“It Feels A Little Bit Like The Top”
Readers suggested a topic surrounding Wall Street bonuses and New York real estate. “Slightly off topic, and thinking out loud: I just do not understand where those tremendous Wall Street earnings are coming from, which cause all those record bonuses???”
A reply, “If you don’t understand where they are coming from, there is some chance that they are coming from your and my pockets…”
Another said, “The Amish finally dug up their coffee cans and open a Scott trade account via the local library.”
One had this question. “Whats Fair and Reasonable? Here in NYC how many people can really afford $2000+ a month in rent all by themselves? Yet they do because they own almost nothing. Or they have a roomate and ’share’ a one bedroom apartment.”
“Realistically, How many people really do make $75K+ a year to ‘afford’ that $2000+ month payment?”
“Another NEW condo building here in Long Island City on the east river overlooking Manahatan just put up a big Now Renting banner.”
“The first buliding a few years ago were selling for $60-90K yes that redicuolus low price in NYC…….the catch……..you knew there was one……….It was built on almost all borrowed money so the monthly maintence fee was over $2000 per month !!!!”
“I am also starting to see a few Commercial buildings in LIC, have Large space available and for rent signs they were not there just 2-3 months ago.”
A reply, “That is great. We will be looking for new digs in April and May. Our current building is full of snot-nosed twenty-somethings that act like spoiled teenagers. I can tell you how most of them afford their rent, ‘Mommy & Daddy.’ I want a crash just so the youngsters might learn some humility and manners.”
Another said, “That new rental in LIC is now offering 1 month free rent. OOH, well now it is only $2180 a month for 700sq feet of stainless steel granite bliss.’
The New York Times. “In recent weeks, immense riches have been rained upon the top bankers and traders. After a year of record profits, investment houses like Goldman Sachs, Lehman Brothers and Morgan Stanley are awarding bonuses as high as $60 million.”
“The Manhattan real estate market, for example, had softened; sales of apartments fell 17 percent in the third quarter this year compared with a year ago, according to the Corcoran Group.”
“Then came bonus day. Last week, Michele Kleier, president of Gumley Haft Kleier, received a call from a hedge fund manager in his late 30s. He had spent $6 million on an apartment two years ago and, with his bonus, wanted to upgrade. His new price range? ‘Not more than $20 million.’”
“The morning Goldman Sachs announced record fourth-quarter and 2006 earnings, Lloyd C. Blankfein, CEO, implored his employees to avoid excess. ‘As stewards of the firm’s reputation, I ask each of you to remember that our actions, inside and outside of the office, reflect on Goldman Sachs. Even a perception of arrogance hurts all of us,’ he said.”
“At cocktail parties, comparisons to 1999 abound. That year marked the height of the technology boom and the eve of a painful crash. ‘It feels a little bit like the top,’ said another banker.”
“Not everyone on Wall Street is getting multimillion-dollar bonuses. The average managing director, who stands at the top of Wall Street’s hierarchical food chain, but far from rock-star status, will be getting $1 million to $3 million, which will likely be stashed in savings as memories of the 2001 bear market remain fresh.”
“‘I’m putting it in the bank because I know next year I could be out of a job,’ said one managing director at a leading bank.”
“For hedge fund traders and managers, markets were rough in the spring and summer, and some did not make gains until stocks rallied this fall. ‘It was a terrible year,’ said one young hedge fund professional. ‘I am going to the movies with my bonus. By myself.’”
“‘I’m putting it in the bank because I know next year I could be out of a job,’ said one managing director at a leading bank.”
If he’s one of those with a $2,000,000 bonus. Putting it in a money market fund at 5.11% interest would be instant retirement in, say, Tucson.
Well, don’t forget the IRS. Is there a state income tax in New York?
Oh yeah. I read that the city of NY had revised their budget projections like in November in anticipation of these bonuses.
Including state taxes, about 50% of that bonus goes to taxes.
Merry xmas ben jones and all fellow bloggers!!!!!!!!
Bwahahahahaha. Oh god Ben, thanks for the laugh. “Is there a state income tax in New York?” That is so good. It’s too funny to read something like that this time of day. My eyes are watering.
