Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: Liberty on August 08, 2011, 11:04:08 AM

Title: JEF - Jefferies Group
Post by: Liberty on August 08, 2011, 11:04:08 AM
Because I can't believe we still don't have an official thread for Leucadia here, I just had to create it. I feel it's better to have a centralized place to put info than have it spread over tons of different threads that get lost after a while...

Now is an especially good day for that since the stock is down 8.7% right now ($26.85, close to book), and it does look like a pretty decent buying opportunity if you believe in management's powers to keep compounding (though with BRK.B at 69.35, many will probably pick BRK first).
Title: Re: JEF - Jefferies Group
Post by: menlo on August 12, 2011, 08:29:22 AM
For what it's worth, and assuming I read their annual report correctly, this week is the first time the stock traded under book value since 1998 (using year-end data).
Title: Re: JEF - Jefferies Group
Post by: Liberty on August 12, 2011, 08:31:55 AM
For what it's worth, and assuming I read their annual report correctly, this week is the first time the stock traded under book value since 1998 (using year-end data).

Seems about right. By my count, it trades at about 1.02 BV today.
Title: Re: JEF - Jefferies Group
Post by: jjsto on August 12, 2011, 09:00:56 AM
Yeah,  i bought some recently cause it seemed cheap to book (compared to the past) and hopefully the recent volatility gave them a chance to deploy cash.  Nothing too scientific. 
Title: Re: JEF - Jefferies Group
Post by: vn35 on August 12, 2011, 10:56:39 AM
I also bought some LUK, but I still save my ammo for BRK in the low 60s (hoping :-).
Title: Re: JEF - Jefferies Group
Post by: bargainman on August 12, 2011, 03:08:02 PM
I wonder how the NOLs carry forward played into this.  During the crisis they wrote those down, which killed a significant amount of their reported book value, but since then they've brought them back no?
Title: Re: JEF - Jefferies Group
Post by: woltac on August 13, 2011, 07:26:39 AM
Based on the 2Q 10Q, I calculate book value per share at $27.80, which includes an NOL per share of $4.73.

From the 10Q:

As a result, the Company was able to conclude that it is more likely than not that it will have future taxable income sufficient to realize a significant portion of the Company’s net deferred tax asset; accordingly, $1,157,111,000 of the deferred tax valuation allowance was reversed as a credit to income tax expense on December 31, 2010.

and

In addition to the reversal of deferred tax liabilities related to unrealized gains, the Company will need to generate approximately $4,000,000,000 of future U.S. pre-tax income to fully realize its net deferred tax asset.
Title: Re: JEF - Jefferies Group
Post by: Poor Charlie on August 15, 2011, 03:51:49 PM
The guys at LUK keep buying Mueller.  Anyone here familiar with MLI?  At first glance it does not look like a bargain: paying 2x book for a company with thin margins and modestly above average ROC.    I believe Buffett was also in MLI at some point.  Buffett, Cumming, & Steinberg are all smarter than me so I must be missing something.   ???
Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on August 16, 2011, 10:53:25 PM
Based on the 2Q 10Q, I calculate book value per share at $27.80, which includes an NOL per share of $4.73.

From the 10Q:

As a result, the Company was able to conclude that it is more likely than not that it will have future taxable income sufficient to realize a significant portion of the Company’s net deferred tax asset; accordingly, $1,157,111,000 of the deferred tax valuation allowance was reversed as a credit to income tax expense on December 31, 2010.

and

In addition to the reversal of deferred tax liabilities related to unrealized gains, the Company will need to generate approximately $4,000,000,000 of future U.S. pre-tax income to fully realize its net deferred tax asset.

A good essay on the current valuation of LUK wrote "bryanemail65" on the yahoo boards.

Cheers!

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_L/threadview?m=tm&bn=10954&tid=15176&mid=15184&tof=1&rt=2&frt=2&off=1 (http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_L/threadview?m=tm&bn=10954&tid=15176&mid=15184&tof=1&rt=2&frt=2&off=1)
Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on August 16, 2011, 11:05:14 PM
The guys at LUK keep buying Mueller.  Anyone here familiar with MLI?  At first glance it does not look like a bargain: paying 2x book for a company with thin margins and modestly above average ROC.    I believe Buffett was also in MLI at some point.  Buffett, Cumming, & Steinberg are all smarter than me so I must be missing something.   ???

true,... Cumming & Steinberg increased significantly their MLI

http://finviz.com/insidertrading.ashx?oc=96223&tc=7&b=2 (http://finviz.com/insidertrading.ashx?oc=96223&tc=7&b=2)

2011-08-03  --->  5,274,097 shares of MLI

2011-08-15  --->   7,779,917 shares of MLI
Title: Re: JEF - Jefferies Group
Post by: txlaw on September 22, 2011, 11:41:38 AM
Bought some LUK today.

Interesting to see that they bought a large slug of JEF stock from Richard Handler at a bargain basement price.  Don't think they can buy any more MLI, so it will be interesting to see if there's anything else they put money into. 

Regarding MLI, I believe there are two interesting angles to the story.  First, volumes of their goods have nowhere to go but up if we are at a bottom in housing starts.  Second, a collapse in copper prices due to China slowdown and a global commodities bubble bursting could boost the cost to price spreads on a unit basis so that gross margins go up quite nicely in the next few years (especially if MLI can buy up future copper production at collapsed prices). 

So I believe MLI is both a hedge against a bursting of the commodities bubble (something LUK must be well aware of, as they are intimately familiar with commodities like copper and iron ore) and a play on  housing starts being at the bottom.  Thoughts? 
Title: Re: JEF - Jefferies Group
Post by: tombgrt on September 22, 2011, 02:16:31 PM
-8,5%
-6,6%


I have work to do!  :o
Title: Re: JEF - Jefferies Group
Post by: greenwave on September 22, 2011, 07:08:12 PM
txlaw-
 
I think you are right on target with the reasons for luk's  large purchases of M L I . I would not be surprised if they eventually attempt to purchase M L I outright .

Although I don't post often , I always appreciate your commentary and insight on investing in general !

Thank you and all other contributors to this GREAT forum !

green wave
Title: Re: JEF - Jefferies Group
Post by: txlaw on September 23, 2011, 07:40:03 AM
txlaw-
 
I think you are right on target with the reasons for luk's  large purchases of M L I . I would not be surprised if they eventually attempt to purchase M L I outright .

Although I don't post often , I always appreciate your commentary and insight on investing in general !

Thank you and all other contributors to this GREAT forum !

green wave

Thanks, green wave.  I appreciate the props.

This board is great because people who don't invest for a living (like me) and even some of the professional guys out there are willing to share and bounce ideas off one another.

Even though I disagree with a lot of commentary on the board, especially about the macro, I also appreciate hearing the other viewpoints. 
Title: Re: JEF - Jefferies Group
Post by: Munger on September 23, 2011, 12:10:21 PM
Previous owner of LUK but no current position in LUK or JEF.

