The presidents of three of Baltimore's investment firms could barely conceal their glee yesterday as they held their third annual review of the investment business.
The reason for the smiles from the executives of Alex. Brown Inc., Legg Mason Inc. and T. Rowe Price Associates Inc. is that the investment business is booming, even as the rest of the economy scrapes along.
"We've gone through five extraordinarily strong quarters in the investment banking environment," said Mayo. A. Shattuck III, president of Alex. Brown, the nation's oldest investment banking company.
In fact the more than $8.5 billion worth of initial public offerings in each of the first and second quarters this year far exceeded the peak years of the mid-1980s, when a high of nearly $7.5 billion was raised in the fourth quarter of 1987.
Secondary equity offerings also have been booming, Mr. Shattuck said, with almost three times as much money being raised in the past four quarters as in any prior year.
Even the junk bond market "is roaring back," Mr. Shattuck said as the three men discussed the investment outlook at a private luncheon in the Stouffer Harborplace Hotel.
Although no junk -- below investment grade -- debt was issued in 1990, $10 billion was raised in 1991. In the first half of this year, $25 billion in corporate junk bonds has been issued, compared with a record $36 billion in all of 1986.
T. Rowe Price, which manages 43 mutual funds, and Legg Mason, with 10 funds, also have profited handsomely from the exodus of bank deposits into mutual funds.
Sales of stock and bond mutual funds are on a record pace this year, said James S. Riepe, president of the subsidiary T. Rowe Price Investment Services Inc. and chairman of the Investment Company Institute, a mutual fund industry trade group.
Mr. Riepe credited the influx -- more than $160 billion worth in the first half of the year -- to the strong performance of the stock market and the sharp drop in short-term interest rates.
He also noted that interest in retirement planning has skyrocketed in the past few years, partly because of the lower interest rates and partly because people have little confidence in the ability of the government or their employers to pay enough toward their retirement living costs.
Legg Mason has reacted to the new investment boom by hiring more brokers. This year, the company will train 97 new brokers, up from 37 last year and the previous record of 51 in 1985, said James W. Brinkley, president of Legg Mason Wood Walker Inc., the stock brokerage unit of Legg Mason Inc.
"I think we have a great decade ahead for the financial-services industry," he said.
Unless, that is, interest rates start to rise and the stock market begins to decline slowly. All three presidents warned of the dangers to the industry of excessive expectations based on today's performances.