time the wealth of the asset owners has pulled away and the window has closed, you'll be left behind with little hope.
And the crazy part is that this was totally optional. Voters chose this future, even if they may not have understood what they were choosing.
Comfortable-Web9763 | 2 hours ago
Dude 1000% were already entering the period of techno-feudalism. Where some of these ultra wealthy people are "chosen by god" to have this extreme amount of wealth. Yes some of these guys have worked very hard and some had really good ideas but its definitely not "earned" they were lucky and most of them arent some kind of super genius.
Im not convinced we're beyond the pale just yet. Im curious to see what happens as this wave of right wing ideology starts to fade and if a real grassroots for the people movement can happen. History says we're cooked but I never lose hope. Rebellions are built on hope
ZaphodG | 2 hours ago
The home ownership rate is 65%. 40% of homes have no mortgage. The 35% who are renters are the most exposed to housing inflation. Reddit is disproportionately renters so the perception is skewed. It looks like 40% of Gen X is going to retire comfortably assuming they have Social Security without the 20% reduction. It’s too soon to say for Millennials.
Matt2_ASC | 2 hours ago
That's pretty wild about the 40% in the clear homes. Is this higher today since we have older home buyers or has that been typical?
ZaphodG | an hour ago
It fluctuates. In 1940, 55% had no mortgage. In 1980, 35% had no mortgage. 33% in 2010. The home ownership rate has been fairly stable since 1980 so before then isn’t a good comparison. In 1940, there was a much higher percentage of renters.
dinosaurkiller | 3 hours ago
Trump made a lot of people rich with this economy. It turns out 10% is a lot to him.
Rocktopod | 3 hours ago
This is what I don't like about the "K shaped" terminology. In the letter K the break is roughly at the middle, or lower than that for lower case, so calling it "K shaped" implies that about half of the people are doing well, and half aren't, when that is very much not the case.
HumorAccomplished611 | 3 hours ago
What letter would you choose?
dust4ngel | 2 hours ago
shapes can be non-letters
Rocktopod | 3 hours ago
There isn't really one that fits the shape. Closest I can think of is a P or an r, where all the wealth is trapped at the top and there isn't any left over for the rest.
SirVengeance92 | 2 hours ago
capital L
yrotsihfoedisgnorw | 4 minutes ago
That's a good point. I think the reality is that we had a 'K shaped' recovery, or continuation, of the economy when Covid hit. That really was closer to half at the time. Now it's a K that evolves from the upper arm of the original K.
SirVengeance92 | 2 hours ago
There's a word or number missing there. Please adjust your post.
river_tree_nut | 2 hours ago
It's the hangover from the pandemic-era's massive quantitative easing. The wealthy and financially comfortable rode the expected wave of inflation by socking the money into hard assets. Their net worth inflated with everything else. The poor and working class just get to pay more without the benefit of an appreciating asset. Printing money has long term societal consequences, and in this case it has exacerbated wealth inequality.
zxc123zxc123 | an hour ago
Capitalism without proper effective government regulation/taxation/execution creates and exacerbates inequality.
>Interest rates when rates are high? MAAAM/S&P500/billionaires/top20% will win.
The rich were bagging tons of money with their cash. Buffet's BRK cash horde at 5% was making more money then entire S&P500 companies did with their operations. Apple and other MAG7 were raking in money. The 8 big banks were hiking rates.
>Interest rates when rates are mid? MAAAM/S&P500/billionaires/top20% will win.
They were winning from 2016-20219, winning in the 90s, winning in 2005-07, and winning now. No matter what rate a small biz or regular person gets it won't be as good as the billionaire or S&P500 company.
>Interest rates when rates are low? MAAAM/S&P500/billionaires/top20% will win.
Then the borrow and leverage up on cheap debt to buy assets. Buy backs, real estate, stocks, etcetcetc. The billionaires dodge taxes by paying interest on loans rather than selling and paying cap gains.
>Inflation? MAAAM/S&P500/billionaires/top20% will win.
>Deflation? MAAAM/S&P500/billionaires/top20% will win.
>Stagflation? MAAAM/S&P500/billionaires/top20% will win.
The rich and powerful will win in ANY environment because they have economies of scale, more resources, better employees that work for them, teams of accountants/lawyers to fight for them, have the laws written for them or the resources to lobby/campaigndonate/fund, trainers/teachers that train them from childhood, etcetcetc. They have EVERY advantage in life given to them down to their DNA and parents who are subjectively if not objectively better quality partners (hot models, physically impressive athletes, shrewd politicians, entrepreneurial businessmen, intelligent academics, etcetcetc).
K-shape isn't ABNORMAL. It is the natural state of things for most of civilization like how life in nature works with Darwinist competition.
