There is money to burn on Wall Street, but these days no one is using it to light an expensive cigar.
While the top achievers on Wall Street are spending their record $21.5 billion in 2005 bonuses, ostentatious shows of consumption are gone, observers say.
“It’s extraordinarily politically incorrect now to be showy,” said Alan Johnson of compensation consulting firm Johnson Associates Inc. “You can’t be lighting your cigars with $20 bills and drinking $5,000 bottles of champagne.”
Or, to put another way: “You can’t have the hookers meet you at the restaurant. They’ve got to go to your house.”
The latest round of bonuses can easily reach into the millions of dollars for thousands of people who work on Wall Street, particularly investment bankers. The previous bonus record of $19.5 billion was set in 2000, the year before the Sept. 11 attacks left New York and its economy reeling.
This year, the spending sobriety comes amid sobering times, whether it’s the pall of the U.S.-led war on Iraq or a year of grim news from the Asian tsunami to Hurricane Katrina.
But don’t think that that big money isn’t being spent.
Most goes into real estate, said Susan Wachter, professor of financial management and real estate at the Wharton School of the University of Pennsylvania.
“There’s a feeling of ’buy it today or don’t buy it at all’ because you’ll miss the market,”’ Wachter said.
Manhattan real estate agent Robert Morgenstern counts among his clients Wall Street workers who started eyeing bigger properties when they learned of their latest bonuses.
“It’s clearly bonus based. There’s no question,” said Morgenstern, an agent at Gumley Haft Kleier.
Domestic help
At the International Guild of Professional Butlers, “we can’t meet the demand,” said vice chairman Charles MacPherson. That demand for domestic help is so strong that a butler and house manager position can pull in $200,000 a year, he said.
At Linden Travel in New York, some Wall Street families are doubling what they spent last year on mid-winter vacations, owner Barbara Gallay said.
But such spending tends to be behind closed doors, or at least closed gates.
“The new luxury is much more luxury on the inside, not on the outside,” said Pam Danziger, president of Unity Marketing and author of “Let Them Eat Cake: Marketing Luxury to the Masses -- As Well as the Classes.”
“It’s the difference between going to the hot nightclub that everybody says go to, where the service is lousy, versus going to your favorite spot because nobody is there and it’s a place that you enjoy.”
Part of the quiet can be explained by people reluctant to reveal how much they got, said Johnson. Wall Street firms fire people for telling how much they get paid, he said.
“The reality is that the ’Liar’s Poker’ world is long gone,” he added, referring to the heady days of excess in the late 1980s. “If you did some of that stuff now, they couldn’t fire you fast enough.”
One of the best reasons to be quiet is that bonuses, even big ones, send messages mere mortals may not comprehend, say insiders.
“If you’re in a category of people who get $2 million or $3 million bonuses and you get a $1 million bonus, that’s an indication that, ’Gee, you didn’t have such a good year,”’ said Bruce Tulgan of RainmakerThinking Inc., a research and management training company.
It’s not unlike a waiter getting a bad tip. “It’s the same message,” Johnson said. “The difference is when you get a million dollars, no one is going to listen to your whining.”
