the nanny bubble

Doug Henwood dhenwood at
Thu Sep 17 09:04:19 PDT 1998

[From the October Harper's.]


>From "Say Hi to the Nanny Bubble," a memorandum sent on July 6 to clients
of Morgan Stanley Dean Witter by economic strategist Barton Biggs.

Odd things have always happened during stock-market bubbles. Charles Mackay, in Extraordinary Popular Delusions & the Madness of Crowds, tells of the incredible goings-on during the three great seventeenth- and eighteenth-century bubbles, such as when rich speculators fed their horses on gold. More recently, at the height of the great Japanese stock-market bubble, golf-club memberships were traded like securities and, at the peak, were selling for several million dollars apiece. Now they have crashed 90 percent or so.

As it creates wealth, a stock-market bubble spreads into other asset classes, particularly real estate and collectibles, and eventually seeps out into the obscure nooks and crannies of sectors that directly service the bubble participants. It is well known that this time, in the full voluptuousness of our bubble, luxury residential realestate prices have skyrocketed, and that the glorious bull market has embraced everything from jet time-sharing to wine cellars.

In Greenwich, Connecticut, where I have lived for some time, the older citizens are appalled by the size of the mansions ("starter castles") that are being added to the landscape by wealthy young investment bankers and hedgefund managers. But the latest madness that has the town clucking is the "nanny bubble."

In this town, you are not a real family unless you have two live-in Anglo-Saxon nannies. Unfortunately, there aren't enough to go around. You would think that like the old slave traders, procurers would be beating the Irish and Scottish countryside and the farms of North Dakota for likely prospects, but apparently they aren't so easy to find. The Emerald Isle is not exactly a depressed area these days, and the lassies would rather be somebody's secretary.

As a result, the price of nannies in Greenwich and presumably in similar parts has soared. The hourly baby-sitting rate is pushing $20, but the real inflation has come in the livein market. Prices are up to $600 or even $750 a week, with four weeks of paid vacation plus personal days. Although English nannies have the cachet, Filipina women vastly outnumber them, and they maintain an efficient information network that ensures quick dissemination of each uptick in the wage scale.

These days, the vicious competition is in the perks. A room and bathroom of your own is automatic, and desperate mothers are now offering everything from tennis lessons and theater tickets to the exclusive use of an automobile to facilitate nanny social life. The latest escalation to outrage Greenwich is that a family new to town enticed a nanny by buying her a new car (which she helped choose) with the proviso that if she sticks around for two years, it's hers. In effect, it's a signing bonus with golden handcuffs. Brilliant, except that now other nannies are demanding similar deals. I would bet you it wilt be a long time before that particular family gets into a country club.

Of course, it will all come to a bad end someday, and, as in the 1930s, the twenty-five-room mansions with their five-car garages will be selling for a fraction of what it cost to build them, and the nannies will have migrated to where the next boom is. But only the god of the markets knows when.

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