Show me a tax that they don’t have in New York. Yes, there is a state income tax and it’s not cheap. Don’t forget we also have a city tax. That is another 3% of your income that is going to go bye-bye. I put a little over 15% in to my 401k per check. I took home 47% of my Christmas bonus this year.
There aren’t enough legal tax shelters in this world to get these guys to keep all that money.
” Show me a tax that they don’t have in New York.”
Ok, let me try this one: A personal property tax.
At one time we had this in Allegheny County. The tax was assessed against the value of your stock brokerage accounts (but not against cash or cash equivelants). Every year you filed a return and reported the EOY value of your investments.
It was a pain in the butt.
Gold outperformed the s&p and bonds this year.
And Silver did even better ! But don’t expect CNBC, MNBC, Forbes, the Economist, or Bloomberg mentionning this interesting fact.
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The historical real return of gold is ZERO. Factor in trading costs, storage, and insurance and the real return is NEGATIVE. Please review this chart:
http://www.mskousen.com/Books/Articles/golden2chart2.GIF
Reversion to the mean!
not while we are in the era of the printing press.
why are people so anti-gold? it’s not that tough to store. I have mine in a little box under my bookcase. not storage costs. no insurance. I don’t need to trade.
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why? look at the chart, silly. negative returns, opportunity cost.
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Correction - its real return is negative even before costs.
so what do I do since I bought gold and silver starting in early 2004? do I get to keep those gains?
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you may have to give them back and then some. Google “reversion to the mean”.
luckily I bought low. why would I put money into the stock market?
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why? same answer, silly. look at the chart.
I love historical charts, what they tell me is that gold and silver will be a good investment in the next 10+ years and stocks won’t. worked so far. when the time comes, I’ll jump to stocks for 10+ years.
besides, there are so many things in your chart that I could pick apart. substution bias, the fact that the gold price was fixed, bonds were essentially defaulted upon in 1932 and 1971 and etc. an inflation adjusted chart would show a fall different story than your chart.
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market timing doesn’t work and the chart doesn’t lie.
good luck!
first of all, there are many things wrong with your chart. second of all, timing has worked good so far.
so gekko, you aren’t timing the housing market right now? since you’re so good with money, should I buy a house right now? I was going to hold off, but that would be timing the market.
“you may have to give them back and then some. Google “reversion to the mean”.
While you’re at it, you might want to apply this principle to the historical trend of corporate profit margins.
“market timing doesn’t work” Now that’s just silly. For some people it works very well. For some people it works out very poorly. Now there can be a great deal of disagreement as to how much of the determining factor is luck or wise investing. Either way, some people who time the market right make out like bandits. By defintion, the “average” investor can’t make above average returns. The fact that it is unreasonable to plan one’s future on being luckier and smarter than people who spend all day researching the market doesn’t mean that market timing doesn’t work for SOMEBODY.
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I think you need $5M net sitting in a tax-free money market to live really well. $5M will generate about $200k in tax-free annual income. At that point, no need to take much risk.
I’m not a big fan of Crammer, but he has a good line: “You’re either in the ‘get rich’ business or the ’stay rich’ business.” If you can get $5M, you’re in the latter!
Given location flexibility, you can live quite well on less than $100K / year.
As for the ’stay rich’ crowd, I could never figure out why people like Bill Gates sat in a cubicle all day when he had already made billions. Richard Branson is one of the few fat cats who knows how to live.
Nobody who is priviliged to live in NYC could even find PHX on a map.
NY state has close to a 9% state tax, then if you live in the city they tax you another 3.5%!!!!!
Plus isn’t there a special tax on incomes over $1M?
That’s one tax I don’t have to worry about any time soon. There is a benefit to being middle-class.
That’s why some of us live in NJ or CT.
However, I’d like to point out that NY’s top state income tax rate doesn’t kick in until your income is about $200K/yr, in contrast to Maine, where the 8-point-something kicks in as soon as you make more than $12K/year. A Maine state legislator explained this to me by saying Maine is a poor state that needs more tax revenue. I said it was pretty stupid to make sure all those NY summer people are motivated to maintain their NY residency.
