CEO Pay Still Hasn't Recovered From The Financial Crisis

In a followup to their 2008 paper on CEO compensation, Xavier Gabaix, Augustin Landier, and Julien Sauvagnat just released a paper looking at how CEO compensation decreased and rebounded as a result of the crisis. 

The result isn't pretty, at least for top executives. 

From the abstract:

During the crisis (2007 - 2009), average total firm value decreased by 17%, and CEO pay decreased by 28%. During 2009-2011, we observe a rebound of firm value by 19% and of CEO pay increased by 22%.

This is a solid recovery, but still means that CEO and other executive compensation is down after the crisis. 

Firm value has by and large rebounded by 2011, as a 17% drop and a 19% rebound comes to a net decrease of only 1.2%.

However, a 28% decrease followed by a 22% increase means that by 2011 CEO compensation was still down 13% from pre-2007 levels. 

Take a look at this chart of executive, non-CEO compensation from 1992 to 2011.

While firm value exceeds pre-recession levels for top 500 firms, equity value is still quite lower than 2008 levels. 

Even more, both CEO compensation and non-CEO executive compensation is still below pre-recession levels. 

Still, looking on a longer view, it's pretty clear that the hit chief executives took in the recession is nothing compared to the explosion in compensation levels they've enjoyed since the eighties.

Even as firm value has risen steadily, CEO compensation hit huge highs in the 2000s that even a significant hit can't really wipe out:

Check out the whole paper here >

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Watch A Dead Housing Development Come Back To Life

The U.S. housing market is officially back, and we have proof.

Lindsay Park, originally a 156-unit subdivision in Mesa, Ariz., had been mothballed (as well as repossessed) from 2007 to 2010, after the housing bubble burst.

It's since come roaring back thanks to Woodside Homes, which purchased the project in December 2010. All its remaining units have now been sold, said Paul Scroff, president of Woodside's Arizona division. The last one, which had opened at $169,000, closed for $228,000 just last week, he said.  

We have the pictures to show the project's evolution from boom to bust and back. 

We'll start with Google Earth.

Here's what the empty lot looked like in October 2005, after it had been bought by the original developer, Landmark Homes, but before construction had begun. 

Google Earth

The first set of units had gone up by November...

Google Earth

But that basically proved the top.

By May 2007, things had basically ground to a halt, with just a few other units having been built in the intervening years.

Google Earth

At the low point of the recession, all the place had to show for itself was a new pool.

Google Earth

Woodside Homes came in in early 2011 and set up a model house...

Google Earth

By last spring, construction had exploded.

Google Earth

Which brings us to today: the entire thing's been built out.

Google Earth

Fran Bangert, a Woodside Homes rep at Kovach Marketing, sent us an additional series of on-the-ground before and after photos of the subdivision.

(May 2009-August 2010)

Fran Bangert/Kovach Marketing/Woodside Homes

Fran Bangert/Kovach Marketing/Woodside Homes

Fran Bangert/Kovach Marketing/Woodside Homes

Fran Bangert/Kovach Marketing/Woodside Homes

(May 2013)

Fran Bangert/Kovach Marketing/Woodside Homes

Fran Bangert/Kovach Marketing/Woodside Homes

Fran Bangert/Kovach Marketing/Woodside Homes

Fran Bangert/Kovach Marketing/Woodside Homes

Woodside's Scroff told us the project's prime location — minutes from schools and Mesa's main freeway — along with aggressive courting of the community helped leapfrog the project to the front of buyers' lists. There is no typical purchaser profile, he said: everyone from retirees to foreclosed homeowners "coming out of the penalty box" are now neighbors.

Nothing really changed in the Mesa-Phoenix market itself, he said. As soon broader financial conditions became ripe, the area's reputation for affordability and favorable weather would kick in to bring back buyers.

Do you live in an area that has experienced a housing revival from bust to boom? Even better, have before and after photos? Share your story with Business Insider's Rob Wile at rwile@businessinsider.com.

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Goldman Explains Why The Bond Selloff Is 'For Real'

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Goldman Sachs recently declared that the sell-off in Treasury bonds is for real.

They're convinced bond prices are heading lower, which means interest rates are heading higher.

"Our bond valuation models (Sudoku and GS Curve) and a separate study of the determinants of US Treasury yields which explicitly accounts for the impact of QE, policy ‘guidance’, uncertainty and the European crisis indicate that intermediate yields should be trading in the upper half of this range, given the decline in systemic risks and the brightening US economic outlook," wrote Goldman's Francesco Garzarelli and Silvia Ardagna in their note. "Our model estimates (and, consistently, our forecasts) show 10-year Treasuries reaching 2.5% in the second half of this year, with German Bunds trading at 1.75%."

Garzarelli spoke with the WSJ's Katie Martin about the call.

He noted that interest rates won't rise straight up, but that there would be "speed bumps" along the way.  This is why Goldman recently told clients to take some profits on their short positions.

Nevertheless, Garzarelli continues to be convinced that rates are heading higher.

Here's the video via WSJ.com:

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GOLDMAN: The Fed Could Begin 'The Taper' As Early As September

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The word of the moment is "taper" as in "when will the Fed begin to taper its monthly purchases of bonds as part of quantitative easing."

The question is consuming market talk, as interest rates and the dollar rise.

There's an increasingly widespread belief that the taper begins sometime this year.

It may even be in the next few months.

From Bloomberg:

While Goldman Sachs’s forecast remains for Fed officials to wait until December before slowing their $85 billion of monthly asset purchases, Hatzius said yesterday that so-called tapering could occur sooner.

“A September tapering is certainly possible, I think that is going to depend on the data,” Hatzius said in a Bloomberg Television interview at Goldman Sachs’s Global Macro Conference in London.

Since this question is likely data dependent, the attention paid to the next few job numbers will be significant.

The next one, of course, comes this Friday.

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To embed this post, copy the code below and paste into your website or blog. The term quantitative easing (QE) describes a form of monetary policy used by central banks to increase the supply of money in an economy when the bank interest rate, discount rate and/or interbank interest rate are either at... More »

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Iranian Oil Output Is Collapsing

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Iran oil production reached a 25-year low as its main export destinations seek to avoid the effect of sanctions, the FT's Javier Blas reports.

May production is expected to come in at just 2.6 million barrels a day, a level not seen since the end of the Iraq-Iran war. They'd been pumping 3.5 mb/d prior to the sanctions.

Blas reports countries who did not sever ties with Iran faced punitive action from the U.S. and E.U. like losing insurance on refineries.

Read the full story on FT.com >

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The Feds Seized Another Bitcoin Site

The domain of Bitcoin exchange wm-center has been shut down by the government (as first observed by BitcoinByte and FT's Stephen Foley).

Here's what you'll see right now if you go to http://www.wm-center.com/index.html:

This comes on the heels of the feds shutting down Liberty Reserve, the charges against which contained language seemingly directed at all other digital currencies, including Bitcoin.

UPDATE: wm-center was named as one of the sites seized in the Liberty Reserve case:

DOJ

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