Will be very interesting to watch the JEF story unfold.  JEF management philosophy over the past few years can be summed up as -- "damn the torpedos, full steam ahead!"  No doubt gutsy but we'll probably learn if smart over the next 12 months, if not sooner. 

Just my opinion but the most recent conference call reminded a lot of the perfomance of some other excessively compensated management teams during 2008 (and we know how that turned out) -- analysts having trouble getting straight answers and reconciling the answers they did get with the question asked is never a good sign.

For those interested, replay is available -- note questions re:
1) sudden shrinking of the balance sheet at quarter end (four quarters in a row)
2) realized vs unrealized losses in the quarter (i.e., how much bad stuff is still on the books)
3) the health of their European business which they have dramatically increased in size
4) the massive ramp in dfd comp and the implications for future results
5) the surprising lack of any losses in the convert bond business during a period when the corresponding market got destroyed -- note JEF has one of the largest convert businesses on the street, according to analysts
6) the size of the company's direct exposure to European banks (the initial hesitation/stuttering was humorous).

I wish I personally had better insights because on the surface, management sounded like they were full of crap -- rarely answered any of the questions directly.  Plus I rarely short stocks (although that could change) -- put me in full agreement with the real Munger, who finds shorting stocks irritating.  So in the case of Jefferies, I have to settle for just grabbing the popcorn and watching this story unfold with great interest at this point.

Based on their apparent track record of success, I have respect for the LUK management team but I do find it odd they have gotten themselves knee deep with this company (a second tier IB without a stable source of financing like JPM, BAC, WFC?), unless their intention has long been to ultimately acquire JEF...so obviously the cheaper the better for LUK if they want to own this platform in entirety....
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on September 23, 2011, 04:06:02 PM
I've been adding to LUK at $23 and change, a decent price indeed at or slightly below book value. That should yield a return on investment in excess of 15%/yr. over time. As an aside, I just saw the movie Moneyball, watching this movie I could only thing of the comparison to Berkshire and Leucadia as the type of game that an investor *should* want to play, careful, methodical, seeing value in the discarded and unrecognized, with partners who know what they're doing, like each other, and are successful in understanding and playing the game. Those in this ballpark can be counted on 2 hands. Of those, only 2-3 are significantly superior to the other great value investors.
Title: Re: JEF - Jefferies Group
Post by: Poor Charlie on September 24, 2011, 08:29:33 PM
I've been looking for the LUK shareholder letters / annual reports from 1979-2003.  I was planning on contacting LUK Monday but thought I would check here first.  If any of you guys have the letters in PDF or link I would really appreciate it!!

whr981@gmail.com
Title: Re: JEF - Jefferies Group
Post by: bargainman on September 24, 2011, 09:03:39 PM
I've been looking for the LUK shareholder letters / annual reports from 1979-2003.  I was planning on contacting LUK Monday but thought I would check here first.  If any of you guys have the letters in PDF or link I would really appreciate it!!

whr981@gmail.com

You can get some of this on sec.gov..  Do a search on prior to 2004.  here's a link that should search for all 10-K's prior to 2004..  Doesn't go to 1979, but it gets you a few more at least...

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000096223&type=10-K&dateb=20040101&owner=exclude&count=40

Title: Re: JEF - Jefferies Group
Post by: Poor Charlie on September 24, 2011, 09:20:07 PM
Thanks Bargainman.  I've checked out most all the sec filings.  I'm looking for the C&S shareholder letters which aren't on sec.gov...  Pretty sure they are available in PDF tho.
Title: Re: JEF - Jefferies Group
Post by: beerbaron on September 25, 2011, 02:46:28 AM
PM me with your e-mail address I'll send 1979 to2004.

BeerBaron
Title: Re: JEF - Jefferies Group
Post by: link01 on September 25, 2011, 04:13:21 AM
Quote
Based on their apparent track record of success, I have respect for the LUK management team but I do find it odd they have gotten themselves knee deep with this company (a second tier IB without a stable source of financing like JPM, BAC, WFC?), unless their intention has long been to ultimately acquire JEF...so obviously the cheaper the better for LUK if they want to own this platform in entirety....

actually, jef's financing has has historically been financed by more long term debt & less of a reliance on short term vs their bigger brethren in the i-bank industry, which explains why the were much less exposed to the decimating losses of 08-09.

i doubt c&s have any desire to enter that industry via acquisition of jef or anyone else. like web i've seen them (figuratively) hold their noses when talking about the insane compensation structure prevailing there. the do seem to like & admire handler tho.

as far as this point goes: <<6) the size of the company's direct exposure to European banks (the initial hesitation/stuttering was humorous).>> one of their analysts has this very interestiong take:

<<The most scathing report describing in exquisite detail the coming financial apocalypse in Europe comes not from some fringe blogger or soundbite striving politician, but from perpetual bulge bracket wannabe, Jefferies and specifically its chief market strategist David Zervos. "The bottom line is that it looks like a Lehman like event is about to be unleashed on Europe WITHOUT an effective TARP like structure fully in place. Now maybe, just maybe, they can do what the US did and build one on the fly - wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs - one for each country. That is going to require a US style socialization of each banking system - with many WAMUs, Wachovias, AIGs and IndyMacs along the way. The road map for Europe is still 2008 in the US, with the end game a country by country socialization of their commercial banks. The fact is that the Germans are NOT going to pay for pan European structure to recap French and Italian banks - even though it is probably a more cost effective solution for both the German banks and taxpayers....Expect a massive policy response in Europe and a move towards financial market nationlaization that will make the US experience look like a walk in the park. " Must read for anyone who wants a glimpse of the endgame. Oh, good luck China. You'll need it.

Full Report:>>

http://www.zerohedge.com/news/jefferies-describes-endgame-europe-finished
Title: Re: JEF - Jefferies Group
Post by: Poor Charlie on September 25, 2011, 08:41:55 PM
Beerbaron,

Don't know if my PM went through, I was trying to send it from an Ipad.  In an case my email is: whr981@gmail.com

Thanks again!
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on September 25, 2011, 09:46:03 PM
The first decade of letters 78 to 88 are actually quite boring and mundane looking. This is what I find extremely fascinating on two fronts. Obviously, the first being the evolution of something so mundane into something so successful. The second, however, is more subtle, which is that it is often hard to tell from early beginnings which capital allocators will be great. The signs are not overt, it's not like they all started writing folksy letters from the start. Likewise, it's amazing how a string of mundane deals can lead to a good end result. You have to be smart, but you don't have to go for the home-run, a series of well planned, under the radar deals can do the trick. Just like you don't need home-runs to win in baseball, just a series of constant walks, runs, or whatever it takes to get on base over and over.
Title: Re: JEF - Jefferies Group
Post by: dwy000 on September 26, 2011, 12:35:06 AM
In addition to the price of JEF, I would guess that the other name position that's weighing on LUK is Fortescue.  They've lightened up on the position over the past few quarters but at June 30 it was worth $1.06bn.  As of today it's worth closer to $750m. 
Title: Re: JEF - Jefferies Group
Post by: Poor Charlie on September 26, 2011, 07:16:06 PM
The first decade of letters 78 to 88 are actually quite boring and mundane looking. This is what I find extremely fascinating on two fronts. Obviously, the first being the evolution of something so mundane into something so successful. The second, however, is more subtle, which is that it is often hard to tell from early beginnings which capital allocators will be great. The signs are not overt, it's not like they all started writing folksy letters from the start. Likewise, it's amazing how a string of mundane deals can lead to a good end result. You have to be smart, but you don't have to go for the home-run, a series of well planned, under the radar deals can do the trick. Just like you don't need home-runs to win in baseball, just a series of constant walks, runs, or whatever it takes to get on base over and over.