Don’t you know the best way to make a poor man rich is by making a rich man poor? DUH…everyone knows this.
they make their profits off of the gov’t anyway, so I won’t feel sorry if they create money out of nothing, profit off of it and we tax their bonus.
Well, didn’t they just report that 52% of NY babies are born out of wedlock. Someone has to support them…LOL
The Wall Street bonuses are funny money rewards for expert gamblers. Problem is, there’s no value behind that money, so what’s it really worth? “Money” is only a medium of exchange, representing the value of goods and services exchanged. I am not anti-wealth or anti- the wealthy. I believe every person who has created something useful and valuable should have all the money they can get, because they improve life in some way, create jobs, etc. Many of these Wall Streeters, however, are nothing more than good casino proprietors and the house always comes out ahead. Don’t get me wrong, gambling is a form of entertainment and I suppose has some worth that way. There may also be some good investment advisors who have safeguarded the assets of their clients and made them grow. But the shills and the carnie barkers? These people are just not worth it. Easy come, easy go. And the sooner gone, the better.
Are they really expert gamblers? Or are these bonuses sort of a commission on sales, and they get paid win or lose?
Serious question.
Serious answer: I was a little off on the “expert gamblers” analogy. “Expert shills” is more like it. Getting paid for bringing the gamblers into the house.
Inflation benefits those who have access to the money first. This is an example. Leveraged buyouts are done with a lot of credit, or money substitute. They are getting the cut same as the realtors, lenders, title companies, etc. got it when money/credit was flowing in real estate. If that new money, originating for credit which someone has to pay back…but not them, flows to real estate in NYC, then prices go up.
Those who are gambling are the ones putting their capital/credit into the game. The facilitators are the house. The odds favor the house. Some skilled gamblers do well, some lose their shirt, literally. If you gamble on savings, it hurts. When you gamble on credit not backed by savings, it really hurts. If enough people are gambling with credit and no savings, then those who think they are bystanders with no skin in the game and money in the bank are in for a surprise. If systemic enough, they’ll be irate when they realize the fool’s credit was their savings.
I think we’re all in for a lesson on money, credit, fractional reserve banking, and the economy.
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the bonuses are what they can steal and skim off the top from their customers!
this is why i’m in low cost index funds.
Agreed. Wall Street is the ultimate casino. Vegas high rollers are playing “Old Maid,” compared to what’s happening in NYC. And I’m not against the wealthy nor against wealth. BTW: Dennis Prager (talk show host) makes a great point in saying that the famous are rarely significant and the significant are rarely the famous. Paris Hilton is famous. Significant? No. She does not add value. Most sports, television, and movie celebs are famous and none are signficant. The movers of the world are the ones who create wealth, and make us all more productive at the same time. Those are the significant.
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i think people can treat wall street like a casino - but it does not have to be. one can choose to simple be a passive market participant vs. an active gambler.
that’s a good line from dennis prager. the older i get, the less interested i’ve become in watching professional sports. i can’t help but think that these NBA, NFL, MLB players making multi-millions to basically play a game have to be laughing and looking at the fans as a bunch of suckers. it’s hard for me to get excited about teams anymore - either way, if they win or lose, my life doesn’t change at all - I still have to get up for work on Monday morning.
I read a Bill Gross article the other day. He says that leverage has reached the point of diminishing returns in the bond market. They can’t squeeze any more return from increased leverage. Also, consider that most of the derivatives bomb is held by only three or four of the big banks. There are no real counter-parties. They are just juicing each others’ paper returns.
Ps; money should also be a store of value, not just a medium of exchange. I don’t think the USD is storing value very well.
Agreed on store of value. Also agree on how USD is storing value at this time. Those bonuses remind me of the stories of Germans carting around wheelbarrows of cash to buy loaves of bread.
Why? Their loaf of bread costs the same as yours.
In 1929 the loaves of bread cost the same everywhere, but the Deutschemark wasn’t even worth used toilet paper.
Must have been organic bread baked with olive oil, cracked peppercorns and asiago - you need a HELOC to buy a loaf.
