Because some federal Wall Street bailout money comes with strings that limit executive pay, some formerly very big earners at recipient firms may have to settle for compensation packages that top out at $500,000 per annum, a mere 2 1/2 times the average annual income of brain surgeons, according to Labor Department numbers. In consequence, many of the Street’s best and brightest are jumping ship, leaving firms that may be saddled with these compensation limitations for unsaddled firms, or starting their own shops where they can set pay policies.
I believe this is a wonderful development. And that it will give investors, both individual and institutional, a clear choice in the future about where to put their money.
The “best and brightest” in Wall Street parlance are a financial firm’s biggest producers. The guys and girls who generate the most income by generating the biggest returns for the firm’s investors. When one considers what this has meant in years past, it’s thus a sure hint about where investors should put their money in days to come.
Best returns in years past were almost always the product of risky investments that in all too many cases have now bubbled out, leaving investors much the worse financially. Almost nobody in years past generated great returns playing it safe and producing honest, stable, consistent returns over a long period. People who did this were deemed chumps generating the chump change.
So here’s he choice for tomorrow’s investors. Migrate, along with the best and brightest of years past, to better than average short-term gains that justify these folks’ own huge compensation packages, and likely tank again the next time these Potemkin winners reveal their true worth. Or stick with firms run by well paid professionals who derive job satisfaction for a darn good wage by doing plodding due diligence and steering clear of the new derivative du jour.
I know where I’m going with what’s left of my now much diminished asset pool. Who will you trust with your own money in coming months and years?