Mickey Z
Cool Observer
Tuesday, December 28, 2004
Fault Lines: Real and Imagined
If you’re one of those who rapes the planet (or at least plays a role), the holiday season is a time of bonuses...and long lines at the luxury car dealer. So say the New York Times. (Click “more” at the bottom of this post to read the entire nauseating article.)
If you’re one of those on the receiving end of capitalist predation, well, have a look here to see what you might get:
http://dahrjamailiraq.com/gallery/view_album.php?set_albumName=album28&page=1
Rich or poor, North or South, white or black, we can all count on the randomness of nature to even things out if we don’t. I read an op-ed in the Times today...and have excerpted it below:
“We have a tsunami warning system in the Pacific Ocean because, in recent history, we’ve experienced tsunamis there. We don’t have a similar system in the Indian Ocean. This has something to do with the technologies developing nations can afford, of course, But it also has to do with the fact that our experience with the giant waves in this region is less immediate. Yet the single worst explosion in our known geologic history - an eruption of a 20-by-60-mile caldera some 71,000 years ago - occurred on Sumatra, just 100 miles from the epicenter of Sunday’s earthquake.
The earlier eruption left a 10,000 square-mile sheet of volcanic rock, more than a thousand feet thick, and so filled the sky with ash that it probably created our last ice age. Still, the eastern Indian Ocean is thought to be an area of infrequent tsunami activity. Earthquakes as a rule occur at the ridge of land and water, where plates usually meet and either slide, thrust or pull apart, releasing awesome power. But there are exceptions.”
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“The greatest cliché in geology is the question, Can it happen again? Sure. Will it happen again? Well, nature is never overdue, and we simply don’t know. The earth has had many configurations of land, water and living inhabitants over the ages, and if we think of an earth-changing event as being “overdue,” we are failing to understand geologic time. It is mind-boggling to think that only 200 million years ago the earth was one gigantic continent, and one can only imagine the explosions that broke it into today’s continents. The plates beneath these continents continue to creep, and they don’t need an earthquake to move them along.”
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“Sunday’s tragic earthquake occurred miles beneath the Indian Ocean, and despite its 9.0 magnitude it was hardly felt in Indonesia, and not at all in Sri Lanka. Yet the water displacement caused by the thrusting of the Indian plate beneath the Burma plate created 30-foot waves that were to kill people on the African coast more than 3,000 miles away. This distance may seem hard to believe, but after the Great Chilean Earthquake of 1960, tsunamis traveled more than 6,200 miles to Hilo, Hawaii, where they killed 61 people and destroyed many buildings with waves of more than 35 feet.
“Oddly, a tsunami cannot be felt as it passes ships on the open ocean, for the wave is usually small, one to two feet, and traveling very fast, as fast as airliners. It is only as it approaches shallow water that it begins to break; as the bottom of the wave slows, the top keeps traveling at the higher speed and increases in height, hitting landfall at 30 to 40 miles an hour. In 1958, an earthquake in Lituya Bay, Alaska, caused a landslide into the ocean that created a tsunami 1,720 feet high, a wave that could have swept over the Empire State Building. Fortunately it headed into a wilderness area and did not travel across the ocean to Hawaii or Japan.
“The possibility of great landmasses falling into the ocean is always with us, and recently scientists found vertical fault lines through a volcano on La Palma, one of the smaller and more westward Canary Islands. The volcano has a crater about five miles wide and a half-mile high, and erupts about every 200 years. The last eruption was in 1948, but the newly discovered fault lines have convinced some scientists that eventually the huge crater will break apart and slide into the ocean, bringing more than a half-trillion tons of rock with it.
“Since tsunamis are created in proportion to the amount of land that has fallen into the water, this event would likely create a wave mass never before known to written history, many times bigger than the wave at Lituya Bay. The wave would diminish a little as it crossed the Atlantic, but if it hit the Atlantic Seaboard it could be higher than the skyscrapers of Boston, New York, Washington and Miami. Scientists do not know if it will take one, four, or 10 eruptions to separate the landmass, only that the separation is inevitable.”
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“Big earthquakes occur infrequently, but when they do they usually come unexpectedly and with horrendous power. It is, of course, dangerous to live in an earthquake-prone area, but what area in the world can we say is earthquake-safe? Surely the people in the Mississippi Valley feel they are safe, as do the people in New York City. Yet, New York has a fault line going across 125th Street that I would guess 99 percent of the city’s population does not know about.”
December 28, 2004
That Line at the Ferrari Dealer? It’s Bonus Season on Wall Street
By JENNY ANDERSON
Samantha Kleier Forbes, a 30-year-old real estate broker, was getting ready to leave for a vacation to Florida with her mother and sister when she got an urgent call. It was a client who had spent the summer scouring the Upper East Side of Manhattan for an apartment priced between $4 million and $5 million.
The client insisted on seeing more apartments that day, but now she wanted to look in the $6 million range. Her husband, a banker at Goldman Sachs in his late 30’s, had just received his year-end bonus.
“Normally this time of year is dead,” said Ms. Forbes, a vice president at Gumley Haft Kleier, a residential real estate brokerage. But this winter there is unusual buying interest that she attributes to rich Wall Street bonuses. She is cutting her end-of-the-year vacation short, so she can prepare for an onslaught of clients eager to see apartments.
The year-end bonus is a Wall Street tradition, and for a second consecutive year, the amounts are significant. Three major Wall Street firms - Goldman Sachs, Lehman Brothers and Bear Stearns - have reported record profits for the year and all are said to have given out handsome bonuses.
