Skip to comments.Hamptons Hard Times: Wall Street Loss Means Giving Up the Plane
Posted on 08/01/2003 11:58:48 AM PDT by presidio9
At 4:15 p.m. on a Friday in July, short-seller James Chanos logged off his office computer and jumped into his sea-green Lexus sports convertible. Within minutes he was turning up the tree-lined gravel drive, past his tennis court, to his beachside mansion in East Hampton, New York. At about the same time, James Burger, president of Service Insurance Co. in West Orange, New Jersey, threw a bag into his red Volkswagen camper van and began his four-hour journey east to the Hamptons. While Chanos still moves from Manhattan to his beachfront mansion for the summer, Burger, 40, no longer rents a Cessna or Piper Cherokee for his weekend commute from New Jersey. He's economizing. ``I went from renting $50,000 houses on the beach to camping out in the van last year,'' said Burger, after his personal portfolio ``followed the Nasdaq down.'' Nasdaq stocks started falling in March 2000. Burger and Chanos are part of the annual summer exodus, akin to an avian migration for thousands of people in the financial services industry. They flock to the beaches, bungalows and mansions in the Hamptons, the enclave of wealth on Long Island's eastern tip. This summer, there are two Hamptons: One has felt the sting of Wall Street's slump. The other is still basking in the sun. For Chanos, president of New York-based Kynikos Associates Ltd., a New York firm with more than $1 billion in assets, and other Wall Street millionaires and billionaires, this summer is a familiar round of business and pleasure.
After the longest stock market decline since World War II, Wall Street layoffs and leaner times, their Palm Pilots still log golf games at Shinnecock Hills, power brunches at Jean-Luc East, matches at the Mercedes-Benz Polo Challenge and dancing at the Parrish Art Museum Midsummer Gala. For those vulnerable to the market sell-off, it's a different Hamptons this summer, even as stocks have started to climb. They've found cheaper quarters, sometimes further from the beach, as rental prices have fallen. They've renounced $100 restaurant dinners and are sharing gourmet barbecues with friends. Some, like Burger, have cut back on private-plane transport and chauffeur themselves to the beach, if they make it at all. Burger no longer has to camp out after finding a ``last- minute deal'' on a house rental. He still commutes in the van and spends about $50 a weekend on gas, instead of renting a plane for $600 to $1,000. ``I'm looking for a place to fly my hang glider instead,'' he said.
Chanos, lounging on his slate deck beside a ``negative- edge'' pool with one side that flows into a waterfall, said he didn't notice much change among his neighbors. Few of them were victims of the economic decline and stock market retrenchment that took 32,800 securities industry jobs in New York City between August 2001 and May 2003. Chanos, 45, said he would attend the annual lobster brunch this month that Byron Wien, director of investment strategy at Morgan Stanley, hosts for Wall Street executives. ``Wall Street got clobbered, but at the end of the day this is still a small community,'' Chanos said, referring to his neighbors on Further Lane in East Hampton. The street was nicknamed Raiders' Row after several corporate raiders who launched the takeover battles of the 1980s bought homes there. Now his neighbors include the financier Carl Icahn, Lazard LLC's Bruce Wasserstein, Starbucks Corp.'s Howard Schultz and comedian Jerry Seinfeld.
Some of his other neighbors haven't arrived this summer, he said. They include Martha Stewart, the recently indicted diva of home decorating; Samuel Waksal, ImClone Systems Inc.'s founder and former chief executive who last week began serving a seven- year prison sentence for insider trading; and Waksal's Manhattan art dealer, Larry Gagosian. He's being sued by the U.S. government for $26.5 million in unpaid taxes, interest and penalties. Chanos prospered as the market fell by short selling, or selling borrowed securities he expected to drop in value and replacing them when they were available at a lower price. He was one of the first investors to raise questions about Enron Corp., and benefited from the Houston energy trader's collapse into bankruptcy in December 2001. Chanos shorted Enron from November 2000 -- when its stock averaged $79.14 per share -- through December 2001, when it traded at 60 cents. ``A lot of the people who were hurt on Wall Street were unfortunately the investors and not the brokers and money managers,'' Chanos said. ``The investors were too busy buying Yahoo and America Online, they should've been buying houses out here.''
Riesling and Regrets
On a recent Friday night, some of those who didn't buy a house and instead paid $3,000 to $5,000 to rent part of a ``share'' house for the summer, were enjoying a wine tasting at the Duck Walk Vineyard in Southampton. ``I've run a share house for the past 15 years, and this has been the worst possible year for getting shares'' even though rental prices have fallen, said Marilyn Holstein, managing editor of Budget Travel Magazine, sampling a dry Riesling. ``I signed the lease and put the money down'' this spring, she said. ``When it came to Memorial Day my house was about half full.'' Holstein, who said investment bankers making six or low- seven-digit salaries have been the cornerstones of her share market, managed to get a few more renters by early July. Rental prices in the Hamptons are down about 20 percent from last year, said Patricia Burnham, president of P.S. Burnham Inc., a brokerage in Manhattan and Southampton.
