NEW YORK - At the Sherry-Lehmann wine shop on Madison Avenue, $500 bottles of Bordeaux are selling at a clip that owner Michael Aaron figures is 7 percent ahead of 2003's pace.
"It's instant gratification," Aaron said last week, "and why not get it?"
The reason for the increase: Wall Street securities firms have been shelling out their annual bonuses, the discretionary six- and seven-figure payouts that can account for up to 90 percent of an investment banker's or bond trader's income.
Bonuses will be up an average 8 percent on Wall Street for 2004, according to the Securities Industry Association. Analysts said some firms, such as Goldman, Sachs & Co., Lehman Bros. and Morgan Stanley, would see bonus increases in the healthy double digits.
Better still, a year-end flurry of big corporate acquisitions - Sprint Corp. buying Nextel Communications Inc. and Oracle Corp. swallowing PeopleSoft Inc., to name two - and initial public stock offerings will get this year's bonus pool off to a strong start when the deals close in early 2005.
"It's not euphoric, but the feeling is we're prosperous again," Wall Street headhunter Henry G. Higdon said.
The bonus money is a far cry from the bull-market peak of four or five years ago, but it's welcome news just the same for New York, where the securities industry, to borrow ex-Yankee slugger Reggie Jackson's self-description, is the straw that stirs the drink.
Benefits to the city
Directly and indirectly, Wall Street accounts for 26 percent of New York's sales and income tax revenue, according to Ray Orlando, spokesman for the Mayor's Office of Management and Budget. He mentioned the taxes paid by waiters and bartenders at a restaurant that depends on Wall Street trade as an example of an indirect effect.
In 2003, bonuses paid by New York-based securities firms reached $11 billion, according to the New York state comptroller's office. That represented a 25 percent jump from $8.6 billion in 2002, though it was well below the 2000 peak of $19.5 billion.
If the predicted 8 percent increase is correct, the 2004 bonus pool will total nearly $12 billion.
Experts caution that bonus estimates are inexact, because the firms report only an overall number for total compensation. And for the majority of firms that operate on a calendar-year basis, bonuses won't actually be paid until January or February, after the companies complete their fourth-quarter earnings reports.
Senior Wall Street professionals tend to make base salaries in the $200,000 to $250,000 range. Their bonuses vary widely - from the mid-six figures to well over $1 million - depending on subjective performance measures and the profitability of their sector, according to compensation experts.
The strong bond market of the past few years has put bond traders and underwriters on top of the heap, with salaries for managing directors averaging around $1.5 million, says compensation consultant Alan Johnson. Because the sector has been strong for years, their bonuses will rise by only 5 percent to 10 percent this season, he said.
Investment bankers who might have been earning $1.5 million at the peak of the bull market will probably take home $800,000 to $900,000, Johnson said. That would include bonuses of $600,000 to $700,000, up perhaps 20 percent from the previous year, he added.
Though nobody sheds tears for people at such salary levels, Johnson noted that many Wall Streeters are still dealing with personal finances that were badly damaged by the slump.
"They always spend beyond their means," he said. "When you had a $1.5 million income, you had a $2 million lifestyle."
Thousands of securities pros lost their jobs after the late-1990s stock market bubble collapsed, and the ones who remain are more seasoned - and more cautious.
Luxury goods
Brian Miller, owner of Manhattan Motors near the Chelsea waterfront, says the Wall Street bonus babies are mainly kicking the tires of the Bentleys, Porsches and Lamborghinis in his showroom - most flashing sticker prices well north of $100,000.
"You're not seeing those real young guys who used to come in here and blow their first bonus on a Porsche," Miller said. "I think those guys are out of the business."
Still, sales are stronger than a year ago, Miller said. The dealership is on track to sell about 1,000 cars in 2004, up from around 700 in 2003. And the really big money - top-level executives making millions of dollars in bonuses - is still around, as shown by the strong sales of ultra-high-end cars. Miller expected to sell 50 Rolls-Royces in 2004, about double 2003's total.
At a slightly less lavish spending level, Krups Kitchen & Bath in Manhattan's Flatiron district has been getting a lot of calls about high-end barbecue grills priced at $4,000 to $7,000, said owner Mitchell Weissberg. If you have a Viking stove in your kitchen, why not put one on your patio, too?
Krups gets most of its bonus-related spending in January, Weissberg said, but early indications are that it will be a strong season.
"There's certainly going to be some frivolous spending going on," he said.
Unusual products appeal to the vanity of Wall Street types who are competitive about all things, including having the hottest new gadgets, he added.
You might think that Wall Street types would be tough negotiators, but Miller, the car dealer, said it isn't so.
"They're basically salespeople," he said. "Salespeople are easy to sell."
The Los Angeles Times is a Tribune Publishing newspaper.
