I’m a loyal investor. Each year I make contributions to my retirement savings plan. Occasionally, I’ll buy stocks in special situation companies I believe have upside potential. I like the precious metal stocks, too.
However, my stocks are not paying me a bonus this year. In fact, they are hardly paying a dividend. For most investors, their stock portfolios have been anything but stellar since the stock market peaked in late 1999, early 2000. Remember the NASDAQ at 5,000 in 1999? Well, it’s still down about 50%. And as for the Dow Jones Industrial Average, adjusted for inflation, it is still below the high the index set six years ago.
Not the same story for the people who work inside Wall Street. Big brokerage houses such as Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley are all reporting great financial years. But they’re not passing on their profits to their customers. No, they are passing on a large portion of there profits this year to their staff.
Goldman is paying out an average of $622,000 this year to its employees. Why not? The company just reported the highest profit ever for a securities firm: Almost $10 billion this year. I’m sure the real estate agents and brokers in New York will love this… and no wonder New York real estate prices continue strong despite a big slump throughout the rest of the United States.
Where’s my bonus, I ask?
Like the fellow walking through the yacht club that sees the big boats of the brokers and then asks, “Where are the customers’ yachts?” the story on Wall Street continues at the same pace and fashion the robber barons established in the 1800s.
How many public company mergers end up successful? Very few; the failed Time Warner AOL merger being a classic. What happens when investors buy stocks in companies and their stock prices lag and lag? Investors or managers buy the companies out at cheap prices and the investors are damned again. And all the while the lawyer, brokers, and investment bankers doing the deal are getting paid handsomely.
Retail investors shouldn’t be looking for stock investing bonuses under their Christmas tree this year, because the guys and gals in New York have cleaned up again… and life on Wall Street goes on.