Wall Street Braces for New Layoffs

Are you renewing your prediction that Charlotte is America's new financial capitol? You kind of lost a lost of credibility with your predictive skills on that one.

New York's loss is Charlotte's gain but a seismic shift south this will not be. Buyers of New York Real Estate will benefit though. As someone who has been shopping, you could feel the palpable shift over the last 30 days for homes in the 1-1.5mn range.

Why would Charlotte gain?

Can you please expand on the "palpable shift"?

It's going to get bumpy...rising rates, lower bonuses, layoffs...let the games begin...

"As someone who has been shopping, you could feel the palpable shift over the last 30 days for homes in the 1-1.5mn range."

Are you inferring due to the wall street layoffs? greek crisis? something else? everything?

stevejhx, did u think it would be a straight line up? This is a normal, 5-10% correction that is right on time. Exactly as needed and an expected human behavior response(anxiety levels now drop). Greece is a convenient excuse to selloff. However, most economists and all indications point to a strong 2011 second half.

Unlike Real Estate, which was already in the toilet, and may now be going further in...

That's right SteveF!! Ignore Greece. Ignore Wall Street. Nothing to see here.

SteveF to the helmsman of the Titanic: "Iceberg?!? Don't worry, that thing'll melt. Global warming, dude."

It's kind of funny about the big banks, since regulations being put in place last year have moved many of the jobs away from the big banks to the hedge funds.

"SteveF to the helmsman of the Titanic: "Iceberg?!? Don't worry, that thing'll melt. Global warming, dude"

The funny part is with SteveF, he's actually saying at after the boat sunk....

"this boat isn't sinking, it is actually is 20% higher than last year!"

@ somewhereelse: I meant to say that whatever the causes (many identified by you), there was a palpable change in tone by all parties associated with these homes (selling brokers, mortgage brokers, etc.). As a buyer I could immediately tell the difference in both negotiating leverage, hastiness in intent to close (i.e. get it done before the shit really hits the fan) and other anecdotal changes.

As for causes, I thought it was more the sea change in domestic macro-economic conditions: monthly unemployment numbers worsening, Wall Street economists downgraded growth forecasts for the remainder of the year. That all happened around the same time a month ago.

BTW, as someone on Wall Street with a fortunately stable job, I can say that colleagues around The Street are being extremely conservative with their spending. As has been pointed out at Urban Digs and elsewhere, the high end buying is most commonly foreign money. That said, I would expect the Wall Street buyer to remain muted compared to historic levels.

Makes sense.... with the stock market dip and the headlines recently, a tone change sounds fairly possible.

Yes riversider. For every person laid off in a nyc based I bank, an exact higher paying hedge fund position opens up in nyc. Now hug that unicorn and go back to sleep dear. Your coop is gonna do just fine. Force field on. As long as everyone holds hands and says 'hell no we won't sell below our 2007 $1500psf in basis!' all will be well.

Blood on the street. On top of the scabs that never healed from 2007, 2008, 2009, 2010 and 2011. This blood letting will be severe with none of the niceties of the last 4 yrs. Higher base, lower rev/margins=> simple stuff. But noone else saws this coming?

How about $500psf? Boone saw that too?

i think this will lead to a drop in the new york city douchebag index.
can i get an amen?!

"Yes riversider. For every person laid off in a nyc based I bank, an exact higher paying hedge fund position opens up in nyc. Now hug that unicorn and go back to sleep dear. Your coop is gonna do just fine. Force field on. As long as everyone holds hands and says 'hell no we won't sell below our 2007 $1500psf in basis!' all will be well. "

ha...

"i think this will lead to a drop in the new york city douchebag index.
can i get an amen?!"

hee...

"did u think it would be a straight line up?"

fsteve, I didn't think it would be a straight line up at all. In fact, I think it will be a choppy ride down, as these Great Bubbles of the past 10 years deflate, starting with dot.com, moving on to housing, moving on to commodities and stocks.