The totals in 2003 were already impressive: Lloyd S. Blankfein, the president and chief operating officer of Goldman Sachs made $20.1 million, of that only $600,000 was salary; and E. Stanley O’Neal, the chief executive of Merrill Lynch, received a bonus of $13.5 million and restricted stock worth $11.2 million on top of his $500,000 salary. At the other end of the compensation spectrum, an investment banking analyst right out of college would have made a $65,000 salary and a $35,000 bonus last year. An associate just out of business school might have made $85,000 in salary and a $115,000 bonus.
This year, investment bankers are expected to see gains in bonuses of 10 to 15 percent, amid a year-end flurry of mergers. Fixed-income traders, who have been the best compensated Wall Street professionals in recent years, will also be amply rewarded, but their percentage gains may be smaller than those of bankers. Bonuses, of course, vary by bank, by division and by individual. They reflect the firm’s profitability and the group’s performance, as well as the individual’s contribution.
This year’s bonuses do not quite reach the heights touched by star bankers and traders in the heyday of the late 1990’s technology bubble. But they are rich enough to persuade many of Wall Street’s elite to rediscover conspicuous consumption.
One senior trader is building a sports complex for triathlon training at his house in upstate New York. It will include a swim-in-place lap pool, a climbing wall and a fitness center. Another bought an Aston Martin. For some, upgrading real estate is the first order of business.
But many Wall Street professionals are urging caution, given that the bonus typically constitutes the majority of their compensation. More than a dozen bankers, all of whom would talk about their spending only on the condition of anonymity, said they were all too aware that the good times could end as quickly as they did after 2000, when a $2.5 million income could turn to $800,000 overnight.
“Given the last two to three years when people figured out that this business is pretty volatile, they are going to try and bank a lot of their bonuses,” said one managing director at a firm where bonuses have been announced. “They’ve seen too many people laid off and they realize they can’t just spend all their money.”
It should be noted that this same banker just bought a $150,000 Aston Martin to park in his garage in Greenwich, Conn.
Another senior banker at a different firm, who is set to receive a $2.8 million bonus, said he had bought his wife a mink coat and was planning a weeklong skiing vacation out West. But he also said he intended to save most of the money. “We’re not buying homes or boats, we’re not spending on the big things,” he said. “We are more relaxed and generous on the small things.”
Of course, small is in the eye of the beholder. While the Maybach, an exclusive line of luxury cars made by Mercedes-Benz that starts at $315,000, appears on the wish lists of many bankers, relatively less expensive models from Aston Martin, Bentley and Maserati have also been popular. Michael Parchment, general manager for Miller Motorcars, a luxury dealership in Greenwich, said demand had been soaring.
“It’s probably up 20 to 30 percent from the same time period last year,” he said. “Unfortunately, production isn’t up.” The result, he said, are some unhappy bankers.
Wall Street bonuses are expected to total $15.9 billion in 2004 - second only to $19.5 billion in 2000- according to Alan G. Hevesi, the state comptroller of New York. In 2003, bonuses totaled $15.8 billion. Mr. Hevesi said bonuses of that magnitude were “good news for New York.”
“It’s all taxable income and it means that folks have more disposable income so they will spend money,” he said.
Bonus season is always a particularly angst-ridden time for Wall Street. Managers haggle for more money for their employees, divisions fight for a bigger piece of the pie and bankers try to portray themselves as indispensable. In the end, few admit to being happy, at least to their bosses.
“We used to say there’s no amount of compensation that amounts to people saying thank you,” said Roy C. Smith, a former Goldman Sachs partner who is now a professor of finance at New York University. “They are either sullen or mutinous, but never quite happy.”
Midlevel employees did especially well this year. Three senior-level managers at Wall Street firms said that the people who were enjoying the biggest percentage increases over all were second- and third-level associates and junior-level vice presidents.
The ranks of those managers had been thinned after the stock market bubble burst. But this year, a reinvigorated market meant there were too few associates and managing directors to put together client pitches. At least three banks had to guarantee bonus increases of 25 to 50 percent to prevent defections to other firms. The result is that a third-year associate who might have made $200,000 in income last year could receive $350,000 this year.
The manager with the Aston Martin said that last year’s compensation packages for associates were ridiculously low. “You had third-year associates making $210,000 to $225,000; a lot of these guys are married and have young kids and they are working” very hard, he said.
Many of those associates are expected to use their new wealth to pay off debts incurred from three years of relatively meager bonuses.
But real estate will draw, as usual, a significant portion of the bonuses.
“Usually we get five phone calls a week,” said Richard Steinberg, a managing director at Warburg Realty Partnership who shows apartments priced from $10 million to $20 million. “Since bonuses, we’ve gotten double that from hedge funds, Wall Streeters and money managers. I’ve gotten more phone calls since Dec. 15 than from any other year.”
Late-night entertainment may also benefit from the rise in bonuses, given Wall Street’s reputation as something of a boys’ club.
“Certainly the Wall Street crowd is very special to us,” said Lonnie Hanover, a representative for Scores, a high-end strip club in Manhattan. “December is an amazing month for our business, but it’s everything, it’s Christmas bonuses, Christmas spirit. They have their official parties and then the unofficial party here.”
Even the cautious are probably going to treat at least part of their bonus as play money.
One senior investment banker at a big Wall Street firm said he was putting this year’s money “directly into the bank.”
“I have a sailboat, a motor boat, an apartment, an S.U.V.,” he said. “What could I possibly need?” After brief reflection, however, he continued: “Maybe a little Porsche for the Hamptons house, but probably not.”
Copyright © 2005-2007 Mickey Z.