I'm looking forward to reading the letters Scorpion.  Some of the comments they made re the .com years were priceless.

They certainly have had their fair share of home runs too.  Barbados Power & Light was incredible; I'd love to know how they found it.  FMG wasn't bad either...

My concern over LUK is with some of the newer projects (energy & pharma).  These guys are clearly capable in deep value turnarounds but VC is a totally different animal imho.
Title: Re: JEF - Jefferies Group
Post by: Liberty on September 30, 2011, 01:19:53 PM
Hitting new 52wk lows.. Wish I understood that company better, because they sure have a great reputation. But I still don't feel like I understand enough what they own to buy some.
Title: Re: JEF - Jefferies Group
Post by: rijk on October 21, 2011, 05:13:10 AM
looks attractive at $12, below BV and a PE below 10, assuming $200-250 million normalized earnings power...

LUK's cost basis seems to be around 18 and Berkowitz recently purchased > $20....

anybody else interested?

regards
rijk
Title: Re: JEF - Jefferies Group
Post by: hyten1 on October 21, 2011, 06:08:16 AM
i am hoping someone can share their thoughts about jef

i am a bit confused as to why jef would be a good investment where  luk had put in over $1bill dollars in it. In general i don't like an ibank biz model, not that type of biz i like to invest in.

what makes jef so different and unique? what is luk up to?
Title: Re: JEF - Jefferies Group
Post by: rijk on October 21, 2011, 06:17:35 AM
thanks valuegeek

the risk highlighted in the article is exactly what is playing out right now, there were some questions regarding compensation becoming a really huge number in the q3 call and management didn't really have a good direct response other than saying that comp was already included in net income and net income was an after tax number......... any concerns here???


regards
rijk


"The danger, of course, is that not that Jefferies will make the kind of bets that sank Bear Stearns or Lehman Brothers, but that its growth will turn out to be too ambitious for a low-growth era. If investment banking slows markedly because the economy stalls, for example, all those new hires may be burdensome for Jefferies’ balance sheet. The firm got a taste of the new austerity in the second quarter, when its fixed income revenues fell 30 percent from the prior quarter, in line with a market decline. Like its rival Lazard, however, Jefferies has a restructuring operation that can help bolster its business during economic downturns."
Title: Re: JEF - Jefferies Group
Post by: rijk on October 31, 2011, 12:43:07 PM
seems like the MF Global situation is dragging down everyone, including JEF, management stated on the q3 call that europe exposure is non existent on the asset side and minimal on the liability side (diversified funding).....

regards
rijk

http://online.wsj.com/article/SB10001424052970204528204577008090428088540.html?mod=business_newsreel
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 01, 2011, 06:45:05 AM
JEF still down 15%. Market ignore company statement and is ruled by fear right now.

"Jefferies confirmed today, in response to questions from investors and analysts, that it currently has no meaningful exposure to the sovereign debt of the nations of Portugal, Italy, Ireland, Greece, and Spain. To the extent Jefferies from time to time takes positions in such debt, they are short term in nature, are recorded in the trading book of Jefferies’ regulated UK broker-dealer, are marked to market daily, and fluctuate depending upon customer demand, auction activity, and opportunities in the market place. Jefferies does not have any repo-to-maturity activity or related off-balance-sheet derivative activity.

Jefferies, Markets, MF Global"
Title: Re: JEF - Jefferies Group
Post by: Cardboard on November 01, 2011, 07:46:28 AM
Well, it is fear and it is not.

Greece found a way here to destroy the European economy. 2 to 3 months delay (my estimate for a referendum), then a likely NO vote. That is enough to plunge the continent into a full blown recession and possibly worst before the vote is in, in part due to credit that will start to seize up at some point. This event basically triggers a further plunge in other PIIGS debt which will hamper their ability to refinance (higher yields) and force asset rightdowns at banks. If the vote is YES, it may help repair the confidence in the EURO and with it help the other PIIGS. However, with the amount of time involved and what could happen in between, it seems to me that the damage will not be neutral.

That is why I think that Europe needs to now find a way to isolate Greece and get it out of the Eurozone. I don't know if it is possible at a minimized cost to Europe. Or Europe needs to take control of Greece in some ways and force the adoption of the latest resolution without that stupid referendum. Kick them out of NATO. Adopt a full embargo. We have seen them demonstrate, they will demand a referendum and will vote NO. It has become a very ugly situation and I am now not sure what a democratic and peaceful solution is. Some much tougher measures may now be required, but a cost to the economy here seems a given.

Then the China PMI came at 50.4% for October which is awfully close to a contracting number.

I have two choices here. Either I ignore all the macro data, stay leveraged with some calls that expire in the not too distant future on companies that are still very cheap and make out like a bandit if nothing happens or I sell some today with a market that is certainly higher than a few weeks ago. I have no intention to sell any of my straight equity. With these I can afford to wait and go through a full blown depression if we have one.

In any case, I am really fed up of this macro BS. Tough to see a nice end to all of this.

Cardboard
Title: Re: JEF - Jefferies Group
Post by: Munger on November 02, 2011, 09:22:19 PM
Not sure how to reconcile the JEF press release re essentially no sovereign debt exposure and this move by Egan Jones, which cites large sovereign exposure.

As I previously posted, the most recent JEF conference call was anything but reassuring.

And as I also previously posted, I don't have a confident opinion on JEF but I am puzzled by LUK's outsized exposure to a second tier investment bank with a bloated compensation structure.



Jefferies Group Inc: EJR lowered BBB to BBB- (Neg.) (S&P: BBB)
Synopsis: Changed environment - the problems of MF have increased scrutiny of other medium-sized broker/dealers. We are concerned about the values included the $2.7B of " sovereign obligations " per page 24 of the Aug. 2011 10-Q representing 77% of shareholders equity. Although not as highly leveraged as MF Global's 40:1, we would prefer that JEF maintain a lower leverage than its 12.9:1. Note, the fiscal statements of JEF are skewed by the change in fiscal years. The financials are respectable especially given the tough operating environment. An item to watch is the $108M rise in interest expense (reflecting in part the $420M purchase of Pru Bache's Global Commodities Group) On the pos. side, JEF is a respectable competitor.

 
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 02, 2011, 10:03:21 PM
The press release you're referring to said the following:

Jefferies confirmed today, in response to questions from investors and analysts, that it currently has no meaningful exposure to the sovereign debt of the nations of Portugal, Italy, Ireland, Greece, and Spain.

