Connecticut. This is one of the tonier Zip codes in America. It is the
home of Greenwich. A very nice town indeed. The hosts (Muffi and Chas)
put on a great spread. The invite read, “Seasonal Attire”. I had no
clue what that meant in this circle.
It turns out that Seasonal Attire means for the ladies a $3,000
Bergdorf outfit with lots of ice and gold. For the men it means khaki
colored pants, a blue blazer and hand made French cuff shirts from
China. No tie. I show up in a brown sport coat and black pants. I wore
a tie with holly berries on it; I bought it just for the occasion. What
do I know?
I ditched the tie in a potted palm and tried to be invisible. In a
short period of time I downed six flutes of Moet and most of the shrimp
platter. One of the serving girls saw that I was hungry and kept the
canapés coming. Her name was Laurina; I learned that she comes from
Guatemala. Her story is that her mother hocked the family home for a
$12k IOU to the Coyotes. They, in turn got her to El Paso, Texas. That
was in 2006. She lives in nearby Bridgeport and works steady. She has
already paid back the coyotes (with interest). She thinks America is
great. Can you see this picture?
I did my best to mingle. The ladies had a lot on their minds. There was
a consensus that the private schools were not as good as they used to
be, and as a result there is pressure to find home tutors. The problem
seems to be that there is a shortage of the ‘best’ tutors. That struck
me odd given the number of layoffs in the public schools of late.
Anyway “all” the good tutors have been taken and there is now
competition. One lady confided her solution. “Offer to double the fee
and they will drop one of their other clients”. Money talks in
Greenwich.
They guys seemed to be either bankers, Wall Street types, lawyers or
involved with a hedge fund. They only talked money. From the chitchat I
concluded that every one of them was long the dollar and short gold
last week. At least that was the talk. I think this was like lying
about one’s golf score. I attempted to participate in these
conversations. At one point I threw out something erudite like, “Ben
Bernanke is screwing things up. QE will destroy us!” From the looks I
got, you would have thought I had farted.
I did get some insight on the status of Greenwich real estate.
Properties with a price tag above $10mm are still in demand and the
price drops have been modest. “At most 10%”.
Evidence of this was a home that recently went on the market for a cool
$22mm. It sold in a fortnight for $21mm. All cash, of course. Deep
pockets are still very much in existence in Greenwich. One guy who
might have been drinking a tad too much reminded everyone that there
were still another five properties in town with a price tag north of
$20mm looking for a buyer. Party pooper.
The problem, it seems, are those properties that are in the $1-5mm
range. These have been marked down by 30 –40% and there are still no
takers. These are not for the deep pocket set. These homes have
traditionally been financed by Uber-Jumbo mortgages. No more. From what
I heard, there is no mortgage money around for a $4mm house.
One of the numbers guys provided an update on the market.
-There are currently 496 homes for sale with a price tag
greater than $1mm. The listed value of these properties comes to a
whopping $1.9 billion.
-The 2009 full year sales for these homes will come in around 175.
So there is a two plus year supply on the market. And that is just what
is listed.
-Of these high-end homes, 24 are in foreclosure. The listed mortgage
balance outstanding against them comes to a tidy $50mm. An average of
$2mm. There was some discussion as to who was the lender for the $6.7mm
mortgage on the property out on Close Road. No one knew for sure, but the thinking was, “It had to be Wells”.
-Some concern was raised for the “poor bastards” who might be losing
their big buck homes to foreclosure in the near future. As I looked
around at the unfamiliar faces in the rooms I wondered if any of them
were “poor bastards”.
The average mortgage in the US is about $200k. The average loss in
foreclosure is $75k. In Greenwich the average mortgage is $2mm. So when
one of these babies goes under it causes a big splash. The loss is
closer to $1mm. About 10 times more destructive than your every-day
foreclosure loss.
After listening to all this I concluded that America’s problems with
Sub Prime and Alt-A are in fact finally contained. That is not to say
the problem is resolved. But we at least know what the scope of the
problem is. The problems with Prime Jumbo mortgages are however still
in fourth gear. It is not just a Greenwich issue. It is in every
high-end community in the country. The loss of wealth by the owners of
these palaces is staggering. The impact to the lenders will be so as
well. The stink of Sub Prime has finally bubbled to the top.
