Property Grunt

Thursday, November 10, 2005

The Wall Street Cavalry

Back in July, the Grunt did an entry title Getting the hell out of Dodge regarding corporate world's reaction to the market.

I bring this up now because of an entry I saw on the Matrix and the recent discussion on Curbed regarding a graph that which presented Jonathan Miller's projections if sellers ignore the fact that price appreciation is no longer in their favor.

One of the comments I have been noticing in that Curbed entry and from news on the wire is that there is an expectation that when bonus time comes, the Wall Street Cavalry will come to save the day.

It is understandable why brokers and sellers are so eager for this moment. According to the New York Times there is a strong expectation that there will be a bumper crop of bonuses on Wall Street.

According to a new compensation survey to be released today, the biggest percentage winners for 2005 are expected to be investment bankers who focus on mergers and acquisitions; prime brokers, the professionals who manage a bank's relationship with hedge funds; and proprietary traders, the traders who use their firm's money to bet on the direction of certain market trends.

"It's been a solid year, especially in light of rising interest rates and energy prices, the impact of the hurricanes and geopolitical events like the London subway bombings," said Alan Roost, a vice president at Johnson Associates, the New York compensation consulting firm that conducted the survey.

Brokers have historically relied on the bonuses to pull them through their darkest hours. However I am expecting that the Wall Street Cavalry will not be coming to our rescue.

As I have stated in my previous entry Getting the hell out of Dodge the Wall Street Cavalary are actaully liquidating their real estate investments. Those that are jumping in to buy huge portfolios have the resources to sustain a huge hit from a bust.

The Wall Street Cavalry are in the financial trenches and get to see first hand what will happen to the economy. Mind you, these people aren't always on point with their predictions or actions but they have a ton of experience and resources at their disposal.

Real estate obviously plays a key role in the markets and especially in these times the Wall Street Cavalry has been keeping a very close eye on the market. They are very well educated and have the scars to prove it.

Yes. The Cavalry is going to be awash in bonuses. But they are most likely going to shove that money in the best investments they can find. And it doesn't look like real estate will make the cut.


Yes. Everyone needs a place to live. But if someone does not have a pressing need to find a new home, then they will stay where they are until the market makes sense.

My recommendation is that we should tighten our belts, ration our food and expect to a longer stay in our foxholes.