Focus: Sky's the limit in New York

Wall Street is booming but this time it's not driven by greed; it's a conservative bonanza

When the markets close, the young bucks of the New York trading floors, with their slicked-back hair and roving eyes, like to gather in the bars beneath the soaring glass atrium of the Winter Garden at the World Financial Center, where grand securities houses like Merrill Lynch and Lehman Brothers have their offices. Most days this summer have been good days: the Dow Jones has edged closer to the stratosphere and the girls - many of whom cross the Hudson River from New Jersey on boats known as the "chick shuttles" - have been waiting as usual with their high hems and cute smiles.

An odd - perhaps ironic - feature of the Winter Garden was its 16 swaying palms. They had graced the building for a decade, but a few months ago a large part of one of them came crashing to the ground, and they had begun to wilt and look tatty. In a building whose purpose is to reflect the prosperity of the financial community, that would not do.

LAST week cranes were lowering into 16 holes in the Italian marble floor the last of 16 new palm trees, Washingtonias that had been uprooted from the Arizona desert and trucked to Manhattan, a suitable symbol of conspicuous consumption in a city which is consuming more, more conspicuously than ever before. Though the distribution of wealth is uneven - half of the children in the Bronx and Brooklyn are living beneath the poverty line and the city's unemploy- ment rate is double the national average - Wall Street is on a fabulous roll, and, as a result, the Big Apple is experiencing a remarkable renaissance.

First, there is the bonus effect. For many on Wall Street, their bonus will account for about 90 per cent of earnings. Firms paid out $8.6bn (pounds 5.2bn) in bonuses as the reward for the profits made in 1996, when the securities industry was earning $1bn a month. Traders and salesmen at the managing director level took home an additional $1m to $4m. Alan Greenberg, chairman of Bear Stearns, who bagged no less than $18m last year, says: "It's like Madonna or Michael Jordan."

You can see much of this money coursing through the city. Restaurants where $300 for a bottle does not cause any raised eyebrows are booked solid every night. It is impossible to get a reservation at Le Cirque, one of the most desirable, until the end of August. One of my local take- aways offers doughnuts in paper bags with three choices of gourmet jam. Cost? $8 each. The luxury goods shops - Gucci, Tiffany's and the rest - are turning in record profits. The most popular accessory of the Wall Street male (and an occasional female) is the hand-rolled cigar. "It's rather disgusting that when you go for a round of golf here, you discover that all anyone is interested in talking about is who has cigars handrolled in Cuba and who hasn't," complains one broker from Britain.

Alan Gurtner, the general manager at the five-star Four Seasons Hotel on 57th Street, sees the boom first-hand. Rooms at the IM Pei building, which opened in 1993, start at $440. Its top-floor presidential suite - $7,000 a night - is occupied 70 per cent of the time, and guests leave the bathtub filled with discarded shopping bags. "We're doing better than we ever anticipated. It's just accelerating all the time," says Mr Gurtner. But most astonishing, he says, are the takings in the hotel's restaurant and bar. The most popular drink is a $12 martini. But if they like, customers can spend $100 on a single glass of 1963 vintage port. And they do. Last year, meanwhile, takings at the bar for cigars alone topped $100,000.

Similar craziness is invading the property markets, where the equivalent of a Cuban cigar is a summer rental in the Hamptons, on Long Island. This year is hotter than ever which meant that virtually every available house had been snapped up by February. For a season that lasts from mid-May to early September, prices for places with pool and ocean view ranged between $100,000 and $250,000.

Prices are soaring on properties in Manhattan. Barbara Corcoran of the Corcoran Group says the city is becoming a buyer's nightmare with bidding wars breaking out on almost every deal. Last week she watched as the price of a Park Av- enue apartment with three bedrooms escalated from $1.3m to almost $1.5m in just a few days. A loft in trendy Tribeca shot up in hours from $1.76m to $1.97m. "It is hard for people to keep their cool. They are acting like they did in the 1980s. They are almost fear-buying," she says.

Various factors are driving the boom. One is the collapse in crime rates - the murder rate is at a 30-year low. That, in turn, is feeding the popularity of the city's tough-guy Republican mayor, Rudolph Giuliani, who should cruise to re-election this November. Even Ed Koch, his predecessor- but-one and a lifelong Democrat, announced last week that he would be voting for Rudy.

Of all the cities in the US with populations of a million or more, New York's crime rate is the lowest, but Mr Giuliani points to the more subtle, quality-of-life improvements. Under his almost dictatorial direction, the graffiti artists have been chased from the underpasses, the windscreen- wiping squeegee men are gone and even turnstyle-jumping on the subway is out of fashion.

The symptoms of the city's regained self-assurance abound. Under moonlit nights this summer you can catch free opera in Central Park, enjoy ballroom dancing at the Wollman Ice Rink, or catch a classic movie, also for free, on the lawn of Bryant Park, an oasis of green behind the City Library on Sixth Avenue that a few years ago was the territory only of drug dealers and pimps. Times Square has been transformed from a nightmare of sleaze and porn into a bustling theme park under the rule, for better or worse, of the Disney Company.

But it is money that has lifted Gotham from the ditch, and Wall Street is the source of most of it. John Marlin, chief economist in the City Comptroller's office, believes that about half of the cash that is feeding the recovery comes from the industry whose workforce numbers only 150,000. "Wall Street is earning $3bn pre-tax each quarter. I would like to know how many countries have gross national products that large," he says. Thanks in large part to taxes paid by the securities houses, Mayor Giuliani is now presiding over an $800m budget surplus - the largest in New York's history. Not only is the Big Apple no longer broke, it is positively rich.

BUT compared to the last Wall Street boom of the 1980s - the so-called "greed decade" when junk- bond deals were making million-dollar fortunes overnight - spending now is of a different quality. True, the Ferraris and Lamborghinis are flying out of the showrooms. But, maybe because the recession in the early 1990s remains fresh in memories, there is less excess this time.

A commodities trader who has lived through both booms and who is a million- dollar earner defines the change. "Last time it was more wild. It was about sex and drugs. There is still wildness out there, but even that has become conservative." (Cocaine is fairly cheap now - about $100 a gramme, compared to pounds 70 a gramme in London). "But people are more likely to go out and buy a car or pay off the mortgage than fly to Paris and screw the night away." While he recently bought a $60,000 car almost on a whim, he admits to balking at spending $25 on a small item if he thinks he is being ripped off.

Alan Rogers, managing director of Douglas Elliman, a real estate company, also detects a different feel. "The 1980s boom was built on sand. This is a stronger, more solid and safer recovery and it has a more solid basis," he says. "And people are more savvy, they are comparison shopping, and trying to be careful."

But there is no escape from one basic truth. If New York is rising on the Dow Jones tide, so it must fall when the stock market bubble bursts. And in the planting this weekend of those Washingtonia palms, there may be a worrisome omen. The trees they have replaced were installed in the Winter Garden in the summer of 1987. Black Monday came just a few weeks later.