I have never been a big proponent of the “trickle down theory”. But a
lot of others are. We may be seeing its affects. The impact of the
illiquidity and the drop in value of high end RE will influence
consumption and demand for a very long time to come.
At one point someone asked me what I did. I responded that I wrote
about financial issues. When asked where these might be seen I said
“Zero Hedge”. Talk about cutting a fart. I went home early.
The Wall Street crowd is very much aware of Zero Hedge and the other
new sources of financial information/ideas. I did not get the sense
that it was welcome. That’s a good thing.
it is amazing, that even with the mind boggling array of deteriorating conditions, corruption, shortage of leadership, america is still a great country, probably, because everywhere else sucks worse. not the best claim to fame.
Little does she know...
America is great - she's got it right!
Very good article Bruce, I enjoyed it very much.
It's tough to generate real insights from analyzing the Greenwhich set as these folks are the major beneficiaries of Chapter 1 of how to manage the crisis. I'm a big fan of analyzing the second derivative. In this situation, the first derivative is a happy holidays in Greenwhich. I suspect the second derivative will be the political blowback that will label this group the villains of this Depression.
just as we always suspected, Goldman made money for nothing and knew they could count on govt to bail them out if their risking ventures went bad
http://online.wsj.com/article/SB10001424052748704201404574590453176996032.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
As a Greenwich resident and local real estate follower I have to respectfully disagree. Since June the market for the $1-5MM homes has picked up substantially. There is absolutely no shortage of jumbo financing available - I was just approved for a stated loan @2 million, 5.50% 75% LTV. My Fico is 600.
Go to this site for Raveis' local stats - I admit it could be flawed but I doubt it is far off the mark - as you can see inventory is off sharply.
http://www.raveis.com/localhousingdata.asp
Now that is not to say there is not plenty on the market, there sure is plenty. But like so much in the world today, perhaps the situation is not as dire as being touted in some circles. BTW I share your disgust with the so-called elite and their shameless and shameful attitudes, I do not hang with them. My kids go to public school.
Best to all and Happy Holidays!!
As an addendum to my last post, I also note that without question price is keeping sales down right now, not just demand. Inventory priced at 2003 levels is moving smartly. Inventory priced at 2007 levels is mostly not moving. NB A prime single lot on Round Hill Road (demolition) just closed at $4.3 million - not a sign of a stale market. Just my opinion of course
Your farts make them smell better.
:)
Great piece, Bruce. Totally jealous of you for getting into that party. Sounds like it was fun. Go easy on the shrimp, next time. High in cholesterol and full of toxins...
But you don't really substantiate your assertion that the problems with subprime and Alt-A have been contained.
They haven't. The statistics about it are fairly dramatic. Millions of those mortgages are yet to reset or in trouble. No relief is in sight. Furthermore, the problems for those families spiral. They don't have nest eggs to fall back on like the families in Greenwich. If they lose a job or need expensive health care, it can destroy them for a long time. There are no good paying jobs to be had out there.
The problems in Greenwich ARE going to trickle down. All the more reason why asset bubbles cannot be allowed to blow up like this again.
nice work Fletch!
...just wished it ended with you bangin Buffy in the pool house!
Brown sport coat and black pants. Are you kidding? Brown socks to match your sport coat? Brown or black shoes? Just how much time did you spend in the kitchen with Laurina?
Brown sport coat and black pants. Are you kidding? Brown socks to match your sport coat? Brown or black shoes? Just how much time did you spend in the kitchen with Laurina?
Bruce, what are the odds of you snagging an invite next year?
I wrote this for the ZH audience. I thought they would find it interesting. This thing has leaked out and is now on billboards all over Greenwich. I got some nasty 'off the grid' comments. So I think I am forever on the 'B' list for these parties. Too bad. I was hoping to meet Laurina again sometime....
Why don't you just brazenly call up and ask for Laurina.
Don't be surprised that some people from Greenwich have their knickers in a twist over what you posted, Bruce.
