Wall Street rebound?

Don't believe all the Chicken Littles:

http://www.nysun.com/new-york/ny-fares-well-vs-london-in-a-new-study/83495/

Excellent! Thank you, LICC, for that sunny article from 1970 stating that, although Japan is producing a growing number of those funny little cars that they make, Detroit still produces the overwhelming number of the world's vehicles; it is, after all, the Motor City. So relax.

alan - I can't cite the date or year, but I remember being very convinced by a talking head's article in NYTimes or another paper warning that NYC was no longer the epicenter of the financial services industry, that employment growth in that sector was happening out in California, Chicago, other cities, so that as the industry went through future expansions, it would not be disproportionately in New York City. That was in 2002. From then till this year the NY metro area's financial services employment was exanded vigorously - I have no idea if it's been disproportionate employment growth here compared to other cities, but my feeling is .... premature prediction.

In the 1960s most American corporations had NY headquarters. It is not only the oil companies who moved away from Manhattan. There used to be not only publishing houses, but the printing of publications. Right before the dotcom bust people were beginning to refer to a Silicon Alley or some such nickname somewhere in NY. I often have the feeling the only "industry" left in Manhattan is law firms. For some reason, I don't see The End Is Near in this town, even though we all know there are hiring freezes, layoffs.....

alan - people are generally more happy and optimistic when they own their homes. Maybe you'll get there one day and see how good it is.

Alanhart. No doubt there will be some restructuring as this economic mess unfolds and no doubt there could be some drag on the local real estate market.

But we're two or more years into the bursting housing bubble,and Manhattan is still doing well, appreciating in some areas, a little down in others, generally kind of flat. Just today, according to Urbandigs, inventory is down to 6,000.

One other key factor you leave out is that on an island with 1.6 million people, 6,000 is a pretty low availability rate. Yeah, could go up again. But it seems that there's a very short supply up - price down - supply down - price up cycle that goes on here, mainly because of the high population and low inventory.

The sixth months may be a little tougher on us bulls, but overall, I have a lot of faith that we'll get finanacially back on track by mid-to end 2009.

In the even longer run, while inventory, or at least new availability may increase in the short term with so much new building, population will also increase. The report below suggests a 200,000 net increase, but energy issues (e.g., gas prices) and other factors seem to be making the city interior an even more desirable place than it was when the report was completed.

I recall the death of Manhattan being touted right after September 11. Companies and people were going to desert the island in droves. Maybe some did, but more came. One footnote to that is I actually believe that the September 11 attacks had an immeasurable drag on home prices here for a longer period than imagined. In other words, we didn't see the bubble we would have seen had the attacks not occurred, which will in the longer term minmize any declines caused by the current economic situation. This also explains why Manhattan is still much cheaper than other international cities like London, as the report above points out.

http://pewhispanic.org/files/reports/85.pdf

alanhart, the problem with the financial industry (banks & brokers) whether it be New York, London, Ireland or Switzerland is the enormous damage these firms have experienced in the past year. Their balance sheets with very few exceptions, continue to be loaded with securities that are highly toxic with little or no secondary market. Recorded write downs thus far are in the tune of $500 billion and total estimates stand at around $1 trillion. The asset write downs continue today plus there are substantial remaining highly leveraged risk areas which have yet come home to roost, mainly consumer credit and commercial RE loans (a biggie).

An additional question, is where is the future profitabiity of these investment banking firms going to come from? The mortgage market mania of the past several years is over and it will not return for many years to come. This is not my speculation but a significant concern of WS analysts as they attempt gauge the value of these firms. The firms/banks will continue to downsize for some time to adjust to the new business environment as their overhead remains elevated from the massive expansion for most of this decade.

In the end, it may not be about geographic location but rather the remaining banks/banks that have the financial wherewithal to do the deals. As to London being much more expensive, the dollar had been strengthening considerably against Sterling in recent weeks (11%) & as the USD continues in that trajectory, the value discrepancy will narrow. I do believe that the bear market of the USD over the past several years has finally reversed. The economic fundamentals of the UK & EU are far worse than ours.

If none of the above had a direct correlation with the value of real estate (history would beg to differ), it would be easy to be be more positive. I was a huge bull from the mid-1990s thru mid 2006. The fundamentals have changed so my views have adjusted accordingly.

Housing is still falling. No ones knows for sure,what the real damage is going to be in the end. The worst is still ahead. The reason is, all models used by the banks, are grossly underestamated. They are using figures in the 10-15% decline range. The reality is that they are already down 20% in most areas and are going to go down at least another 10-15%. Even Fannie and Freddie have said it will continue until 2010.

Has anyone asked why Thain got rid of that paper for 3 cents on the dollar. I'll take a stab at it. Because it will be worth nothing in a few months. All of the estimates are way off. They don't even include prime mortgages that are going bad at an insane rate. Lets not even start with other loans such as Autos, Student, HELOCs, Credit Cards and Commercial RE. These estimates are already grossly behind. The true number will be well over a trillion. Lets not forget that this is a global problem. Which makes the losses even greater for these banks.

NYC RE has held up better then the rest of the country, that is not even debatable. However it takes time for it to cycle. NYC without wall street, is like Orlando without Disney World. It will devastate the local economy. Oh need we forget that the consumer is dead.

End of the world absolutely not, financial disaster more like it.

Yikes, sounds scary!!

Hi dco, welcome back.
Merrill recently sold some subprime assets at 22 cents on the dollar, not 3. Those were legacy subprime assets, of which Merrill held a tremendous amount before the write-downs began.

