The Breakfast Table



Funny you should mention real estate. Last summer, the rent on my tiny, cavelike studio in Little Italy jumped from $800 to $1,200 a month. So I moved to Brooklyn, paying $1,100 a month for a one-bedroom, which I thought was a safe, market rent. Last Friday, my landlord surprised me with a notice that he is raising it to $1,550 in July. So it looks like gypsy Dave will be packing up his tent again and moving on for greener pastures … Queens, perhaps?

At any rate, this reporter’s anecdotal evidence strongly suggests that the New York City real-estate market is all too hot. You are on to a really compelling issue, though, because unlike the stock market, the housing market really hits every American (forgive me) where they live. I am not nearly genius enough to figure out how fast the economy is growing/slowing and what effect that has on real-estate prices. But since this seems to be a convention of this format, I am willing to talk about the question anyway.

In the late 1980s, there was a real-estate bubble, fueled in part by tax laws that encouraged unprofitable development projects and in part by loans from savings and loans. When that bubble burst, it exacerbated the country’s recession.

Nobody thinks there is a real-estate bubble today, for a lot of complicated reasons–lenders are still reeling from mistakes the last time around, a lot more of the real-estate market is funded by the stock and bond markets, which tend to react quickly to signs of trouble. Maybe even too quickly sometimes.

This time the doomsday scenario, as we all know, is that there is a bubble in the stock market, and when it bursts the resulting loss of wealth will make us all feel poor, lead to layoffs, and send us into a recession.

My own view is that this is a much bigger problem in NYC than that it is anywhere else. In New York, real-estate prices swing much more wildly than elsewhere in the country–routinely doubling in booms and falling by half during downturns, especially in wealthy or peripheral neighborhoods.

Here is the real catch: The New York economy is more dominated more than ever by the notoriously volatile Wall Street firms. In 1987, the 4 percent of New Yorkers who worked on Wall Street accounted for 11 percent of the income paid in the city; in 1998, the roughly 5 percent of New Yorkers who work on Wall Street took home 19 percent of the money earned in the city. A downturn in stock trading or underwriting business (both correlate closely with the Nasdaq) would seriously hurt the securities business. Bonus cuts, maybe even pink slips. And that would send a chill through the whole local economy–especially the real estate market. We saw what happened to the stock market in 1987 and then the New York real-estate market in 1989 (before the rest of the country slid into recession). Next time around, it could be much worse. (I am getting my numbers from a recent study by the Federal Reserve Bank of New York–economists Jason Bram and James Orr.)

Sound like wishful thinking? It certainly is. How else am I going to be able to afford an apartment around here? But that doesn’t mean I’m wrong.

By the way, right you are about the slippery slope between Goldman, Sachs and Tokyo Joe–it is not like the mainstream investment firms are so lily-white about promoting stocks to investors in order to enrich themselves.

And that lead us to … James Cramer. I have to say, I find Fox’s reaction to his comments about the value of’s stock a little silly. That is what he does: He’s a money manager who talks about what stocks he is buying. I think he recently commented in New York magazine that stock was trading at just about the value of the cash on its books. That’s a tout of sorts. Big deal. It isn’t like he hasn’t disclosed his relationship with

Let me know if you hear of anyone moving out of an apartment.