Christine Harper, Pat Wechsler and Matthew Benjamin wrote a piece today for Bloomberg examining the possibility that the Obama administration may relax the compensation restrictions on the banks that have received TARP money.  The restrictions were imposed by Congress after Merrill Lynch executives had received bonuses while the company was floundering and already under purchase from Bank of America.  The story quotes Gary Parr, the deputy chairman of Lazard  Ltd.,

“It is clear that the government’s going to have to come out with some guidelines on what will compensation be at the big institutions that have TARP,” … “There’s going to need to be something done so that there isn’t a picking off of certain institutions where they’re at a severe disadvantage to others.”

The authors of the story also referred to research by Liberum on turnover in the financial industry and how those numbers might impact Congress’ view on the compensation question.  Check out the story if you are interested in executive compensation or the government bailout of the financial industry.

Each issue of TWST, we speak to portfolio managers coming from a variety of perspectives on the market. In each interview, we make sure to ask them what advice they would offer at the present moment for our readers. Here’s what three different portfolio managers had to say:

1. Lee Lahourcade, Vaughn Neslon Investment Management: We would advise, given how volatile the markets are, not to chase the market. We think 2009 is going to be a range-bound market with the S&P likely to trade in a range of 700 to 1,000. We would recommend, as levels get closer to the bottom of that range, that one put more money to work. Today we are about in the mid-point of the range, so building some positions in selected stocks is probably a smart strategy.
2. Ken Salmon, M&I Investment Management Corp.: Our advice to investors would be to have a diversified portfolio that includes exposure to small cap and mid-cap stocks. We’re still in a difficult time with the economy and the stock market, but there are a lot of policy responses around the globe trying to offset the weakness. Whether it’s improving liquidity in the credit markets, whether it’s working with the banks to remove some of the most problematic assets from their balance sheets to free up some capital, whether it’s the federal government and/or state governments coming up with various economic stimulus programs, certainly all that helps. Also, we’ve spent the last six months going down at a tremendous rate and we’re in a period of stabilization right now. Everybody is kind of taking a deep breath and we’re hoping we can move forward from here. We’re long-term optimists, but we’re also taking it one day at a time and seeing how things develop.
3. David Pequet, MPI Investment Managemen: In fixed income, I would stay away from pure Treasuries and money funds. I would keep my portfolio quality high. We like seasoned GNMAs right now that have average lives of four years and yield 3%-3.5%. They are very high quality, good income, short duration…On the municipal side, also stay in short/intermediate durations. Focus on essential service bonds, GOs, water, sewer, electric revs and pre-refunded bonds.

For the complete Investing Strategies report, including a complete interview with each of these portfolio managers and more, click here.

This week The Wall Street Transcript has released a new report on the The Financial Crisis in the Banking Sector.  This unique 742-page document tracks the thinking and perspective on the major sectors of finance, from 2000 through to 2009, with particular emphasis on the period from 2003 to 2006 when the seeds of today’s crisis were sewn.

The following is a excerpt for the report:

03/20/00 – Analyst Interview:  Financial Services: A Legislative & Regulatory Outlook: Stephen Blumenthal – Schwab Washington Research Group

“You have conflicting messages being sent by the government. On one hand, we have the regulators who are trying to protect the FDIC Fund and the taxpayers. They’re saying they have concerns about the decline in credit quality. They are uncomfortable with banks making loans to people with less than perfect credit histories or on riskier business propositions. On the other hand, recently the Department of Housing and Urban Development put out a report that said Fannie Mae and Freddie Mac are not lending enough to minorities.”

This is a record of in-depth verbatim interviews conducted and published at the time, probably the only long-form, first-hand account of what exactly people were thinking as the crisis unfolded.

In the most recent issue of TWST, we spoke with analyst Michael Kim of Sandler O’Neil & Partners. He talked to us a little bit about the Asset Management space and the stocks that he’s concerned about there. Here’s what he had to say:

 Mr. Kim: One that I would highlight is T. Rowe Price (TROW), which has historically commanded a premium multiple, and rightly so. But I think the very reasons why TROW has historically traded at a premium multiple are rapidly evaporating, the first being the consistency of their organic growth over time. A lot of that has been on the back of their skew toward retirement accounts, or 401(k) plans and IRAs. We’ve already started to see many investors slow contributions and, in many cases, stop contributions altogether. I don’t think it’s unreasonable that we see the next step, or a meaningful step up in withdrawals from retirement accounts. So now, the very driver behind TROW’s organic growth advantage could ultimately turn into an incremental risk for that
franchise.