I’ve been making my own bread for about 6 weeks now. This is all over the internet. It’s unbelieveably easy and anyone can make a loaf you’d pay $5 for at the store
http://www.nytimes.com/2006/11/08/dining/08mini.html?ex=1167195600&en=964dc6a0ae6a5f35&ei=5070
We “had” to get one of those machines years ago. Zojirushi or something like that. “We” made 3 loaves total, at about $34 per loaf as I recall. But even that was a better deal than the Nordic Trak that we had to have and used just once.
But even that was a better deal than the Nordic Trak that we had to have and used just once.
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At least you admit it, Chip.
Rob Kirby on derivatives:
http://tinyurl.com/yy87kv
I am afraid that fool’s credit is our savings!
God bless America!
Greedy Basterds. Pump and Dump. The history books will reveal what they did.
I think the $1,000,000 is only Jersey. It is $500,000 there and they call it the “Millionare’s Tax”. Don’t think it is in NY, but not positive.
Californians correct me if I’m wrong, but I thought those with over $1,000,000 annual income in California are now also taxed extra. I think it was something the meathead, Rob Reiner, socialist/producer extroardinaire, lobbied effectively for.
You are correct, sir.
Incidentally, in 2005 California showed a net loss of population for the first time in decades.
Google is the new AMZN. It does feel like history all over again. I did margin risk management for a big online broker during the Nasdaq crash. We blew people out of their shoes. I liquidated accounts worth millions, and at the end they owed us money after everything was sold. I personally saw a guy lose over $60 million in one account. The fear at the time was leverage would break the firm if we didn’t blow those accounts out. My understanding is that leverage by financial firms now is much higher than it was during the last cycle.
I liquidated accounts worth millions
I’ll bet that’s kinda fun if it isn’t your money, just indiscriminately hitting bids. I can tell when that’s happening in smaller stocks. Usually a great time to buy.
We blew people out of their shoes. I liquidated accounts worth millions, and at the end they owed us money after everything was sold. I personally saw a guy lose over $60 million in one account
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I see a career in the greeting card business for you. LOL.
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history all over again? maybe. But is today 1995 or 1999? Nobody knows. Hence, diversify.
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I know one history that keeps repeating: THE BEAR ARGUMENTS!
http://ddo.typepad.com/photos/uncategorized/buswk_1979.gif
http://bigpicture.typepad.com/comments/death_of_equities.bmp
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Buy Stocks? No Way!
Spurning Wall Street, small investors put their money elsewhere
By BARBARA RUDOLPH
Time Magazine
Posted Monday, Sep. 26, 1988
http://www.time.com/time/magazine/article/0,9171,968506-1,00.html
this is great:
Judith Meuli, 50, was an active stock-market investor for ten years, putting money mostly into savings-and-loan and technology issues, until she lost $6,000 in the crash. Says Meuli: “I only want solid things, like real estate.” Since 1983, she has bought, rehabilitated and rented four apartment houses, mostly in marginal Los Angeles neighborhoods. She prefers a safe haven for her spare cash as well: “I keep looking at banks that are paying good interest rates.” New Yorker Peggy Berk, 37, who owns a media-consulting firm, cashed in stock worth $45,000. She spent about $40,000 moving her office to Fifth Avenue and furnishing it. “At least I’m investing in something I believe in,” says Berk. “The stock market has become a crapshoot.” Berk’s remaining $5,000 will appear on her back: she bought two fur coats.
You are just too foolish to argue with.
Gekko is the type of guy that some times you agree with him and some times you just want to kick him squarely in the nuts.
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i’d be worried if all you kooks always agreed with me!
No Gekko, I actually think you are a pretty level-headed person.
I’m not a big fan of gold, although I wouldn’t be surprised if it went through the roof, either. Quite honestly, I’m not sure what to really invest in right now. I think stocks are overvalued right now in relation to the coming earnings bust, and keeping a small amount of gold is OK, but when you look at a substantial sum, you are missing a lot in potential interest if it doesn’t go up.
All markets are behaving so strangely I’m sitting mainly in Treasuries right now.
