Wall Street bubble starts to burst
By James Langton in New York
BELTS are tightening on Wall Street as the American stock market shifts downwards.
In the words of one trader on Friday, as the Dow hiccuped another dozen points south:"Until Russia went ape, this had been the best time any of us could remember. But a memory is what it may now be."
Sales of Versace ashtrays for $400 (œ245) are said to be stagnant. The price of a case of 1982 Chateau Latour has been slashed by half to just $5,500. In Greenwich, Connecticut, things got so bad last week that, as one local put it: "People are jumping out of their windows - into their swimming pools."
A more tangible example of economising among the super-rich emerged with the announcement that one of the leading Democratic candidates for the Governorship of New York was a little short of money.
Betsy McCaughey Ross, a former Republican confessed that her wealthy investment banker husband, Wilbur, had reneged on an earlier promise to underwrite her election campaign. Mrs Ross, who revealed that she was now "$2 million lighter" has had to chop expensive television advertising days before polling. Her husband, a senior managing director at Rothschild New York, refused to comment. Mr Ross is understood to have pulled the plug after suffering financial difficulties as a result of stock market losses.
Much of the immediate pain of Monday's 500 point slump was diluted by the mid-week mini-recovery. The New York Times reported from Greenwich where wealthy members of an investment club held a crisis meeting to discuss their portfolios.
Some of the heaviest hits were taken by company chief executives whose share options plummeted by millions in a couple of hours' trading. A survey by Wall Street analysts found that Jill Barad, the head of Mattel, woke up on Tuesday more than $24 million poorer. Ten of the top 138 company bosses lost more than $120 million between them, while Bill Gates, the richest man in the world, saw the value of his Microsoft holdings plummet $5.6 billion.
Sales of designer clothing along Fifth Avenue were said to be slower and the crowds swilling Champagne at Manhattan's exclusive restaurants a little thinner. But the cause was the long Labor Day weekend, with the wealthy flocking to seaside homes for a last taste of summer.
Analysts agree that the volatility of the stock market means that it is not yet possible to measure the impact on the sales of Rolex watches and Mercedes sports vehicles. But some are being hit harder than others. "The superbly wealthy are not affected," noted one Hamptons fine wine merchant who dropped his prices substantially in recent months. "But some of our plain wealthy clients are. We've made a lot of money over these past years. Now we have to give a little back."
Such vast sums have been piled up by many investors that even losing a couple of million has only a marginal effect. The latest edition of Fortune magazine describes recent conditions on Wall Street as a "Pig Market" where many make more money than they can spend.
The magazine quotes Christopher Block, owner of a brokerage firm who bought twin Porsches for himself and his wife but decided that they could not both have the same car and traded up to a Ferrari. "What do I like that I don't have?" the 31-year-old trader said. "I don't know. If I think of it, I'll buy it."
A longer-term decline in the stock market could spell an end to some of the worst excesses of consumption. Many brokers depend heavily on their performance-related bonuses which can be up to 20 times their salary. But for the moment, many investors and traders are taking their minds off the current stock market woes in the way they know best. One luxury car dealer reported a call from a client first thing on Tuesday morning seeking what he called: "Instant gratification in the Porsche area." |
