April 7, 2010--"Still A Lot Of Money"

I have an interior decorator friend whose clients are among America's wealthiest families. When the recession hit, I was concerned about how this might affect him.

This is how he put it: "If you had three billion before things crashed and now you are left with only two, it's still a lot of money."

In other words, he was doing OK.

I was thinking about him as I walked down Broadway on my way to morning coffee since the signs of the economic collapse were everywhere evident. The Silver Spurs coffee shop, which is traditionally thriving at this time of day, was three-quarters empty. The waiters and cooks were standing around looking forlornly out the window as if attempting to will passersby in for breakfast.

Half a dozen shops between here and Spring Street in Soho were for rent. When we had left for South Florida in December all had been occupied. It was clear that their business was off, but they were hanging in and the proprietors had told us that the were anticipating a decent Christmas season and they were sure they would still be there when we returned in early May.

But they are all gone. The shelves are empty. In fact, for the most part the shelves themselves are gone and the fixtures have been abandoned. There was no market for them as nobody came to scoop them up at bargain princes since no one with any sense was thinking about taking on Lower Broadway rent when so few were optimistic enough about the future to start a business or had the money to shop.

Our first night back we went to our favorite local Italian restaurant. We have been going there for at least 15 years and know the owners: three cousins all with the same first name--Giovanni. The middle Giovanni was working that evening and greeted us warmly. Frankly, we were not only happy to see him but also to find that they were still there. In this economy, we didn't know what to expect. We did notice, however, that there were many tables available and while ordering tre-colore pasta with pesto sauce, I asked him how they were doing.

"Not so well," he said, gesturing toward the empty tables. "It's been a difficult winter. Business is off 20 percent." He paused to let that sink in. I shook my head in commiseration. "And you know, that 20 percent is the profit. Most all of it." He shrugged his shoulders, slumped, and walked slowly back toward the kitchen to place our order.

The pasta as usual was delicious and we vowed to return frequently to help them get through the downturn.

Back home, on the news was a report about an auction at Sotheby's. The 1934 Picasso, "Nude, Green Leaves and Bust" sold for more money than any other work of art in history--for it an anonymous buyer paid $106.5 million. More money than 2,000 public school teachers make in a year.

The next day the New York Times quoted the auctioneer as saying there was a United Nations of buyers present. "The [art] market is all about global liquidity. It's brand buying. This group will go for a great Monet just as the will for a great Warhol." (Article linked below.)

But a Manhattan dealer supplied the appropriate corrective, "I was surprised [by the prices] because the material was good but not great. [But] the market is as solid as ever."

Then yesterday afternoon, at 2:45 PM, in about 30 minutes, the Dow Jones Industrial Average lost 1.000 points and then as quickly regained 700 of them. A 1,700 Dow-point swing in half an hour!

We were watching the action on MSNBC in real time and thought we were witnessing the end of the world as we know it. Greeks were rioting in the street since their government had just passed legislation requiring them to pay taxes and not just collect generous benefits as the price for of the thrifty Germans agreeing to bail them out; and one commentator was saying that not only would Spain be next to tumble but the U.S., burdened as we are with Greek-like national debt, might be in line after that. Was what we were seeing the final panic before economic Armageddon?

With only a trace of irony Rona asked, "How much Spam do we have?" She was talking about food, not the spam that infects our computer.

Other analysts were saying that something was wrong with the trading system. Yes, people are nervous, some even panicked, but a movement of this kind could only be the result of some error. It was soon discovered that a trader in Chicago had punched a B into his computer rather than an M, when he offered a few million, not billion, shares of P&G for sale. By why that would cause Tiger Woods' former sponsor, Accenture, to plunge from $40 a share to one penny was not made clear. Even this morning no one appears to know for certain what happened.

But in the meantime ordinary Picassos are going for tens of millions, teachers are being laid off, and the Giovannis are hanging by a thread.

As I wondered out loud while the market plummeted, "Though maybe our decorator friend is right, two billion is still a lot of money, perhaps what happened to Accenture is a glimpse of the future."