JEF - Jefferies Group

[mevsemt]

http://blogs.wsj.com/marketbeat/2011/11/23/jefferies-oppenheimer-jumps-into-the-ring/?mod=yahoo_hs

 

Oppenheimer comments on Egan-Jones and their analysis of Jefferies in a report titled "Another Hack Attack". 

[stahleyp]

 

http://www.foxbusiness.com/industries/2011/11/22/exclusive-jefferies-ceo-weighing-future-as-independent-firm/

 

The saga continues.

 

 

Who are these "investment banking sources"?

 

anyone know?

[value-is-what-you-get]

Looks like Egan-Jones has decided to double down on their call for JEF to raise equity and reduce their leverage ratio. 

 

http://www.bloomberg.com/news/2011-11-22/jefferies-should-raise-1b-in-equity-egan-jones.html

 

Meanwhile, Fox News reports that JEF is considering selling itself to a "bigger player."

 

http://www.foxbusiness.com/industries/2011/11/22/exclusive-jefferies-ceo-weighing-future-as-independent-firm/

 

The saga continues.

 

strong companies don't put themselves up for sale when they are trading at multi year lows and putting out daily press releases saying how great they are.

 

Gee - I just don't know what to believe any more . . . an informed opinion about Jefferies from legendary value investors Cumming and Steinberg who sport decades-long double digit compounding records and recently invested 10s of millions of their own money in Jefferies Common Stock?

. . . or unnamed "sources familiar with the activities of the firm" whispering sweet nothings about what others are thinking and speculations about the intentions of Canadian banks as reported on the ever-reputable FOX. 

 

So confusing  ;D   

[value-is-what-you-get]

Who would you rather have as a business partner?

 

“Handler is a quite unusual bird,” Frank Glassner, CEO of Veritas Executive Compensation Consultants in San Francisco, said in a phone interview. “He clearly communicates a message that he’s in it for the long term and in it with shareholders as well. It’s a great leap forward in faith on his part not to have an executive contract.”

 

The Jefferies CEO owns a bigger share of his company than CEOs at the biggest Wall Street banks, with a 6 percent stake that dwarfs the 0.43 percent Lloyd Blankfein holds in Goldman Sachs Group Inc. and the 0.05 percent of Morgan Stanley’s James Gorman, according to data compiled by Bloomberg.

 

Here's the article:

 

http://www.businessweek.com/news/2011-11-23/jefferies-stock-swoon-lops-249-million-from-handler-s-holding.html

[txlaw]

Looks like Egan-Jones has decided to double down on their call for JEF to raise equity and reduce their leverage ratio. 

 

http://www.bloomberg.com/news/2011-11-22/jefferies-should-raise-1b-in-equity-egan-jones.html

 

Meanwhile, Fox News reports that JEF is considering selling itself to a "bigger player."

 

http://www.foxbusiness.com/industries/2011/11/22/exclusive-jefferies-ceo-weighing-future-as-independent-firm/

 

The saga continues.

 

strong companies don't put themselves up for sale when they are trading at multi year lows and putting out daily press releases saying how great they are.

 

I think the gist of the story was that, at this price, JEF is an acquisition target, and the sale of the company might be "inevitable."  That suggests that Leucadia is (and maybe has been) shopping JEF around to a bigger institution, maybe even a foreign bank holding company.  And Rich Handler seems to be aware that his firm could be bought up whether he likes it or not.

 

Almost no financial company is immune to a run on the bank.  They are all vulnerable in times of financial distress -- like now, with the whole European mess and MF Global fiasco -- especially, when there are short and distort campaigns directed at particular institutions.  And as we all know, investment banks have proven to be nice targets to go after, whether there is or isn't anything wrong with their funding setup or accounting.  (Shorts, don't hem and haw about what I just wrote -- I'm not saying that all or even most shorts distort or are out to destroy companies.)

 

Handler's excellent letter was necessary to instill confidence in JEF's various constituencies.  A run on the bank by its customers is the only thing that can take JEF down, given how well it is run for an investment bank.

 

I think it's sad that one of the only viable competitors to the traditional rating agencies has made such a poor, misinformed (even reckless) call.  It's like Meredith Whitney redux.

[Munger]

“Handler is a quite unusual bird,” Frank Glassner, CEO of Veritas Executive Compensation Consultants in San Francisco, said in a phone interview. “He clearly communicates a message that he’s in it for the long term and in it with shareholders as well. It’s a great leap forward in faith on his part not to have an executive contract.”

