Would the smart thing this year for wallstreet not to take the bonuses?

[WaveStrider]

Quote from lolatency:


Second, the bonus is compenstation given to workers for the fact that they can't trade their own portfolios individually without severe restrictions. For example, some employees are forced by their employer to hold positions for 30 days at a minimum to avoid issues with insider trading, etc. This alone cuts employee's earnings potential because they cannot aggressively make the sort of side income regular Americans can by managing a portfolio actively.

This is an interesting perspective. It is true that you have to adhere to trading restrictions working for a financial company.

However, the premise is that the individual given the guaranteed bonus to compensate for the opportunity-cost would be able to at least make that amount of return on his/her investments without access to information from the company - basically on-their-own as the "regular Americans" do.

That return is then riskless since it is guaranteed, unlike the regular American who can lose all his/her stake.

So if the employee can indeed consistently get better than that bonus, why be an employee at all? Better to take a spot in "Market Wizards". And if he/she can't consistently do better, then they are getting the bonus for underperforming.

And if Goldman didn't need the $$$, why give up it's leverage as an Investment Bank?

 

[blade235]

Quote from lolatency:

The reason is because "bonuses" aren't always just performance bonuses. They are guaranteed as part of the package at the end of the year. So, for a low level employee, he may make 80k and then have a 20k guaranteed bonus. Not everyone is a hot shot executive. They break it down this way to minimize turn-over. So the total "bonus" payout isn't really performance related payout.

Second, the bonus is compenstation given to workers for the fact that they can't trade their own portfolios individually without severe restrictions. For example, some employees are forced by their employer to hold positions for 30 days at a minimum to avoid issues with insider trading, etc. This alone cuts employee's earnings potential because they cannot aggressively make the sort of side income regular Americans can by managing a portfolio actively.

... As for why the big guys at the top get bonuses? Good question. I've never been a big enough guy to know all the details.

WTH is a guaranteed bonus? Isn t a 80k salary and a 20k guaranteed bonus, just a 100k salary?

There s no such thing as a guaranteed bonus. I ll change that phrase. There shouldn t be a thing called guaranteed bonus.

 

[Mecro]

Quote from lolatency:

The reason is because "bonuses" aren't always just performance bonuses. They are guaranteed as part of the package at the end of the year. So, for a low level employee, he may make 80k and then have a 20k guaranteed bonus. Not everyone is a hot shot executive. They break it down this way to minimize turn-over. So the total "bonus" payout isn't really performance related payout.

Second, the bonus is compenstation given to workers for the fact that they can't trade their own portfolios individually without severe restrictions. For example, some employees are forced by their employer to hold positions for 30 days at a minimum to avoid issues with insider trading, etc. This alone cuts employee's earnings potential because they cannot aggressively make the sort of side income regular Americans can by managing a portfolio actively.

... As for why the big guys at the top get bonuses? Good question. I've never been a big enough guy to know all the details.

You need to revisit the concept of a "BONUS".

 

[Mecro]

Quote from WallstYouth:

Its the tax payers that got us into this mess in to the first place taking out loans they couldn't afford to pay back.

Ok, now I'm convinced you are some lackey on behalf of Wall Street. A "useful idiot" who thinks he will get somewhere.

The crisis is orchestrated...ehhh..caused by the DERIVATIVES that were written 10x over each mortgage by Wall Street.

It's quite simple really. Give some shmoe a loan he cannot afford, backed by an inflated home price, then take the mortgage paper and write a bunch of worthless crap 10x over it (call it a bunch of fancy names like CMO, CDO, MBS, etc). Then sell as much of it as you can to whichever institutions are stupid enough to trust you (cause Wall Street is all about making the capital markets work for the people). Hold whatever you can't sell and mark it each quarter to show profits and growing assets. Pay those salaries and bonuses ASAP in large amounts before the scam is unfolded. Oh, and make sure you put any real cash you gathered from selling crap to work, like buying real assets. But don't forget to transfer them out, would not want any of this liability on them.

 

[lolatency]

Quote from WaveStrider:

This is an interesting perspective. It is true that you have to adhere to trading restrictions working for a financial company.

However, the premise is that the individual given the guaranteed bonus to compensate for the opportunity-cost would be able to at least make that amount of return on his/her investments without access to information from the company - basically on-their-own as the "regular Americans" do.

That return is then riskless since it is guaranteed, unlike the regular American who can lose all his/her stake.

So if the employee can indeed consistently get better than that bonus, why be an employee at all? Better to take a spot in "Market Wizards". And if he/she can't consistently do better, then they are getting the bonus for underperforming.

And if Goldman didn't need the $$$, why give up it's leverage as an Investment Bank?

Why would it be riskless?

One: I lost out big not being able to participate in the red hot commodities market. I would've made much more than what my bonus will be this year -- that is, if I don't get laid off before the bonus period. (See my other thread about my pathetic situation.)

Two: As already stated, what if I get canned before the bonus period?

 

[lolatency]

Quote from Mecro:

You need to revisit the concept of a "BONUS".

Look, I didn't invent the system. I'm telling you what's in my contract and the contracts of other people I know. They split the salary and call the year end portion of it a bonus.

 

[WaveStrider]

Quote from lolatency:

Why would it be riskless?

One: I lost out big not being able to participate in the red hot commodities market. I would've made much more than what my bonus will be this year -- that is, if I don't get laid off before the bonus period. (See my other thread about my pathetic situation.)

Two: As already stated, what if I get canned before the bonus period?

Sorry - I am not questioning your sincerity, just examining your argument.

1) Losing out big on the red hot comm market would be a voluntary employment choice. I am not sure why anyone would need to be compensated for a deliberate choice.

2) Getting canned before bonus time is something ALL workers face - whether on Wall St or not. It is a non sequitur to getting a guaranteed amount.