Oh, and another reason I’m not a big fan of gold: the last time I bought, it dropped over $40/oz the next day (the largest daily loss in 15 years). That was in June, after it had gone through a steady decline for over a month and I figured the worst was over. Go figure. It is difficult considering gold a “safe haven” when its value can fluctuate 5% in a DAY! Timing is everything for PMs.
“i’d be worried if all you kooks always agreed with me!”
Not nearly as worried as we would be.
This article is very timely. Do these commissions represent a top in NYC real estate?
I was reading the other day about 2007 being a ‘nirvana’ for various markets, with almost everything ending up. Stocks, bonds, gold. But obviously, some of these markets are going to end up being wrong. Was this Wall Street boom the last spasm of the credit bubble?
Most of them would tell you, no, they’ve hedged away all risk.
If it looks like bubble and sounds like a bubble and tastes like a bubble and smells like a bubble…
…its a fart.
Only if you’re taking a bath at the time. : )
… especially if you’re under water …
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nobody knows what will be up or down. that’s the whole point of diversification - Nobody knows.
re: New York City
There are three types of people in New York City:
1) The banker/fund wealthy
2) the subsidized rich (daddy pays)
3) the debt-riddled, impractical delusionals who don’t make enough money to pay for things whose prices are inflated by demand from groups 1 and 2.
Not really feeling any of these people.
I am not offended by this since the whole, “I’m offended” thing is just silly. But there are a few of us flying around, like condors in this city, that are not debt-riddled and not subsidized. You just have to look really hard to find us. I don’t know if we deserve a full category but an asterisk might be a nice touch.
“Not really feeling any of these people.” - I’m not quite sure what that means.
You’re right. It was a big generalization. The meaning of the last sentence is that I don’t find either of the three life styles particularly enticing.
I don’t know, “daddy pays” might be fun while you’re in your upper 20s.
you also have the morons who willingly pay 75% of their take home pay in rent just to live in manhattan
Yes, that’s true. We are nowhere near that figure so what do I care what others are paying? Yes, they may be inflating what we pay but we still have a very high quality of life. I can’t control what those around me do and I am not forced to keep up with them. We live our lives simply but still do a lot. We don’t love everything about this city, but on balance, we love the life we have here. So, it doesn’t matter to me if others are living something they are not.
A life built on simple and timeless principles is always going to be the proper life to lead. I don’t care if you are in Florida, Nebraska or New York City. The concepts of hard work, honesty and frugality will always bring you out on top. You may never reach the super highs but you will also avoid the super lows. I have yet to see a crash in human history that has changed that truth.
As a whole, we live similarly to you. Most of our financial planning revolves around how the world is today / where it’s going overall vs. what we want out of life. Once you figure out what’s important to you and ignore the rest, life becomes a lot simpler to plan and manage.
A lot of people, regardless of their education or career, have a problem with this concept. They’re never quite sure why they aren’t where they want to be. This leads to lot of resentment, grief, stress, etc. (even if they’re doing well on paper) that usually has them taking it out on some nefarious entity that must have been responsible for their situation, as vague as it might be.
You forgot people trying to get by because NYC is a center for their work such as Graphic Arts/Publishing/Fashion ect.
Or my friend Joe trying to get by living in Corona who works 2 jobs.
Broad generalized statements lead to minunderstanding, yes your three exist but not as much as you would like to think.
Corona - I like a city named after a beer.
Manhattan renter, no debt, financially self-sufficient. I know other New Yorkers in much the same boat.
“Ed Petrie, a broker at Sotheby’s in East Hampton, N.Y., is now fielding two bids for $8 million to $10 million properties in exclusive Georgica Pond — properties that have been on the market since the spring. “The fall was relatively slow and then suddenly, with news on bonuses, there has been quite a bit of activity,” he said”.
Yeah, but a lot of those recieving bonuses and less financially bulletproof won’t be rushing into real estate out on the east end. The smart ones will be putting the money into safer places. A big real estate crash looms in the Hamptons - one that will expose many for being as stretched out as they are. I must say, it couldn’t happen to a nicer bunch of people.
If you do not know people that are part of this community, then you should just make uninformed comments and cling to stereotypes. There is no question that many bankers are grossly overpaid. However, they are providing the markets and economy a tremednous service of bring buyers and sellers together, and helping them evaluation their choices.
