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Three Cents Worth: The Onus of the Bonus

[A special Friday edition of Three Cents Worth? Deck the halls, people. This week, our graph guy Jonathan Miller takes a trip down to Wall Street. Click on the image to expand.]

It's that time of year again. Wall Street placed yet another good one under its belt. Since Thanksgiving we have seen activity levels increase sharply.

I plotted Wall Street bonus income data prepared by the Office of the State Deputy Comptroller against median sales price. Both were adjusted for inflation. The bonus figure was placed at the end of the year the bonus money was announced. Interestingly, I could not verify whether or not the Comptroller's numbers were already adjusted for inflation so I assumed they didn't adjust. Either way, it's the same idea: Bonus income has been generally rising since the early 1990s. In 2006, it is estimated that 60% of personal compensation on Wall Street comes from bonus money.

Although both data series trend upward, I don't think its much of an argument for cause and effect. It is pretty simplistic to assume that bonuses will be the real estate savior and return New York back to frenzied times. It is simply one favorable condition within a suite of other conditions. I explored this topic in a post at Matrix called The Onus of The Wall Street Bonus. Inventory levels have been stabilizing but remain at higher levels than cannot be sustained without prices adjusting downward, or demand accelerating to absorb the excess units before that happens. It now seems like the latter will happen, at least thats consistent with what is going on right now.
· Bonus Income Versus Manhattan Co-Op/Condo Sales Price [Miller Samuel]
· The Onus of The Wall Street Bonus [Matrix]