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When I lived in New Haven in the 90s I took the train in to NYC on weekends to visit old friends from physics and mathematics, most of whom worked in finance. One Sunday morning in the spring I found myself with a friend of a friend, a big fixed income trader and devoted audiophile. His apartment in the Village had a large room with a balcony surrounded by leafy trees. In the room he kept only two things: a giant divan next to the balcony, on which several people at a time could recline, and the most expensive audio system I have ever seen. We spent hours listening to jazz and eating fresh cannoli with his actress girlfriend.

NYC Bed Bugs

NYC Bed Bug Registry.

NYC.gov resource.

Recent Bed Bug Reports for New York City

September 09

Sheraton New York Hotel And Towers I stayed @ Sheraton Towers for 2 nig
Hilton Times Square I've been staying with my family at Hilton Times Sq

September 08

Vanderbilt YMCA Stayed here for three days in August, 2012 and came hom
101 Cooper St Dear Tenant from the 5th floor north side, Perhaps if

September 07

455 E 14th St
Paramount Hotel
300 W 49th St

September 06

19 Hamilton Ter
50 Murray St
Dream Hotel
Salisbury Hotel

Trivia credit to anyone who can remember the character Bed Bug Eddie. More.

You'd be hedging too if you were a Chinese billionaire

Ill-gotten gains + giant real estate bubble in China + limited liquid investment options = windfall for top international cities such as Manhattan, LA and London.

If the RMB were allowed to float, the short term effect could easily be a decline relative to the dollar, as Chinese investors rush to diversify their portfolios.

NYTimes: ... The explosion of wealth in China has created myriad new billionaires eager to diversify their holdings with real estate investments in the United States. Often, they are looking to give their children a plush crash pad for boarding school or college, or a place to live in when they start careers and families. Many wealthy Chinese are also looking for places to invest where they can preserve their wealth and avoid the rising inflation in major Chinese cities like Shanghai and Beijing.

... The old way of doing business is no longer enough, Ms. Field said. “We as Americans always expected anyone to adapt to our business style, and they did,” she said. “That is no longer true with the Chinese. There are too many of them, they have too much power. We truly must adapt to their style of business in order to do deals.”

... Chinese billionaires continue to buy high-end properties in buildings like the Time Warner Center, 15 Central Park West and the newest, One57. But in May and June she saw something different: an “almost overwhelming volume” of calls and sales driven largely by interest in apartments ranging from $3 million to $6 million — what Ms. Lenz calls the “middle market” in Manhattan.

Chinese buyers are also no longer paying all cash as they were a few years ago. In recent months, several Chinese buyers have financed their purchases, some with United States-based loans, Ms. Lenz said. They seem to be leveraging in New York so they can also buy properties in Los Angeles, London or other cities, she said.

On her trips to China, Ms. Field has noticed a change in the conversation among potential clients. “When I first went over there five years ago, my presentations all had to be about return,” she said.

“Everyone was looking for returns. Two years ago, return questions almost dried up. Now it is all about wealth preservation. They are anticipating a bubble” in China, she added.

Manhattan blues

I just returned from NYC. The mood there is pretty bleak :-(

It looks like people are deserting the city in droves. Entire areas of finance and banking are gone and won't return for many years. I heard some very detailed estimates of the carrying cost of supporting a family in Manhattan (see Times analysis here):

$500k per year (pre tax) for minimal high end lifestyle (2 kids in private school, nanny, 2000 square feet of living space; not counting big vacations or Hamptons rental)

$150-200k per year (pre tax) for minimal non-Manhattan life: kids in public schools, long commute to and from the city.

The problem is that $500k is the compensation cap figure, and $150-200k is the base salary number, which is all most people are getting these days. The phrase I heard several times is "I'm effectively paying to work here -- no f#%king way!"

The cost of living in Manhattan is going to drop precipitously in a nasty 1-2 year equilibration.

I also heard serious apocalyptic predictions about US hyper-inflation starting in a year or two.

This is what the money men have to look forward to -- the post 1920s finance bust will probably repeat:



See earlier post Is the finance boom over?

$chadenfreude?

With the current troubles on Wall Street, New York City's economy is in for a rough patch. Unfortunately, so are the rest of us -- the financial sector accounts for over 20% of all S&P earnings :-(

How do New Yorkers feel about the recent misfortunes of the masters of their universe?

NYTimes: ... For many of the city’s middle class, especially those in the creative class, who have felt sidelined as the city seemed to become a high-priced playground for Wall Street bankers, the implosion of the brokerage house Bear Stearns raises a tantalizing possibility: participation in an economy they have been largely shut out of.

Few romanticize the nearly bankrupt New York of the 1970s or the recession of the late 1980s. But if the city suffers an economic downturn, as many now predict, there are fantasies of New York returning to a pre-Gilded Age, before the average Manhattan apartment cost $1.4 million, SAT tutors charged $500 an hour and dinner entrees crossed the $40 threshold.