These were people that fought tooth and nail to keep people from the neighboring town of Stamford from wandering onto the pristine sands of their public beaches. The town of Greenwich even went to court over it. They lost. People from Stamford can now wander onto their pristine beaches anytime they goddamn well please (as long as they don't try to come in and park, then Greenwich can charge them a hefty per car fee). But they still don't like it, and they sure don't make the out-of-towners feel welcome.
Other than being filthy rich, Greenwich is a typical small town. Something like this spreads like wildfire. It's comical.
I tip my drink to you, Bruce. Thanks for the smile, and the chuckle.
It seems most of the people commenting here are Americans, who as a people are not very good (by international standards) at being rich and employing household staff. That, by the way, is a complement. There is an egalitarianism at the core of most Americans that follows them throughout life the same way guilt follows a lapsed Catholic. Affectation is sometimes the only way to quiet it.
I would delight in reading an article by Bruce---with his great sense of the moment---after he did a road trip and attended similar cocktail parties in places like Hong Kong, Mumbai, Bangkok, Singapore, Dubai, Jeddah, London, Monaco, Moscow, Shanghai, Rio, etc. Having had the experience of doing it in a number of these locales, I walked away with the feeling that the sense of entitlement and the absolute belief in inherent superiority of the elite is encoded in their mitochondria. It's not an act. And I would much rather be Laurina in Greenwich than a Filipina or Thai or Sri Lankan domestic just about anywhere.
Anyway, perhaps Bruce can dip into the Zero Hedge kitty and embark on the World Tour. I'll spring for the ties.
+100
Rich people almost always have attitude, all over the world.
Their motto:
If you're so smart, how come you're not rich like me?
I read Alan Abelson's column in Barron's this morning. He had a nice nod to ZH. If you don't think the banksters have been reading our scruffy little puppy in the past, they definitely are now.
Jeez, a lot of class warfare here. Am I in the minority who doesn't think money stinks? Or that most rich people aren't shallow? Yeah, I know about the "I can top that" syndrome, but that happens at at barbecues with guys drinking Iron City ("Seen my new truck?"). I guess there is always some schadenfreude at seeing the mighty fall. I don't dismiss Wall St.'s role in the crash, but greed always exists on the playing field. Cheap Fed money and loose lending encouraged by Barney Frank created this mess. What we should bitch about is the bailout and handing the keys to the vault to Timmy, Larry, and Ben. Yeah, my house took a big hit too.
Econophile, listen very closely. No one has said "money stinks". No one has said that "most rich people" are shallow.
I would like to hear your understanding of what Wall Street's role in the crash actually was. Absolutely, we should bitch about cheap Fed money, loose lending (driven by Wall Street, but let that go), the bailout (bought and paid for with Wall Street lobbyist money), and handing the keys to Timmy and Larry- (both of them intricately involved in Wall Street's role in the crash).
You see, it's not one or the other. It's not criticize rich bankers for their greed OR criticize Washington. Rich bankers are running Washington! Barney Frank DID have a big role in creating this mess and, right now, he's playing a big role in not cleaning up the mess, in not implementing reforms that will prevent the behavior by banks and lenders that led to the disastrous mess, and he's doing that because important colleagues in the House and Senate have BEGGED him not to force them to vote for legislation that will anger their Wall Street benefactors. Okay? Clear enough? Bill Clinton also had a role in creating this mess. And so did Phil Gramm. The blame can nicely be spread across the board.
The problem with your argument that we shouldn't be angry at rich people who did whatever they could get away with to make more money, and that greed always exists, and that we should only attack Washington, is that it puts you in an ethical bind. It's like arguing that in a world without speed limits, or laws against drunk driving, a plastered yahoo in a Mazerati driving 140mph down Main Street who jumps the curb and kills a mother and her infant child IS NOT RESPONSIBLE FOR HER DEATH.
He needs to be in jail. And right now, his lawyer is slipping millions of dollars into the pocket of the judge to get him off with just a warning. And changing the law to protect innocent people from reckless drunk drivers is not happening because the reckless drunks don't want their freedom taken away. That's what we're talking about. The speed limit on Wall Street. The Mazeratis driven with jet fuel. The leveraged drinking. And the laws that protect that activity at the expense of other people's lives.
cdskiller,
Hmmm. Where do I start. You misread my comment. The point of Bruce's article was that rich people are shallow. He had a bad experience at this party. Most commenters were very angry and disdainful of wealth as represented in the article.
