Smith Barney

Legg Mason has long bet on its fund managers the way its fund managers bet on stocks: Do your homework and put big stakes on a few promising ponies. It worked beautifully for years, but now Legg's dependence on high-profile talent such as Bill Miller may be backfiring. The firm's recent, mediocre money management has gotten extra attention because it's being delivered by former stars. No, the headline effect isn't wholly responsible for the billions withdrawn from Legg funds last quarter; poor performance can repel money all by itself.

ON DEC. 31, 1998, when the Dow Jones industrial average average closed at 9,181.43, Charles Carnaggio of Lutherville became our contest winner with his year-end forecast of DJ 9,183. He made the projection last January when the Dow was around 7,875. About 2,500 entries were received.The winner and his wife will be dinner guests of Mr. and Mrs. Ticker at Michael's Cafe, the Carnaggios' favorite restaurant.Carnaggio, a retired Bell Atlantic equipment installer, said: "I felt that the high-tech, regional Bells and pharmaceutical stocks would do very well.

ON DEC. 31, 1998, when the Dow Jones industrial average average closed at 9,181.43, Charles Carnaggio of Lutherville became our contest winner with his year-end forecast of DJ 9,183. He made the projection last January when the Dow was around 7,875. About 2,500 entries were received.The winner and his wife will be dinner guests of Mr. and Mrs. Ticker at Michael's Cafe, the Carnaggios' favorite restaurant.Carnaggio, a retired Bell Atlantic equipment installer, said: "I felt that the high-tech, regional Bells and pharmaceutical stocks would do very well.

THE STOCK MARKET was closed yesterday in observance of Martin Luther King Jr. Day, the first time that has happened since the federal holiday began 12 years ago. Getting Wall Street to do more than observe a moment of silence is the most significant result so far of civil rights leader Jesse Jackson's latest campaign. There is much, however, that still needs to be done.Mr. Jackson's Rainbow/Push Coalition opened a Wall Street office last year. With Salomon Smith Barney Inc. and the New York Stock Exchange, it co-sponsored a three-day diversity conference last week.

NEW YORK -- Smith Barney Inc.'s settlement of a class-action lTC sex discrimination case was rejected yesterday by a federal judge, who called the company's plan to expand the role of women insufficient."

NEW YORK -- Smith Barney Inc. is expected to announce today a settlement of a class-action lawsuit that accused the firm of denying women promotions and doing nothing while brokers harassed women employees.Under the settlement, women employees would take their claims to an independent arbitrator outside the securities industry, people involved with the negotiations said.Such a move is a radical departure for a Wall Street firm. Wall Street firms have typically fought long and hard to have all disputes -- whether with clients or employees -- settled by industry arbitrators.

NEW YORK -- Travelers Group Inc. said yesterday that third-quarter operating earnings climbed 29 percent, led by profit at its Smith Barney Inc. brokerage and in its property and casualty insurance business.Profit excluding gains from investment sales rose to a record $740.8 million, or $1.12 a share, from $576.1 million, or 86 cents, a year earlier.The latest earnings beat the expected $1.01-a-share forecast in an IBES International survey. Travelers shares gained 81.25 cents to close at $75.3125 on the New York Stock Exchange.

NEW YORK -- Travelers Group agreed yesterday to buy Salomon Inc. for $9.3 billion, moving closer to its goal of becoming a financial supermarket handling everything from health insurance to retirement plans.Travelers, an insurer and the parent of Baltimore-based Commercial Credit Co., will join its Smith Barney Inc. and Salomon Brothers Inc., the world's biggest bond trader with investment bankers around the globe, to create Salomon Smith Barney Holdings Inc., the nation's third largest securities firm.

WASHINGTON -- Securities and Exchange Commission JTC Chairman Arthur Levitt has launched an inquiry to find out whether compensation practices at major Wall Street firms keep brokers from acting in their clients' best interests.Merrill Lynch & Co. and Smith Barney Inc., the two largest brokerages on Wall Street, received letters from Levitt last week asking about their use of sales contests and financial inducements to brokers working at other firms, securities industry executives said Friday.

NEW YORK -- Travelers Group Inc. said yesterday that fourth-quarter earnings jumped 38 percent as profits increased at its Smith Barney securities brokerage and its insurance businesses.The insurance and financial services company said profit excluding gains from investment sales rose to $608.5 million, or 92 cents a share, from $441.7 million, or 66 cents, a year earlier.Those results exceeded Wall Street's expectations of 89 cents a share, based on a survey of eight analysts by IBES International Inc.For the year, Travelers reported that it earned $3.35 a share from operations, up from $2.44 a share in 1995.

