Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Selectric II who wrote (32511)	3/6/2001 4:04:35 PM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Here's some more incentive for the Houses to stimulate the market to rebound: _____________________________________________________ Tuesday March 6, 3:55 pm Eastern Time Profits Down at Top Wall Street Firms By Brian Kelleher NEW YORK (Reuters) - Profits at top Wall Street firms dropped off in their fiscal first quarter from record levels a year earlier as stock offerings and merger activity dried up, leaving investors searching for signs that the worst is over. ``It was a tough quarter, no question,'' said Mark Constant, who covers securities firms for Lehman Brothers. January was an excellent month, but February was terrible, he added. Morgan Stanley Dean Witter & Co. (NYSE:MWD - news), Bear Stearns Cos. Inc. (NYSE:BSC - news), Goldman Sachs Group Inc. (NYSE:GS - news) and Lehman Brothers Holdings Inc. (NYSE:LEH - news) wrapped up their 2001 first quarters at the end of February. Earnings at the firms are expected to fall as much as 28 percent from last year, when soaring markets were driving investment banking fees. The Nasdaq composite posted its third-worst month ever in February with a 22.4 percent slide, sending stock offerings and mergers and acquisitions (M&A) -- major revenue drivers for investment banks -- down dramatically from earlier levels. ``These companies are so tied to the overall markets -- and selectively more on the Goldman and Morgan Stanley side, to the Nasdaq -- and to investment banking flow,'' said Tim Ghriskey, portfolio manager of the $4 billion Dreyfus Fund. ``At this point, (a second-half recovery) is really wishful thinking,'' he said. ``We're certainly closer to the bottom than to the top, but the environment remains very dicey.'' Analysts have been downgrading their first-quarter estimates while hoping interest-rate cuts by the U.S. Federal Reserve will give the economy -- and the stock market -- a shot in the arm. The Fed slashed interest rates by a full percentage point in January. ``Typically rate cuts take a quarter or two to really impact the economy,'' said analyst Jim Mitchell of investment firm Putnam Lovell Securities. ``So, I think it makes sense to anticipate some sort of pickup at the end of the year.'' Salomon Smith Barney analyst Guy Moszkowski on Tuesday lowered his share-price target for Lehman to $85 from $95 and reduced his Goldman target by $10, to $140. Lehman was at $69.45 in afternoon New York Stock Exchange trade, while Goldman Sachs was at $95.70. ``It is difficult to see an immediate catalyst'' for reviving investment banking earnings, short of a market rebound, Moszkowski said in a research note. NO DEALS LEADS TO CREATIVITY Only 12 companies have gone public so far this year, raising a total of $2.78 billion, according to market research firm Commscan. That pales in comparison to year-earlier activity of 75 initial public offerings (IPO) at a combined value of $11.29 billion. Global M&A volume -- the value of completed deals -- rose 6 percent from the fourth quarter, according to Putnam Lovell data. But excluding the blockbuster AOL-Time Warner merger that closed in January for a record $165 billion, activity in the quarter was actually down 15 percent. This dearth of activity led to a novel investment scheme during the quarter. Morgan Stanley agreed to buy about $2.6 billion of debt from troubled Lucent Technologies Inc. (NYSE:LU - news), according to a report in the Wall Street Journal. Morgan Stanley reportedly agreed to trade the debt back to the telecommunications equipment maker for shares of its Agere Systems Inc. unit. Agere is planning to raise about $7 billion from its pending IPO, making it the second-largest new offering in U.S. history, behind the $9 billion generated when communications giant AT&T Corp.'s (NYSE:T - news) AT&T Wireless Group Inc. (NYSE:AWE - news) wireless telephone unit went public last year. Morgan Stanley will act as the lead manager on the deal and will sell 200 million shares out of a total of 500 million being offered. The deal could bring underwriting fees of up to $250 million, with the lead manager taking the bulk of that, the Journal reported. ``I think the economics of Morgan Stanley leading that transaction are big,'' said Constant. Goldman turned down a chance to help Lucent raise money and is not participating in the Agere deal, according to the Journal. ``Looking at a very large fee as a lead manager is different from Goldman Sachs' decision, which would have been a co-management role,'' Constant said. ``Goldman certainly did the right thing.'' Morgan Stanley's approach is unique because of the size of Lucent and its desperate need for capital, analysts said. The company is trying to restructure its operations and recover from massive losses. ``This is a sign of the times, but it's not a sign of the future,'' Constant said. ``Most issuers...two and three years from now, will be having a different set of priorities in a more favorable market environment'' than which firm can lend them money.