JEF - Jefferies Group

[Kraven]

 

 

You obviously didn't read those books -- you're lying.

 

You wound me.  If you want, you can come over to my house and I will show you the books and prove to you I read them.  On second thought, I'll skip the visit.

 

My point was that the seeds for Bear would be were planted under Ace.  Jimmy grew the business but all the IBs similarly situated grew during that time.  Jimmy certainly destroyed the business with his half assed management style.

 

For the record, Marano started at Bear in 1983 and was part of the first MBS effort there.  It really started taking off when Howie Rubin joined a few years later I believe from Merrill where he almost blew them up.  But before you accuse me of lying again, I may not be remembering the Rubin history exactly right.  And further, there are more books out there than the Sorkin and Gasparino ones.  I suggest you read some of them.  I also suggest you speak to those who lived it.  I understand fully well what the ABS/MBS market was and what it became and what it isn't any longer. 

[Viking]

Gimme Credit (not sure who they are?) has what looks to be a pretty balanced summary:

 

http://blogs.wsj.com/marketbeat/2011/11/23/jefferies-gimme-credit-upgrades-it-to-buy/?mod=yahoo_hs

[Munger]

My point was that the seeds for Bear would be were planted under Ace.

 

 

Your point is wrong.

 

 

[Ross812]

I thought I’d elaborate on the Munger Correlation after being reprimanded last time I suggested such a correlation. This is a joke, just to clarify! 

 

Technical findings:

 

1. Munger posts are associated with high volume and volatility. Is this the market’s reaction to Munger’s posts or Munger’s reaction to the market… More data is needed.

 

2. If Munger posts more than once in a day, the stock goes up!!! Munger, I would really appreciate you posting more often in the BAC thread!

[stahleyp]

I thought I’d elaborate on the Munger Correlation after being reprimanded last time I suggested such a correlation. This is a joke, just to clarify! 

 

Technical findings:

 

1. Munger posts are associated with high volume and volatility. Is this the market’s reaction to Munger’s posts or Munger’s reaction to the market… More data is needed.

 

2. If Munger posts more than once in a day, the stock goes up!!! Munger, I would really appreciate you posting more often in the BAC thread!

 

 

 

hahahaha. JEF is up about 5% today too!  8)

[Munger]

hahahaha. JEF is up about 5% today too!

 

I did note the following this morning:

 

 

On the positive side -- if reported tangible book value is correct, shareholders could make some money from current levels if management plays its cards right...theoretically a buyer could pay some premium to acquire and then liquidate the firm for a positive return.

 

 

As I've long asserted, it will be very interesting to see how managment plays this out.

[stahleyp]

hahahaha. JEF is up about 5% today too!

 

I did note the following this morning:

 

 

On the positive side -- if reported tangible book value is correct, shareholders could make some money from current levels if management plays its cards right...theoretically a buyer could pay some premium to acquire and then liquidate the firm for a positive return.

 

 

As I've long asserted, it will be very interesting to see how managment plays this out.

 

So, overall, your feelings are something like this? "The stock will probably go up or down in the future; I'm not really sure."

 

Am I right?

[Munger]

stahleyp -- i've tried to treat you w respect but you honestly strike me as pathetic...and you clearly have no clue re investing.  honestly wish you well but you are not worth my time -- sorry

 

my opinions re JEF are clearly expressed in this thread

[stahleyp]

stahleyp -- i've tried to treat you w respect but you honestly strike me as pathetic...and you clearly have no clue re investing.  honestly wish you well but you are not worth my time -- sorry

 

my opinion re JEF are clearly expressed in this thread

 

Here is what I gathered. Feel free to correct any inaccuracies.

 

You have no position.

 

You post bearish remarks about unsustainability of the business model and talk about the uncertainty.

 

You also state that if "tangible book is correct" the it might be a good investment.

 

Where am I wrong?

 

To me, that says that you think it's gonna go down but certainly can go up, too, ie the stock will go up or down; I'm not really sure which way.

 

 

[Liberty]

Hitting 52wk lows.

[rranjan]

Hitting 52wk lows.

 

Established medium size postion. I will make it large size if it drops more.

[tombgrt]

I bought more today as well. Should be under BV, around 0.9x maybe.