It didn't say that JEF had "essentially no sovereign debt exposure."
Title: Re: JEF - Jefferies Group
Post by: Ross812 on November 03, 2011, 05:45:13 AM
I think this is one of those situation where the baby is being thrown out with the bathwater. JEF was lowered to BBB- because another second tier investment bank with 3x more leverage was exposed to debt from PIIGS and went bankrupt. Think of it this way. JEF has 70% of shareholder equity in sovereign debt which until the last six months has been considered a low risk asset; they reiterate they are not exposed to the five problem nations in Europe; they employ the 30% leverage of MF Global; yet, somehow JEF is now more risky than it was on Monday? I think the Leucadia guys know what they're doing on this one. JEF is worth a minimum of $12 and I would bet this time next year will be somewhere north of $20...     
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on November 03, 2011, 07:20:54 AM
LUK is was crashing as well...for obvious reasons.

Grab some while you can!!  8)

(http://finviz.com/chart.ashx?t=LUK&ty=c&ta=1&p=d&s=l)

Update: Oops. Too late!  :-\
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 03, 2011, 07:30:12 AM
Why was JEF halted?

Just because the stock plummeted? Lol.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 03, 2011, 07:41:39 AM
Why is LUK down 8% because JEF is crashing? Their market cap is $6b and they have a 30+% in JEF and some bonds? At day low it seemed like the market already thought is was worth nothing.

edit: Bought a very small position.
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 03, 2011, 07:57:03 AM
Berkowitz has lots of positions on black box companies (MBIA, Citigroup, Bank of America) and is invested in Jefferies
Ackman has some Citigroup
Title: Re: JEF - Jefferies Group
Post by: mevsemt on November 03, 2011, 08:04:22 AM
Couldn't resist... just put ~9% of my portfolio in JEF...
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 03, 2011, 08:12:37 AM
Couldn't resist... just put ~9% of my portfolio in JEF...

That is a bold bet!  8)

I bought a small position in LUK.
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 03, 2011, 08:20:51 AM
Insiders purchased total of 8 million shares on Sept. 22. at price of $12.5.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 03, 2011, 08:24:18 AM
Valuegeek

I have no confident opinion on Jefferies -- I don't know how anyone could.  You seem to trust management and their claim of "hedged" positions -- I can't tell you for certain that you are wrong.  I personally am not willing to take the leap of faith -- there are better risk/reward opportunities. 

The last JEF conference call was a disaster -- management was not straightforward in response to any of the more difficult questions.  I also see a lot of risk with Jefferies because in my experience it is very difficult to establish a perfect hedge --LEH and BEAR claimed to be hedged as did MS, C etc during the crisis, which proved to be delusional. 

Further, Wall Street as a business is facing an extended period of challenges, which will adversely affect all of the investment banks -- there is no quick business rebound for these companies...will be many years before we see sustainable profits reach previous peaks, if ever for some companies.  On a side note, the NY metro economy is going to get hit by a mack truck as a result of the sustained downturn in Wall Street business and the consequent layoffs (which will be larger than currently announced)...would not want to be long real estate in the area, which hindsight will show had been one of the larger bubbles in US prior to the music stopping.

Regardless of how this turns out, I remain puzzled by LUK's outsized exposure to JEF -- an over-levered, mediocre company with a bloated cost structure in a mediocre industry (at best). 

Title: Re: JEF - Jefferies Group
Post by: Ross812 on November 03, 2011, 08:29:06 AM
Bears Stearns also did not come out and say they had no exposure to sub-prime mortgages. As a value investor you have to go against the herd. The herd is saying "CF Global is a second tier investment bank that filed for chapter 11; therefore, other second tier investment companies must be at risk of filing for chapter 11. Sell Jefferies Group!" Every time you invest in common stock you are buying a black box. As an investor, you can identify within a margin of error what a company should be worth, but you cannot stop management from running that company into the ground and eroding your margin of safety.

I learned this the hard way. Imperial Sugar (IPSU) had a refinery explosion which resulted in an insurance settlement worth $14 a share in cash. The company still had a fully depreciated Mississippi sugar refinery and a 60 million dollar 50% interest in Wholesome Sweeteners (a sugar alternative company growing at 20% per year). I calculated the company was worth at a minimum 170 million in cash + 50 million for the operating refinery + 60 million for the Wholesome Sweeteners investment. The liquidation value should have been somewhere around 280 million. Shares could be bought for $9 or ~108 million for the company. I then watched as management spent the 170 million rebuilding and outfitting the new sugar refinery, got killed in their hedging activity, and issued themselves shares which they sold along the way. Today IPSU is selling for $6.8 a share 83 million and cannot make any money refining sugar.

You can calculate to your heart’s content and have a huge margin of safety and still lose money. Management is going to make or break your investment thesis. Management is ALWAYS a black box that doesn’t show up on the balance sheet.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 03, 2011, 08:31:57 AM
Bob Rodriquez wouldn't go near any of these companies.  Any true value investors should follow him.  With the exception of Buffett, Klarman, and possibly Prem -- I believe he is the best in the business.  And he certainly didn't get caught with his pants down during the financial crisis -- he has been spot on throughout his career. 
Title: Re: JEF - Jefferies Group
Post by: T-bone1 on November 03, 2011, 08:33:02 AM
I think part of the issue is that they are long $2.5 billion or so of soveriegn debt and "short" a similar amount . . . but they likely aren't short similar debt on the other side.  The offsetting position is likely a long position in CDS. 

This brings up a number of possible problems, the least of which is counterparty risk.  The biggest potential problem in my mind is what happens if the EU continues to allow ordered defaults (which is what the Greek deal is) without triggering CDS - if this happens JEF could be screwed. 

The position is large enough that they probably can't just sell the CDS or bonds, they will probably have to carefully ladder out of both sides of this position at the same time to avoid being net long or short if there is a big move in either direction - which is very possible in the current environment.  Of course to get out of this position is to kill a major trading operation and a decent part of their business, which is also not good.

I think Egan Jones has it right, there is some real risk of a decent loss here - in getting out of the position, having it move against them etc, and a small tail risk of a large loss - if their bonds go down and CDS declines at the same time because of a lack of faith in the validity of that vehicle. 

I think things will turn out fine for JEF, but I'm not touching it.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 03, 2011, 08:35:02 AM
You can calculate to your heart’s content and have a huge margin of safety and still lose money. Management is going to make or break your investment thesis. Management is ALWAYS a black box that doesn’t show up on the balance sheet.

This. Please, let's not have another Munger-like "All-financials-are-black-box-companies-not-worth-taking-the-risk"-discussion. Investing is about probabilities and trying to take the right side of the bet. And for every risk and every crappy company (aside from the worst) there is a valid price at which it will be a good investment. It is not about knowing every detail and being 100% sure nothing can fail.
Title: Re: JEF - Jefferies Group
Post by: mevsemt on November 03, 2011, 08:42:02 AM
http://mevsemt.blogspot.com/2011/11/couldnt-resist.html 

Wish me luck!
Title: Re: JEF - Jefferies Group
Post by: Munger on November 03, 2011, 08:54:45 AM
"I'm trying to persuade you from speaking before you've done your homework." -- I infer that you seem to be confident in your opinion because you have done your homework on a black box by reading the SEC filings...OOOOOOOOOOOOOOOOOOOOOOOOOOOK -- gotcha on that one.