The issue of the government's involvement and Wall St.'s involvement is very complex. But I will generally say that the proposed solutions to the perceived problems are, to use a metaphor, breaking the thermometer of the fever patient to hide the disease. The underlying problems relate to the government's role in the economy.
Wall St.'s role was using the wrong risk models. Washington's role was to start the cycle.
Here are some of my understandings of what happened:
http://dailycapitalist.com/2008/11/17/the-smartest-guys-in-the-room/
http://dailycapitalist.com/2008/10/03/the-law-of-unintended-consequences/
http://dailycapitalist.com/2008/12/07/the-most-important-economic-issue-of-the-century/
http://dailycapitalist.com/2009/02/17/why-the-do-something-stimulus-bill-wont-work/
http://dailycapitalist.com/2009/10/09/will-we-have-a-lost-decades-like-japan/
http://dailycapitalist.com/2009/09/21/exit-strategy-can-the-fed-stop-inflation/
http://dailycapitalist.com/2009/05/06/inflation-or-deflation/
http://dailycapitalist.com/2008/03/30/another-cautionary-tale-or-if-its-too-good-to-be-true-it-isnt/
Have at it.
Dear god, man, I don't have all day! If I am really to slog through all those links, I ask respectfully that you read Partnoy, Das, even Steinherr would help, for a better understanding of the role of Wall Street in this crisis. If you really think their only role was "using the wrong risk models", there is very little to talk about.
well said... i find it interstesting that many "law and order" types when it comes to street crimes are complete anarchist (read economic libertatians) when it comes to financial rules and law enforcement of financial crimes. By this logic, all street crime is committed by corrupt cops, so we should abolish government, police force and just all individually hire private security and sue criminals in civil court. Sure some street cops are corrupt, in some cities, most street cops are corrupt, but that does not mean these govt employees that are using their state authority to do bad are the only criminals on the street and does not mean should abolish police forces en masse. In some case the corrupt cops with their badge and gun may be causing/creating more crime than if there was no cops, but would street crime dissappear in the absence of cops? While you could make an argument that you can't hope to fight street crime effectively til you root out corruption in the local police force, you would not say the police are the one and only source of crime, if you just removed them from the street, all would be fine.
Our government and our businesses/markets both f'd up. Both parties screwed up. Smaller govt might be a good idea for other reasons, but it does not solve financial corruptions.
Parasites exist in big and little government systems, in systems with central governemnt planning and no private market and in systems with hardly any government. A certain portion of rich people people left deregualted always form cartels, monolopies and commit fraud, rip-off others, just cause they can, and they will make money at it.
We must see the enemies as corrupt parasites that essentially get over on everyone else to enogorge themselves while leaving the host's common wealth trashed. Parasites can bleed us through taxes that go into rich hands and do no good for average guy, or they can bleed us thru manipulating markets to make super profits, commit fraud on people, forming insider deals and cartels etc.. Either way, they are parasites.
Wealthy people, on the whole, are just like everybody else. Really wealthy people are like really [fill in the blank] people, just out of balance. For some it's food, some drink, drugs; for them it is money that "seems" to fill their void. Of course, it doesn't.
Most people, regardless of their financial situation, are just trying to get by day to day. Some might bs better than others, but we're all in the same yacht.
One runs across the 'expert' syndrome. The expert is
highly capable in a field. This capability is rewarded.
These rewards and capability allow him to take advantage
of random events and thus prosper. The rich get
richer. However capability also ensures that he is aware of his own limitations and the input that 'luck' has had on his success. This person is now in a uncomfortable situation. He knows that he is 'better' than most but at the same time he knows that he is faking. The conclusion is that the plebes must be more incompetent than himself. To feel comfortable with his own perceived inadequacy he emphasizes the shortcomings of others. This 'attack' is reflected back on him as hostility. As there are many more 'others' so low level paranoia results. The end result is an intelligent, rich, paranoid, insecure, defensive asshole.
interesting, but really, anyone experience some type of biased privledge their whole life, how really concious of this are they. Does a white person really realize how much better off they are having a white name on their resume, even tho there are ample studies and facts to objectively show a white name as opposed to a black names helps immensely.