[roughlyright]

I am just a little bit excited about Jeffries for next week. Next week there are plenty of bond sales coming up in Europe..and there will be lot of fireworks in market, based on the Italy's raising interest rates. I am hoping this would cause Jeffries to tumble and hopefully I can take a initial position.

 

I have not done much research other than the fact the Leucadia has a big position and Berkowitz has a big position.  I am terribly disappointed that insiders are not buying any. However, I am plan on taking a position only with Call options $5 Strike price in 2014.

 

Are other board members taking position by Stock or call options?

[prevalou]

No insider buying any ?

 

R Handler bought 61231 shares on november 15

[rijk]

check again, those were option awards....

 

leucadia did buy....

 

regards

rijk

[tombgrt]

http://www.bloomberg.com/video/81699844/

 

Epic Errors in Egan's Jefferies Note, Kotowski Says

 

Nov. 28 (Bloomberg) -- Chris Kotowski, an analyst at Oppenheimer & Co., talks about Egan-Jones Ratings Co.’s analysis of Jefferies Group Inc. Egan-Jones said that Jefferies should raise $1 billion in equity and reduce leverage as MF Global Holdings Ltd.’s bankruptcy increases scrutiny of the firm’s balance sheet and said it may cut Jefferies’s credit grade. Kotowski speaks with Stephanie Ruhle and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

[Mark Jr.]

Minor question: I'm reading the annual shareholder letters and they keep making references to "our 130th year", our "150th year", etc. How is that? They took over Talcott National in '78, was Talcott around for that long beforehand?

[robface]

Minor question: I'm reading the annual shareholder letters and they keep making references to "our 130th year", our "150th year", etc. How is that? They took over Talcott National in '78, was Talcott around for that long beforehand?

 

Which years letters are you looking at?

 

I've heard LUK's roots are from Civil War time when the predecessor company made socks for the Union army.

[Mark Jr.]

Minor question: I'm reading the annual shareholder letters and they keep making references to "our 130th year", our "150th year", etc. How is that? They took over Talcott National in '78, was Talcott around for that long beforehand?

 

Which years letters are you looking at?

 

I've heard LUK's roots are from Civil War time when the predecessor company made socks for the Union army.

 

1980, 1982, 1983, 1985.

[robface]

here's the best history of Leucadia that should help answer your question

 

http://www.fundinguniverse.com/company-histories/Leucadia-National-Corporation-Company-History.html

 

Both the Leucadia name and the corporate strategy that engendered its exponential increase in revenues emerged in 1980, but the foundation from which Leucadia was built was formed more than a century earlier, in 1854, when James Talcott, Inc. was established. James Talcott, Inc., incorporated 60 years after it was created as a factoring concern, generated revenue initially by accepting accounts receivable from companies involved in the textile industry and using those accounts as security to provide short-term loans. James Talcott, Inc.'s importance to Leucadia, however, did not arise until the company evolved into a more diversified concern, when it began acquiring numerous financial institutions during the 1950s and 1960s, becoming, in 1968, Talcott National Corporation, a company engaged in commercial financing, real estate mortgage financing, equipment financing and leasing, factoring, and consumer financing.

[Grenville]

In my research of Jefferies, I needed to find good references to understand the mechanics of securities lending & repurchase agreements. In addition, I wanted to make sure I understood the implications accounting wise on the balance sheet. Here are three books that I came across that were very helpful in my understanding of securities finance. The first book was by far the best reference.

 

The Repo Handbook by Moorad Choudhry (2nd Ed. 2010)

http://www.amazon.com/Handbook-Securities-Institute-Capital-Markets/dp/0750681594

 

Securities Finance editors Frank Fabozzi and Steven Mann (2005)

http://www.amazon.com/Securities-Finance-Lending-Repurchase-Agreements/dp/0471678910/ref=sr_1_1?s=books&ie=UTF8&qid=1323641789&sr=1-1

 

Audit and Accounting Guide: Brokers & Dealers in Securities by AICPA (2010)

http://www.amazon.com/Brokers-Dealers-Securities-AICPA-Accounting/dp/B004HZLXEG/ref=sr_1_3?s=books&ie=UTF8&qid=1323641955&sr=1-3

[racemize]

In my research of Jefferies, I needed to find good references to understand the mechanics of securities lending & repurchase agreements. In addition, I wanted to make sure I understood the implications accounting wise on the balance sheet. Here are three books that I came across that were very helpful in my understanding of securities finance. The first book was by far the best reference.