For the complete Financial Services report,  including a roundtable discussion of the space and interviews with top CEOs, click here. 

In our recent Corporate Software report Kevin McVeigh of Credit Suisse First Boston explores Iron Mountain’s Growth Opportunities:

Mr. McVeigh: They have both domestic and international growth opportunities. Penetration rates tend to be low in both regions. What is unique about the model is that you get a fair amount of internal growth from its existing customers. Every year existing customers tend to generate higher levels of storage activity. If you layer in new sales opportunities and price increases, you get a model that has been growing 7% to 9% internally on an annual basis for a long time. We don’t expect that to change. One caveat is in 2009, the company reduced its internal growth target to 5% to 7%, but the 200 basis point reduction was due to a reduction in commodities in one of the less predictable business lines.

Now nothing is recession proof but a predictable business models like Iron Mountain’s works well in this macro environment .

In our special focus on Corporate Software, analyst Mark Schappel of The Benchmark Company has some good and some bad news to share on the nature of M&A activity in the Corporate Software space:

The Good

• “On the plus side, several large and mid-sized software vendors have a lot of cashto spend. Most software companies are profitable, have little if any debt and don’t pay a dividend. So they have plenty of cash, good cash flow and positive operating margins.”
• “Another positive is that smaller vendors and some startups may be motivated sellers, especially if they are having cash troubles. Some of these smaller companies don’t have the access to the financing the way they did a few years ago. Also, valuations are low.”

The Bad

• “Some impediments include fewer buyers than in the past. For instance, over the years, Oracle bought PeopleSoft, Siebel, Hyperion and BEA Systems. All those acquired vendors were themselves buyers at one time. Now there just aren’t as many buyers in the software space as there used to be. The PLM space or the business intelligence space is another good example. Most of the big business intelligent vendors have been bought — Hyperion by Oracle, Cognos by IBM and BusinessObjects by SAP. So the available buyers are fewer.”
• “Another M&A impediment in this environment is the lack of available credit that has sidelined some of the financial buyers, such as private equity funds. It’s
  also keeping some of the acquisitive minded software vendors on the sidelines as well, such as Open Text or Infor that have relied on debt to help finance their acquisition sprees.”

For the complete Corporate Software report, including a full interview with Mr. Schappel, as well interviews with a variety of other analysts giving a complete overview of this space, click here.

Forbes Editor, Paul Maidment put out a video the other day examining some of the recent conclusions put forth by Liberum on the level of executive turnover as compared with overall unemployment.  Check it out.

In one of our featured interviews this week Benny Aboud, CEO, and Michael W. Wallace, SVP & CFO, of Saveology.com  discuss Saveology.com and its current market position;

“The Saveology.com core services include satellite, cable, broadband, Internet, telecommunications, home security and utility services. We currently offer over 30 products and reach over 95% of the households in the United States. Consumers will spend over $3 trillion on these home services by 2010 and Saveology.com is uniquely positioned to take advantage of this market opportunity.”

Saveology.com launched SaveologyMoving and SaveologyFinance – Additions to Service Offerings Reaching over 2 Million Monthly Visitors

In a special interview in our last issue, we spoke with Steven Frenkel of Patternwatch, who told us about his unique perspective on investing, the 75-year cycle:

Mr. Frenkel: Since late 2006, leading up to the top in October 2007 and. more important. since that top, the 75-year cycle has played a predominant role in market analysis and portfolio management, in my opinion, and since it’s such a large top and it’s such a long cycle, using it or taking account of it in trading and in portfolio construction prior to this period would have been truly meaningless. Using such a large cycle prior to the topping window period would not have given you the extra alpha or separated you from your peers. But only in this turning window period was taking account of it able to provide that separation. Indeed, if you see what the track record of my newsletter PatternWatch has been for these past two years, you see that I was able to separate myself from those who didn’t take account of that cycle. This track record is below.

To see the track record of Mr. Frenkel, as well as to read the full interview with him, giving his unique perspective on the market, click here.

In one of our featured Interviews this week Marty Becker of Max Capital discusses the growth and changes to the company;

“Max is a traditional underwriter of specialty insurance and reinsurance. It has successfully transitioned from its origins as a Bermuda reinsurance company with a structured and alternative risk underwriting portfolio and an investment strategy that included a relatively high proportion of hedge funds and other alternative investments. We’ve successfully executed a 180-degree turn over the past 10 years, and today we believe Max has a really strong traditional underwriting operation. And we run a fairly similar investment portfolio to the other major global writers.”