The Vanishing Wall Street Bonus Act

Wall Street traders and brokers are likely still hoping it were still 2006. That was the year the big Wall Street bonuses were paid out. Remember Goldman Sachs paying out multi-hundred-thousand- dollar bonuses to its employees? In fact, 2006 bonuses on Wall Street were up 20%-30% over 2005.

In 2007: One later and it’s very different story. After five years of rising bonuses, traders and brokers could be receiving very small bonuses this year. The cut? Anywhere from 15% to 50% depending upon the area of employment for the players. The biggest cuts in bonuses will obviously come from those that peddled the disappearing subprime loan packages.

Small Wall Street bonuses will result in a general cutback on spending. That’s simply how it works for the Wall Street crowd. Money coming in… the big houses and Porches it goes to. Money not coming in… spending slows considerably. Could this be the year New York real estate finally halts its rapid rise in price? Yes.

While many were betting (or should I say hoping) that the stock market correction that started a few weeks ago was over, the market has remained very choppy. We saw this yesterday when the Dow Jones Industrials dropped 280 points. Investors don’t like such big one-day swings in the stock market. And that makes the jobs of the traders and brokers that much more difficult.

Yesterday, the Dow Jones U.S. Investment Services Index, comprised of the biggest broker stocks on Wall Street, plummeted 3.8%. If we look at this chart from June of this year, it looks like it is in a free fall… down about 30% in only three months. The big brokerage stocks like Morgan Stanley, Merrill Lynch, Lehman and Goldman Sachs are down big-time in price.

Reading from the charts, the future doesn’t look so rosy for the big brokerage houses, their traders and brokers. And when business doesn’t look good for them, a poor stock market is sure to develop.