 

The Repo Handbook by Moorad Choudhry (2nd Ed. 2010)

http://www.amazon.com/Handbook-Securities-Institute-Capital-Markets/dp/0750681594

 

Securities Finance editors Frank Fabozzi and Steven Mann (2005)

http://www.amazon.com/Securities-Finance-Lending-Repurchase-Agreements/dp/0471678910/ref=sr_1_1?s=books&ie=UTF8&qid=1323641789&sr=1-1

 

Audit and Accounting Guide: Brokers & Dealers in Securities by AICPA (2010)

http://www.amazon.com/Brokers-Dealers-Securities-AICPA-Accounting/dp/B004HZLXEG/ref=sr_1_3?s=books&ie=UTF8&qid=1323641955&sr=1-3

 

Thanks Greenville, that first one looks very good.  Do you mind posting your current thoughts based on your new understanding?

[Grenville]

In my research of Jefferies, I needed to find good references to understand the mechanics of securities lending & repurchase agreements. In addition, I wanted to make sure I understood the implications accounting wise on the balance sheet. Here are three books that I came across that were very helpful in my understanding of securities finance. The first book was by far the best reference.

 

The Repo Handbook by Moorad Choudhry (2nd Ed. 2010)

http://www.amazon.com/Handbook-Securities-Institute-Capital-Markets/dp/0750681594

 

Securities Finance editors Frank Fabozzi and Steven Mann (2005)

http://www.amazon.com/Securities-Finance-Lending-Repurchase-Agreements/dp/0471678910/ref=sr_1_1?s=books&ie=UTF8&qid=1323641789&sr=1-1

 

Audit and Accounting Guide: Brokers & Dealers in Securities by AICPA (2010)

http://www.amazon.com/Brokers-Dealers-Securities-AICPA-Accounting/dp/B004HZLXEG/ref=sr_1_3?s=books&ie=UTF8&qid=1323641955&sr=1-3

 

Thanks Greenville, that first one looks very good.  Do you mind posting your current thoughts based on your new understanding?

 

Hi racemize,

 

After reading those three books and reading the last two annuals and the most recent 10Q, I feel comfortable with Jefferies. Based on my understanding of their balance sheet they are conservatively financed relative to equity. The have conservative exposures across their inventory positions. Most of their pledged securities are backed by liquid financial instruments so the risk of liquidity is reduced. If you net out all their financing, their financing comes from repurchase agreements and payables to customers. An increase in the payables to customers is a result of their recent commodities acquisition of Prudential Bache. Also their derivative positions and book is growing but a large percentage of the portfolio is exchange traded versus OTC. I also like the fact that their CDS on the liability size is related to index positions versus individual names.

 

With financial institutions you have the black box risk. In terms of Jefferies I feel comfortable with this risk knowing that Leucadia has two board members and have known Handler since at least 2000. Handler also owns a decent slug of equity. I also like that Jefferies has raised capital at decent equity prices and interest rates this year before the markets went haywire. The other thing I like is that when push came to shove they have been very transparent about their sovereign exposure and you got the long letter from Handler.

 

In terms of valuation, the company is trading below tangible book with a conservative estimate of shares outstanding (include RSUs and convertible prefs). Right now the company is making about 200mln a year in a muted environment. In addition, they are hiring aggressively in investment banking and building out the franchise across the world. The willingness to hire and take on the additional expense when things are tough shows me a capacity to suffer and an eye towards long term value creation.

 

It's a good company and I believe a good investment, but you really need to understand the balance sheet and their model. In these volatile times with MF global and all the rumors from certain websites, the share price seems to be pretty volatile.

 

I'm long JEF stock (~5%) and the bonds (~2%).

 

[racemize]

Thanks Grenville--I'm planning on taking a solid position in LUK given its downturn related to JEF, so this is very encouraging.  My less thorough research was making me feel similarly.

[racemize]

I'm thinking of taking a pretty major position in LUK tomorrow (hoping it goes down some more)--if anyone feels like telling me why this is a stupid idea, I'd love to hear it!