No fundamental has supported any of these bubbles; just free cash. This latest unprecedented (in 85 years) 30% rise in the stock market and commodities since the free money party began in September is starting to be unwound. With it will be the jobs that it created.

QEII was a massive failure. It will be unwound slowly, but the first of the unwinding hasn't even started yet, which is no Fed buying treasuries every month. Hence interest rates will go up. Next step, not renewing maturities. Final step, selling all of the assets.

QEII is the primary cause of all of the bad economic numbers out recently. More bad news is coming as the monster deflates. Sort of like The Blob, Michael Landon, and fire extinguishers. They just can't all be in the same room at the same time.

Take a look at this:

http://www.google.com/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/d/de/Nasdaq2.png&imgrefurl=http://en.wikipedia.org/wiki/Dot-com_bubble&h=351&w=458&sz=29&tbnid=yut7pqRRgs2W0M:&tbnh=90&tbnw=117&prev=/search%3Fq%3Dnasdaq%2B2000%26tbm%3Disch%26tbo%3Du&zoom=1&q=nasdaq+2000&usg=__ursnr6az7qTJqLFdjR5GJWl-VkU=&sa=X&ei=eqb7Tb3DIojQgAe_lpjwCg&ved=0CEEQ9QEwAw&dur=24

and this

http://futures.tradingcharts.com/chart/CN/M

Every chart looks the same since QEII.

Steve is really good at explaining why he loses so much money.

http://www.youtube.com/watch?feature=player_embedded&v=0ufk8Gglw6Y

For a guy who thinks he's smart, Steve's an odd fellow. Got taken to the cleaners on RE decision to buy on Fire Island. Is essentially priced out of NYC and is about to move to Fort Lauderdale or some such place. Rationalizes all this somehow by continually announcing the sky is falling in NYC. He's been saying it for nearly half a decade. Yet life here marches on. Some of us have sold, purchased, made new homes, and are loving life in the most exciting city on earth. Steve? He makes one off the wall pronouncement after another (like Charlotte is the new financial center of the US) but really just seems to be treading water in the misery of his poor prognostications and own situation.

Market timing is bad. Life as a rolling stone is incompatible with RE ownership. Duh. But for those with stable lives, clear goals, reasonable plans to achieve those goals, RE ownership in NYC can enhance one's life immeasurably. Ownership never was for everyone. That's still the case. But that's not exactly profound. Continually posting any morsel that can be construed as negative just seems sad to me. I don't understand it. Obviously there are positive indicators over time on any number of topics, but Steve and his friends unfailingly ignore them. They focus on the negative and generalize from it and thrive and believing the world is ending. There are always those who do this--in any economy, in any time. I just don't understand the pleasure derived from it. Especially when day after day the sun rises and sets and life goes on and life gets wasted as they fritter away days waiting for "the end" to come. I just don't get it.

Just that it's more fun to be a Prophet of Doom, if inclined that way.

Steve did do OK on his 1997-2003 co-op at 350 Bleecker, though holding on until 2009 would've gotten him ~$300K more. But what's $50K per year when balanced against quality of life?

but...everything is cool.

the middleeast.

greece.

the deficit ceiling.

this is the way its always been?

Everything is always bad, right? You probably saw the Berlin Wall falling back the year that you retired and were upset.

Yes. Actually. It is the way it has always been. In no special order: Vietnam, Cold War, Israeli-Arab wars, Venezuelan mess, Central American revolutions, Cuban Missile Crisis, Korean War, WWII, domestic political crises like Bush v. Gore, NAFTA, Savings and Loan scandal. Everyone of these threatened "the very fabric of our being" and was predicted by some to spell the end of days. An age old fallacy is to believe that the times in which one lives are any more exceptional than the times in which others have lived. Perspective. It's easy to lose. This board is evidence of that day after day.

what would be the equivalent of the upcoming vote on the deficit?

what would be the equivalent of the eurozone default?

