Record Year on Wall Street

As the stock market continued to sell off, news reports today estimated that the top Wall Street firms will pay out record bonuses at year-end. The five leaders - Goldman Sachs (GS), Morgan Stanley (MS), Merrill Lynch (MER), Lehman Brothers (LEH) and Bear Stearns (BSC), collectively employ 186,000 workers who are expected to split bonuses of about $38 billion. This is in addition to normal salary and benefits, and works out to an average of $201,500 per person.

Of course, many employees will receive far less than average because a small number of top producers will keep most of the money. The one group that seems destined to receive nothing is shareholders, who have lost some $74 billion in the market value of their shares this year. The companies will argue that competition for top traders is fierce and they must pay for talent. It remains unclear how many shareholders will agree with this logic.

Stocks tumbled today to open the holiday-shortened week. Financial stocks were again the downside leaders, with sector benchmarks dopping to test their early November low points. One analyst estimated that Citigroup (C) will have to write down another $15 billion in subprime loan losses. The classic defensive sectors are beginning to assert clearer market leadership in our momentum rankings. Utilities, consumer staples, and health care funds are the main islands of stability right now, while the uptrends in technology, energy and materials seem to have broken down. Gold funds still dominate the top of our lists but are falling fast.

Due to the Thanksgiving holiday, our next update will come to you on Wednesday, November 21.