The V-Shape we had during 2020-2023 was the ABNORMAL part. It had strong government support, upward mobility, working employees getting more support, attempts to crack down on tech monopolies, fighting big mergers, and everyone won (the rich just saw less RELATIVE gains to the explosive gains the bottom got).
Americans however don't know how good they had it and voted that away on vibes or a lady laughing funny.
PabloBablo | 4 hours ago
Just as an FYI, you are on the bottom part of the K.
The K suggests a midpoint break. Its not the top 51% that are benefiting from this type of recovery.
GoodOlSticks | 4 hours ago
Median income in an average state (#25 by median income, Wisconsin for example) is less than $80k/year for an entire household.
I'd imagine a lot of redditors (likely to be educated professionals & college students) probably come from or manage a household in the top 33% (the upswing of the K) and even more in the top 50% (stagnation to mild upswing)
TrainingJellyfish643 | 2 hours ago
Lol so many replies saying "no youre probably rich if youre in this subreddit"
Speak for yourselves lmfao. Some of us absolutely are brokies or at least not doing that well financially
Or maybe im the only one. But I doubt it
PabloBablo | 2 hours ago
My point is even the wealthier people in this subreddit aren't on the top of the K.
zxc123zxc123 | 3 hours ago
>you are on the bottom part of the K.
That's a bit of a generalization no? Most folks with the free time to hang out on r/economics on a Monday morning are more likely to be on the upper half if not upper 3rd.
Raichu4u | 3 hours ago
I'm here because I'm trying to extract as much time away from my employer as possible without getting fired.
zxc123zxc123 | 2 hours ago
All the more power to you.
I'm do the same despite my employer being myself.
welshwelsh | 4 hours ago
It's not a midpoint break but you only need to be in the top 10% to benefit, with even the top 25% doing pretty well. Tens of millions of people are winners in the K-shaped economy, and probably a substantial portion of the readers here.
JoeBamique | 3 hours ago
Let me guess, no war but the class war? Everyone is working class unless they’re part of the owner class? Everyone is one missed paycheck away from being homeless?
RedAero | 3 hours ago
It is one of the strangest things about redditors: no accusation makes them recoil as hard as being accused of being financially successful. Heaven forfend you be seen as - *gasp* - rich.
Conscious-Food-9828 | 3 hours ago
I see it on my end as well, even as a fairly "middle class" young 30year old. I have a house and dual income. Neither me nor my partner make a ton of money, but I already feel like I'm leaving my non home owning friends behind. My mortgage is not much more than their rent and yet my quality of life is significantly higher. The bulk of my savings are all for my retirement and fun things while they are still scrounging every penny for a down payment.
I didn't even purchase a house early or at an extremely low rate, so I can imagine it's an even bigger swing for those who did, even with modest incomes. It's not just a straight line K, it's two exponential lines in opposite directions.
Oryzae | 2 hours ago
Anyone who bought pre covid is living a much better life than almost anyone post COVID. I’m a layoff + 1 year from being able to keep up my standard of living
paladin10025 | an hour ago
I am just barely in the top 10% in household income based on the various tables posted on reddit. My comp has been stagnant for awhile so I feel the inflationary pressures. Everything feels (and is) more expensive than in the recent past. Property tax surged by $8k for 2026 so somehow I need to find that within my income so bye bye that much discretionary spending for the economy.
All this doesnt seem like news - rich get richer when assets go up. Poor dont have those assets so they dont benefit.
On the other side, I am in my 50’s so well on my way to retirement. Networth is around 15-17x household income. In past three years retirement savings networth increased $1M. So even if I am not sure how to address the $8k annual shortfall, my networth goes up and down daily by more than that.
At the grocery store but also while on vacation I think about how the vast majority of people spending what I am spending but not everyone has a few million growing long term at about 10%. The rates of return have seemed wild the past few years, but I have averaged about that over past 25 years.
moshennik | 3 hours ago
"Currently, higher-income households – that's the top third of households by income – their growth in spending is around 2.6% year-over-year, but for lower-income households, it's only at 0.6%," Tinsley noted. "That's quite a big gap."
i don't think they know how to draw a K... It would suggest growth on top and decline on the bottom. In this case there is growth on both top and bottom, just slower growth on the bottom..
Babhadfad12 | an hour ago
The shape is not necessarily referring to numbers, but rather difference in realized quality of life versus expected quality of life.
aurelorba | 3 hours ago
How much of the lower end spending is debt fueled?
moshennik | 14 minutes ago
r u asking this question? what does it have to do with anything?
Werealldudesyea | 3 hours ago
This K shaped economy non sense emerged post COVID. Anyone who owns assets has always been at an advantage it’s nothing new or something that needs to be studied.