Press Sighting: Bloomberg
October 17, 2005
"The $200,000 Italian-made Lamborghini Gallardo is this year's hottest car at Gotham Dream Cars LLC, says Noah Lehmann-Haupt, president. Clients including mortgage brokers and traders pay $1,750 a day to drive the 200-miles-per-hour machines."
Bonuses on Wall Street Spur H2, Lamborghini Sales
By Adrian Cox and Josh P. Hamilton
Published: 2005-10-17 09:40
Oct. 17 (Bloomberg) -- On Wall Street, they're counting the days until New York's securities firms hand out $17.5 billion or more in year-end bonuses. Car dealers, private jet operators and city officials are ready to share the windfall.More than 150,000 New York bankers, brokers and traders are in line for payouts of two to 12 times their base salaries, according to executive-search firm Options Group. Novice commodities traders may get an extra $80,000 while some managing directors can expect $3 million from companies including Morgan Stanley, Merrill Lynch & Co. and Goldman Sachs Group Inc.
Manhattan car dealers, Long Island yacht brokers and boutique service providers such as air charter operators and butler agencies are already seeing anticipatory spending. The city itself is looking forward to the income and sales tax
revenue. And then, there are the parties.
"There's someone on Wall Street that's taking 20 of his closest buddies for his bachelor party, renting a yacht, cruising in the Caribbean and ending up in Sandy Lane in Barbados on the golf course,'' says Tatiana Byron, president of New York event planner 4PM Events. The cost: at least $200,000.
Financial professionals, New York's best-paid workers, are benefiting from one of their employers' biggest years ever. Wall Street's total U.S. pretax profit is likely to rise 2.4 percent to $21.2 billion in 2005, according to the Securities Industry Association. That would make it the fourth-best year for Wall Street profits; the biggest was 2000, followed by 1999 and 2003.
Trading Boom
Low interest rates, volatile commodity prices and rising stock markets fueled a trading and investment-banking boom at firms such as Goldman Sachs, the third-biggest securities house by market value. Goldman said last month its third-quarter earnings rose 84 percent to a record $1.62 billion.
The five largest independent New York-based firms may post combined net income of $18.7 billion this year, up 8.9 percent from their all-time high in 2004, according to a survey of more than 15 analysts by Thomson Financial.
Besides Goldman, the firms are Morgan Stanley, the largest by market value; Merrill Lynch, the one with the most brokers; and Lehman Brothers Holdings Inc. and Bear Stearns Cos., the fourth and fifth biggest.
Bankers and traders usually find out the size of their bonuses two weeks after the end of the fiscal year. Firms including Morgan Stanley, Goldman, Lehman and Bear Stearns will announce bonuses in mid-December.
New York Taxes
Bonuses for employees at Citigroup Inc., the world's largest financial firm, and Merrill will be disclosed in mid- January. Citigroup today reported record quarterly profit; Merrill is to report third-quarter earnings tomorrow.
Federal, state and local tax collectors will have first dibs on the bonus payments. New York City budget officials count on the tax revenue from securities firm employees, who make up 4.5 percent of jobs in the five boroughs and 19 percent of pay, according to the Securities Industry Association.
"Wall Street has a huge impact on the city's economy and the budget,'' says Marcia Van Wagner, New York City's deputy comptroller for budget.
Last year, the city balanced its budget partly by using taxes generated by $15.9 billion in Wall Street bonuses, according to New York State Comptroller Alan Hevesi. The bonuses paid out in January will help with a projected $4.5 billion budget gap for fiscal 2007, says Van Wagner.
Hummers and Lamborghinis
Luxury retailers are looking for their share, too. Even the fallout from Hurricanes Katrina and Rita, including gasoline at $3 a gallon, hasn't stopped bankers and traders from tapping their anticipated bonuses to buy Hummers and Lamborghinis.
John Bruno Jr., general sales manager of Hummer of Manhattan, says he sold 29 percent more of the General Motors Corp.-made sport utility vehicles this September compared with a year ago. The majority of sales are of the H2, with luxury packages starting at more than $61,000, and the military- specification H1, which sells for $129,000 or more.
"We get a lot of Wall Street guys,'' says Bruno.
The $200,000 Italian-made Lamborghini Gallardo is this year's hottest car at Gotham Dream Cars LLC, says Noah Lehmann-Haupt, president. Clients including mortgage brokers and traders pay $1,750 a day to drive the 200-miles-per-hour machines.
Lehmann-Haupt says he is planning to almost double the Upper West Side exotic car rental company's fleet next year to 11, including the new Gallardo Spyder.
'Bigger Boats'
"You may not get a bonus that's going to let you buy a Lamborghini Gallardo this year, but at the very least you can take it out for the weekend,'' he says.
On Long Island, prospective buyers of expensive watercraft have been emerging from hibernation after an "awful'' period, says Glenn Mazzella, president of World Wide Yacht Corp. in Northport, New York, 45 miles east of Manhattan.
"We're starting to see bigger boats and higher-end expensive boats get a lot more interest,'' says Mazzella, who sells about nine Norwegian Windy Boats, priced between $600,000 to $1.8 million, a year.
"People have had enough of listening to bad news,'' he says. "They want to go yachting, and they want to go skiing and they want to drive a Maybach,'' the $325,000-and-up luxury sedan made by Stuttgart, Germany-based DaimlerChrysler AG, the world's largest commercial-vehicle maker. "They're tired of feeling embarrassed.''
Services providers also expect to share in Wall Street's success.
Butlers and Airplanes
Charles MacPherson, vice chairman of the International Guild of Professional Butlers, says it's already impossible to fill the demand for butlers to handle domestic tasks such as shopping and "making sure the housekeeper is doing what she's supposed to be doing.''
"You've got the person who's making a million or two or three who's at the point where they just want someone to handle their life,'' says MacPherson. Starting salaries for full-time butlers are a record $50,000, he says.
Daniel Tew, director of client relations for Long Island-based air-charter company Eastway Aviation, says he has seen a 10 percent rise in chartered flights from New York this year. Executives pay about $7,000 to fly eight passengers to Washington and $60,000 to charter a jet for 16 to Los Angeles, he says.
"We have a lot more scheduled flights, even as the price of jet fuel is approaching $5 a gallon,'' Tew says.
Then there are also are those "only in New York'' ways to spend money. Take Garde Robe Inc., which claims to be the world's only "cyber-closet company.''
Virtual Wardrobe
For a starting fee of $350 a month, the company takes studio photographs of clients' Armani suits, Hermes ties and Jimmy Choo shoes, then puts them away in a climate-controlled loft in Manhattan's Garment District. Customers use their computers to point and click on a virtual wardrobe for their clothing to be delivered the same day to their Manhattan apartments.
"We're the most high-end service you could possibly have,'' says Douglas Greenberg, Garde Robe's vice president of sales and marketing. "The clothes live better than 99 percent of the people in this city.''
Copyright 2005 Bloomberg