"Further, the fact that the industry has struggled, is struggling, and likely will continue to struggle, plays into Jefferies' hand, because they're able to attract talented workers and grow their business at high returns on capital as their competitors shrink." -- I am CERTAIN that this statement is pure nonsense...did your due dilligence lead you to a giant pitcher of kool aid.  The financial crisis should have disabused all of any notion that there is collectoin of special "talent" capable of defying the laws of basic arithmetic at any of these companies.  Once upon a time, Fuld, Mack, Pandit, Winkelried, Corzine, Johnson, Raines, Gary Cohn, Rubin, Summers, Meriwether, Ranierie, Maheras, Cane etc were viewed as supreme talents...good marketing schemes but reality proved quite different.
 
JEF may or may not survive -- I don't know.  But here is what I do know for certain -- this an over-levered, mediocre company with a bloated cost structure in a mediocre industry (at best)...a company that dodged every relevant question on the last conference call. 
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 03, 2011, 08:58:31 AM
look at the 10 Q

level 1 sovereign bonds=2000m$
level 2 sovereign bonds= 690 m$

and footnotes

Sovereign Obligations
•         G-7 Government and non-G-7 Government Bonds : G-7 government and non-G-7 government bonds are measured based on quoted market prices obtained from external pricing services. G-7 government bonds are categorized within Level 1 of the fair value hierarchy and non-G-7 government bonds are generally categorized within Level 2.
 
•         Emerging Market Sovereign Debt Securities : Valuations are primarily based on market price quotations from external data providers, where available, or recently executed independent transactions of comparable size. To the extent market price quotations are not available or recent transactions have not been observed, valuation techniques incorporating foreign currency curves, interest rate yield curves and country spreads for bonds of similar issuers, seniority and maturity are used to determine fair value. Emerging market sovereign debt securities are generally classified within Level 2 of the fair value hierarchy.

Which countries are in the G7:
US, Canada, UK, Germany, Japan, France, Italy. So except Italy , level 1 exposure doesn't concern PIIGS.

Moreover, a lot of sovereign obligations on the liability side are level 1 (if it was cds, it would be classified level 2 or 3 and in thederivative item.
Title: Re: JEF - Jefferies Group
Post by: Ross812 on November 03, 2011, 09:15:23 AM
Prevalou,

Note the press release stated "No meaningful exposure to Italy." So they have 2 billion in G7 ex Italy.
Title: Re: JEF - Jefferies Group
Post by: Ross812 on November 03, 2011, 09:23:52 AM
On a side note.

This may be the BEST investment to make during the European debt crisis based on Munger's accuracy as a contrarian indicator.

Then again, the "Munger Correlation" could be considered a black box... 
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 03, 2011, 09:24:41 AM
can I conclude that Jefferies is not a black box ?...
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 03, 2011, 09:31:45 AM
prevalou, Thank you for posting on the composition of sovereign debt obligations. Important information to know at this point.
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 03, 2011, 09:47:49 AM
the short hedges are classic short positions. I think the risk can be cancelled out in this case. The Net exposure is the net exposure.

A Jefferies spokesman confirms that the firm’s European debt exposure is in its role as a market maker, and not a proprietary bet, and that the short hedges are classic short positions – the same bonds, maturities and countries as the corresponding long positions – rather than holdings of credit default swaps (CDS).

The latter point is an important one, with concerns in the marketplace that the current debt deal on table for Greece – which includes 50% haircuts for bondholders but does not appear likely to trigger CDS payouts –calls the reliability of such instruments as hedges on sovereign debt into question.
Title: Re: JEF - Jefferies Group
Post by: Ross812 on November 03, 2011, 09:50:21 AM
Jefferies Details Short Positions To Europe Debt Amid Concerns
1 hours 47 minutes ago - Dow Jones News


By Brett Philbin
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Jefferies Group Inc. (JEF), seeking to stem the steep drop in its share price, on Thursday provided details of its exposure to European debt, saying it had a net $38 million in short positions, or no meaningful exposure.
Shares of Jefferies fell as much as 20% Thursday, adding to this week's declines, as investors concerns about the company's European debt exposure were renewed in a research note from ratings agency Egan-Jones.
Egan-Jones raised questions about the company's "sovereign obligations," saying those positions accounted for a large percentage of the company's shareholder's equity.
Jefferies quickly refuted those findings, saying recent reports focused only on the company's long inventory of $2.7 billion, but didn't account for offsetting short positions of $2.5 billion.
Jefferies said its net exposure to the European nations include positions of $5 million to Portugal, $28 million to Ireland, $104 million to Italy, $3 million to Greece, and a short position of $178 million to Spain.
A person familiar with the situation told Dow Jones Newswires that Jefferies exposure at the end of August was "similarly not meaningful."
In recent weeks, investors have, in general, punished bank stocks over fears about how much those firms could stand to lose if European banks defaulted on their debt. Many U.S. institutions are counterparties to bonds in Greece and other European nations.
Jefferies reiterated that when it "from time to time" takes positions in such sovereign debt, the positions are short term in nature, recorded in the trading book of its regulated U.K. broker-dealer, marked-to-market daily and fluctuate depending on customer demand, auction activity and opportunities in the market.
Egan didn't immediately respond to a request for comment.
Shares of Jefferies recovered following the steep drop and were recently off 7.7% to $11.34. Earlier, the stock fell to $9.79, its lowest price in more than two years.
The stock was hit hard on both Monday and Tuesday, plunging more than 9% in both trading sessions.
Concerns have shifted to Jefferies in recent days following the rapid downfall of broker-dealer firm MF Global Holdings Ltd. (MFGLQ). Jefferies is smaller than many large financial institutions and as an investment bank it relies more on short-term financing than other firms. The firm also isn't a bank holding company so it isn't subject to the same rules as larger rivals like Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS).
Jefferies however is a primary dealer, which means it's among a small group of institutions with which the New York Fed conducts monetary policy and which are obligated to participate in U.S. Treasury debt auctions.

-By Brett Philbin, Dow Jones Newswires; 212-416-2173; brett.philbin@dowjones.com
(END) Dow Jones Newswires
11-03-11 1101ET
Copyright (c) 2011 Dow Jones & Company, Inc.
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 03, 2011, 10:01:29 AM
JEF supplemental release to confirm that short positions are not CDS.
NEW YORK & LONDON--(BUSINESS WIRE)-- In response to further questions from its investors, Jefferies reported that, with respect to its short sovereign debt positions, all are in securities. Moreover, Jefferies has no credit-default swaps hedging its sovereign debt positions, which as previously indicated are short-term trading positions that turn over approximately three to four times per week.