I am asking these questions sincerely---help me to feel better.

Who are you kidding? You don't want to feel better. Your whole world revolves around being miserable. The reason you couldn't stand a window in your shower was because you might see sunlight in the mirror when looking at yourself.

bj---what do you make of this poster?

"Vietnam, Cold War, Israeli-Arab wars, Venezuelan mess, Central American revolutions, Cuban Missile Crisis, Korean War, WWII, domestic political crises like Bush v. Gore, NAFTA, Savings and Loan scandal.

Apparently columbiacounty has never heard a Billy Joel song.

Kyle, I'll add to that - "it's always the same" - people spew this meaning that "after X or Y or Z, there's always a real estate crash" but X and Y and Z do not ever repeat themselves in exactly the same way. That's why some predictions get boring, whereas others are interesting. When I hear "always" I lose interest.

I guess the fall of rome was an outlier

British empire, Thatcherism

i recently read that corporations are looking to Africa for their next source of cheap labor. this will all end well for everyone.

be happy. give me an f'ng break. the world seems much different to those ensconsed in well-paying seemingly secure jobs. great, most americans have long lost that comfort

and of course, japan's stagflation. our real role model

The sky is falling! The sky is falling! And my toilet seat is broken!

Doctor, I need another refill.

The green ones this time. 40mg.

http://www.rxlist.com/paxil-drug.htm

There is a fundamental disconnect on this site: Yes, NYC RE has done extremely well from 1997-today, but do people really understand that reasons why?

People who own and were able to take advantage of this unique, once-in-a-lifetime bubble seem to believe that NYC is bullet-proof. They don't seem to remember NYC's history pre-mid 1990s or understand how artificial and government-driven the RE bubble was. They also don't seem to understand that the whole world has over-leveraged itself to the point where - after additional inflationary and expansionist monetary policies - something is going to break in the near future.

There is no denying that buying NYC RE in the late 1990s and early 2000s was a great investment decision. One could go back and argue that buy-rent ratios were favorable during those periods and financing requirements were reasonable.

The mid-2000s were another story, not only on the RE financing front, but from a macro-economic and fiscal one as well. It is well-known that lending standards became non-existent, helping creating a worldwide RE bubble. And as we are now seeing, governments worldwide went on a spending spree - the US on wars and domestic welfare programs while the rest of the world borrowed and spent in a low-interest rate environment. This sort of interest rate and investing atmosphere drove money into emerging markets and fed an unprecedented amount of growth - but it wasn't, and will not be, sustainable.

2007-2009's crisis would have traditionally cleared the market of over-priced assets and reestablished a normal interest rate environment. Instead the US gov't and FED decided to use even more debt to try to solve a debt-driven crisis. It worked, partly, because there was room to drive interest rates to zero and a political/financial tolerance to take on even more public debt to save the "capitalist" economic system. Private losses were made public and a 5+ trillion US gov't umbrella coverage to further protect exposed financial institutions.

The trillions from TARP, QE1 and QE2 didn't help with general unemployment or foreclosures, but instead pushed up speculative assets and protected companies and institutions that SHOULDN'T exist and the thousands of jobs in NYC that wouldn't exist without taxpayer money. NYC and Washington DC were the cities that benefited the most from these "socialism for elites" and prices have thus remained stable or even gone up as the spoiled top 1% of our society fight over a limited inventory - which has remained limited for the very same reasons.

Questions:

1. Does ANY of the above sound like a traditional economy?
2. With all that is going on with Greece and Europe; debt/spending issues in the US and the artificial asset inflating FED policies is THIS the time to buy NYC RE?
3. Just how can these policies be maintained indefinitely?

It is clear to me that they aren't sustainable. The only question is what is the cost we are going to have to pay to ultimately resolve this orgy of spending and ponzi-finance that we have had for the last decade. It is also obvious that many on this board could care less if the end-consequence is a further deterioration of our political freedoms and expansion of gov't involvement in our "free market" economy. Many "buy now and forever" posters would have fit in very well in the Soviet communist Moscow elite that benefited from a system with twisted fundamentals/morals/understanding of finance/economics.