That’s the same thing I hear all the time about daytraders. Greedy, unproductive leeches, etc. Well, I add liquidity to the market which isn’t as important as when I was doing it in 2002 but still I act as a market maker myself in some lower volume stocks.
Hahahaaa. I love all the anti-Wall St. dogma on this blog…. It’s like anti-government rants. The problem is, there’s no better system. Daddy can’t fix it. Stop whining, enjoy a little chaos.
Wall St. is an unbelievably competitive environment, where capital is allocated each year by the $$ trillion. Yes, the bankers and fund managers skim a bit. But less than ever, as a percent of value created. Remember trading commissions of $.50/share? Not too distant past. And they’re crawling over one another for every dime. Quite a spectacle.
And, on a slightly different topic, here’s one other humble observation: everyone here appreciates the fact the the mass media is not a reliable source of info or insight on the real estate market. Well, don’t blindly lap up all the negative press about hedge funds, either. (Funny, it is all negative, isn’t it.) The Economist has only recently (last year or two) begun to print half-accurate pieces on hedge funds. All the other rags just print scare pieces for the (exlcuded) masses to ooooh and ahhhh over.
The real scandal is that many talented fund managers are NOT ACCESSIBLE to every investor equally, by law. How do you like that?
Hedge fund managers get paid for performance, predeminently, not simply turning on the lights every morning and tweaking their benchmark index, like many mutual funds. Against this structural background, to where do you think the talent gravitates?
Merry Christmas everyone!
“as a percent of value created”.
Give me a break. Wall Street doesn’t create any value. The companies they invest in do that. If you mean leveraged finance, that comes from the the genious of Federal Reserve.
To the extent that Wall Street is competitive (which is a doubtful claim when you normalize the labour by the returns), it has been forced by technological advances (including the replacement of your cited $0.50/share with flat-rate electronic trades).
All the rants about hedge funds have a basis in reality - they falsely claim to offer risk hedges by treating variables as only related to the first or second order - the reality is that everything is alot more deeply intertwined that then their models account - the result is that if/when there is a real economic shock, all the higher order effects will overwhelm the bounds allowed for in the models - and all the risks that have been hedged will come into play with extreme prejudice. Ask Warren Buffett about it if you’re not convinced.
In general, hedge fund managers as a group have not cumulatively outperformed the markets - some individuals may have done so - but for you to sing paeans to them as a class is either disingenuous or ignorant.
What’s “predeminently”? Yes, that’s rhetorical.
“Give me a break. Wall Street doesn’t create any value. The companies they invest in do that.
So Wall St. is not a crucial part of the equation? I would argue it’s indespensible. Inefficient, maybe. But information technology makes it more efficient every day.
“In general, hedge fund managers as a group have not cumulatively outperformed the markets - some individuals may have done so - but for you to sing paeans to them as a class is either disingenuous or ignorant.”
What group has outperformed the indices? One always has to pick and choose.
“all the higher order effects will overwhelm the bounds allowed for in the models”
This statement (the whole paragraph above, actually) seems to apply to a very specific class of hedge fund, highly leveraged quantitative model-based. And I agree with you assessment. But what about the HF that’s 50% long stocks, and 40% short? I don’t know about NYC or London, but this plain-vanilla strategy describes most of the many billions invested in HF’s in San Francisco. Any articles you’ve read lately tell that boring story? Nope, and there’s a reason: doesn’t sell.
“…predominently”
Fees: 1% management, 20% profits. So….
Fund up 10% gross: fees, 66% from performance (manager possibly fired).
Fund up 40% gross: fees, 8/9ths performance (sorry, lazy).
Readers of this blog are into personal responsibility, generally. How can anyone argue with performance based compensation?
“How can anyone argue with performance based compensation?”
We generally don’t, for people who actually work. Much of Wall Street effectively does nothing at all, and the “performance” has not a jot to do with the brokers or managers.
FYI -
It’s not anti-Wall Street
It’s anti-corruption on Wall Street
a bit?
20% of profits to underperform the indices?
