Evan Newmark‘s column Mean Street elaborates a bit on the Wall-Street-Needs-to-Shrink meme that’s been making the rounds. Meredith Whitney estimates that 80,000 jobs need to go on The Street over the next five years. This may sound really extreme until you think about the fact that the emerging markets, on which so much hope for revival is based, will probably want to have their own domestic versions of Wall Street.
Newmark nails it by asking how much longer China may be interested in paying Lloyd Blanfein $50 million a year.
But just hang on, you might say! How can you forget Wall Street’s last great frontier and its best hope for the future, the world’s ever-rising, ever-miraculous emerging markets?
I haven’t. No doubt, the BRIC nations will generate billions of dollars in investment banking fees in the coming years. No doubt Wall Street will get a good chunk of that. But will it be enough to keep all those folks on Wall Street fed?
Do the math. Do the headcount. Then ask yourself if Chinese Premier Hu Jin Tao has much of a continuing interest in paying Goldman’s Lloyd Blankfein a $50 million bonus.
He doesn’t. China wants its own Wall Street. Already, for the first ninth months of this year, seven of the top 10 investment banking fee-earners in China were domestic firms.
Don’t expect a different story in Brazil or India. Last week’s Petrobras $67 billion capital raise was led by Brazil’s Banco Bradesco for the stunning fee of 0.21% of the offering. A U.S. Nasdaq IPO has fees that at 7% are proportionately 35 times bigger.
Don’t be shocked to see less demand for Wall Street’s investment banking exports as emerging markets grow their own Goldmans and Morgans.