Too many on this board act is if their $350K+ jobs (that didn't exist in such quantities 15 years ago) are going to be around for the next 10-20 years - which will be necessary if they are going to pay off that $2M 1 bedroom apartment they bought last year...

Prudent and conservative investors would wait until all of these debt/financial/economic uncertainty clears up and we return to some sort of sustainable economic environment and policy. Instead some on this board think that buying a $1.5M -2M 1 bedroom apartment is a "good investment" at any time - and it might be if you can afford to put down a ton and/or have the cash reserves to cover one's expenses for years: In other words, if one can afford to make a luxury purchase. Instead many buyers are taking a good deal of their savings to put just 20-30% down and assume that their high paying jobs will be around for the next decade or two to pay down the mortgage.

And just what happens if that isn't the case?

Do people really think that the US gov't has the ability or could muster the political support to bailout Manhattan apartment owners that can't pay their $12K/mo. mortgage payments? Such a move would sow the seeds for radical political change - exacerbating our already excessive income distribution disparity.

It is clear that the last 15 years of ponzi RE price growth has convinced many that the policies and spending that supported it are going to be around forever (and God knows what sort of economic and political changes we would have to endure to maintain these high-end supporting policies for years to come).

Any rational observer of economic and financial history and theory would disagree.

What shocks me is the number of "educated" and "well-off" individuals seem to ignore the economic whirlwind have been experiencing - and the RE price pumping policies that created it in the first place (or quietly rejoice them).

It gives me the impression that we have created a generation of delusional and spoiled investors that think that risk is for others to deal with and assets should always appreciate at multiples above income-growth rates. It implies that all of these real estate "investors" or "capitalists" are riding a wave of government spending, zero-interest rates and making private losses public as investment principles.

It is not just backward but somewhat disturbing....

Extra extra long post award:

Memito ----- 1
Financeguy - 0

Manhattan has lower LTV's. and had less equity take out loans.
It's underwater mortgages and bad job prospects that kill housing. Manhattan does not have the negative equity problem the rest of the country has.

just keep saying that, rs.

really, every condo buyer (and there were a LOT of condo buyers) purchased wisely?

tool.

the sky is falling! my toilet seat is broken! i might have to go back to Seattle!

Just because an asset is fully paid for doesn't mean that it can't depreciate in value.

Yet another misconception created by 10+yrs of ponzi finance.

The world as NEVER seen this level of debt and asset inflation...

But I am sure everything will be a-ok...

memito, you have some well thought out points of view, yet you didn't rely on Japan, Rome, or Britain to support your arguments. Interesting.

kyle, i'm sorry but i have to take issue here. you were somewhat making sense to someone who might be intimidated by the purdy way you say things (and i do mean that sincerely) but you lost me at the "bush vs. gore" domestic crisis. the citizenry of this country is incredibly naive and frankly just undeveloped in many ways because we haven't had a true large scale domestic crisis since the civil war. like, where people take up arms and shoot at eachother. we HAVE NOT seen everything before, and we most certainly still HAVE a lot to see. please don't fool yourself by suggesting that we are more developed or civilized than countries a or b, when the time comes, our civility will go the way of everyone else's.

>but you lost me at the "bush vs. gore" domestic crisis

Strategery

memito, a small percentage of the population has benefited from those unsustainable bubbles and assorted scams - the RE market in Manhattan is the trickle down from them

All asset value is realitive. The only constant is change. The manhattan economic picture might fair better than the rest of the country but the times, they are 'a changing. Residential re is in the process of a revaluization process which we all know from history is a slow process. Everyone should be able to PROCESS that shred of info. Around and around she goes no one knows where she stops. Examination of the maro picture would indicate a long term downward trend. For my birthday wish I'll wish for a prosperous recovery. For my long and short term financial planing I'm battening down the hatches and getting the boat ready for some pretty intense weather. This last year or so has been a gift from the g-ds. If you were asleep at the wheel during the initial crash, you have had ample time to recover and dig in, preparing for the next wave. If you were busy hanging the Mission Accomplished banner your going to be disappointed.