While its by no means the norm, many funds utilize hurdle rates and that MAY be the norm of the future, though alot of managers will obviously fight that to their own extinction. I’ve even seen some clients, like Calpers, utilize decent regression models to determine the beta of the portfolio in a hopes of establishing an incentive fee which does not pay for simply providing beta or leveraged beta…
Oh, and in regards to TxChick, I don’t want a trout upside my head, but if I were running a true absolute return fund or any type of fund, the SP500 index is NOT my benchmark. From a purely theoretical standpoint, if I were running a true absolute return fund and could provide say 6.5 percent returns with only 1 percent deviations, hypothetically, you would then leverage up that portfolio 10 fold to have the same risk of the market portfolio but a 65 percent rate of return minus the costs of leverage (I’m JUST illustrating a point, not saying any managers actually properly do this).
Actually, I expect a lot of folks on this blog to become very pro-Wall Street by the end of Q1 or Q2 07 at the latest. By then, a sharp sell-off in the stock market will have confirmed the pessimism we have about the real estate market and its impact on the economy as a whole.
Oh, and could you comment on this?
http://www.itulip.com/forums/showthread.php?t=733
Not knowing anything more about hedge funds than what I learn from reading (virtually all) links like this on Ben’s blog and LR, I particularly like point/section 7, “Contributing little to the economy and society.”
1 - Unfortunately this is a byproduct of the original commodity pool investments being lumped into hedge funds - a professor of mine did a fairly good study utilizing the one attempt at registering hedge funds to pick apart what the rough reporting entity #s were… alot of the old commodity pools reclassify themselves as hedge funds in order to benefit from all the “buzz” surrounding them.
2 - well, just like with real estate, when something’s hot, everyone pours in :/ can’t argue that there’s many many many poor managers out there … the only good news is they don’t last long.
3 - in this case, as I previously discussed, you are supposed to then leverage up this portfolio for a greater amount of risk to satisfy your needs.
3 #2 - ummm, this would be a specific instance but that is NOT the case with MANY managers… seeing as I don’t know ALL of their portfolios, I can only speak for a dozen or so I know really well.
#4 - woh…. ummm… maybe I only work with the really really good ones or summin’…. Many funds will exit markets they know well and can at least marginally compete in because its overplayed…. they constantly look for something they can leverage in a less liquid environment in hopes of still getting a good return, in extreme circumstances… Do some funds do this? Absolutely…. look at how bad MA Arb (an oxymoron/contradiction as its not arbitrage at all) is overplayed. But yes, there is some truth here as I, in rambling english, described.
#5 and this is the one that makes me wet/soil my pants… this one I wholly agree with him regarding and is the focal point lately of my job - huge huge huge huge huge risks here.
#6 - once again, this is individual instances - Do I think in the long run google is a good investment? No. Just like I knew in 2000 that PALM and HAND weren’t good investments. I’m sure you can explain this better TxChick, but given enough experience and market info (if a mkt maker or can see all the various orders), you can ride the wave up and maybe ride the wave down. Being a fundamental person myself, I instead recall shorting hand about 6 or 7 times at 90, covering as it went up a few bucks and successfully hitting it at about 100 and change. point being - if i can create a deal that longs a company that is not good, i can still generate a good return.
#7 while not everything they do is good, they’ve permitted the development of many companies and a more robust derivatives market to name a few and their creation shook up asset management as a whole and they’re still relatively young. Give them more time.
#8 Yup. One reason I’m hesitant to jump ships onto the SS Hedge Fund Management team right now.
NYC’s biggest RE enemy is itself. Construction costs are millions of $$$ before you even start building. For the curious, look up air rights.
Condos and SFH’s are mostly ways to launder money for sole proprieterships and tax cheats.If you have a cash business like say a dry cleaners or restaraunt you have a good accountant who helps you lie on your taxes. This means that many co-ops which are 75% of the RE market won’t let you in since you won’t have the income to buy in. This means your only RE investment path is a condo or a home. you can get a stated income loan and no one cares how much money you really make. With a coop they will make you declare your income no matter what kind of mortgage you get.
http://www.chelseatower.com/home.html
i pass by this on my way to work a few times a month. It will be done in 2007. Lately there hasn’t been a lot of construction activity.