Stanford Financial Group, the Texas-based investment house accused of "massive fraud" by federal authorities, recently opened a Baltimore affiliate that manages money for area nonprofits such as the Park School and Loyola College. Nine financial advisers and analysts left Smith Barney's Lutherville office and set up business in December as Stanford Institutional Consulting, bringing along nonprofits with endowments to manage and other clients. Although the Securities and Exchange Commission says billions are missing from Stanford Financial, there was no indication yesterday that the alleged fraud there had affected Stanford Institutional clients.

Citigroup Inc. began yesterday to shrink its financial "supermarket" model that took shape in Baltimore two decades ago by splitting into two businesses, as it reported an $8.29 billion quarterly loss. Citicorp will focus on its stronger operations, including its global, corporate and investment banking services, while Citi Holdings will oversee noncore businesses such as its government-backed risky assets, insurance unit Primerica Financial Services and CitiFinancial, its Baltimore-based consumer lending arm. Citi Holdings assets are expected to be sold or merged, although Citigroup chief executive Vikram Pandit said yesterday that the company is in "no rush ... to separate ourselves from these businesses."

Somali pirates drown after getting ransom 3 MOGADISHU, Somalia : Five of the pirates who hijacked a Saudi supertanker drowned with their share of a $3 million ransom, a relative said yesterday, a day after the bundle of cash was apparently dropped by parachute onto the deck of the ship. The Sirius Star and its 25 crew sailed safely away Friday at the end of a two-month standoff in the Gulf of Aden, where pirates attacked over 100 ships last year. The drowned pirates' boat overturned in rough seas, and family members were still looking for four missing bodies, said Daud Nure, a pirate who knew the men involved.

Morgan Stanley is in advanced talks with Citigroup Inc. to form a joint venture that would combine the brokerage units of both banks and give Morgan Stanley a 51 percent stake, according to a person familiar with the matter. An agreement could be announced as soon as this weekend, said the person, who declined to be identified because the deal is not complete. Morgan Stanley would pay cash for control of the venture and would have an option to increase its ownership to as much as 100 percent in coming years, the source said.

In the biggest round of layoffs seen to date in the battered U.S. financial sector, Citigroup Inc. said yesterday that it plans to cut about 50,000 additional jobs as part of an effort to stem huge losses sparked by bad investments and lending decisions. The job cuts amount to the second-largest layoff, according to Challenger Gray & Christmas, since the tracking firm began keeping score in 1993. Only a 60,000 job-cut announcement from IBM in 1993 was bigger than Citi's disclosure yesterday.

Citigroup Inc. said yesterday that it is buying back its account-trading technology business from Legg Mason Inc. in the latest deal announced between the two companies. Citi, the largest sponsor of separately managed accounts, said the transaction gives the New York financial giant the ability to customize such portfolios for investors under its global wealth management group. The separately managed account technology also will allow Citi to combine SMAs, mutual funds and exchange-traded funds into a single statement as these unified managed accounts become more popular among clients.

Legg Mason has long bet on its fund managers the way its fund managers bet on stocks: Do your homework and put big stakes on a few promising ponies. It worked beautifully for years, but now Legg's dependence on high-profile talent such as Bill Miller may be backfiring. The firm's recent, mediocre money management has gotten extra attention because it's being delivered by former stars. No, the headline effect isn't wholly responsible for the billions withdrawn from Legg funds last quarter; poor performance can repel money all by itself.

With sales of some mutual funds slumping along with performance, Legg Mason Inc. has renegotiated an agreement to expand the sale of its funds outside of Citigroup Inc.'s Smith Barney brokerage. An agreement giving Smith Barney the exclusive rights to sell Legg Mason Capital Management funds dates to a landmark deal between the companies two years ago, in which Baltimore's Legg Mason swapped its brokers for Citi's asset management unit in New York. The swap made Legg Mason one of the world's largest investment managers.

Citigroup's sweeping overhaul to cut costs and streamline its global banking operations likely will affect more than 500 people in Maryland as the company consolidates operations through layoffs and by shifting workers around the world. A Citigroup spokeswoman said about 240 of the nearly 6,000 Maryland workers would lose their jobs as a result of yesterday's announcement. But she added that the company expects to move 300 other jobs into Maryland during the next year in an effort combine back-office and other corporate functions.

Legg Mason Inc. announced yesterday that it would eliminate about one-third of its mutual funds to streamline operations and get rid of funds with poor track records acquired in a business swap with Citigroup Inc. last year. With the proposed reorganization, Baltimore-based Legg Mason would whittle a stable of more than 165 mutual funds to 119 though mergers and the liquidation of eight funds. In evaluating which funds to target, company officials said they considered a fund's performance and size, its ranking by tracking firms Morningstar Inc. and Lipper Inc., and whether it overlapped with other funds in the product lineup.