A few articles together in the Wall Street Journal struck me as representative of larger trends we are seeing right now. Total assets under management for the hedge-fund industry have risen to a record $2.82 trillion. Bankers working on M&A, IPOs and other corporate transactions expect to be seeing strong increases in bonuses this year, while their cousins on the trading side expect declines despite a stock market hitting record highs. And for the rest of the population outside of the financial sector, a 2% annual rise can be hoped for, barely above inflation. The stagnant income of a great many in this economy continues.
Analysis by Johnson Associates:
- Investment bankers, including M&A and IPOs +15%
- Private-equity employees +15%
- Asset managers and wealth advisors +5% to +10%
- Hedge-fund payouts + 5% to -10%
- Fixed-income and stock traders -10%
- Annual pay +2%
So, while stock markets hit highs, and profits seemingly look good, revenue growth is lagging and some concerns are expressed. Cost efficiencies and stock buybacks seem to be disproportionate drivers of earnings growth right now. Those most excited around the proposed splits of Ebay and HP seem to be the bankers and senior managers set to make millions, despite a lack of inspiration and creativity about how to grow their businesses.
It is refreshing to see Facebook guide that they intend to invest more next year in their long term growth, though the ownership structure and track record allow Zuckerberg that all too rare luxury right now.
Revenue Softness Worries Stock Investors -- Abreast of the Market - WSJ - WSJ: Revenue Softness Worries Stock Investors. Third-Quarter Earnings Reports Show Solid Profits but Also Possible Warning Signs
“While profit gains have generally been solid,
many blue-chip companies are posting weak sales growth or outright
year-over-year revenue declines, causing worries about their long-term
growth prospects. Others are reporting earnings increases driven by
factors that don’t reflect sustainable improvements in their business,
such as share buybacks and cost-cutting efforts.”
“Another cause for worry has been
the explosion in share buybacks. These purchases goose earnings per share
by reducing the total amount of shares on the market. Critics say buybacks
consume cash that could be invested in future growth opportunities.
In the third quarter, buybacks have boosted
earnings per share at S&P 500 companies by 2.35%, the highest level in
more than two years, according to Barclays.”
Bonus Season Brings More Pain for Traders - WSJ - WSJ: Bonus Season Brings More Pain for Traders Deal Makers Set to Get Bigger Bonuses, But Not Traders and Hedge-Fund Employees
"The [Johnson Associates] study echoes many of the same themes sounded by each of the biggest banks during their quarterly results. A stock-market rally and mounting confidence in the economy’s direction have emboldened corporate chiefs to pursue acquisitions."
"Through the first nine months of 2014, merger-and-acquisition volume was up 39% globally from a year ago, and was on pace to become the second-biggest year ever, trailing only 2007, according to Dealogic."
Bloomberg BNA | Your Information Advantage: expects annual pay increases to climb above 2.0 percent by early 2015, compared with a 1.9 percent gain in the second quarter reported by the Labor Department in its employment cost index.
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