Does a guy really get how much more comfortable other guys are hiring and promoting him rather than women? Sure, objectively we can say in most (not all) commerical settings, being any thing other than a tall, handsome, straight white male will, on average, disadvantage you either slightly or greatly, but if you are Brad Pitt, do you really have a clue what life is like for an ordinary looking, working guy. Pretty women don't even get it, thinking that having to pay for their own drink is a fate worse than death.
I think they are arses precisely because they don't get it, they haven't been humbled, they don't have a clue what is like for others, what their mocassins feel like, not because the experts see themselves as lucky but because the experts don't know how much luck and/or privledge has assisted them
Agreed. I lost my job for an extended period time. I had thought I was special with exceptional skills, but then went without a job offer for more than a year. When I went to the employment office one day, I saw a woman who I thought was overdressed, but then I thought, " I get it she is putting on the person that she used to be."
Really wealthy people are just like everyone else, just luckier. Having the money to explore their passions and interests also makes them just like us, with money. It's not a void. Why does everyone assume really wealthy people have a void because they've got the cash to do what they want? The point of Bruce's post was about really wealthy people, not most people who are trying to get by. What would you do if you had a checking account that didn't ever go to zero? Who would you be? You'd be surprised.
If you think really wealthy people are just like everyone else, then you have never known really wealthy people. Not only are they not like everyone else, they feel they are owed the greatest entitlement as their birthright, and they will destroy you and everyone else to keep it and get more of it. I once had a neightbor whose first job out of college was as an assistant to the chairman of the board of a particular company. He emphasized to me on multiple occasions that "those people are not like anyone you know". He told several stories to illustrate his point. The one that stuck in my mind is that he went to a party one night, and it was made clear to him that he was expected to offer his wife to one of the chief executives. This is one of many outrageous expectations he witnessed while working in the job. He said that when you fly everywhere on the corporate jet you actually begin to believe it's your right. But he said that those people are not like ordinary people, they don't think or act like anybody you know. Think David Rockefeller who has actually given speeches proposing the annihilation of two-thirds of the world's population. Now, there's a thought from someone who is truly rich.
These are not "really" wealthy people. Most really wealthy people DO NOT show it. The ones who do are dealing with the void the most. What's the point of showing wealth otherwise?
"Really" wealthy meaning newly wealthy, "really" wealthy meaning people who have had their wealth for a while :). The Wall Street types are essentially hyper-over achievers, and therefore more likely out of balance.
unfortunately, the old money people (inherited) tend to think they are better than. as if wealth can elevate you to a superior value to society.
i took this as an expose on a certain click of people, not rich, or upper class as a whole. I find a big difference people rich people in general and what, for lack of a better word, I'd call wall street/financial rich. Just as an example, I have noticed a big difference between rich people that made their money thru a successful small business or well timed moves in say real estate developement, title/mortgage business etc...and rich people that got ther by coming up the frat boy connections in the world of investment banks and hedge funds, or their advisors. Wall streeters are not the only rich people in the country, but they are some of the most clueless and obnoxious.
I would like to ask,
Bruce why does the Wall-Street crowd shun Zero Hedge?
Even if you think the underlying motivations of ZH are not main stream, savvy investors do not lock out new sources of information. Information (knowledge) is what sets one apart on Wall Street. If the Wall-Street types are always in their safe zone, they are doing themselves a disfavor.
Mark Beck
I don't think WS shuns the new media. But they do not like it. This web sight pounded on Goldman for the last nine months. Now they are defferring compensation for the big shots.
Is ZH responsible for that? No. But they did make a difference in the outcome. That is a very clear threat.
I think a lot of 'deciders' are looking at this this stuff.
Hilarious Bruce.
So I take it Laurina from Guatemala was a hot serving girl, or she would not be employed as a serving girl at the tonier Greenwich residences... after all an unattractive girl serving attractive food would simply be gauche...