At this point all of you should be able to get to the life boats in your sleep. How much more warning do you need?
Price of gold says it all.

On gold:

"Trading Of Over The Counter Gold And Silver To Be Illegal Beginning July 15"

"Section 742(a) of the Dodd-Frank act which "prohibits any person [which again includes companies]from entering into, or offering to enter into, a transaction in any commodity with a person that is not an eligible contract participant or an eligible commercial entity, on a leveraged or margined basis."

http://www.zerohedge.com/article/trading-over-counter-gold-and-silver-be-illegal-beginning-july-15

You are retarded. OTC gold contracts traded today, dumb ass.

To Be Illegal Beginning July 15

I know nothing of this but, jason....I don't get the retard comment?

Unless you mean retards that can't work a calander...

Jason is just another hostile jackass working on wall street who hasn't gotten very far and so is angry at everyone who has been successful. He doesn't even like being in New York but can't seem to leave back for California because even fewer opportunities await there.

Well put Memito. You nailed it.

Ah yes, touche. July 15. However, OTC gold contracts are not outlawed. THey simply must be centrally cleared - as is the case already with oil contracts.

>Ah yes, touche.

Touche is French for - I was completely wrong and acted as a blowhard, but if I say a French word with a snooty accent, it sounds soft and nice like a puppy and you won't remember that I was a jackass before?

yes memito. some kind of paradigm shift is certainly in the cards. you can't have the largest RE bubble in history and not have a long slow, difficult unwind.

So glad we have backups.

touche sounds nothing like a nice puppy

In my view:

1) NYC RE -> 0
2) Stock market -> 0
3) I don't know about hyper-inflation, but healthcare costs (if we want the "best") tuition costs will outpace inflation.
4) Can't trust any money managers/seers, they're all in it to pump up their own pet theories.

So, I give up and I'm just happy to have some choice in where to settle should the U.S. hit some turbulence.

Great piece in the times! Gov't forcing banks to lower bonuses caused the firings.
----------------------------
http://dealbook.nytimes.com/2011/06/20/bonus-cuts-pay-raises-then-layoffs/

The new pay structure is now having an unintended consequence: It is perverting Wall Street’s calculus during periods of weakness.

In the past, banks could cut variable costs like bonuses when profits slipped, rather than handing out pink slips en masse.

Now, fixed costs like salaries make up a higher portion of their expenses. So layoffs are starting to look more attractive.

Mr. Abouhossein analyzed the major banks in Switzerland, which has stricter disclosure requirements than the United States but may be a good proxy for the rest of Wall Street. His research, which has been getting a lot of attention among Wall Street’s higher-ups, found that 81 percent of Credit Suisse’s compensation expenses are now fixed, compared with 66 percent in 2009. At UBS, they rose to 63 percent in 2010 from 55 percent.

“Increasing fixed costs increases pressure on the cost base and offers a limited cushion in the form of variable cost to absorb the impact of revenue downturns,” he wrote in a note to investors. The next downturn, he explained, “is likely to lead to material staff cuts.”

We have a negative story here, 63 comments in and ZERO negative posts from aboutready. That can only mean one thing ... 6 first class airline flights, 5 European countries, 4 private villas, 3 weeks vacation has begun.

"Hubby" controls access to the laptop on vacation, so AR has limited access to SE.

Sorry but Hubby, a senior partner at a top NYC law firm doesn't get as much vacation as Wifey who can't even manage to write a monthly article on Brick Underground anymore.

Riversider is correct.