 

The Jefferies CEO owns a bigger share of his company than CEOs at the biggest Wall Street banks, with a 6 percent stake that dwarfs the 0.43 percent Lloyd Blankfein holds in Goldman Sachs Group Inc. and the 0.05 percent of Morgan Stanley’s James Gorman, according to data compiled by Bloomberg.

 

 

Sure sounds an awful lot like the description of Jimmy Cayne right up until Bear began to implode.  Handler is one of the highest paid CEOs on the planet (despite running a 2nd tier IB) -- like Cayne, he controls the board and awards himself massive compensation every year.  In addition, he awards himself egregious stock option packages...as a result, he like Cayne, showed high ownership stakes.  An Cayne was widely regarded as an "unusual bird," in the most positive way possible of course...until the Bear began to implode. 

 

Let's hope Handler proves smarter than Cayne and finds a buyer before it's too late.

 

[Munger]

Gee - I just don't know what to believe any more . . . an informed opinion about Jefferies from legendary value investors Cumming and Steinberg who sport decades-long double digit compounding records and recently invested 10s of millions of their own money in Jefferies Common Stock?

. . . or unnamed "sources familiar with the activities of the firm" whispering sweet nothings about what others are thinking and speculations about the intentions of Canadian banks as reported on the ever-reputable FOX. 

 

So confusing

 

You should believe the laws of basic arithmetic -- if JEF borrowing rates don't come down, the business model doesn't work, especially with IB crumbling and JEF carrying an insane compensation structure.  This reality accounts for the frantic issue of press releases.  The unintended consquences of TBTF only adds to the challenges for JEF, an entity clearly not TBTF.

 

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.

 

 

 

 

[stahleyp]

“Handler is a quite unusual bird,” Frank Glassner, CEO of Veritas Executive Compensation Consultants in San Francisco, said in a phone interview. “He clearly communicates a message that he’s in it for the long term and in it with shareholders as well. It’s a great leap forward in faith on his part not to have an executive contract.”

 

The Jefferies CEO owns a bigger share of his company than CEOs at the biggest Wall Street banks, with a 6 percent stake that dwarfs the 0.43 percent Lloyd Blankfein holds in Goldman Sachs Group Inc. and the 0.05 percent of Morgan Stanley’s James Gorman, according to data compiled by Bloomberg.

 

 

Sure sounds an awful lot like the description of Jimmy Cayne right up until Bear began to implode.  Handler is one of the highest paid CEOs on the planet (despite running a 2nd tier IB) -- like Cayne, he controls the board and awards himself massive compensation every year.  In addition, he awards himself egregious stock option packages...as a result, he like Cayne, showed high ownership stakes.  An Cayne was widely regarded as an "unusual bird," in the most positive way possible of course...until the Bear began to implode. 

 

Let's hope Handler proves smarter than Cayne and finds a buyer before it's too late.

 

Dude...seriously? Cayne was out playing bridge while Bear was collapsing. Handler writes a detailed letter with a lot of thought and clarity. Totally different.

 

Let's try this.

 

Born in the 1930s he is a self-made man. His father was a stock broker and he is known for his ethics and philanthropy. He married his sweetheart and never divorced. He also started his firm in the 1960s and he is well known for his outstanding returns. He is a friend to many celebrities and people look to him for guidance.

 

Hmmm...this sounds a lot like Buffett!

 

Ummm...no, it's Madoff.  :o

 

 

By the way, what value investors were invested in Bear?

 

[value-is-what-you-get]

“Handler is a quite unusual bird,” Frank Glassner, CEO of Veritas Executive Compensation Consultants in San Francisco, said in a phone interview. “He clearly communicates a message that he’s in it for the long term and in it with shareholders as well. It’s a great leap forward in faith on his part not to have an executive contract.”

 

The Jefferies CEO owns a bigger share of his company than CEOs at the biggest Wall Street banks, with a 6 percent stake that dwarfs the 0.43 percent Lloyd Blankfein holds in Goldman Sachs Group Inc. and the 0.05 percent of Morgan Stanley’s James Gorman, according to data compiled by Bloomberg.

 

 

Sure sounds an awful lot like the description of Jimmy Cayne right up until Bear began to implode.  Handler is one of the highest paid CEOs on the planet (despite running a 2nd tier IB) -- like Cayne, he controls the board and awards himself massive compensation every year.  In addition, he awards himself egregious stock option packages...as a result, he like Cayne, showed high ownership stakes.  An Cayne was widely regarded as an "unusual bird," in the most positive way possible of course...until the Bear began to implode. 

 

Let's hope Handler proves smarter than Cayne and finds a buyer before it's too late.

 

Dude...seriously? Cayne was out playing bridge while Bear was collapsing. Handler writes a detail letter with a lot of thought and clarity. Totally different.

