Fired Equity Analyst Lands Key Investor Role at Vivendi. (Wall Street West).

LAURA Martin, the Pasadena-based entertainment-industry analyst who was indelicately let go by Credit Suisse First Boston, is slated to start the year handling investor relations for Vivendi Universal.

Martin will play a "key role" in helping the French media empire achieve its publicly stated goal of boosting ownership of its stock by U.S. investors, said Vivendi Universal spokeswoman Anita Larsen.

Martin, paid $3 million a year at CSFB, achieved notoriety for being downsized shortly after downgrading 11 entertainment industry stocks, including that of Walt Disney Co., on Sept. 19. Martin was a buy-side analyst and money manager with Capital Research & Management in downtown Los Angeles before joining CSFB. She was reported to have offended CSFB entertainment industry investment banker Jill Greenthal. The CSFB firing raised anew questions about whether brokerage analysts under pressure to issue too many "buy" recommendations.

Last week, a CSFB spokeswoman declined to comment on Martin, a seven-year veteran, and Martin could not be reached for comment. But Martin's work is cut out for her at Vivendi. "Right now, we are about 25 percent owned by U.S. investors," said Larsen. "We want to make that 50 percent. Jean-Marie Messier, our chairman and CEO, moved from Paris to New York in September, specifically for the reason of improving relations with the U.S. investment community."

Martin, who holds a B.A. from Stanford and an MBA from Harvard, will work intercontinentally, with offices in Los Angeles, New York and Paris.

Upside Down

John Marrone, managing director of Roth Capital Partners in West Los Angeles, points out that 18 months can make a big difference in the brokerage world.

Back in 1999 and early 2000, brokerage houses were swiping stockbrokers from each other by paying "100 to 120 percent of annual gross commissions," Marrone said. "That meant some of the big houses -- Prudential and PaineWebber were the most aggressive -- were writing hiring bonus checks for $2 million?'

The $2 million bonuses were usually structured as 5-year forgivable loans, with about one-fifth of the loan forgiven for every year of service, Marrone said.

Fast-forward to the end of 2001. "I know for a fact that some of those brokers went out and invested the whole $2 million on margin," said Marrone. Of course, the hot tech stocks of yesteryear collapsed, while the overall market treads downward.

As the annual installments of loan forgiveness come up, so comes another problem: the IRS. Under federal tax law, a forgiven loan is treated as income, so brokers find they have $300,000 or $400,000 of extra annual income on which to pay taxes, even as a bear market eviscerates their portfolio and commission income. "Some of these guys are upside down by a million bucks," Marrone said.

He said hiring bonuses are now tamer. "A very well-established broker might get a bonus for 50 percent of gross commissions today, but that's a guy with a lot of assets under management," said Marrone. "In 1999, anybody with a pulse got a bonus."

Lab Work

Several local venture shops have talked broadly, and sometimes grandly, about leveraging Southern California's huge base of scientists and engineers to launch world-beating companies based on high technology hot from the lab.

So far, that idea has remained tantalizingly out of reach. Still, Frank Tota, general partner and founder the downtown Los Angeles-based Arcturus Capital LLC venture shop, last week announced the launch of Arcturus Capital Core Technology Fund, to finance what Tota calls "disruptive" technologies emerging from Southern California labs.

He is seeking $100 million, and said that a first round of financing, roughly $30 million, should be in hand by January. In particular, Arcturus Capital has an exclusive relationship through West Los Angeles-based X-Laboratories Inc. to put venture money towards projects unfolding at Malibu-based HRL Laboratories, which is jointly owned by Raytheon Co., Boeing Co., and General Motors Corp., and has engineers and scientists peck away at problems. In addition, X-Laboratories works with Jet Propulsion Laboratory, managed by Cal Tech, and other area research tanks.

Tota vowed to be proactive, bringing commercial ideas, or problems in need of fixes, into local labs. He is searching for technologies that will change the way an industry works, in the manner, say, that photocopying replaced mimeographs.

"It is a great time" to be a venture capitalist, Tota said, as price tags on technology are low. "In 1999, many early stage companies sold for three to five times what they do now, and we are talking about companies with good technologies" said Tota, a Harvard grad.

A New Tack

This month, Westside personal money manager Mary Kaye, founder of Kaye Capital Management, plans to get back to "full" allocation to equities, in the $50 million worth of portfolios he manages for high-net-worth individuals (his minimum account is $500,000). All year he has been slicing back on equity allocations, and he cut way back following Sept. 11.

"I made a major change, the largest change I ever made in my career, on that first trading day after Sept. 11," said Kaye, who began working on Wall Street more than 40 years ago, and who is current president of the Los Angeles chapter of the Financial Planning Association. "I figured all bets were off. This was a period of unprecedented risk. They attacked us on our soil. I reduced our equity allocations by half."

'Thus, if an investor had been 75 percent in equities before Sept. 11, Kaye moved that portfolio down below 40 percent.

Kaye easily admits he missed some of the rally that followed in October and November, and lifted market averages by 20 percent. "I was avoiding risk ... and I didn't see any justification for a market that was trading at such high multiples;' he said. (The average price-earnings ratio on Wall Street is still around 30 for blue chips, a historically high level.) Additionally, Kaye has moved most portfolios out of tech and growth and into value stocks, largely safe blue chip issues. "We tend to look for low-risk alternatives, always mindful of risk and return tradeoffs," Kaye said. "This may be the trickiest investing period ever."

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book is "The Pied Pipers of Wall Street: How Analysts Sell You Down the River," published by Bloomnberg Press.