So did you get Laurina's phone number on the way out the door or did you strike out swinging on some Greenwich toney trim?
Then did you fish your tie out of the potted palm since it was a gift and you will need to wear it before the holidays are out?
Such vulgar questions? After all some of us are the uncouth ZH crowd...
You guys (and whatever bitchin) are so awesome.
Thank you all for the MBA of a lifetime.
Bruce, I live in the Greenwich, Wilton, Westport area (I'm not going to target it or draw anyone a map, for God's sake!), but I have to say I agree wholeheartedly with Gordon's post above.
I don't wear a tie, being female, but when I do consent to go to one of these things I find that consuming alcohol makes the night go a lot faster.
But then again, I don't go very often. I don't make for very good company for the elite these days. I don't give a good rats ass about their private schools, or hearing about their kid's nannys and what a find they were. God forbid they have to spend any time with their kids. They have people for that, too. After working with them day after day, week after week, I have had enough of the elite, and the people they rode in on. Yet, I do get invited to socialize with them on a semi-regular basis. Go figure.
I have found that I have a much better time staying home and actually spending time with my kids, sending them to public schools, and leaving the boring, rich, stuck-up people to...well, to people like you, who don't mind being around them that much.
But for the few times that I absolutely, positively can't say no, alcohol is the way to go!
Hi Bruce -
Up here in Bethel and Newtown (the poor relations of Fairfield County), things are the same. Almost bought a house for $650k that previously sold for $1.3MM. But the taxes were too high... ($15k, AFTER reduction for the new price).
There are "rich" folks, and then there are "wannabe's". Lots more of the latter than the former.
December 11, 2009
BILL MOYERS: Welcome to the Journal. There's only one way to counter the power of organized money, and that's with the power of organized people. This is the theme of our broadcast this week.
We've all seen in recent months how the insurance companies, the drug cartels, Wall Street bankers, corporate lobbies and other powerful interests are reaching deep into their pockets to stifle efforts at reform. And they've been winning. It's been a year since the big financial firms blew a hole in the economy and took down the jobs, wages, pensions and homes of millions of people. They would have gone down too — devoured by their own greed — were it not for the taxpayer bailout. But now major banks and securities firms are on track to pay their employees up to $140 billion in compensation this year. That's more than the combined budgets of the Departments of Commerce, Education, Energy, Housing and Urban Development, the National Science Foundation and the Environmental Protection Agency.
http://www.pbs.org/moyers/journal/12112009/watch.html
"...powerful interests are reaching deep into their pockets to stifle efforts at reform. And they've been winning."
Of course they are winning big. That is what systemic corruption is all about, Charlie Brown...
Do those $3,000 Bergdorf Goodman dresses have tags stating:
country of origin,
% of manufacture by below minimum wage labor,
% of manufacture in sweat shops,
% of manufacture by child labor,
% of manufacture by slave labor.
Does the $3,000 Bergdorf Goodman dress include a photo of a child or slave or sweat shop worker?
Do the ladies of Greenwich send thank you cards to any child or slave or sweat shop worker who produced their dresses?
Or, do the labels of those $3,000 Bergdorf Goodman dresses state:
"No child or slave or sweat shop worker was harmed in the making of this dress"?
Good one mate. Enjoyed reading about the tie - lol! When I end up in such a situation (i.e. with a bunch of freakin' idiots/bozos) my solution generally is to drink a lot.
If Geithner gets kicked out of Treasury job, he may apply for a job as a home tutor in Greenwich.
At the very least he would keep the kids entertained with his antics as a sock puppet for Goldman Sachs and AIG.
Do be a fool, he all ready has a new job, Czar overseeing all plebian, sophomoric lap dogs for our "Dear Leader."
How can we be sure that Geithner is not a child molester?
Child molesting would require initiative and planning...
Neither which I have seen in Secretary Geithner...
Now Fat Larry Summers on the other hand...
Would like to hear how you think this:
There could be no way this containment is under way.
Just check out the plethora of evidence to the contrary:
http://www.doctorhousingbubble.com/
And don't say it's confined to California!