In addition, Jefferies reported it has a limited number of routine regulatory reviews in process, all of which are insignificant in scope and absolutely immaterial to Jefferies.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 03, 2011, 10:03:41 AM
This may be the BEST investment to make during the European debt crisis based on Munger's accuracy as a contrarian indicator.

I see Ross has disagreed with me on HPQ, BAC, and JEF when all were at MUCH higher valuations.  He also has disagreed with me on DELL.  But hey -- he is feisty:)  Probably wise for Ross to get smarter about investing and avoid the personal attacks. 

And while hitting the books, he should also figure out what happened to the thesis underlying his dissertations on MU -- a stock that is now 30% below his entry recommendation price, a stock that he quickly sold after it popped following a week of Jim Cramer pumping on his show because Ross got nervous about market conditions...so much for long term investing based on sustainable competitive advantages and margin of safety...just buy a notoriously volatile stock (with a bad underlying business) and hope Cramer pumps on his show -- if stock pops, sell.  Ross you have figured out the mystery of investing -- congrats. 
Title: Re: JEF - Jefferies Group
Post by: Munger on November 03, 2011, 10:11:34 AM
And where are the "details" on the hedge positions?

So JEF claims to have short securities that hedge its long sovereign debt positions, which it believes elimates the gross exposure to the sovereign debt?  These press releases are vey funny.

While I'm not short the stock, I am skeptical about the bullish thesis here.  Will be interesting to see how this all plays out.     
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 03, 2011, 10:28:09 AM
Whenever Munger shows up the board always reverts to a debate that essentially amounts to who has the biggest equipment.  Nothing wrong with that of course.  Sometimes these little tussles can be amusing.  But guys, come on, whip it out and measure up and declare a winner.  You can all be BSDs.  There's no limit on how many can be on the board.
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 03, 2011, 10:46:24 AM
Munger,

According to the company, the positions are the result of the market making activities. Market maker needs to hold both long and short inventories. The positions are not their proprietary investments. It sort of makes sense to me, unless the company is lying to me.
Title: Re: JEF - Jefferies Group
Post by: mevsemt on November 03, 2011, 11:12:48 AM
And now JEF is positive for the day, I guess Mr. Market found his valium!
Title: Re: JEF - Jefferies Group
Post by: Ross812 on November 03, 2011, 11:38:57 AM
Munger,

The comment was a joke. If you search your name on this board, you will see others have jokingly suggested the same thing. I don’t think anyone here is personally attacking you.

As for HPQ, BAC, DELL, and JEF, I agree that we often disagree about investments. I don’t mind black box situation (banks) if I believe the risk/reward are in my favor, and I don’t mind following Klarman, Valueact, Yackman, or Berkowitz into an investment if I can get in cheaper than they did. I’ve been burned in situations where I believed I understood the risks and was buying below liquidation value (my IPSU example earlier). I defended HPQ and BAC at higher valuations. I still believe HPQ is worth more than $40 and BAC is worth more than $12, I have averaged down in both. 

As for Micron, I haven’t gone back and looked at the company to see if my thesis is still intact. I said the company was worth more than $7 it was selling for when I wrote the review and suggested the company was fairly valued at $10.72 per share. I sold at $11.03 and said Jim Cramer was probably the reason the stock price increased so quickly. I was not going to hold the company at a higher price than what I stated was fair value. I held the stock for 6 months and made ~60%. I’ll sell BAC at $20 and HPQ at $50 too.   

For the record Munger. I think JEF is probably worth more than $22 where Leucadia bought the company. My cost average is right at $11
right now and I'll be looking to sell it around $22. Mevsemt, jef is now ~9% of my portfolio as well. Added Tuesday and today.
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on November 03, 2011, 12:40:26 PM
http://ftalphaville.ft.com/blog/2011/11/03/725391/jefferies-we-have-to-explain-this-again/

Quote
Recall MF Global’s $1.3bn “proxy hedge” of its $7.6bn Italian and Spanish sovereign exposure, conducted through shorting French bonds. That short turned out to be far too small in terms of the notional amount, either given the size of the gross exposure and how the short would economically operate. Spreads on €100 of Italian bonds will move much more than €100 of French bonds. Ergo, your short in France should probably be a bit more than €100. MF Global’s strategy appears to have tried the opposite. That’s only one component of why it was a badly-constructed trade, amid the margin calls, but it’s worth noting.

Anyway, today’s statement from Jefferies is an effort to clarify that Egan-Jones and others have been looking at gross rather than net exposure. We were going to use this as an excuse to say that like other banks, the broker-dealer does itself no favours by making such disclosures so opaque as to fool an NRSRO, but above it seems clear enough. So we’re not sure why Egan-Jones chose not to net the exposure, except to say that perhaps it simply lacks faith in counterparty reliability at the moment and is uncomfortable with a firm levered 12.9:1 (a lot less than MF Global’s 40:1, mind) taking on certain levels of gross exposure. If so, we definitely won’t blame them for being cautious.

Then there’s this part of the Jefferies statement, also a response to Egan-Jones: “With respect to interest-income expense, Jefferies carries interest-earnings investments that turn over rapidly with its funding. As a result, Jefferies has had significant interest income in the past and should continue to have it in the future.” The “interest-earnings investments” it seems to be referring to is an acquisition from July of this year, when it bought the Global Commodities Group from Prudential Financial. But in truth we’re not sure what to make of it.
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 03, 2011, 04:50:43 PM
Egan-Jones Defends Its Downgrade of Jefferies

http://blogs.wsj.com/deals/2011/11/03/egan-jones-defends-its-downgrade-of-jefferies/?mod=yahoo_hs


After reading it, I am very skeptical on Egan-Jones downgrade. His defense is weak.

We don’t know how those shorts are set up and whether they completely offset their $2.7 billion [exposure].
(Can you downgrade based on UNKNOWNS? (instead of solid facts?))


“They claim it’s beautifully hedged,” Mr. Egan said. “Our view is that we’re skeptical until we see complete proof of that. In the past, the hedges haven’t been as perfect as originally presented. We don’t know how those shorts are set up and whether they completely offset their $2.7 billion [exposure].” Jefferies didn’t immediately return calls for comment. Mr. Egan said his firm’s downgrade resonated for two reasons. One, investors are skittish about exposure to sovereign bonds, which Mr. Egan called the “toxic assets of 2011.” Two, Egan-Jones keeps “getting more and more market presence every single month,” Mr. Egan said. Egan-Jones has been issuing ratings since 1995. Investors pay the firm for its ratings, rather than debt issuers.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 03, 2011, 09:22:01 PM
Initiated position at $11.25/share...

If Egan is a rating agency why do they have the same information as a public investor? They said they are skeptical of the hedges and want to see the "details". What? A rating agency that doesn't have the data and rates companies? ANYBODY can do this.

Ok, I rate Jefferies AA, about the same as the US government.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 03, 2011, 09:47:50 PM
Anyone who thinks perfectly hedging $2.7B of sovereign debt is easily accomplished is seriously misguided -- in fact, I would say, rather than easy, it is impossible...no doubt there are hedges in place but whether they prove effective is an entirely different story...Egan is right to be skeptical until greater transparency is provided.

