Expert View: Behind plastic smiles, New Yorkers gnash their teeth

Wall Street's young blades decamped en masse long ago to Downtown Manhattan, turning Chelsea, SoHo and the Village into prime real estate. One trader I know proudly boasts that he has never spent an evening above 30th St.

Wall Street's young blades decamped en masse long ago to Downtown Manhattan, turning Chelsea, SoHo and the Village into prime real estate. One trader I know proudly boasts that he has never spent an evening above 30th St.

And yet, I have a sneaking suspicion this may be because he is afraid of meeting his boss. For in November 2004, the rainmakers - those waspy men and women who really run, indeed own, the Street - still live on the Upper East Side.

In Swifty's, on 72nd St, over a bowl of American caviar, life is beautiful for these old men in stripy trousers with frozen, plastic smiles. But whether you are in Chelsea or up on 72nd St, start probing behind the "happy face mask" and you soon find Wall St is surprisingly depressed.

It's unusual for optimism to be in short supply in New York, particularly ahead of the bonus season. For this is the time of year when the men with plastic smiles start composing those six-figure cheques that keep the downtown traders loyal. Expectations this year are high - the post-election market rally couldn't have come at a better time. M&A activity has also resumed with a vengeance, as last week's $11bn (£5.9bn) deal between Kmart and Sears Roebuck showed.

Even the tech stocks and their disciples have made a comeback, spurred on by the successful Google float. The search engine's stock price has more than doubled in the past three months. Sure, once-great tech investors such as Henry Blodget are spending more time with their families. But it is noticeable that other fallen stars are breaking cover. Mary Meeker of Morgan Stanley, once known as the "Queen of the Net", and Anthony Noto of Goldman Sachs, whose disastrous buy recommendations earned him the nickname "Anthony Don't Know", are back in business. Ms Meeker's forthcoming bonus cheque is rumoured to be in the $3m to $5m range.

And yet, I felt last week that the Manhattan tribe was lacking its usual zip - the bullish optimism that infects this island. At first, I assumed it could be the many economic problems closing in on this stock market recovery. Concerns over the deficits are indeed all-pervading; some pessimists talk of the dollar hitting 1.40 against the euro before Christmas. And while UK markets bask in the idea that interest rates have already peaked, the US is having to live with a clear trend upwards, and no certainty as to just how high rates will go.

But the more I spoke to traders, the more I realised their gloom was not caused simply by economics. The recent election has given New Yorkers a real sense of isolation as the East and West coasts turned out in force for John Kerry, but the "flyover States" gave President George Bush the victory.

Somehow, the financial community, so scarred by 11 September, has parted company with this administration's "war on terror" follow-up. At a Goldmans party last year, mine seemed to be the only lapel not sporting the compulsory, patriotic US flag badge. Last week, the crowd was speaking of a different badge of honour.

For it is perhaps not fully appreciated in Europe just how far Mr Bush's "stealth draft" is making inroads into ordinary life. With the huge escalation in the US numbers fighting in Iraq - a gearing-up largely staffed by reservists who never expected to serve on the battlefield - nearly everyone I met last week had a brother, a son or a friend at war. Perhaps in the Republican flyover states this engenders further patriotism. But in Democratic New York, anger and frustration are more prominent. And together with its summary of the score on Wall St, The New York Times has started publishing a daily body count.

christopher.walker@tiscali.co.uk