...New York City has always been defined by the yawning gap between its haves and have-nots. But the last 15 years have witnessed the rise of a class of financiers whose salaries and bonuses have reached staggering heights. Over the last five years, the median compensation for a managing director working in investment banking rose from $650,000 to $1.37 million, according to Johnson Associates, a compensation consulting firm.

That is a pittance compared with hedge-fund managers. The highest-paid managers earned at least $240 million a year in 2006, according to the Institutional Investor’s Alpha magazine, nearly double the amount of 2005 (and up from a minimum of $30 million in 2002).

Their pay — and eagerness to spend it — has encouraged the growth of a luxury market in everything from groceries to restaurants to spas to specialty boutiques. Witness the Marc Jacobs-ization of the West Village, the surging average price of a two-bedroom apartment in Harlem to $1.1 million, and the rise of $15 tubs of ice cream in, of all places, the Lower East Side, at Il Laboratorio del Gelato.

In a city where the median household income in 2006 was $46,480, it’s no wonder that many people are bitter.

...Robert H. Frank, an economics professor at Cornell, has written about the phenomenon of Americans who feel impoverished because of the towering wealth of those above them. In New York City, he said, those feelings are compounded by the sense that much of the wealth at the top is derived from financial instruments that merely move money around.

“It’s one thing if people are adding value to society,” Professor Frank said. “But there is skepticism that this is all a shell game and these guys are not adding value, at least to the extent that justifies their salaries.”

34k Wall St. layoffs since last July, and another 20k to come? Read what the locals have to say:

March 25th, 2008 9:22 am

Best and the brightest?! Please! They are the greediest and the selfish. I for one am tickled pink that these bankers are finally coming back to earth a bit. They have ruined the entire East Coast as far as affordability. No one except an investment banker or hedge funder can afford a house in a nice area between NYC and Boston. And you can forget about vacation spots - they’re all ruined by them. The ridiculous monopoly money bonuses these “geniuses” receive every Christmas has made me sick for years so my schadenfreude meter is on high.

— Posted by tomas

Or, as I wrote a couple years ago:

...Yesterday, waiting for a lunch meeting, I met an old friend for coffee. We wandered into the recently renovated MOMA in midtown, with its quiet sculpture garden. His employer, like all the big banks, is a major donor, and his ID card gained us immediate entry. Manhattan is like a big amusement or theme park for financiers. Relative to their compensation, all the rides (taxis, restauarants, everything but real estate) are free! See the drivers in big black sedans dropping off perfectly groomed, uniformed children at their $25k/y private schools, where the headmistress greets each child by name.

Econ 101

The following is a real posting from Craigslist. The guy who replied is a VP at JP Morgan.

I remember not so long ago the big thing for money men was to find the clubs where all the models went. Perhaps the supply-demand balance has shifted recently :-)

POSTING

What am I doing wrong?

Okay, I'm tired of beating around the bush. I'm a beautiful (spectacularly beautiful) 25 year old girl. I'm articulate and classy.

I'm not from New York. I'm looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don't think I'm overreaching at all.

Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 - 250. But that's where I seem to hit a roadblock. 250,000 won't get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she's not as pretty as I am, nor is she a great genius. So what is she doing right? How do I get to her level?

Here are my questions specifically:

- Where do you single rich men hang out? Give me specifics- bars, restaurants, gyms -What are you looking for in a mate? Be honest guys, you won't hurt my feelings -Is there an age range I should be targeting (I'm 25)?

- Why! are some of the women living lavish lifestyles on the upper east side so plain? I've seen really 'plain jane' boring types who have nothing to offer married to incredibly wealthy guys. I've seen drop dead gorgeous girls in singles bars in the east village. What's the story there?

- Jobs I should look out for? Everyone knows - lawyer, investment banker, doctor. How much do those guys really make? And where do they hang out? Where do the hedge fund guys hang out?

- How you decide marriage vs. just a girlfriend? I am looking for MARRIAGE ONLY

Please hold your insults - I'm putting myself out there in an honest way. Most beautiful women are superficial; at least I'm being up front about it. I wouldn't be searching for these kind of guys if I wasn't able to match them - in looks, culture, sophistication, and keeping a nice home and hearth.

it's NOT ok to contact this poster with services or other commercial interests
PostingID: 432279810


THE ANSWER

Dear Pers-431649184:

I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis Of your predicament.

Firstly, I'm not wasting your time, I qualify as a guy who fits your bill; that is I make more than $500K per year. That said here's how I see it.

Your offer, from the prospective of a guy like me, is plain and simple a crappy business deal. Here's why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here's the rub, your looks will fade and my money will likely continue into perpetuity in fact, it is very likely that my income increases but it is an absolute certainty that you won't be getting any more beautiful!