 

Let's try this.

 

Born in the 1930s he is a self-made man. His father was a stock broker and he is known for his ethics and philanthropy. He married his sweetheart and never divorced. He also started his firm in the 1960s and he is well known for his outstanding returns. He is a friend to many celebrities and people look to him for guidance.

 

Hmmm...this sounds a lot like Buffett!

 

Ummm...no, it's Madoff.  :o

 

LOL - That's a good one!  ;D

[Munger]

Born in the 1930s he is a self-made man. His father was a stock broker and he is known for his ethics and philanthropy. He married his sweetheart and never divorced. He also started his firm in the 1960s and he is well known for his outstanding returns. He is a friend to many celebrities and people look to him for guidance.

 

Again until Bear imploded -- Cayne had a huge positive following.  And yes Caynewas:

big in philanthropy

never divorced

well known for his outstanding returns (see the "legendary" muni bond trades) as well as being a world class bridge player

viewed as the man who built Bear

friend to celebrity and politician alike... 

 

Sounded a lot like Buffett.  Although I don't believe Buffett hangs out with "celebrities" the way Handler does.

 

And none of these so called positive attributes can change the fact that Handler is one of the most egregiously compensated CEOs on the planet...if fact, relative to the size of the company he runs, this unsual bird is one of the most egregiously paid CEOs in the history of business.

 

 

[Munger]

Ace Greenberg was actually the one who was considered to have built Bear Stearns.  

 

 

Wrong. 

[stahleyp]

Born in the 1930s he is a self-made man. His father was a stock broker and he is known for his ethics and philanthropy. He married his sweetheart and never divorced. He also started his firm in the 1960s and he is well known for his outstanding returns. He is a friend to many celebrities and people look to him for guidance.

 

Again until Bear imploded -- Cayne had a huge positive following.  And yes Caynewas:

big in philanthropy

never divorced

well known for his outstanding returns (see the "legendary" muni bond trades) as well as being a world class bridge player

viewed as the man who build Bear

friend to celebrity and politician alike... 

 

Sounded a lot like Buffett.  Although I don't believe Buffett hangs out with "celebrities" the way Handler does.

 

And none of these so called positive attributes can change the fact that Handler is one of the most egregiously compensated CEOs on the planet...if fact, relative to the size of the company he runs, this unsual bird is one of the most egregiously paid CEOs in the history of business.

 

 

Did you really miss my point? I was comparing Buffett to Madoff in a similar way you compared Hander to Cayne.

 

The point is just because someone has some vague similarities, does not mean the outcome will be the same.  ;)

 

 

[mevsemt]

Not sure why everyone gets so worked up over Munger, remember this thread: http://www.cornerofberkshireandfairfax.ca/forum/index.php?topic=4909.0

 

... and this Munger quote:

 

Allowing the banks to count stock market capitalization as capital that can be lent against never made any sense and is now coming back to haunt.

 

As stock prices collapse, banks become more insolvent by the day without any connection to the quality of their assets.  Downward spiral.  Who did the regulators and banks think they were kidding w this accounting gimmick?

 

... and then this one:

 

I am not a bank expert by any means but as I understand (and have read from several sources) -- stock market capitalization is counted as capital.

 

 

 

 

[stahleyp]

Buffett in his lat interview on Bloomberg said very politely that he "wouldn't touch JEF with a ten foot pole".

 

http://online.wsj.com/article/BT-CO-20111121-707920.html

 

How is that?

 

Or

 

http://mobile.bloomberg.com/news/2011-11-21/jefferies-says-firm-makes-further-reduction-in-its-greek-ireland-holdings?category=%2Fnews%2Fbonds%2F

 

"'I don’t know anything specific about Jefferies,” said Buffett, who said he looks to put at least $1 billion into one investment. Jefferies has a market value of about $2 billion. "

 

[Munger]

The point is just because someone has some vague similarities, does not mean the outcome will be the same.

 

I agree...this was the essence of my post as well. 

 

Just because Handler has a high insider ownership and talks a big game, doesn't mean the ultimate outcome for JEF will be good.  And also worth noting that there is reason for concern about Handler, recognizing that this doesn't guarantee disaster. 

[Munger]

Really, when did Jimmy Cayne take over?

 

Canye took over when he became president in 1985 and was credited with building Bear in a multi billion$ bond powerhouse.

[txlaw]

Buffett in his lat interview on Bloomberg said very politely that he "wouldn't touch JEF with a ten foot pole".

 

No, he said that JEF wasn't even on his radar because it was so small.  In fact, he specifically said that he didn't know anything about Jefferies.

