Bank Earnings? No, Here's What Interests Wall Street

Goldman Sachs (GS) opened at a 52-week high on its strong earnings report today. But that's not what the Street is talking about.

The Street is talking about pay, not about Goldman, not about JPMorgan's "Whale Task Force," nor about net interest margin compression. It's about pay -- the Street's pay. Tomorrow Goldman and Morgan Stanley (MS) hold their compensation communication day, when employees find out what their annual bonus will be.

EFE/ArchivoThe worry is that the new Morgan Stanley compensation package -- based on deferred pay, essentially an IOU -- will become the standard for the rest of Wall Street. If you haven't heard, Morgan Stanley announced that those making more than $350,000 a year will not collect the bonus immediately. This applies only to bonuses of $50,000 or more, but it's got the Street talking.

The ostensible purpose - that traders were likely to make less risky bets when they know the firm owes them money - is besides the point. Most traders I talked to believed the goal was to yoke employees to the company by not paying the full bonus up front.

(Read more: Republicans and Business Aren't Friends Any More)

Traders made as much at 60 percent to 70 percent of their overall pay from bonuses. Now, the figure is down -- way down. Let's say you make $250,000 in pay, plus a $250,000 bonus. Of that bonus, you make a third this year, a third next year, and a third in 2015. If you leave before that, you will likely lose it.

Will this hasten the exist to hedge funds? It certainly means New York will have far less money to spread around from traders spending their bonuses. On down payments for apartments. On cars. On restaurants.

Elsewhere:

1) Lots of chatter about this headline: "Germany looks to repatriate gold." Is it a sign that the Bundesbank no longer trusts other central banks? That the Bundesbank is unhappy with the fiscal irresponsibility of Washington?

(Read more: Germany to New York and London: Give Us Our Gold Back)

This is one the hawks love to talk about. The simple answer is that the gold was stored in the U.S. by Germany during the Cold War because of fear of the Soviet invasion. That threat has long since gone away.

Another answer is that it's expensive -- London, for example, reportedly charges 500,000 euros a year to store the gold, which can be held in a small room.

The final answer is, It is not repatriating that much. Germany has the second largest gold holdings in the world after the U.S. About 45 percent of the holdings are in New York, 31 percent are in Frankfurt, London has 13 percent, and Paris has 11 percent as of Dec. 31, 2012.

Germany is looking to reduce the 45 percent holdings in New York to 37 percent, and Paris to zero. That would bring the German's gold supply to about 50 percent in Frankfurt. Hardly a wholesale rush home.

2) This cheerful comment from ISI on the debt ceiling negotiations: "We doubt a comprehensive deficit reduction bill, or Grand Bargain, will pass Congress, and investors ought to assume the U.S. is headed for downgrades by all three of the major credit rating agencies one way or the other."

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