Friday, October 27, 2006
Goldman Sucks? A lesson of greed and ambition.
I've never liked Goldman, it always seemed a desperately "worky" place, and really somewhat up itself to boot. This sounds like sour grapes, and it probably is. Let me explain many moons ago,pre-IPO, they turned me down for a job. Of course one is bound to take this stuff personally( think about it, I missed out on free windfall shares), in my case I think it turned to hate.For other people this can have a very positive effect.Look at Lloyd Blankfein http://money.cnn.com/2006/01/23/magazines/fortune/stars_blankfein_fortune_060206/index.htm he runs the place now.The new partners have been announced-there are 400 now, yes they will make a lot of money over the coming years, but spare a thought for the non-partners.That is the majority of the working population in the firm.Last time I looked total headcount was approx 25,600. The other 25,200 don't do that badly, but the majority of it's employees are junior people. VP and below, to be honest for a firm that makes so much cash I was always surprised at how very average the compensation was for most of the worker bees.I wonder if they feel just a wee bit exploited whilst senior management live it up.This attitude is attributed to the fact that there is some kind of special employer brand equity at Goldman that the employee can cash in on later.That's true in the case of Hank Paulson who skipped over to the white house to take over from John Snow as treasury secretary.Although Mr Paulson cannot be described by any stretch of the imagination as a 'brainbox', he is a clever operator.One of the conditions of getting that government job is that he can defer tax on his shareholding in the firm, which I believe is valued around $500 million dollars.Who needs a tax break more than he, there would be an awful lot of tax to pay on that.He's not completely dumb, but then again being the US treasury secretary is not exactly the world's most demanding job. Devalue the dollar without pissing off the rest of the world. It's like PR without the skill.Remember previous incumbents in that office have been known to say things like,"the dollar is our currency, but your problem". Not exactly the words from the mouth of a rocket scientist , nor phrased with the delicacy of language of one holding high office.So the bar is set pretty low as you can see.
In the end I realised I didn't actually want to work there, I just wanted to be on their payroll.I committed the cardinal sin in this industry.Never confuse greed and ambition.
RB
In the end I realised I didn't actually want to work there, I just wanted to be on their payroll.I committed the cardinal sin in this industry.Never confuse greed and ambition.
RB
Monday, October 23, 2006
Make Poverty History: City Inflation, the incredible rise of the Million Dollar Pauper Executives
Million Dollar Problem : The £500,000 a year breadline
"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Last week's supplement with the FT was a special 'bonus' issue of 'How to spend it' magazine. Unfortunately even if you're on a fair whack most of the items are plain ridiculous. Most middle ranking executives in financial services just aren't paid well enough to afford this stuff. On paper they seem to earn a lot of money, but the problem is if you're paid less than £500,000 a year total comp ( approx 1 million USD) in London, and you have a family, you are officially getting by, if not poor and most months you're in overdraft. I'm always a bit amazed to see political and media whining about city pay, especially with the bonus season coming up soon for most banks.
The saying goes a fool and his money are lucky enough to get together in the first place, that's certainly true with me.Most people I bump into these days in London seem to be comping around a million US Dollars/500,000 pounds. Unfortunately you're only as rich as you feel and the majority of these people don't seem to feel very wealthy at all. So what's the problem? The real problem is the rising cost of living for these middle earners. Once upon a time the FT used to produce an annual survey for middle class professionals in London. I haven't seen it for a while, probably because they've just given up. The numbers literally don't add up. So I've done my own analysis. You can use this to try and get yourself a pay rise.
The cost of living in London and environs is now seemingly out of control. £500,000/approx 1 million USD is the basic subsistence total compensation for anyone with 2 children, wife/partner for living a middle class lifestyle-and not a showy one at that, merely comfortable at best. This seems like an absurd proposition, indeed it is, but it's also true. Once upon a time this kind of salary would fall into the category of compensation for super-professionals, partners in Magic Circle Law Firms, Tax Partners in Big 3 accountancy firms, Senior managers in private equity houses, averagely performing minor league hedge fund managers.The problem is wage inflation. These chaps are now routinely taking over a million / 2 million USD. This is driving middle class inflation up.