 

Total mischaracterization of what WEB said.

 

 

[Munger]

LOL !

 

I was simply commenting on the implications of an assertion made by Karl Denninger, which I included in the post.  And in no way was his assertion ever the foundation of my view on BAC, JEF or any other bank...as all of my prior posts will show.

 

 

 

From Denninger

"Note that given the utter fraud of allowing a bank to count "equity value" as capital, when it cannot be spent and is subject to 10% or more swings in value in a single day, means that precipitous stock price drops like this can instantly render a bank insolvent. We could have fixed that in 2008 and 2009 but of course that would have meant that banks would have had to actually go find capital from real people to make loans with, and that was unacceptable - so in addition to allowing them to "mark assets to fantasy" we also allow them to count as "capital" things you can't spend, thereby allowing them to generate profits from that phantom "capital" - and huge losses when the deception is revealed."

 

 

 

[Munger]

I think its fair to say that Ace's track record was better than Jimmy's.

I would agree 100%.

 

But Bear was a tiny and far different company when Ace handed off to Cayne.  The Bear that was glorified as a bond powerhouse was built by Cayne. 

 

[Kraven]

I think its fair to say that Ace's track record was better than Jimmy's.

I would agree 100%.

 

But Bear was a tiny and far different company when Ace handed off to Cayne.  The Bear that was glorified as a bond powerhouse was built by Cayne.

 

This just isn't correct.  The soul of Bear was Ace.  The seeds of everything Bear became were planted under Ace, not Jimmy.  Check your history.

[Munger]

This just isn't correct.  The soul of Bear was Ace.  The seeds of everything Bear became were planted under Ace, not Jimmy.  Check your history.

 

 

This comment is complete, utter, and total nonsense.

 

The inaccuracy of the above comment is hilarious.  Ace would even assert that the Bear Jimmy Canyne built was far different than what he wanted for Bear.  Ace was marginalized the day Cayne became President -- these are all widely known facts.  And over time, Ace willingly checked out despite still being an employee. 

 

And if you want DIRECT quotes from Ace, Cayne, and other Bear executives -- spend some time with Too Big To Fail (Sorkin) and/or Sellout (Gasparino).         

[Kraven]

This just isn't correct.  The soul of Bear was Ace.  The seeds of everything Bear became were planted under Ace, not Jimmy.  Check your history.

 

 

This comment is complete, utter, and total nonsense.

 

The inaccuracy of the above comment is hilarious.  Ace would even assert that the Bear Jimmy Canyne built was far different than what he wanted for Bear.  Ace was marginalized the day Cayne became President -- these are all widely known facts.  And over time, Ace willingly checked out despite still being an employee. 

 

And if you want DIRECT quotes from Ace, Cayne, and other Bear executives -- spend some time with Too Big To Fail (Sorkin) and/or Sellout (Gasparino).       

 

Wow, complete, utter and total nonsense.  You pimp the Sorkin and Gasparino books frequently.  I've read them, they are both fine.  You are confusing size with nature.  Just because a person gets bigger as they grow doesn't mean they are a different person.  MBS which was the bulk of Bear being a "bond powerhouse" started in the early 1980s with Marano.  This was Ace time, not Jimmy time.  Jimmy grew the firm, but didn't change it. 

[Munger]

MBS which was the bulk of Bear being a "bond powerhouse" started in the early 1980s with Marano.  This was Ace time, not Jimmy time.  Jimmy grew the firm, but didn't change it. 

 

LOL!!!!! 

 

Cayne empowered Warren Spector to build the MBS/asset backed effort. 

 

And the MBS market in early 80s was totally different than the asset backed/mbs securitization market that evolved in the 90's and 2000's, which was the essence of Bear's bond powerhouse. 

 

And Cayne radically changed Bear as highlighted by the change in the culture of risk management under Cayne vs Ace.  In fact, Ace was ultimately kicked out of the risk management meetings! 

 

You claim to have read these books but somehow completely missed:

1) large sections devoted to Warren Spector

2) the differences between the asset backed market as originally conceived and what it ultimately became

3) the embrace of Cayne's view of risk management over Ace's, which ultimately led to the downfall of Bear

 

 

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

[prevalou]

concerning Jefferies and Bear stearns, I'd say: "comparaison n'est pas raison"

[Munger]

MBS which was the bulk of Bear being a "bond powerhouse" started in the early 1980s with Marano.

 

For the record, Marano was still in college in 1982 and didn't graduate until 1984.

 

Marano was not even mentioned in Too Big To Fail and showed up on all of 2 pages in Sellout -- with his named misspelled as Morano.