On Goldman Pond

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Memorial Day marks the official beginning of summer. I wrote this story years ago and revisit it each year just before Memorial Day. Some details haven’t changed. Loaves and Fishes really does sell lobster salad at $100 a pound, and I have seen customers buy multiple pounds. A few years ago, a 3,000 square foot “cottage” did sell for $10 million and a 7,500 square foot house did for $75 million.

In 2020, Covid brought the plague to the Hamptons. Not the disease. “Compounding” — families buying two and even three seven- and eight-figure homes on the same street. A Hamptons real estate agent: “I have a client with a $10 million main house buying another one with a whopping price tag next door for the kids… I have another client who’s trading up — from a $5 million home to a $10 million one.”

2022 has produced peak insanity. The landlord at 205 Surfside Drive in Bridgehampton is asking $1 million from August-Labor Day. Down the street a beachfront property is priced at $750,000 for  2 weeks. Impossible? Here are the Sotheby’s listings.

The characters in my story and the plot are fiction. But then, so is Hamptons reality.

Jed was supposed to have a summer internship at an online startup, but the startup lost its financing the week before he was to report for work, and all the good internships had been taken. Not tragic. He could take a course, add golf to his hobbies, maybe read Proust. He believed his parents were chill about his financially unproductive summer — their house was in Bridgehampton, south of the highway and near the ocean, and large enough that his father’s home office was called “the C-suite” — but they did bitch at dinner about the ridiculous tuition they had paid to a college that didn’t have students on campus for eighteen months.

“Not a college,” Jed reminded them. “Stanford.”

Then his father unleashed a rare dart: “A college where kids think they’re failures if they don’t start a company before they graduate.”

“I’ll be a junior. I’ve got time.”

But email from his Stanford friends confirmed the truth of his father’s barb. Marty had bought Amazon stock early in the pandemic, added pharmaceuticals and Home Depot, and was now, for a fee, suggesting stocks to classmates. Jenna made a few masks, sold them in an hour on Etsy, and started a workroom with undocumented women at the sewing machines. Helen, a compulsive shopper, had a room for her clothes; she was now flipping them on resale sites.

Jed was no slacker. He made his bed. He washed the cars. He went to Loaves and Fishes to pick up a pound of chicken salad for his mother. That was no chore. Most of the customers were women, often wives of wealthy men. Whatever their age, they looked expensive and fit. To see them was to be momentarily conflicted about white privilege.

The customer ahead of him ordered five pounds of lobster salad. She wore a dazzling tennis bracelet and had great legs, but what kept Jed’s attention was how she paid — in cash, with five hundred dollar bills — and how she left without change. A more cynical kid, or Jed on a more cynical day, would have found a reason to follow her out and make her acquaintance.

In fact, she had done something better. She’d given him an idea. He called his friend Nick, who was financing his summer by growing weed in his mother’s greenhouse, and proposed they launch a cash business, a few hours a day, with modest start-up costs, “like the weed business, just legit.”

They could have sold their lobster salad for less than $100 a pound and made a good profit. They’d be cooking at home, they had no employees, and they had the ever-so-simple Loaves and Fishes recipe: lobster, dill, capers and mayo. If they bought the lobsters that Loaves and Fishes used, that would be a cost, but really, who could tell the difference between Canadian hard-shell lobster and the lobsters they’d buy in Montauk?

Jed and Nick had learned something important at Stanford — your marketing is as important as your product — so when they set up a table on Sagg Main with their lobster salad nicely chilled in a cooler in the back of Nick’s mother’s Range Rover, they unveiled a marketing masterstroke: a red, white and blue sign that read LOBSTER SALAD. $125 A POUND. WHY PAY LESS?

They sold out in a few hours. The next day, they sold out faster. Two days later, they were the eighth wonder of the Hamptons, and it seemed they really ought to think about getting a permit.

Jed’s father bragged to a Goldman banker about his son. And the Goldman banker had the next light-bulb idea. Nick wasn’t interested in working for Goldman Sachs, even for the summer, but Jed heard “salary” and “bonus” and jumped.

Goldman had identified a new revenue opportunity: houses on the shore of Georgica Pond. This is prime East Hampton real estate, maybe the most prime now that Hurricane Sandy has shown us how houses overlooking the ocean may not be the wisest long term real estate investments. But because houses on Georgica Pond have a strip of beach for protection from storm surge, home prices there were astronomical.
And quality Hamptons real estate was a scarce commodity getting scarcer.

Around Georgica Pond, there were executives who were surely highly leveraged. Their Manhattan co-ops often had outsized mortgages and monthly fees. Their portfolios were beyond belief, but stocks fluctuated, and they were too greedy to cash out before the dips. Bottom line, they had only one disposable asset — the Georgica properties they’d bought long before the stock market and the tax cuts made everyone they knew majorly rich.

Those executives were Goldman’s targets.

Jed joined another intern and a manager — Goldman’s virtual Georgica war room — in July. Working from social web sites, the Blue Book of the Hamptons and real estate records, they made their lists. And then they made their calls.

They weren’t subtle. They called the wives.

“We see your husband bought your house for $10 million in ’09,” Jed might begin. “That was a bargain. But you have an $8 million mortgage. And another mortgage on an apartment in the city. And two kids at St. George’s — that’s such a great school, I used to play soccer against them; I’ll never forget how cold it gets on those bluffs in November. Goldman would like to be of service. If we can come to terms quickly, we’ll pay you $25 million for your house — and we’ll pay off the mortgage. You will not be homeless in the Hamptons. We will find you another house, south of the highway. Not as large, but nothing to be ashamed of. And, of course, more affordable. Let me do the math for you: Your $2 million down payment turns into a pot of gold. Overnight. In an all cash deal. Yes, there’s a catch: Our offer expires in a week.”

Some of the women gasped — this kid from Goldman knew more about their husband’s finances than they did — but no one hung up, especially after nervous, chatty Jed babbled about the origins of this job and the wives cut a deal of their own: they’d encourage their husbands if Jed provided lobster salad for the rest of the summer. Not that their husbands needed encouragement — they were mostly dealmakers, and whatever the numbers said, they had all the leverage. They pushed Goldman to improve the deal, and Goldman did, and the men pushed again, and Goldman ended up paying three or four times its original offer. More than $200 million for 12 houses in two weeks — for Goldman that wasn’t even a rounding error.

Jed walked away with a $200,000 bonus and a belief that what his manager told him was true — this was a textbook case about the efficiency of the financial market: a buyer for every seller, the universe in perfect balance.

True, but in a specific, 2022 way. The buyers weren’t Manhattan refugees, eager for the final imprimatur of their wealth. They were lawyers representing unknown buyers. Russians moving money. Chinese collecting assets. Would Russians and Chinese occupy these houses? It would be years before anyone knew. And by then Jed would be climbing the ladder at McKinsey.

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