NYC has a lot of other profitable industry and wealth beside Wall Street; it isn't as reliant on Wall Street as Orlando is on Disney. Sure, Wall Street's problems will affect the NYC economy and real estate significantly, but not at the levels that you are claiming.

"Yikes, sounds scary!!"

The fall out may not be so evident in the RE values yet but it certainly is in the State's economic budget & outlook. RE is very slow to adjust but all else has more of a resemblance of real time.

A bit of lite reading. :)

http://www.nypost.com/seven/07302008/news/regionalnews/crisis_puts_ny_in_sell_hell_122211.htm

http://www.nypost.com/seven/07292008/news/regionalnews/mike__dave_issue_doomday_warnings_122086.htm

I posted the same article in the "wall street bonuses expected to tumble" thread. I don't see this having a big effect on this current downturn as much as it having an overall impact on the job market as a whole as well as limiting the rebound we will see.

LICComment- What's up, how are you doing? I missed you guys.

Actually I'm fully aware of the 22 cents. However most people are unaware, that they are actually still on hook for a large % of the future loses for that paper. It was the only way to unload it. The buyers got a pseudo insurance policy in the "unlikely event" the paper deteriorates further.

Thain "At this time we are well positioned". notice the "at this time" part of the statement. Like I said read between the lines.

I know that NYC also has other industries. But tell me one other, that would have a greater financial impact, on NYC RE and it's economy. Come on LIC, even you can't undermine the importance of wall street to NYC's economy.

dco - I too would like to know about these other industries that will contribute to the economy...here let me try a few;

Could LIC be referring to law, where thanks to the downturn in the securitization business there are a record number of layoffs being announced...my firm does (oops did) a lot of business with Cadwalader in the city...they have fired close to 1000 lawyers since the beginning of the year.

maybe LIC was referring to media...since the financial, mortgage, car, luxury business are doing so well, I'm sure they will increase their ad pages tremendously...Conde Nast publications are down 5%-20%in ad pages

Restaurant/Hotel - my company has slashed by 75% the amount we can spend entertaining clients...I won't even go into the fact that I am now flying Coach on a regular basis...Goodbye Ritz carlton...hello Best Western

No one denied that big wigs will continue to make money...but the increase we have seen is a direct result of little people in the industry also making money...that is now gone

The falloff in state city taxes points to an unavoidable fact... the money being made in this town is dwindling by the minute, and has some time to go before it recovers.

You can talk about comparisons and trends and movements all you want, but the pain is here.

LICC: Thank you for your warm concern regarding my happiness and optimism. In fact, I bought a Harlem condo in 2001 and sold it a year ago for a bit less than 5x what I paid. I enjoyed living in it, as I do living in the own/rent hybrid that I'm now in. It's not much, but it's home.

Grownups: Can we all just assume that NY's economy has some time before it recovers, or will it need to radically reinvent itself again? How about a SWOT analysis, all you people who miss business school?

"NYC has a lot of other profitable industry and wealth beside Wall Street; it isn't as reliant on Wall Street as Orlando is on Disney. "

Hmmm.... Wall Street was directly responsible for 30% of total NYC income. And that doesn't include the lawyers and printers and such who get their business almost exclusively from Wall Street. Or the restaurants they fill. Or go down the list... publishing, thats big here... and getting killed
when the tourists find themselves in their own recessions.

And, even if you pretend that major pullbacks with 40-60% of what's driving the economy, consider that commercial bankruptcies have tripled in NYC (per Crains).

So, the non-Wall Street section, even if it is substantial, is having its own major problems.

Sorry, this should read Wall Street was directly responsible for 30% of total NYC income in 2007...

New York's major industries fall into a few categories:
1. Wall Street and those industries that are directly supported by it.
2. Tourism, which is easier to attract when the city is clean and shiny and zooming along happily.
3. Industries that are simply dying worldwide, like print publishing, and maybe live theater.
4. Industries once tethered to NY, but now freed by air transportation, instantaneous telecommunications, and globalization. These include advertising, apparel, entertainment, as well as wholesale trading for retail channels.

Boston Bloomberg and Detroit Dan Doctoroff put all their economic-development eggs in one basket -- their friend Jersey Johnson's midtown stadium scheme -- which thankfully failed. However, they failed to lure biotech, or any aspect of the World Wide Internets, really, or anything else that might flourish in a place with a high concentration of talented, educated people. All their other efforts have been small-timey also-ran nothings.

Is our biggest hope now wealthy retirees moving here, bringing in the money that they earned elsewhere?

"How about a SWOT analysis, all you people who miss business school?"

LMAO.

NYC will have to start reinventing itself since print isn't coming back anytime soon, and Wall Street will never be like it was - we're going to see 1930's style re-regulation.

Bloomberg seems to know this, however - recent changes to UBT and corporate tax law means that most small businesses aren't double-taxed as they used to be. Saves me a couple grand a year.

Live theater will always be here: it's a main reason why people visit. The only comparable place for English-speaking theater is London; you need a huge population and infrastructure to support theater, and in the English speaking world only NYC and London have that.

If there is ever health care reform, that will also cripple NYC - the hospitals and medical schools all run off of government largess. It's a giant subsidy.

has anyone figured out that EddieWilson and Stevejhx are the identical person?

Same positions
Same style of posting a negative article as worthy of its own discussion topic
Same argument style
Same style of rebuttal, interspersing the original quote and his response
Same claim to have worked at an investment bank, but seemingly not in the investment banking group itself
Same language style and pedantry related to language
Same self-corrections of their own posting
Same imperfect ability to do math
Same level of anger
Same reference to "they" and "them" as out to get people who don't think real estate is going up

what else is the same ... anyone care to point it out?

Has anyone figured out that ESueCho and Rod Blagojevich are the identical person?