My Wall Street Bonus down 21%

thx for the comment - what group are you in? i heard fixed income vs. ibd vs. equities makes a big difference.

Was your bonus down 21% vs your bonus last year (so down ~40% from what people with your current title got last year assuming comp increases ~20% for each year of experience) or down 21% from what people with your current title got last year?

charles, are you renting for another year or two because your bonus was lower than expected or because you generally feel like the market will slow and you will get a better deal in the next year or two?

Just curious, down %20 means you're getting 80,000 vs 100,000 or 160,000 vs 200,000.
Does the 20% really make that big of a difference to your net worth/cash.
If so, then my thinking is that you're probably not ready to buy anyway.

Good point aifamm, I was trying to get at that with my question. Are bonuses really going to impact the market if they are down 20%? It may impact how big of a place you will buy, or the location, but if you are indeed in the market to buy, it doesn't seem like a huge impact, especially if the difference is made up in stock. Hopefully Charles isn't a "one time poster" and can shed some light.

while actual size of bonuses themselves may not impact the re market here in manhattan, the psychology change may! Its NOT that bonuses are going to be bad (20% drop is not all that bad anyway), but Im hearing that the mentality of these bonus earners & confidence for near term has dropped and that they believe the whole group expecting bonuses has a more sobering view of real estate. So, that herd like mentality will certainly influence action during what is normally a very active selling season with packed open houses and bidding wars. If the herd is a bit cautious, and they worry that hard asset prices may be pressured or even move sideways for a while, then of course they will take a more wait & see attitude; and I think that is what is going on here.

I'm not disputing that Noah, I'm just calling out people trying to spread FUD.
If your 20% bonus drop hurts you that much that you can't afford to buy, you probably weren't a real serious buyer to begin with.

"Suzaifamm researched this!"

My understanding is that in some IB sectors, people are finding it time to move on from their current jobs - not because '07 is bad but that '08 will be worse. Apparently b/c of the credit crisis a lot of deals have been put on hold/stalled/cancel etc. Therefore there is very little work in the pipeline for '08. And I guess looking at a near future with little work, which equates to pay, gets people a little jittery. Even people with a big nest egg might think twice about using it if the future portends potential lean times.

I would also have to think the prospect of layoffs would make people a little less secure in the conviction that they'll have steady cash flows to support a mortgage.

Also, a lot of previous buyers may have overextended themselves - I have a wall street friend who told me that a 20% cut in his bonus would make things extremely tight for him as he recently purchased a $4+mm condo with a large mortgage. There are many people on wall street who ironically don't practice fiscal responsibility when it comes to personal finance especially during good years when everthing is rosy. Combine the 20% cut with a larger portion of stock and deferred comp, and you could end up with a lot of people who need to downsize...

Interesting point buster2056. Not to bash your friend, but it is amazing that there are people out there who can afford a $4M+ condo and still lack common financial sense

Hardly amazing.

How many hedge fund managers leveraged up their funds to capture the 100bp spread offered by CDOs? Good financial sense there.

But they were probably the ones paying cash for their pads during the salad days.

Bonuses on Wall Street surge 14 percent By JOE BEL BRUNO, AP Business Writer
Fri Dec 21, 4:56 AM ET

This might have been one of Wall Street's most dismal years in a decade, but that hasn't stopped bonus checks from rising an average of 14 percent.

Four of the biggest U.S. investment banks — Goldman Sachs Group Inc., Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. — will pay out about $49.6 billion in compensation this year. Of that, bonuses are traditionally estimated to represent 60 percent, or almost $30 billion.

But that might not sit well with investors who held on to investment bank stocks this year — and watched them plunge by up to 45 percent. Investment houses have been slammed by the credit crisis, and top executives this past week said they've yet to see a bottom.

Further, some of those executives have even agreed to forgo their bonuses this year to reflect the poor performance. Morgan Stanley CEO John Mack and Bear Stearns CEO Jimmy Cayne won't be collecting their payouts.

Mack received no cash bonus a year ago but received stock and options worth an estimated $40.2 million, well above his $800,000 base pay. Cayne received a bonus of $33.6 million in 2006 and base pay of $250,000.

Goldman Sachs CEO Lloyd Blankfein reportedly is in line for a bonus of up to $70 million this year, as the nation's largest investment bank has largely navigated past any mortgage-related losses. Lehman Brothers' CEO Richard Fuld was granted a $35 million stock bonus for 2007, up 4 percent from last year.

There had been some predictions the increase in bonuses would have been significantly higher. However, layoffs and top managers giving up their bonuses have curtailed that.

For the army of bankers and traders on Wall Street, it remains to be seen what their bonus checks will offer when they're handed out over the next several weeks. Top performers will still see some significant compensation as an incentive to not defect, while underperformers will suffer, executives at the banks said.

"If you were to normalize our business ... you would see we had a record year across the whole enterprise," said Morgan Stanley Chief Financial Officer Colm Kelleher.

Morgan Stanley, the second-largest U.S. investment bank, reported compensation rose 18 percent to $16.6 billion from $14 billion a year earlier. This comes after the investment bank reported Wednesday the first quarterly loss in its history amid a $9.4 billion writedown due to the credit crisis.

Bear Stearns, the fifth-biggest securities firm, posted the first loss in its 84-year history on Thursday after a $1.9 billion writedown. It reduced compensation this year by 21 percent to $3.4 billion from $4.3 billion in 2006 — and members of its executive management committee, like Cayne, won't be collecting year-end bonuses.

"Compensation levels need to be maintained to reflect market levels," said Chief Financial officer Sam Molinaro.

At Lehman, compensation rose 9.5 percent to $9.5 billion, with bonuses accounting for an estimated $5.7 billion. The firm booked losses last week but managed to offset most of its mortgage writedowns and beat Wall Street expectations. Head count at the investment bank rose by 10 percent this year.

The bankers in the best position this year are at Goldman Sachs.

The nation's largest investment bank said Tuesday it was able to chalk up another record-breaking year with higher investment banking fees and smart bets on mortgage-backed bonds. It beat fourth-quarter projections.

In response, compensation at Goldman rose 20 percent to $20.1 billion. That means roughly $12 billion has been set aside for bonuses.

Still nervously waiting to find out about bonuses are the employees of Merrill Lynch & Co. The nation's largest brokerage won't report fourth-quarter results until January, and there has been some speculation newly appointed CEO John Thain might shake up the bonus structure.

Thain won't get a year-end bonus since he took the job on Dec. 1 after Merrill Lynch ousted Stanley O'Neal because of significant subprime losses. But he did take home a $15 million cash bonus just for taking the job.

aifamm - agreed. prob not serious buyers in that situation. What is that extra amount in financing anyway, for the lost bonus of 20%. Unless of course we are talking multimillion dollar bonuses here which I have a feeling is not the bulk of bonuses. I would expect more people to be earning 50K-200K in bonuses than there are those getting 1-5M bonuses.

all monopoly money at that stage anyway. Funny thing about bonuses, firms MUST keep them high or risk losing their best people to foreign firms or competitors. I think 2009 & 2010's bonuses will be shockingly lower than most think right now.