I'm in A New York State of Mind

There is something happening here in NYC. Like Billy Joel crooned in 1976, many of us just want to be here. The energy on the streets is palpable. Wall Street is humming. The entrepreneurial and technology scenes have never been more vibrant. Stores across the economic spectrum are filled with eager shoppers. There are loads of new - and good - restaurants opening every week. Hope is springing eternal, even if interest rates appear headed up, China's markets are getting hammered, Putin is flexing his muscles and the US equity markets seem jittery with the DJIA in the mid-13000s. Joggers and cyclists are everywhere; frisbees are filling the skies in the parks and baseballs are being launched at diamonds all across Manhattan. Adults, kids, bankers, artists, musicians, massage therapists, and yes, hedge fund managers, too. Everyone seems to be getting into the act.

I've lived in NYC for 20 years. I first moved here just before the crash in October 1987 (and was working as an M&A analyst, no less) and saw the era of the corporate raiders and junk bond kings. Names like Milken, Belzberg, Icahn (yes, the 1987-raider-turned-2007-activist), Rales, and Boesky struck fear in the hearts of sluggish corporate managements, while the 2007 private equity titans Carlyle and Blackstone were just getting started. Fortress? The principals were young men early in their careers. DE Shaw? Och-Ziff? Huh? 20 years seems like an eternity, and the financial landscape has been dramatically transformed. As rich as the hedgies and Goldman Sachs PMDs are today, the NYC of 1987 felt much more stratified, much more polarized than the 2007 version. It appears that a wider swath of the City is benefiting from the general economic climate, and the specific benefit of a booming financial sector that is permeating every inch of NYC life. I've got to tell you, I couldn't have imagined such prosperity and, more importantly, happiness in a post-9/11 NYC - but it's here.

I've been trying to think of exactly why this is. Some issues are clearly NYC-specific while others are more reflective of the global financial markets and the tools and techniques for playing in them. For better or worse, NYC is going through a gentrification process that is impacting every neighborhood in Manhattan and the outer boroughs. So while NYC - Manhattan, specifically - is certainly a safer, cleaner, greener place than it was 20 years ago, it is also less economically diverse. It's just freaking expensive to live here, period. At the same time, some major NYC public-works projects like the build-out and beautification of the Hudson River Park, the further enhancement of Rockefeller Park and Battery Park City (as you can tell, I'm a downtown-er) and many others across the island have come online, rendering the City a more attractive, liveable place for people of all ages. And this is good. Kids can go to public school, play in year-round baseball, soccer, football and basketball leagues, romp and climb in playgrounds, and ride bikes in safety along the river. NYC has actually become a great place to raise a family. It's true. I'm doing it as are many others across the socio-economic strata.

But this doesn't begin to answer all the questions. We are in the wake of a long economic boom cycle that has raised many boats in the City. Is this just a cyclical phenomenon or is there something else at work? I'd say the rise of derivatives, better tools and techniques for risk management and the globalization of the financial markets all play a part in this financial renaissance. Systemic volatility has dropped ever since I've been in the financial markets, roughly corresponding to the growth of the derivatives markets and the rise in liquidity across the global financial landscape. Does this mean shocks won't (or haven't) occurred? Of course not - there have been several "once in a hundred years" jolts in only the past decade (LTCM, emerging markets debt, Russia default, etc.) and they are sure to continue (but hopefully they'll be modeled better - fat tails, you know). But does it mean that the markets are better poised to bounce back from such shocks as risk is more broadly distributed to those who can absorb it? I'd say yes. And this is a very, VERY important point, and is particularly important for a town like NYC that is so dependent upon a vibrant financial sector.

In sum, this is a lot of words to convey a very simple point: NYC is rocking and it is fun. So I guess it's no surprise that I'm in a New York state of mind.

Comments

[Marcos Dinnerstein]

Hi, Great post and I don't disagree that NYC is a nicer more vibrant place than at any other time in recent history. But the crazy housing situation and resultant loss of diversity that you correctly note is saddening. I fear the Yogi Berra situation: "Nobody goes there anymore, it's too crowded." Have a great vacation.

[mike simonsen]

indeed. Isn't it just marvelous? Despite the cascade of downer headlines -- oil prices, war, oceans perched to roll up Broadway, housing bubble, outsourcing and immigration -- people are rocking. (SF/Silicon Valley feels much the same way. I haven't checked the flyover states lately).

You hit the nail on the head too: the benefits of globalization and derivatives in particular either help us mitigate or help us innovate our way right past the crisis headlines. It's a good time to be alive.

We're clearly at a business cycle high. I'm curious as to how soon/painful/long the next downturn will be.

[memi]

yep

NYC is cool indeed

[AnitoKid]

Personally, I think this is one of your best posts ever. I've followed your views and thoughts, and learned from them. But this one - I simply love the way your words intertwined with one to the other to deliver the final thought. Keep them coming! More power! Mabuhay!