Title: Re: JEF - Jefferies Group
Post by: Munger on November 04, 2011, 07:03:04 AM
While it is not easy to run a hedged market-making book, it most certainly isn't "impossible".  

In the way presented in the press release -- I believe impossible.  To essentially assert we have short almost $1 of European bonds against every $1 of sovereign debt and therefore we have virtually no exposure because the change in value on each side of the book will always offset is disingenuous at best and a complete lie at worst -- assumes the investing public is a bunch of suckers.  Simplistic and misleading would be an appropriate description of the press release...

And if they have devised perfect hedges -- what is the harm in disclosing the details...would eliminate all noise on this issue and earn management the respect of the skeptics...


That said, one would have thought that he would do so before going public with a downgrade backed by the simplistic and misleading talking point that sovereign debt

As I heard the interview, Egan noted that he presented his work to management, asked for more transparency in response to their rebuttals citing the short positions, and management was unwilling to provide the transparency.  Now management is allowed to provide limited info on the hedges -- there are no SEC rules that state otherwise -- but Egan is equally allowed to be skeptical.  I don't see Egan as a bad guy here.


All said, that doesn't mean that Jefferies is a good investment.

I agree.  A big question is whether this company (as currently configured) will be able to generate sustainable profits that justify the current valuation.   
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 04, 2011, 08:34:55 AM
I don't get why people are worried about companies that hold mostly US government debt! This is plain ridiculous. In fact, it's kind of funny that they are even hedging that. The reason they are is because they are market-makers, not proprietary traders.
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 04, 2011, 08:42:04 AM
I don't get why people are worried about companies that hold mostly US government debt! This is plain ridiculous. In fact, it's kind of funny that they are even hedging that. The reason they are is because they are market-makers, not proprietary traders.

Apparently, actual market making is now considered a subpar business.
Title: Re: JEF - Jefferies Group
Post by: vinod1 on November 04, 2011, 08:48:57 AM
http://www.bloomberg.com/news/2011-11-01/selling-more-insurance-on-shaky-european-debt-raises-risk-for-u-s-banks.html

Selling More CDS on Europe Debt Raises Risk for U.S. Banks

U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the first half of 2011, boosting the risk of payouts in the event of defaults.

Guarantees provided by U.S. lenders on government, bank and corporate debt in those countries rose by $80.7 billion to $518 billion, according to the Bank for International Settlements. Almost all of those are credit-default swaps, said two people familiar with the numbers, accounting for two-thirds of the total related to the five nations, BIS data show.


Maybe we need something like this to get real financial reform.

Vinod

Title: Re: JEF - Jefferies Group
Post by: Cardboard on November 04, 2011, 09:12:07 AM
While I believe that the panic here might be just that. For example, while Meredith Whitney is wrong at times, it is interesting for her to come out and praise an executive as she did. I have a hard time seeing a $0.50 on the dollar with this investment.

Other investment banks such as MS and GS are trading at much lower multiple of book and earnings while I would argue that both have much stronger franchises. Why not buying these instead?

So what is the thesis? And, I don't believe that "it has fallen from $27" and "Leucadia owns a significant stake at much higher prices" means much.

Is this just a trade, betting on a quick rebound and exit?

Cardboard
Title: Re: JEF - Jefferies Group
Post by: Munger on November 04, 2011, 09:57:18 AM
From the lead article in today's WSJ:

For the past two years, MF Global Holdings Ltd. may have disguised its debt levels to investors by temporarily slashing the debt it was carrying before publicly reporting its finances each quarter, according to an analysis by The Wall Street Journal.

Relative to JEF, I make no accusations but would highlight the following from my post on Sept. 23 -- analysts unable to get straightforward answers to a number of questions, including:

1) sudden shrinking of the balance sheet at quarter end (four quarters in a row)


Any owner of this company should demand that management provides transparency in this regard, especially in light of MF Global.
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 04, 2011, 10:09:21 AM
The valuation thesis is that they are presently under-earning because of their growth in headcount.  Simply, they expense the salaries associated with new hires today even though the associated revenues take 12-18 months to ramp.  This is why I think that its important to consider what their comp ratio reflects.  The Leucadia guys basically said as much in response to a question from Tweedy Brown at their AGM.

The fact that it doesn't look superficially cheap (relative to competitors) is actually what makes it interesting.

Hi Valuegeek,

Is there a transcript of the LUK AGM or audio recording? The insight on the JEF investment is much appreciated.
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 04, 2011, 10:10:02 AM
Could you tell me where you find the information about sudden shrinking of Jef balance sheet at quarter end (four quarters in a row)?
Title: Re: JEF - Jefferies Group
Post by: Munger on November 04, 2011, 10:24:11 AM
Could you tell me where you find the information about sudden shrinking of Jef balance sheet at quarter end (four quarters in a row)?

The conference call replay is still available on the JEF website, which I cited on my original post and several subsequent posts.  Note the other very relevant questions that analysts struggled to get answered.  I'm surprised some of those who have expressed bullish opinions on this company haven't even listened to the most recent conference call.
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 04, 2011, 10:34:20 AM
Unfortunately I've never seen a transcript from the AGM.  From my recollection, Tweedy Brown asked: "it seems like Jefferies trades at high P/E... is it fair to say that you think earnings will grow?" and the Leucadia guys (with charactersitic loquaciousness) replied: "I think that's fair."

Thanks!
Title: Re: JEF - Jefferies Group
Post by: Munger on November 04, 2011, 11:42:02 AM
Will be interesting to see the actual securities.  The company is def in panic mode given the bond spreads so kudos to management for trying to be proactive but why not just give this info to Egan when he first asked and simultaneously release to the market?

Further -- the info does nothing the address questions re the business model.

As management noted on the conference call -- hedges work until they don't and inventory turns until it doesn't.

First, the U.S. Treasury hedges used to offset the interest rate risk in our high grade inventory increased in value significantly due to a flight to quality which resulted in significant losses. Second, we incurred significant write downs in the value of some of our long inventory positions including high yield, distress and some mortgage inventory.

Maybe as a little more color, Rich, on FIC. Even if it's just roughly, what was maybe the
percentage of impacts of secondary trading versus prop and then inventory marks, even if it's just generally speaking? I mean, was one disproportionately impactful than any other?


No direct answer.

But management at least again admits hedges work until they don't and inventory turns until it doesn't: :
Once August hit, the events that I mentioned, we carry inventory to facilitate trading with our clients, and effectively, the market for most of those assets classes just went a little bit haywire in August.

We had markdowns in high yield. We had markdowns in mortgages. We had that the spread widening in the corporate high grade business and clearly we operate generally on a pretty hedged basis with treasuries and that generally works unless you're in a period of extreme volatility in which case it didn't work.


What good is a hedge if it doesn't work when you need it most?

