Morning Brew Daily
Wall Street Brings Back Bigger Bonuses & Trouble in Mega-City Neom Paradise?
Wed, 13 Nov 2024
Episode 452: Neal and Toby chat about the return of Wall Street’s big bonus-time after its 2 year drought of shrinking payouts. Then, Activist investor Elliott Management has taken a massive stake in Honeywell and is calling the company to break itself apart. Plus, the CEO of Saudi Arabia’s Neom has suddenly left, which marks another setback for the anticipated ‘city of the future’. Meanwhile, Amazon is also getting into the smart glasses game, this time looking to supply its delivery drivers to maximize drop-off efficiency. Lastly, the biggest headlines to close out your day. Visit https://www.sage.com/morningbrew for more! Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Get your Morning Brew Book of Crosswords HERE: https://shop.morningbrew.com/ Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Morning Brew Crossword 03:20 - Wall Street Bonuses 09:00 - Honeywell Breakup 13:20 - Neom CEO Steps Down 17:00 - Amazon smart glasses 21:45 - Headlines Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the trends in Wall Street bonuses this year?
Some that we've talked about on the show are the pending merger between Kelanova's snack business and its sale to Mars, which is a $36 billion deal. We've talked about the private credit market as well. Boeing just raised a huge amount of debt to try to pull itself out of its nosedive.
That is something that Bank of America, Citigroup, JPMorgan, Wells Fargo, all these big investment banks are getting in on and taking fees from. So we are starting to see a thawing. We're starting to see more of these companies being more active really across M&A, across IPO market, and across just the private credit market as well.
So that is why you're seeing some of these increase in bonuses after two years of it not increasing and actually going down.
No, I mean, but if that Mars deal comes to pass, that's so much money for banks. Goldman Sachs is said to make $90 million on that deal if it should happen. So that's how much the M&A market means to these banks. Let's talk about just the amount of bonuses that these Wall Streeters get because it is a large chunk of their pay. The average bonus last year on Wall Street was $176,500.
And the average Wall Street salary total was $471,370. That's nearly five times the average of the New Yorker's average salary. But you can see that's like a pretty big chunk. So it is a big deal when these end-of-year bonuses come through. And a lot of what happens on Wall Street drives the larger New York economy as well.
Right. Let's talk about that because I can hear some people rolling their eyes right now saying like, oh, the world's tiniest violins bonuses were down the last two years. But it does impact New York City and New York State's economy as a whole. The industry accounted for around $28 billion in state tax revenue, which is over a quarter of the state's entire collections last year.
And then if you zoom in on the city level, it accounted for $5.4 billion in city tax revenue. So As bonuses go, if they go down, that's less tax revenue for the city, less tax revenue for them to spend on public works and the transportation authority and all sorts of things. It does filter down through the economy.
So even though no one is that sad if bonuses are going from the six-figure range to the lower six-figure range, it still does have broader impacts.
And going forward, I think there's a lot of optimism around the banking sector at the end of this year and next year as well. We've talked about interest rates going down. Anytime there's stock market volatility is also good for their trading divisions. It looks like the IPO market, which has been frozen over for the past two years, is starting to get going again.
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Chapter 2: Why is Honeywell facing pressure from Elliott Management?
Chapter 3: What does the Neom CEO departure mean for the megacity project?
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Like a beautiful sourdough loaf in the proving drawer, bonuses on Wall Street are set to rise across the industry for the first time since 2021. Investment bankers, traders, and wealth managers, basically anyone who might rock a Rollie and a Patagonia vest to work, all had above-average years thanks to an increase in corporate dealmaking and a stock market run-up.
Chapter 4: How is Amazon entering the smart glasses market?
According to an analysis by Johnson Associates, every single business area is expected to see pay jumps this year, except for real estate investing and retail and commercial banking. Bonuses are still not back to the frenzied heights of 2021 when deal volume exploded, SPACs became a thing, and companies were going public left and right.
But it's clear that Wall Street is emerging from the muted spell over the past two years actually fell.
The star of this year's show is debt underwriters, the bankers who work on those deals where corporations need to refinance or raise new debt. It may not be the sexiest role on Wall Street, but this year it will be the most lucrative. Debt underwriters are expected to collect bonuses that are anywhere from 25% to 35% higher than last year.
Big picture, 2024 bonuses are set to rise for nearly every subset of the finance industry. making it the second biggest end-of-year windfall for bankers in the last five years, and easing interest rates and a thawing M&A market mean that 2025 could be even bigger.
Chapter 5: What are the latest headlines in finance and business?
Yeah, we're coming off of a weird time for investment bankers. The last two years were kind of muted. There wasn't a lot of things going on. The IPO market got very clogged up. We weren't seeing any of these big M&A deals. But as the interest rates have started to thaw, you have started to see more of these mergers popping up. I mean...
Some that we've talked about on the show are the pending merger between Kelanova's snack business and its sale to Mars, which is a $36 billion deal. We've talked about the private credit market as well. Boeing just raised a huge amount of debt to try to pull itself out of its nosedive.
That is something that Bank of America, Citigroup, JPMorgan, Wells Fargo, all these big investment banks are getting in on and taking fees from. So we are starting to see a thawing. We're starting to see more of these companies being more active really across M&A, across IPO market, and across just the private credit market as well.
So that is why you're seeing some of these increase in bonuses after two years of it not increasing and actually going down.
No, I mean, but if that Mars deal comes to pass, that's so much money for banks. Goldman Sachs is said to make $90 million on that deal if it should happen. So that's how much the M&A market means to these banks. Let's talk about just the amount of bonuses that these Wall Streeters get because it is a large chunk of their pay. The average bonus last year on Wall Street was $176,500.
And the average Wall Street salary total was $471,370. That's nearly five times the average of the New Yorker's average salary. But you can see that's like a pretty big chunk. So it is a big deal when these end-of-year bonuses come through. And a lot of what happens on Wall Street drives the larger New York economy as well.
Right. Let's talk about that because I can hear some people rolling their eyes right now saying like, oh, the world's tiniest violins bonuses were down the last two years. But it does impact New York City and New York State's economy as a whole. The industry accounted for around $28 billion in state tax revenue, which is over a quarter of the state's entire collections last year.
And then if you zoom in on the city level, it accounted for $5.4 billion in city tax revenue. So As bonuses go, if they go down, that's less tax revenue for the city, less tax revenue for them to spend on public works and the transportation authority and all sorts of things. It does filter down through the economy.
So even though no one is that sad if bonuses are going from the six-figure range to the lower six-figure range, it still does have broader impacts.
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