`Looking for Alternatives'
Bob Mazzone Sr., the broker for Hamptons Sales and Rental Corp. based in Hampton Bays, said his rental volume is off by about 40 percent from last year. ``This year is very soft,'' he said. Kathleen Dunn, managing director of Dunn & Associates, a San Francisco executive search firm, couldn't decide whether she would rent a share this month or travel abroad. She said she'd just returned from two weeks in London. ``With travel and the economy the way it is you can go to London for $500, which is less than what it costs to be out here for a weekend,'' Dunn said. ``A lot of my friends and a lot of people in the industry are doing that -- really consolidating or looking for alternatives.'' Still, for others, lubricating business connections and building new contacts means being seen at benefit galas and golf clubs and getting past the velvet rope at exclusive nightspots such as Jet East in Southampton, or elbowing up to the bar of the wood-walled pub Stephen Talkhouse in Amagansett.
``Coming out to the Hamptons is without a doubt a help in your business career or in starting a business,'' said Jeremy Wiesen, associate professor of business law and entrepreneurship at New York University's Stern School of Business, who has been going to the Hamptons for 30 years. ``You've got over 100,000 people who come here in the summer and most of them are movers and shakers,'' he said. ``And they're looking forward to this time of the year to get together, because they're compacted. They're all here in a six-week period.'' Many of them network at the Mercedes-Benz Polo Challenge at the Bridgehampton Polo Club, a charity event that runs for six Saturdays in July and August. On opening day, July 12, an invitation-only group gathered under a large white tent, among them singer Billy Joel, actress Kim Cattrall of the HBO television network's ``Sex and the City,'' and Russell Simmons, the hip-hop entrepreneur and founder of Def Jam records weathering his 14th season in the Hamptons.
``That was pretty boring,'' Simmons said after the polo match. ``I used to go and it used to be fun.'' A silent auction, a raffle and VIP table rentals, at $5,000 each, raised $30,000 for The Retreat, a shelter for victims of domestic violence. Across the field, people who came just to watch the match paid $20 per carload. Wiesen, the associate professor, chatted with Vittorio Assaf, the owner of the Manhattan restaurant Serafina, and assessed the crowd. Women in designer sundresses stretched their legs on white ottomans, and bankers in linen suits sipped lychee martinis. The dress code for females was minimalist: white, backless and see-through. ``Polo? There's polo here?'' joked Thorne Perkin, a vice president at Credit Suisse First Boston Corp. ``It's a very social event. People are here to relax, to meet people.''
Jeweler to the Stars
A few hours later, in Southampton, the Parrish Art Museum Midsummer Gala raised $600,000 for itself at a $300- to $1,500-a- plate dinner. Mingling with the crowd were Daniel Wassong, chairman and president of Del Laboratories Inc.; Muriel Siebert, the first woman member of the New York Stock Exchange and founder of the discount broker bearing her name; and the artist Eric Fischl. Martin Katz, a Beverly Hills jeweler who said he had adorned the actresses Nicole Kidman and Helen Hunt for the Academy Awards, brought some diamonds to hang on the necks and wrists of guests. He displayed them in the museum's arboretum. ``That's a $1.5 million necklace, those are $1.8 million earrings, that's a $1.7 million bracelet; the blue and pink diamonds on the right are $2.5 million,'' said Katz, owner of Martin Katz Ltd. ``This blue diamond ring in the middle is $4 million, the color of the Hope Diamond,'' Katz said. ``These are what we call our right-hand rings, made for women that buy diamond rings for themselves.''
Sea Bass, Steak
After 10 p.m., 500 more guests arrived, mostly the under-40 set. Each had paid $175 to join the after-party with drinks, dancing and dessert. ``This is a stretch for a lot of people given where the economy is right now,'' said Brian Feuer, a portfolio manager for McKinsey & Co. To save money before the event, he invited 30 people to a barbecue at his house. On the menu were Chilean sea bass, sirloin steak, corn on the cob, grilled Portobello mushrooms, and wine. Each guest put in $20. ``Five years ago, we wouldn't have thought about eating at home,'' he said. ``We would've all just gone out to the hottest place and had dinner for $100 a person.''
`Everyone Had a Stake'
Back on Raiders' Row, $100 dinners are still on the agenda. Chanos said he noticed one change after the market slumped -- what people talk about on the beach. ``In 1999 my wife would sit on the beach and listen to her friends talk about stocks,'' he said. ``Everyone was in the market, people in the building trades, everyone. It was the classic bull market phenomenon. Everyone had a stake.'' He leaned back in his deck chair and ate some guacamole and chips out of a clay pot. Then he gazed across his landscaped lawn, toward the ocean draped in an afternoon mist. ``Now you don't hear it,'' he said. ``You really don't.''
I'd rather kick back with a few beers, some burgers and good friends.
Maybe that mindset is why I don't have a bazillion dollars? Like I care!
And the fish didn't get there by swimming either. Think of all the oil that was consumed to catch, package, ship, fly, and then truck the endangered bass to eastern long Island just to stoke the egos of the liberal elite. These are the same people who want to castrate me for driving an SUV six miles round trip to work, while they fly in their oil sucking private planes and helicoptors or drive their gas guzzling luxury vehicles four hours in stop and go traffic to their 12,000 energy draining houses built in environmentally sensitive beach areas just so that can be seen with the "right" people.
This just isn't right! Why isn't there a government program to help these poor unfortunates who have to eat at home? Why, why, why??? Oh, the humanity!!!
Especially if you get in Lizzie Grubman's way! Ouch!