Wall Street has a habit of riding its booms a bit too long. And that leads to collapse, layoffs, and hand wringing about the future. But it looks like Wall Street is already moving forward. And that means exporting its future by taking its finance franchise to cash rich countries and out of the canyons of Wall Street.
Wall Street's boom and bust cycles tend to eclipse a decade. In the 1980s, junk-bond fueled takeovers created massive amounts of wealth -- and also led to the collapse of junk-bond issuer Drexel Burnham. Wall Street licked its wounds for a few years and by the mid-1990s it had reinvented itself as the headquarters for Internet initial public offerings. That bubble burst in 2000. Then the Fed cut rates to 1% and Wall Street reemerged as a packager of mortgages -- along with servicing hedge funds and private equity moguls.
That all ended last August and the collapse of that bubble led to the demise of Bear Stearns and Countrywide and the loss of about $8 trillion worth of wealth. The New York Times reports that the latest collapse has cost 80,000 finance jobs as well. But Wall Street is already mapping out its future by following the money. And the Times pinpoints where Wall Street thinks that money resides -- based on the growth in the number of Wall Street people moving to various global money centers.
While New York jobs are shrinking, those in Russia, China, and Dubai are booming. The Times quotes growth figures from Jeanne Branthover, head of the global financial services practice at Boyden Worldwide, a recruiting firm. Despite flat revenue growth in the quarter worldwide, financiers are moving where the money is:
- Russia +73%
- China +300%
- Dubai +300 %
- New York -24%
Wall Street's future seems to be following the places where Sovereign Wealth Funds (SWFs) are booming about which I posted here and here. SWF growth flows from oil and export wealth. And Wall Street is following that money. The Times quotes Edith Cooper, head of human management at The Goldman Sachs Group (NYSE: GS), who said "Pools of capital will move to where the industry sees an expansion of opportunities."
Are the business opportunities in these countries big enough to offset the lost revenues from the most-recently collapsed bubble? Is Wall Street moving into these countries just as they are peaking? (This comes to mind particularly in light of oil prices which have fallen from $147 to $114 in recent weeks.) Or will the future of Wall Street indeed be in financing the future of those countries whose wealth will swell over the next 10 years?
Time will tell.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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