" 6 first class airline flights, 5 European countries, 4 private villas, 3 weeks vacation has begun."

sounds like a sweet trip. small issue, if it's just them at the "villa" it's just a smallish house. maybe old and pretty, but likey euro communist architecture. looks something like a small ranch house on an unattractive suburban street. if it's a true Villa, no way they're there alone. people go with groups of friends or it's a B&B with other guests. either way, sounds wonderful.

The Benny and the Feds can prop up the stock market, but no one can prop up the real estate market. That's the true indicator of the economy.

I went to open houses in Brooklyn Heights last weekend and realtors were literally begging for offers saying how "motivated" their sellers were. Hmmmmm....

"Great piece in the times! Gov't forcing banks to lower bonuses caused the firings."

sounds like fantastic news for apartment prices...

and let's actually be clear about that.... the DOWNTURN cause the firings... the lower bonuses just limited the options. That the banks chose to raise salaries was their own dumb move.

The banks didn't have a choice There was clearly regulatory , legislative and public relations pressure.
Banks are notorious for over-hiring and over-firing. This time is no different. The change in comp structure clearly created some negative side effects.

Comp structure was messed up, but change should not have been brought about by regulators and congress but rather through the proper mechanism, which is the board of directors. Fix corporate governance and a lot of problems go away. Hard to see how share-holders make out when a ridiculous percentage of the revenue is paid out in salaries and bonus.

"The banks didn't have a choice There was clearly regulatory , legislative and public relations pressure. "

And that thing noted in the article but you somehow keep missing - them, well... making less money.

Layoffs are because their revenues dropped dramatically. That's how business normally works.

"The change in comp structure clearly created some negative side effects."
I think being able to cut someone's pay in half after the year is over is a pretty negative side effect.

Now Goldman has to work like most other companies... I don't consider that a side effect.

"but rather through the proper mechanism, which is the board of directors"

Should have... sure... but after decades, that CLEARLY didn't work.

Banks are making less money, so there will be less employment. Why are folks so surprised by this?

Should have... sure... but after decades, that CLEARLY didn't work.

....it was never given a chance. Just try and get an item put on the slate at a shareholder meeting. The laws are stacked against the share-holders.

"Benny and the Feds"

LMFAO.

"U.S. Banks May Accelerate Job Cuts After Firings Jump 21%, Challenger Says"

Bullish!

http://www.bloomberg.com/news/2011-06-21/banks-in-u-s-may-speed-job-cuts-after-firings-jump-21-challenger-says.html

Jason, your mom is calling.

"Goldman Sachs Draws Up Deeper Cuts ...

With the company’s third quarter closing on Friday, Goldman has been revising its plans, potentially raising the cuts by as much as $250 million ... Along with the possibility of additional layoffs, the firm is expected to reduce employee pay, much of which is handed out later in the year. It is also sharpening its focus on noncompensation expenses, like real estate and travel, according to one of the executives with knowledge of the discussions."

http://www.cnbc.com/id/44681296

"UBS Bankers Face Dwindling Options for Jobs ...

As UBS AG (UBSN) prepares to shrink its investment bank following a $2.3 billion loss from unauthorized trading, bankers pushed out or looking to leave may find few opportunities as Wall Street rivals slash jobs."

http://www.bloomberg.com/news/2011-09-26/ubs-bankers-face-dwindling-options-as-securities-unit-prepares-to-shrink.html

Old news, no effect, move on, malthus.

Don't you see that the stock market has rallied 500 points in 2 days on No News, after falling 600 points in 2 days on Big News?

Don't you see how POSITIVE everything is in the economy?

I can't believe you, sometimes....

Once again, steve spending a lot of effort explaining why he was wrong... again.
He comes in, screaming down, and the market shoots up...

And he's a good 1000 points off on those shorts from months and months ago...

http://mam.econoday.com/byshoweventfull.asp?fid=448707&cust=mam&year=2011#top

Things are GRAND, malthus! Grand, I say!