James W. Brinkley, 67, chairman, Legg Mason Wood Walker, Baltimore
By SCOTT BARANCIK
Published March 1, 2004
Q. What's your take on today's stock market?
Markets bottom at the point of greatest pessimism, rise on skepticism, mature on optimism and die on euphoria. . . . I'd say we're in the early optimistic phase of the current cycle. . . . We came out of the bear (market) in '02, and we'll see what happens going forward. . . . You have to remember that (Federal Reserve) chairman Greenspan gave his "irrational exuberance" speech in (December) of '96, when he thought the market was way ahead of itself. And the market continued to go up for the next four years.
Q. Whether the market is high or low, brokerages always seem to be telling the public that "Now's a good time to buy stocks." Is there a moral hazard to such advice, given that many brokers charge a fee on trades?
I don't know if it's a moral hazard, but I know this: When you place clients interests' first, that is enlightened self-interest. . . . If you're a long-term investor, you will always be in equities, but the percentage you're in, and the type of equities, will be the variable. . . . If you look at the most successful investors, they're the people who've held (stocks) for 10, 20, 30, 40 years. John Templeton and Warren Buffett and Bill Miller, they've always owned stocks.
Q. As chairman of the Securities Industry Association in 2000, you called upon the brokerage industry to promote public trust. What have you learned from Legg Mason's recent settlement with federal regulators over allegations it and 14 other brokerages overcharged some mutual fund customers?
There were several equations there. The mutual funds, their recordkeeping wasn't as good (as it is today). Legg Mason did not have the systems in place that we now know we should have had, and the communications with the clients weren't as good as we would like to see. So you just keep working hard on those things.
