Oligopolistic Banking System and Compensation
Posted on Tuesday, January 19, 2010
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At this stage, most of us are familiar with the idea that compensation within the financial services industry has grown much faster than compensation outside the system. As can be seen below, this trend has largely gone uninterrupted throughout the crisis.
And while this level of compensation remains exorbitantly high across all of financial services, the lack of competition among the largest banks has caused compensation within the industry to become even more concentrated.
Before specifically detailing those firms, lets go to Wall Street Pit:
The Journal reported that based on its analysis — which includes banking giants J.P. Morgan, Bank of America and Citigroup, securities firms such as Goldman Sachs and Morgan Stanley, and exchange operators CME Group Inc. and NYSE Euronext Inc. — executives, traders and money managers at 38 top financial firms can expect to earn nearly 18% more than they did last year, and slightly more than they did in the record year of 2007.While 18% seems like a massive jump (it is) from a level that was already too high (in my opinion), it ignores the broader issue of what has resulted from a government (i.e. taxpayer) guarantee on the downside risks of those banks deemed too big to fail... a MASSIVE increase in compensation (the joys of a "too big to fail" title for the select few).
The chart below details the compensation for all of those 38 firms, grouped here by JP Morgan, Morgan Stanley, Goldman Sachs, Bank of America, Citigroup, and "Other" (all others). BUT, slice off Citi and "other" and we can see that the remaining four make up more than 100% of that 18% jump (let it be known that the data below is not an apples to apples comparison - as Felix points out these charts don't account for the fact that JP Morgan and Bank of America have swallowed up smaller counterparts).
That said, my point is that the increase in compensation (and risk) is now concentrated among only these top banks. Bonuses at these "big four" banks are up a whopping 25% since 2007 (all other firms are down 18% since that time) and 40% since 2006 (whereas all other firms are down 2%).
For all the talk and supposed intervention, nothing has changed (actually, with these banks even more "too big too fail", things may actually be worse).
Source: WSJ / BLS
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Source: http://econompicdata.blogspot.com/2010/01/oligopolistic-banking-system-and.html
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J-E-T-S Jets Jets Jets
Posted on Sunday, January 17, 2010
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In response to my post Sanchez Leads J-E-T-S Past Bengals Eric Hirschberg (a statistician) commented: I had to laugh at a histogram with a sample size of 4 and a data range from 1 to 2! This is data that really doesn't benefit from graphic visualization. :)
Eric- what are you talking about... the chart is beautiful! (kidding).And after an INSANE win (Chargers are [were?] the best team in the league in my opinion), here is the update....
That won't stop me from updating it with every J-E-T-S win.
J-E-T-S Jets Jets Jets!
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Source: http://econompicdata.blogspot.com/2010/01/j-e-t-s-jets-jets-jets_17.html
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J-E-T-S Jets Jets Jets
Thank you for using rssforward.com! This service has been made possible by all our customers. In order to provide a sustainable, best of the breed RSS to Email experience, we've chosen to keep this as a paid subscription service. If you are satisfied with your free trial, please sign-up today. Subscriptions without a plan would soon be removed. Thank you!
In response to my post Sanchez Leads J-E-T-S Past Bengals Eric Hirschberg (statistician commented): I had to laugh at a histogram with a sample size of 4 and a data range from 1 to 2! This is data that really doesn't benefit from graphic visualization. :)
Eric- what are you talking about... the chart is beautiful! (kidding).And here is the update....
That won't stop me from updating it with every J-E-T-S win.
J-E-T-S Jets Jets Jets!
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Source: http://econompicdata.blogspot.com/2010/01/j-e-t-s-jets-jets-jets_17.html
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EconomPics of the Week (J-E-T-S Division Playoff Edition)
Posted on Friday, January 15, 2010
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Opinion / Analysis / RandomPub Power Equity Signal Turns Negative
Becoming French?
The "Recession Generation"
Sanchez Leads J-E-T-S Past Bengals
Digger Deeper
An Alternative Unemployment Rate.... at 11.7%
Is 16-19 Year Old Unemployment at 37.1%?
Inflation is Not an Issue...
On the Retail Inventory "Bounce"
Breaking Down Wholesale Inventories
Production Continues to Recover
Economic Data
Unemployment to Job Opening Ratio Jumps Again
Consumer Deleveraging Continues
Retail Sales Disappoint
Is Australia in Full Recovery Mode?
U.S. Treasury Deficit More than 10% of GDP
And for your video of the week... I'd like to introduce you all to Bruce "B" Manley and his trick basketball shots. After my first viewing I believed this was as real as the [insert corny economics joke here], but apparently it is.
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Source: http://econompicdata.blogspot.com/2010/01/econompics-of-week-j-e-t-s-division.html
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Production Continues to Recover
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Marketwatch details: Colder-than-usual weather contributed to the gain in December, with utility production rising a seasonally adjusted 5.9%. The output of factories dropped 0.1% in November after a 0.9% gain in November, repeating the see-saw pattern of the past four months. Output of mines rose 0.2%. Read our complete economic calendar and consensus forecast.
For all of 2009, output plunged 9.7%, the steepest yearly decline since output fell 13.7% in 1946. Output fell at a 12.5% annual pace in the first half of the year, then rose at a 9.6% annual pace in the final six months of the year. Since the recession began two years ago, industrial output dropped 10.8%. Manufacturing output fell 13.2% since the recession began.
In December, capacity utilization in industry rose to 72% from 71.5%. It's the highest in a year. For manufacturing, capacity utilization rose to 68.6% from 68.5%, also the highest since December 2008. The utilization rate in the factory sector -- a measure of slack in the economy -- is 11 percentage points below the long-term average, showing very weak inflationary pressures.
And the relationship between capacity and inflation remains strong.
Source: Federal Reserve
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Source: http://econompicdata.blogspot.com/2010/01/production-continues-to-recover.html
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Pub Power Equity Signal Turns Negative
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Time to revisit a catchy, data-mined, equity buy signal (with a decent explanation) that was first detailed at EconomPic back in September... the "Pub Power" equity buy signal.What is the Pub Power signal? As detailed back then:
It is the relative strength of 'food establishment and drinking places' sales vs. grocery sales (as expressed in year over year terms). The relevance? Well, the data seems to suggest that "Pub Power" = Strength in the Dow, one year forward.The thought was that the relative strength (i.e. demand) of restaurants relative to cooking at home shows the following characteristics:
- Consumer confidence
- Exuberance
- Spending power
- Wealth
On the other hand, when times are tough, individuals are more likely to eat at home, causing year over year sales at pubs to decline relative to grocery stores. At the time the signal pointed to a further run in the Dow and here we are 10% later.
So lets take a look at what the signal is telling us now...
Beware all of you equity investors out there... the Pub Power signal has turned negative.
Why does this matter?
Well, mining the data a bit further, from December 1993 through December 2008 (the last period in which we have one year forward data on the Dow) the Dow has returned an average of -9.8% one year forward when the "Pub Power" was negative and 10.8% when the signal was positive.
Source: Census
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Source: http://econompicdata.blogspot.com/2010/01/pub-power-equity-signal-turns-negative.html
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BookMark
