By Denis Campbell
NYC suburb, Greenwich, CT has 55 houses for sale asking $9 million dollars or more. Staff at East Hampton Airport on Long Island, a scene of private Gulfstream jet gridlock, says traffic is down 35%. Bettridge Jewelers on Wall Street, sees traffic mostly selling off jewells to make mortgage payments. It means deals on classic pieces to re-sell. Consigned Couture is doing a bumper business reselling designer gowns and clothes, so much so their appointment book is full for the next 3 months.
Vanity Fair’s Michael Schnayerson’s essay in the current edition shows that the panic amongst the ultra-rich, a group Tom Wolfe termed ‘Masters of the Universe’ in his breakthrough 1987 book “The Bonfire of the Vanities,” is reaching alarming heights and taking down retailers and charities across the city.
The amusingly and obscenely rich characters (formerly) running Wall Street’s trading houses are now caught up in a huge personal financial decline. Hardest hit are those who held boatloads of now bankrupt Lehman Brothers stock and saw it collapse after 1st borrowing millions against its paper value.
They were mostly conservative, borrowing no more than 50% of the value so even if the market “fluctuated” they would still have half their portfolio. No one though planned for a stock price of £0.15 a share (down from $80) the Friday before their bankruptcy filing.
Those at the top salted away rainy day funds and will likely feel less pain then so-called ‘middle’ managers worth ‘only’ $5-10 million dollars on paper. They were hardest hit because they lived a lifestyle of penthouses, homes and private schools leveraged to their eyeballs on stock loans that are now coming due with nothing to take their place.
Panic has hit the exclusive corners of New York City so hard, a place where Wolfe described socialite women as “social x-rays,” so thin one could actually see their skeletons if they walked in front of a very bright light and “lemon tarts,” women so young and stunningly beautiful/perfect hanging on the arms of ultra powerful men in their 50’s-70’s that it was like being at an all you can eat dessert buffet, that New York City’s mayor Bloomberg is seriously worried about Manhattan’s tax base. He has already projected a shortfall of 20% and once bonuses are announced… or not… in January that panic could rise even higher.
And here in the UK the effects on tony Notting Hill and other key London addresses where a Maserati in every driveway was the norm are even worse. Real estate prices have been in a two year nose-dive, the financial district in Canary Wharf is a ghost town as even Lehman employees were told to come to work after the bankruptcy filing or risk losing their jobs even though they had nothing to do before being made redundant one afternoon. And Russian oil paper ‘billionaires’ are walking away from huge London Real Estate deals forfeiting huge deposits and leaving empty buildings by the dozens. This is why the 1st Q on Wall Street barons could have a huge global financial ripple affect.
The growing cloud, super rich apartments and townhouses for sale and the cutbacks amongst the super rich could ultimately be a good thing. There are some, including this writer, who sees this as a huge opportunity for us to re-evaluate our global values system. Yes, there will be pain and seeing us return to a place where there is a sense of fairness and balance across the globe could be good for all of us.
The death of: obscene stock price based compensation, CEO’s being paid 1,000-2,000 times their workers, managing for the short term of this quarter and ignoring the long term picture for the health of the company and our planet are all notions we could gladly see end up in the dustbin.
There were those who used greed and could never answer the basic question, how much is enough? Now the altar of the market which they worshipped greed, arrogance and hubris whilst playing Sheriff of Nottingham shipping jobs abroad and shareholders more important than stakeholders in the community, the environment or even global warming is closing down.
So here we go. Major systemic change is coming.
Fasten your seatbelts.
Nice piece, Denis.
Friends left over from the days when I lived on Manhattan’s upper east side write gloomy e-mails saying that there are so many units for sale in some snooty, Park Ave. co-op buildings that the boards - which normally review a potential buyer’s financial statements, family background, medical history and question-laden application with greater thoroughness than the CIA gives a potential employee - are practically begging people to move in.
I’ve been told that, in the past three weeks, four Manhattan limo services locked their stretch Lincolns for the last time. Summer rentals in the Hamptons, usually all taken by this time of the year, are going begging. Upscale eateries are barely filling up once an evening where, for the past 10 years, many had three seatings a night and reservations had to be made weeks in advance.
Other New York friends bemoan the fact that every week, fancy private schools lose another one or two students whose parents no longer can afford the five figure tuition.
Other acquaintances in Los Angeles say much the same thing is happening there, even in old money neighbourhoods such as Hancock Park and South Pasadena.
I know it’s perverse to say this, but if there is to be an economic collapse it is heartening to see the same problems beset those who live in multi-million dollar homes as the who are struggling to stay in their homes in working class districts.
And so it goes.