Consider our middle ranking banking/exec
Income -£500,000 ( let's say 250 base, 250 bonus)
Tax @ 42% ( blended rate including NIC etc) -£210,000
Total annual net income take home £290,000
This equates a monthly post tax income of £24,167 per month.
Here's the breakdown
Background
1x Family House Putney/Chiswick. Purchase price approx 1 million GBP , Deposit £250,000. Mortgage £750,000. Repayment over 25 years @ 5.5%. Add insurance ( e.g Income protection for a proportion of the monthly repayment, etc and some overpayment ). Using the following www.bbc.co.uk/homes/property/mortgagecalculator.shtml.
Household and related -monthly outgoings £16,370
Monthly Mortgage repayment costs :£7,000
Car ( 1xAudi 80-2nd hand , 1x4by4 family car) x 2 leased/monthly repayment : £1000
Petrol :£200
Insurances household and Cars :£400
Life,travel & other insurances x 2 adults : £400 -(no medical insurance taxable but provided by employer)
Food :£1200
Eating out 4xmonth : £800
Cleaner : £200
Gardner :£200
Nanny( shared) :£1200
School Fees ( children aged 5&7) associated expenses £1200
Birthdays, Christmas & associated events :£1000
Gym membership 2x adults :£150
Utilities, phone, heating, electricity, water : £500
Council tax for Putney Band H : £120
Clothing 2xadults, 2xchildren :£ 800
Subtotal £ 16,370
Holidays & leisure ( family) monthly approx £5000
Comprised of the following
Holidays 2 X long weekends Europe
- Venice (total cost £2500)
- Nice ( total cost £2000)
1xlong weekend Cotswolds ( Barnsley House ) -(total cost £1500)
1x European Holiday ( Forte Village Resort Sardinia) 2 weeks-( total cost £15000)
1XCarribean Holiday, include flights ( 2 rooms Sandy Lane 2 weeks) -( total cost £40,0000)
Total p.a 61000/12 = £5083.0
Other & general £3797
Travel Underground, train & Cabs (2x Adults):£400
Coffees, newspapers, minor expenses day to day: £397
Membership Work share participation Scheme :£1000
( though deducted from gross salary net effect)
Credit card bills, unsecured borrowing :£2000
( part payment of principal, some interest)
Subtotal £3797
---------------------------------------------------------------
Total post tax income monthly : £24,167
Total monthly outgoings : £ 25,167
Net monthly overdraft: £1000 per month. RESULT=MISERY.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Before everyone starts whining about the detail, the above figures are all approximations, but according to the Ivan Boesky research institute they should provide a true and reasonably fair picture of lifestyle patterns randomly drawn from senior executives. Now do you see why everyone feels so poor. My suggestion is to use this piece as a pro-forma, print it off and try and get a pay rise.
"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Last week's supplement with the FT was a special 'bonus' issue of 'How to spend it' magazine. Unfortunately even if you're on a fair whack most of the items are plain ridiculous. Most middle ranking executives in financial services just aren't paid well enough to afford this stuff. On paper they seem to earn a lot of money, but the problem is if you're paid less than £500,000 a year total comp ( approx 1 million USD) in London, and you have a family, you are officially getting by, if not poor and most months you're in overdraft. I'm always a bit amazed to see political and media whining about city pay, especially with the bonus season coming up soon for most banks.
The saying goes a fool and his money are lucky enough to get together in the first place, that's certainly true with me.Most people I bump into these days in London seem to be comping around a million US Dollars/500,000 pounds. Unfortunately you're only as rich as you feel and the majority of these people don't seem to feel very wealthy at all. So what's the problem? The real problem is the rising cost of living for these middle earners. Once upon a time the FT used to produce an annual survey for middle class professionals in London. I haven't seen it for a while, probably because they've just given up. The numbers literally don't add up. So I've done my own analysis. You can use this to try and get yourself a pay rise.
The cost of living in London and environs is now seemingly out of control. £500,000/approx 1 million USD is the basic subsistence total compensation for anyone with 2 children, wife/partner for living a middle class lifestyle-and not a showy one at that, merely comfortable at best. This seems like an absurd proposition, indeed it is, but it's also true. Once upon a time this kind of salary would fall into the category of compensation for super-professionals, partners in Magic Circle Law Firms, Tax Partners in Big 3 accountancy firms, Senior managers in private equity houses, averagely performing minor league hedge fund managers.The problem is wage inflation. These chaps are now routinely taking over a million / 2 million USD. This is driving middle class inflation up.