So, in economic terms you are a depreciating asset and I am an earning asset. Not only are you a depreciating asset, your depreciation accelerates! Let me explain, you're 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you!

So in Wall Street terms, we would call you a trading position, not a buy and hold , hence the rub, marriage. It doesn't make good business sense to "buy you" (which is what you're asking) so I'd rather lease. In case you think I'm being cruel, I would say the following. If my money were to go away, so would you, so when your beauty fades I need an out. It's as simple as that. So a deal that makes sense is dating, not marriage.

Separately, I was taught early in my career about efficient markets. So, I wonder why a girl as "articulate, classy and spectacularly beautiful" as you has been unable to find your sugar daddy. I find it hard to believe that if you are as gorgeous as you say you are that the $500K hasn't found you, if not only for a tryout.

By the way, you could always find a way to make your own money and then we wouldn't need to have this difficult conversation. With all that said, I must say you're going about it the right way but in trading terms this is a classic "pump and dump."

I hope this is helpful, and if you want to enter into some sort of lease, let me know.

Inequality and NYC real estate

Felix Salmon argues that Manhattan property values have nowhere to go but up! (Last I checked, desirable apartments were over $1k per square foot, or > $1M for a 1000 square foot pad.)

His argument is simple: thanks to growing inequality (nonlinear returns to big winners in fields like finance, entertainment, technology), and the unique desirability of living in Manhattan (he details these ad nauseum in his post -- as a professional blogger, I suppose he has a lot of free time :-), there will always be high demand for the limited number of units in the Big Apple. I think he's right, at least based on current trends.

In the first quarter of this year, the New York City housing market boomed even as the rest of the country saw some nasty falls in house prices. And I suspect that the same trend might continue for quite a while. Partly, that's because precious few Manhattan homeowners have subprime mortgages. But on a much larger scale, it's because New York is one of a handful of global cities which are the winners in the location stakes. The set of things you buy when you buy an apartment here can't be measured in square feet.

At 11:18am this morning, I got an email which told me that the Committee on Global Thought at Columbia University was having a discussion about the economics of climate change. The discussants? Jeff Sachs, Joe Stiglitz, and Nick Stern. Said discussion was happening at 4pm, and was free and open to the public. Of course, I went. I was even fortunate enough to be able to put to Stern directly my single biggest question/problem on the subject of climate change. He gave a great answer – and then Sachs answered the question too, and then Stiglitz gave his answer, and then Stern came back and added to his answer. (I'll blog it in a minute.) It was a wonderful moment, and I thank New York City for it.

...The climate change event took place one week to the day after I went out for lunch with Nassim Nicholas Taleb, and had a fascinating and wide-ranging conversation with him.

...And because New York is a global town, demand for property here is global as well. Every time the dollar falls, New York property becomes that much more appealing to millions of Europeans and Asians who have visited and dreamed of living here: it's not even expensive, by London or Hong Kong standards.

I wouldn't be at all surprised were someone to tell me that Sachs, Stiglitz and Stern were all having dinner tonight with Bill Clinton, maybe at the house of Mike Bloomberg or George Soros. It's the kind of thing which happens in New York – and in precious few other places. Davos, maybe, once a year. As such people move to New York, other such people follow them here, in a self-perpetuating virtuous cycle.

Taleb says, in his latest book, that there's no particular reason why New York rose and Baltimore fell. But now it has happened, it can't be stopped. Baltimore will never again be a leading global city. And – I feel comfortable in saying – New York will never again (not in the next few decades, anyway) be a crime-addled drug den like it was in the 1980s. The road from there to here was not foreseeable. But the road ahead is clear: New York City is pulling away from the pack, and the bigger a lead it takes, the faster it goes.

Of course, Felix's perspective might change after he has kids :-)

Income inequality: Manhattan toddlers

From the Times, this story tells a lot about what's happening in Manhattan. My friends there say it's very kid-friendly these days, with crime way down from a few decades ago.

Given how the hedonic treadmill works, I can't imagine living in Manhattan if I were a Columbia or NYU professor. Who wants to be the poorest family in the neighborhood? ;-) One of the families in the article, the father a management consultant, says they won't be able to afford the upper West Side once their kids each need a bedroom of their own.

The analysis shows that Manhattan’s 35,000 or so white non-Hispanic toddlers are being raised by parents whose median income was $284,208 a year in 2005, which means they are growing up in wealthier households than similar youngsters in any other large county in the country.

Among white families with toddlers, San Francisco ranked second, with a median income of $150,763, followed by Somerset, N.J. ($136,807); San Jose, Calif. ($134,668); Fairfield, Conn. ($132,427); and Westchester ($122,240).

Median household income of families with children ages 0 to 4. (Left is all ethnic groups, right is non-Hispanic whites only.)



For more on income inequality, including the interesting observation that it is primarily driven by financiers and tech entrepreneurs (third link), see here.