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Lehman fires 500, including strategist Jeffrey Applegate

Lehman Brothers Holdings Inc Chief Investment Strategist Jef-frey Applegate, who said he "missed the whole bear market," was among 500 people fired this week as the bank copes with a slump in stock and bond trading.

The firings total 4 percent of Lehman's work force, people familiar with the situation said. The fourth largest investment banking had 12,980 employees on Aug. 31.

Applegate became Wall Street's fourth stock market strategist to lose his job in recent weeks, as the securities industry copes with a three-year bear market in equities and investment banking.

In September, Lehman reported a 37 percent profit drop, its sixth decline in seven quarters.

"These are highly compensated people," said Tim Ghriskey, founder of Ghriskey Capital Partners, a Greenwich, Connecticut, money manager. "If you can cut one big salary you can save a whole bunch of small salaries."

Applegate was popular among professional investors during the 1990s bull market. He placed third in Institutional Investor magazine's survey of money managers in 1999. That year, he correctly foresaw that fast-growing companies would rise more than inexpensive, so-called value stocks, and that the largest companies would rise more than smaller ones.

Lehman said the job cuts were across all divisions.

"We are constantly reviewing the scope and scale of our businesses and the environment in which they operate in order to increase our productivity and the firm's profitability," Lehman spokeswoman Hannah Burns said. "We have made small adjustments across all divisions and regions to reflect the challenging environment."

This month, Merrill Lynch & Co fired chief economist Bruce Steinberg and Martin Fridson, a junk-bond analyst. Last month, Credit Suisse First Boston fired market strategist Tom Galvin, who, like Applegate, was among the most optimistic equity forecasters.

Like many of his rivals, Applegate didn't see the plunge coming. At the end of 1999, he predicted that the Dow Jones Industrial Average would end the year at 12,750. He was 2,000 points too optimistic. Applegate didn't return calls to his home and office.

At the end of last year, he was one of the most optimistic strategists, recommending investors keep 80 percent of their assets in stocks.

"So I missed the whole bear market," he said in an interview a year ago. "The question is, `where are we now?' And I think we're at one of the cyclical turning points" that will reward investors in an economic turnaround, he said.

Stock indexes are headed toward their third straight year of losses, the first three-year losing streak in 60 years.

Applegate, who joined Lehman in 1995 from Credit Suisse First Boston, has called missing the 1987 crash his worst call ever. He was working for EF Hutton & Co at the time.

The other job cuts are distributed among all of Lehman, people familiar with the situation said.
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