Consider our middle ranking banking/exec
Income -£500,000 ( let's say 250 base, 250 bonus)
Tax @ 42% ( blended rate including NIC etc) -£210,000
Total annual net income take home £290,000
This equates a monthly post tax income of £24,167 per month.
Here's the breakdown
Background
1x Family House Putney/Chiswick. Purchase price approx 1 million GBP , Deposit £250,000. Mortgage £750,000. Repayment over 25 years @ 5.5%. Add insurance ( e.g Income protection for a proportion of the monthly repayment, etc and some overpayment ). Using the following www.bbc.co.uk/homes/property/mortgagecalculator.shtml.
Household and related -monthly outgoings £16,370
Monthly Mortgage repayment costs :£7,000
Car ( 1xAudi 80-2nd hand , 1x4by4 family car) x 2 leased/monthly repayment : £1000
Petrol :£200
Insurances household and Cars :£400
Life,travel & other insurances x 2 adults : £400 -(no medical insurance taxable but provided by employer)
Food :£1200
Eating out 4xmonth : £800
Cleaner : £200
Gardner :£200
Nanny( shared) :£1200
School Fees ( children aged 5&7) associated expenses £1200
Birthdays, Christmas & associated events :£1000
Gym membership 2x adults :£150
Utilities, phone, heating, electricity, water : £500
Council tax for Putney Band H : £120
Clothing 2xadults, 2xchildren :£ 800
Subtotal £ 16,370
Holidays & leisure ( family) monthly approx £5000
Comprised of the following
Holidays 2 X long weekends Europe
- Venice (total cost £2500)
- Nice ( total cost £2000)
1xlong weekend Cotswolds ( Barnsley House ) -(total cost £1500)
1x European Holiday ( Forte Village Resort Sardinia) 2 weeks-( total cost £15000)
1XCarribean Holiday, include flights ( 2 rooms Sandy Lane 2 weeks) -( total cost £40,0000)
Total p.a 61000/12 = £5083.0
Other & general £3797
Travel Underground, train & Cabs (2x Adults):£400
Coffees, newspapers, minor expenses day to day: £397
Membership Work share participation Scheme :£1000
( though deducted from gross salary net effect)
Credit card bills, unsecured borrowing :£2000
( part payment of principal, some interest)
Subtotal £3797
---------------------------------------------------------------
Total post tax income monthly : £24,167
Total monthly outgoings : £ 25,167
Net monthly overdraft: £1000 per month. RESULT=MISERY.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Before everyone starts whining about the detail, the above figures are all approximations, but according to the Ivan Boesky research institute they should provide a true and reasonably fair picture of lifestyle patterns randomly drawn from senior executives. Now do you see why everyone feels so poor. My suggestion is to use this piece as a pro-forma, print it off and try and get a pay rise.
Friday, October 06, 2006
MPC: Lack of interest.
Why do we have the MPC? As tax payers we contribute a lot of cash to keep the treasury in the style it has become accustomed to, but do we get value for money? We let the MPC do what it wants as long as it makes a measured judgement. We fly members in from the US once a month ( Blanchflower) because presumably there aren't enough talented academic economists in the UK to fill a place up at the MPC. The Bank of England is supposed to be independent, in part I would think this also required some courageous and independent decision making which it seems unable to perform. The decision to keep interests on hold yesterday was clearly wrong. Inflation is increasing, personal debt including unsecured lending is over a trillion, house prices in real terms are still going up, commodity prices are volatile to say the least. The reluctance of the MPC to increase rates sooner rather than later is odd. After all whether they put rates up now or in November it doesn't matter for all practical purposes. The MPC seem to dither an awful lot, which is amazing given the unambiguous nature of the data suggesting rates must rise. Instead the vacillation is somewhat inexplicable. Compare this to Jean Claude Trichet's decision yesterday at the ECB. He doesn't mess around. The delay in raising rates means that when the landing happens, it's unlikely to be soft.Mervyn King better start drafting his letter to the Chancellor soon. Can someone please post him a pad and pen.
RB
RB