I also work in LIC and there is a lot of construction going on. Haven’t seen too many For Rent signs, but the two big projects are the new Citigroup headquarters and the new UN building.
http://www.arrislofts.com/home.html
My dad used to work when this was a factory back in the 1980’s. Now it’s going to be executive apartments for Citi execs and UN delegates.
“Now it’s going to be executive apartments for Citi execs and UN delegates.”
There goes the neighborhood.
One source of bonuses is real-estate… They made a lots of money securitizing sub-prime mortgages, now they’re foreclosing on the same people…. Greed is good!!!
Nothing like a little double dip, eh?
Loving every penny of it………
Economists at the brokerage houses have been among the most bearish regarding RE. How many of these employees will be spending their bonuses on a declining asset?
Damn and I thought my $21,000 bnous this year was good.
LOL!!
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Stocks went up ~16% this year because of EARNINGS GROWTH. CORPORATE PROFITS are a GOOD THING.
I know you are not that naive.
corprate profits are a bad thing?
I think she was hinting that the equity bubble drove the prices of stocks up. It would also imply that the 5-year housing-centric economy is coming to an end. Future earnings are what stock gains should be about.
As housing tanks it should be obvious to the stock market that profits in 2007 will not keep pace with 2003 - 2006. The Goldilocks crowd is pumping everything they can with their talk of a “soft landing” and “housing might tank but it won’t impact the overall economy”.
Fundamentals were thrown out the window right around July 15th. Just look at the homebuilders. Gekko doesn’t like to admit such things. It could be bloody in 2007. Caution is the key for the next year.
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no worries if we get a correction. that means i’ll be buying my shares ON SALE. i put at least $5k a month into equites automatically every month including my 401k plan. i’m in the accumulation phase and don’t plan on retiring for another 25+ years. i can ride out the volatility and take advantage of it and the downturns. i’m also diversified with lots of cash and bonds so no worries here.
Corporate pre-tax profits are up 31% in the third quarter. After tax up 25%. Corporate profits through Q3 are at 10.1% of GDP…highest percentage ever.
Profits DO matter and an S&P500 up 13% this year based on the above is quite reasonable.
>S&P500 up 13% this year based on the above is quite reasonable.
15%+ with Dividends.
“S&P500 up 13% this year based on the above is quite reasonable.
15%+ with Dividends.”
This year? Or 2007. S & P is already up by about 14% for 2006.
actually gekko’s right. market has priced in about HALF of the rate cuts Chopper Ben will be making next year.
Anyone who has not figured out by now that Gekko is a stock market shill is not paying attention. His homespun wisdom, which serves the purpose of luring GFs to buy stocks at the tail end of a period Russ Winter aptly described as “the greatest pump-and-dump in history,” is targeted towards those who come here to slake their thirst for housing market information.
I’m with Tx and NYC. The US spins into a recession easily by the end of 2007. Housing related jobs and consumer spending fueled most of the country’s economic “growth.” Now that housing jobs and housing-derived consumer debt have come to a screeching halt, we are going to see the true cost of pretending to be an “ownership society.”
It’s funny that Pig uses “Corporate profits through Q3 are at 10.1% of GDP…highest percentage ever.” as an example of how great things are. To me, this just shows how out of whack things are. If you think that this is the new future, maybe things are fine. But if there is any sort of reversion to the mean, either GDP will grow or corporate profits will shrink. I would love to hear how GDP will grow.
I guess I was out sick in school when they taught the lesson on why high corporate profits are a bad thing for stock prices.
I am confused though. In the 90s bubble we were told over and over that the .coms can’t sustain their price because they have no profits. Right they were. Now companies have record profits and we are also told that stock prices are too high.
So high profits are no good.
No profits are no good.
All that’s left then is what, a little bit of profit?
You are oinking up the wrong tree. The bears are not worrying about which levels of profit are “good.” They’re talking about the quality and sustainability of those earnings.
FUTURE (key word) earnings.
“‘I’m putting it in the bank because I know next year I could be out of a job,’ said one managing director at a leading bank.”