Are bonuses helping the market?

In the Manhattan market, where money was once found flowing down the streets, today finds itself today almost a baren wasteland of what use to be the rich and famous.  In recent years, a down economy, for one reason or another, has caused a slump in the market. Some accredit this to the lack of bonuses given to top execs.  They don't receive the funds, they don't buy the property or maybe they already bought the property and now the bank owns it.  Either way, its taken a tole on the market; a 10% to 15% tole compared with first quarter 2009 if you want to count the figures.  Is this to be contributed to the lack of bonuses?  Quite possibly, among other causes.  But the question still remains; though these individuals add a boost to the economy, at the same time, are they taking just as much away?

Lets say that instead of these execs receiving excessive funds, the funds were more equally dispersed among the many important individuals that make up a company.  You know, those individuals that make it all happen and make those big execs look like Leo on the bow of a very large ship.  Ok, ok, I know what you are thinking, those execs take a much larger tax hit than do the little guys simply because they are in a much higher tax bracket and thus, that is a larger percentage of funds flowing back into the economy.  But lets say we nickel and dime this too death.  Say the money is further dispersed among the little guy (for the lack of a better term).  These individuals will spread that money further because they aren't use to living high on the hog; at least the smart ones will.  They will buy sensible homes in larger numbers, taking more homes off the market and feeding the real estate buck.  They will spend with struggling retailers, helping them to support their own tax contributions.  They will invest funds within struggling institutions because they are being told they need to be doing something smart with their money and investing is what their grandpa told them was smart back in the day (oh if he could see the state of affairs now). Lets not forget that Joe Millionaire tends to live in the same communities within various geographical regions, but the little guy lives in many different communities throughout the same regions.  Thus, the wealth is being felt in more areas across the country.

I mention this after reports have been released from the large financial firms, announcing large bonuses coming to execs opposed to paying back the debt they owe to the country. Hum, the little guy is once again taking the hit for Joe Millionaire as we suffer through the tax liabilities.  When will it end?  

Another good question here is whether or not these same affects have been seen across the country, not just up on New York's mahogany row.  Lets talk about the market affairs here in the Atlanta area.  The mahogany row of these neck of the woods, for anyone who is familiar with the area, is the Buckhead district.  Here the wealthiest of the wealthy reside in mansions surrounding the city.  In my opinion, most of those individuals never moved out. Most of them kept their risk at arms length so it couldn't grab them and take them down as it fell.  But the affects on the value of the home in that district may have had just an ever more small decline.  However, million dollar homes are still million dollar homes and the execs still seem to be able to afford them.

So finally, I bring up the point that people really should realize.  If the execs are going to be paid these major dollars, if they are wise, they are going to invest it where the return really is; in the little guys market.  They are going to buy up those foreclosures and invest in the short sales that are available.  Lets say the Joe Millionaire buys a house in the West End district.  In fact, with the average home price in the foreclosure regions of that district falling right around $15,000 - $25,000, less than the price of 1/2 of 1 of their cars, why wouldn't they just buy blocks of homes at a time.  Lets say they purchase 20 homes on a block, averaging $25,000 a piece.  They are only investing roughly $500,000 thus far.  Now, lets say they put roughly $20,000 worth of repairs into each home.  People, we are only up to $900,000, much less than the millions in bonuses many of these execs receive. However, instead of living high on the hog, they have just revitalized an entire West End district and their name is now plastered everywhere, at least if I were in charge of their marketing, because they have helped the people in this area out of the goodness of their hearts.  Now they are selling those same homes in an area that is now more popular than it once was before the foreclosures and they are receiving $80,000 per home upon the sell. $45,000 in, $80,000 out, that's $35,000 out of each home.  With 20 homes, that's a $700,000 return. Lets see them get that from the market in less than a year, or quite possibly, less than 6 months.  Now they have made the bucks and finally helped the little guy instead of hindering them.  

So what do you say Mr. Millionaire?  Do you think the Manhattan real estate market should be affected by the big execs receiving lots of cash?  I'm thinking the Bronx is a much better place for them to start!

Thanks for reading the ramblings!

- JRO 


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