Wall Street Bonus Picture Goes From Bad to Worse

I found it hard to believe how earlier projections called for a rather conservative 25-30% declines (compared to the record 2007 payouts) when most of these financial institutions are bleeding capital at unsustainable rates & business models in question.

Realistically, where would the funds come when there is nothing but red ink flowing and problem assets continue to mount? I'm surprised that many of these financial concerns continued to distribute dividends but that trend is quickly becoming a rarity.

I agree, no effect whatsoever. :)

"No effect on Manhattan real estate, thankfully."

really?

It seems like even the earlier calls for 50% reductions may have been optimistic.

Bonuses for senior bankers are typically tied to revenue generated, except for areas like equity research which there is no direct link and comp is tied to other metrics. If you brought in revenue this year, you will likely get paid as it's justifiable, especially if you are considered invaluable. My friends in restructuring who are supremely busy are expecting to make a killing this year and next. My friends in industry groups are not so optimistic - they would be happily suprised with 50%... Also, the junior bankers (directors and below) will probably get screwed as they are considered expendible and should really just be thankful they have jobs... Sad, but true...

http://www.nytimes.com/aponline/business/AP-Meltdown-Shrinking-Financial-Sector.html?pagewanted=2

steve, pls tell us you were being sarcastic when you said 'no effect on real estate'. we can't see your face so we can't say if you were or not.

the worst part of the bonus situation is the ones lost from job cuts

yes he was being sarcastic...no need to see his face

i_want, you must be new here.

I've been predicting a "perfect storm" for a year now, saying that real estate would fall in value 50% from peak to trough. Owners' carrying costs are twice what comparable rents are, when they should be approximately equivalent. On a PITI basis a person who can afford to rent an apartment would need twice the income to buy the same apartment. Property prices are 24x annual rents, when historically they should be around 12x. Wall Street is being decimated, never to return in this form, causing the price-to-income ratio to be far too high considering falling incomes. Property prices rose at twice the level defined as a "bubble" rate over the past 5 years.

That is now all being deflated. Rapidly. I'm afraid prices will fall even more than my earlier prediction, because there is now a 3-year supply of properties on the market aimed at a clientele who no longer exist, with thousands of new (overpriced) units coming online. If they were tulips at least tulips die. There's nothing to do with this inventory except sell it or rent it, which will take massive price reductions in the near future.

20% down in a year is considered a crash. We've come that far, and have twice as far yet to go.

For those of you new to street easy, stevejhx is te prophet of doom.

I admit Steve, I am a newbie! yep, you're absolutely right.

I was at northside piers earlier, the prices of the 2nd tower which is being built, is ALREADY 5-10% less than tower 1. every 5 seconds the agent reminded me 'prices are negotiable'. 30% of tower one needs to be filled ASAP.

the 12th floor 638sf is going for 490k! isn't that crazy?? still inflated.

alpine, you must be a broker. my condolences if so.

> It seems like even the earlier calls for 50% reductions may have been optimistic.

Absolutely... particularly because folks seemed to be thinking that this would be a one time, and then everything back to rosy next year.

2008 bonuses will clearly suck.
But the real problems begin when they don't pick up in 2009, 2010, etc...

There is only a 3 year supply if you add more inventory and use the current rate of absorption. As shown last week, at the current inventory number and using historical averages for absorption there is just over 1 year's supply.

did someone just use the word "only" before "3 year supply"?

btw, the number of apartments coming online (from the building trades council) is higher than the current and even the past absorption rate...

all the building frenzy means apartments coming on the market in 2008 and 2009 (2 record years)

"at the current inventory number and using historical averages for absorption there is just over 1 year's supply."

That is true. But since prices increased sevenfold in the last 10 years, one could argue that that absorption rate was abnormally high.

"There is only a 3 year supply if you add more inventory and use the current rate of absorption."

No need to add the new inventory, though it will exist.

My point was that you chose to use an artificially low number for the absorption rate (since it is only from a down time versus a historical average number) and a made up inventory number and are passing that "fuzzy math" as proof of 3 years of supply.

If you take the absorption rate at the peak of the boom and make up an inventory number 1500 units lower instead of higher and you come up with less than 1 year of inventory. This faulty logic and computation is as accurate and useful as what you did.

There is no need to greatly exaggerate data and then try to pass it off as "fact."

I'm sure the absorption rate will increase. However, what will make it increase will be substantially lower prices.

This has been said for almost a year at this point... first you get the falloff in volume, then you get the falloff in prices.

NYC - I agree with you. I just wanted to point out that the 3 year supply statement is completely false. There is enough data out there to show declines in the market without making up data and then passing it off in multiple posts as fact.

That's all.

> NYC - I agree with you. I just wanted to point out that the 3 year supply statement is completely false.

I'm not sure why you think it is.

At current rates, it is correct. And thats what you go by. And you can't point at peak rates either. I don't think we're going to see those for a VERY long time.

You cannot use the rates at the worst time or the best time. You should use historical average rates of absorption to get an accurate number. The volume of sales has gone down 75% and the next logical step is prices decline and absorption increase slightly. To just use the absorption rate of the past 3 months is cherry-picking to alter the numbers. It is too small of a sample size.

I am not suggesting using peak rates at all. If you use the historical average rate of absorption and the current inventory level it is about 14 months of supply. 14 months is not 36 months and is therefore inaccurate and misleading.

waverly, you wouldn't be using historical average rates for either sales or inventory in this market. That's why there is uncertainty. The current inventory level is quite bizarre, in that it is so high and continuing to rise just prior to the Christmas holidays. I've never seen something like that before.

I wouldn't be at all surprised at a greater than 3-year supply overhang sometime in the next couple of years.

> You cannot use the rates at the worst time or the best time. You should use historical average rates
> of absorption to get an accurate number.

Not correct, you use the current.

If sales slow, you can't just ignore that fact because you really want to...

These apartments will sell when they sell, which means current absorption. You can't look at how fast they WOULD HAVE been bought if this was an "average" time.

Its not. This is now.

MOre news about Wall Street, so 2008

but they posted this in 2008. you just dredged up all these old posts by commenting on them.