It's amazing isn't it. This article re NY stock market is thought provoking. Americans should submit a hefty bill to each country mentioned for "global law enforcement"--they've been free to invest in their nations, while our military protects them from terrorists, with 0 thanks in return:
Is NYC Still the Capital of Capital?
By DANIEL GROSS
Published: October 14, 2007
Every day in Lower Manhattan, tourists stroll along the Capitalism Trail. They might start in the yard of Trinity Church, where Alexander Hamilton, the first Treasury secretary and architect of the early United States financial system, is buried. Nearby, on Broad Street, they amble past the hulking headquarters of the New York Stock Exchange. They might stop for a water break in front of 23 Wall, the fortresslike building at the junction of Broad that was the headquarters of J. P. Morgan & Company and was known in its heyday as the Corner. As John Brooks wrote in his book “Once in Golconda,” the Corner was in the early 20th century “the precise center, geographical as well as metaphorical, of financial America and even of the financial world.”
The Corner is now a luxury condominium called Downtown by Philippe Starck. The most common financial transactions there probably involve paying the Chinese delivery guy or tallying bills from the luxury retailers — Thomas Pink, Hermès and Tiffany — that have opened outposts down the block. Wall Street has not been Wall Street for a long time. Big investment banks like Lehman Brothers, Morgan Stanley and Bear Stearns decamped for Midtown years ago, and the largest securities trading floor in the world — belonging to the Swiss bank UBS — is in Stamford, Conn. The N.Y.S.E., which is transforming into an electronic exchange, will close two of its remaining four trading rooms next month. The question today — one being asked with increasing frequency and anxiety in certain quarters — is whether New York as a whole is going the way of Wall Street. Are New York’s days as the world’s epicenter of finance coming to an end?
If you’ve paid even glancing attention to the antics of hedge funds and private-equity barons over these last few years, the question might seem absurd. Walk by the rows of Town Cars idling on Park Avenue, past the Seventh Regiment Armory, where the Blackstone Group chairman Stephen Schwarzman held his multimillion-dollar birthday party, past the hedge-fund aeries on Central Park West and Fifth Avenue, and New York City still seems to be the global capital of capital. This summer’s credit crunch notwithstanding, the Dow Jones Industrial Average is at near-record highs, and the Hudson’s banks are overflowing with cash.
But in today’s burgeoning and increasingly integrated global financial markets — a vast, neural spaghetti of wires, Web sites and trading platforms — the N.Y.S.E. is clearly no longer the epicenter. Nor is New York. The largest mutual-fund complexes are in Valley Forge, Pa., Los Angeles and Boston, while trading and money management are spreading globally. Since the end of the cold war, vast pools of capital have been forming overseas, in the Swiss bank accounts of Russian oligarchs, in the Shanghai vaults of Chinese manufacturing magnates and in the coffers of funds controlled by governments in Singapore, Russia, Dubai, Qatar and Saudi Arabia that may amount to some $2.5 trillion, according to Stephen Jen, a Morgan Stanley economist.
Much of this money is being put to work at home. “Now countries like China are generating enormous amounts of capital,” says Felix G. Rohatyn, the veteran banker who engineered the financial rescue of New York in the 1970s. “And of course they are going to want a piece of this distribution and the marketing.” China is staging the initial public offerings of state-owned companies on local exchanges as a means of building up Chinese capital markets — the $7.7 billion I.P.O. of China Construction Bank in Shanghai last month is just one example.
This growth represents a triumph of everything Wall Street stands for — the ability of capital to seek returns across borders, the growing integration of the world’s economy and the triumph of market activity in previously closed areas. And to a degree, this is good news for New York’s asset managers, as private-equity firms and hedge funds now can raise capital from fresh sources. Nonetheless, the diffusion of wealth has unleashed angst among New York’s financial elite, who may soon rue the excesses of recent years as a last-gasp blowout.
Last November, the Committee on Capital Markets Regulation, a collection of chief executives, economists and policy makers intent on halting the apparent decline of America’s (and hence New York’s) competitive standing in finance, presented a report full of ominous warnings: “Evidence presented here suggests that the United States is losing its leading competitive position as compared to stock markets and financial centers abroad.” In January, Mayor Michael Bloomberg and Senator Charles Schumer of New York released a report from McKinsey & Company that diagnosed the malady in detail. “Today, in addition to London,” the report’s authors intoned, “we’re increasingly competing with cities like Dubai, Hong Kong and Tokyo.”
Some of the trends highlighted in these reports are troubling for the United States financial-services industry and for New York, its spiritual and historical home. The Committee on Capital Markets Regulation noted that the U.S. share of global initial public offerings — those outside the company’s home country — fell from 50 percent in 2000 to 5 percent in 2005. Until recently, the directors of China Construction Bank would have seen no alternative to a New York offering. Only New York had the experienced underwriters, the highly transparent, trustworthy markets and the deep pool of capital to handle such a deal. That’s no longer the case. In 2001, New York’s stock exchanges accounted for half of the world’s stock-market capitalization. Today, the total is more like 37 percent. In 2005, 9 of the 10 largest I.P.O.’s took place outside the United States. The world’s largest-ever I.P.O., the $19.1 billion offering of Industrial and Commercial Bank of China, was staged in Hong Kong in 2006. In the lucrative field of investment banking, sales and trading revenues, the McKinsey report concluded that “European revenues are now nearly equal to those in the U.S.”
These data points represent not so much a shifting from one power center to another but rather a change in how financial power is distributed. In this decade, the global economy has become multipolar. “On the one hand, we have tremendous strengths,” says Robert Rubin, the former Treasury secretary and now chairman of the executive committee at Citigroup. “We’re located in the largest economy in the world. On the other hand, London is creating a regulatory environment that seems to me is equally as effective in terms of safety and soundness. Hong Kong and Singapore are clearly determined to develop as centers. The Chinese are investing in Shanghai.”
Like automakers and consumer-products companies (Coca-Cola derives 70 percent of it sales outside North America), New York’s leading financial institutions are trying to become global operators less reliant on domestic markets. In the last few years, the N.Y.S.E., the iconic symbol of Wall Street, has gone public, hired an aggressive, worldly C.E.O. (the former Goldman Sachs president John Thain) and merged with Euronext, which owns a derivatives market in London and stock exchanges in Paris, Brussels and Amsterdam. In its most recent quarter, NYSE Euronext derived 44 percent of its revenue and 62 percent of its operating income from outside the United States. Nasdaq, the second-largest New York exchange, was thwarted in its bid to buy the London Stock Exchange, but is taking a stake in OMX, which operates stock exchanges in Nordic countries in partnership with a Dubai investment firm.
Entire article at newyorktimes.com |