And then just one last for me on the comp ratio, I mean clearly jumped up in the quarter. Revenues were down. For the nine months, it's about 60%. I mean, if we assume – I hope not – but sort ofstatic level of revenues going forward, is the 3Q absolute number of comp, kind of sticky?

No direct answer.

Okay. So even though it's happened a few quarters in a row, it's really just about when clients
are looking to transact?
  (question re the shrinking balance sheet at quarter end)

Look, we clearly like to make sure we know what's on our balance sheet, and it's tough
enough to get down, and so we put pressure on everybody on a regular basis to have a clean balance sheet. And quarter-end's a good period of time to measure it by so we clearly go through. But that being said, we see opportunities throughout the quarter, and we take advantage of it.


Huh?

Here is the relevance of the question and the lack of an answer -- is the company fully disclosing to owners the leverage required to generate the reported returns.

And I think this observation by Millennium is informed and very relevant:

Ex improved by Bache, ROE for the quarter looked around 3% to 4%, 5%. Jefferies looks like it has cost of capital 12%. So back of the envelope math looks like the assets got up to around $59 billion during the quarter.


As I've stated, I have no position in JEF or LUK.  I'm just tired of the complete BS that emanates from investment banks and their management teams.  I believe JEF is going to provide quite a bit more entertainment over the next 12-18 months as they scramble to make this growth strategy work.

And if you want exposure to an investment bank -- why not buy GS...superior franchise, cheaper valuation.

Title: Re: JEF - Jefferies Group
Post by: txlaw on November 04, 2011, 12:17:37 PM
I suggest everyone who is interested read the actual conference call in its entirety -- not just the Munger paraphrased version -- and read the actual SEC filings to determine whether Munger's interpretation of the conference call (and Jefferies' disclosure) is valid.


Title: Re: JEF - Jefferies Group
Post by: bmichaud on November 04, 2011, 12:30:30 PM
For ease of discussion, here are the last two CCs in PDF.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 04, 2011, 12:31:36 PM
Txlaw -- those are the exact questions and answers.

Even better -- I would encourage all to listen to the conference call so they can hear management hem and haw through the q&a.

And Txlaw -- why don't you answer the following for us based on your "reading" of the SEC filings and the transcript with direct, specific answers -- feel free to cut and paste exactly from management comments and SEC filings.  (this should be interesting given the BAC experience)  Reality will show you can't provide anything more than vague rhetoric offered by management.


What good is a hedge if it doesn't work when you need it most?

What good is citing high inventory turnover when the inventory doesn't turn during periods of stress?

Even if it's just roughly, what was maybe the percentage of impacts of secondary trading versus prop and then inventory marks, even if it's just generally speaking? I mean, was one disproportionately impactful than any other?

And then just one last for me on the comp ratio, I mean clearly jumped up in the quarter. Revenues were down. For the nine months, it's about 60%. I mean, if we assume – I hope not – but sort ofstatic level of revenues going forward, is the 3Q absolute number of comp, kind of sticky?

Okay. So even though it's happened a few quarters in a row, it's really just about when clients
are looking to transact?

How did the convert market collapse but JEF avoid losses?

Title: Re: JEF - Jefferies Group
Post by: txlaw on November 04, 2011, 01:35:47 PM
Txlaw -- those are the exact questions and answers.

Even better -- I would encourage all to listen to the conference call so they can hear management hem and haw through the q&a.

And Txlaw -- why don't you answer the following for us based on your "reading" of the SEC filings and the transcript with direct, specific answers -- feel free to cut and paste exactly from management comments and SEC filings.  (this should be interesting given the BAC experience)  Reality will show you can't provide anything more than vague rhetoric offered by management.


What good is a hedge if it doesn't work when you need it most?

What good is citing high inventory turnover when the inventory doesn't turn during periods of stress?

Even if it's just roughly, what was maybe the percentage of impacts of secondary trading versus prop and then inventory marks, even if it's just generally speaking? I mean, was one disproportionately impactful than any other?

And then just one last for me on the comp ratio, I mean clearly jumped up in the quarter. Revenues were down. For the nine months, it's about 60%. I mean, if we assume – I hope not – but sort ofstatic level of revenues going forward, is the 3Q absolute number of comp, kind of sticky?

Okay. So even though it's happened a few quarters in a row, it's really just about when clients
are looking to transact?

How did the convert market collapse but JEF avoid losses?


How is "No direct answer" the exact answer given in the CC?

Reality will be understood by those who actually read the filings and the available CC transcripts.  Thanks Ben for attaching them.

I already know how I interpret the CCs and quarterly filings.  I'd like to hear from folks who do not have a dog in the fight (I now own JEF) whether they agree with your (Munger's) interpretation.
Title: Re: JEF - Jefferies Group
Post by: mevsemt on November 07, 2011, 03:00:37 AM
http://www.bloomberg.com/news/2011-11-07/jefferies-bears-in-retreat-after-firm-boosts-european-disclosure-options.html?cmpid=yhoo
Title: Re: JEF - Jefferies Group
Post by: fuluvu on November 07, 2011, 06:34:34 AM
JEF reduces Sovereign Debt  in a single days!
Jefferies Reduces Gross Holdings Of Sovereign Debt Of Portugal, Italy, Ireland, Greece, And Spain By 49.5% In Today's Trading In Europe
Title: Re: JEF - Jefferies Group
Post by: rijk on November 07, 2011, 07:02:09 AM
Jefferies Cuts Holdings Of European Sovereign Debt
Last update: 11/7/2011 9:42:16 AM
DOW JONES NEWSWIRES
Jefferies Group Inc. (JEF) reduced its gross holdings of Portugal, Italy, Ireland, Greece and Spain sovereign securities by 49.5% since the close of business Friday, a move it said resulted in no meaningful profit or loss.
"We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book," said Chairman and Chief Executive Richard Handler and Executive Committee Chairman Brian Friedman in a joint statement. "We will now resume our normal market-making activities and serve our clients around the world."
Shares were up 7.3% at $12.95 in early trading and are off 52% this year.
The investment bank was dogged last week by questions about its European exposure. Jefferies disclosed on Friday a $2.4 billion long position and a $2.3 billion short position to European nations including Italy, Spain, Ireland, Portugal, and Greece. Its net cash exposure to the region at the time was $91 million.
The company said Monday its trading positions in the sovereign securities were reduced by about $1.1 billion long and $1.1 billion short.
Jefferies' current net exposure to these sovereign securities is currently $59 million, or 1.7% of shareholder equity.
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 07, 2011, 07:26:23 AM
I spent the weekend reading the 10-K, was hoping someone here could shed light on who the European bank is that supports the commodity business.

Here's the info from the K: p.121 of the 2010 10-K
"JFP maintains a credit intermediation facility with a highly rated European bank (the "Bank"), which allows JFP customers that require a counterparty with a high credit rating for commodity index transactions to transact with the Bank.  The Bank simultaneously enters into offsetting transactions with JFP and receive fees from JFP for providing credit support."
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 17, 2011, 05:56:43 AM
Nice commentary on Jefferies on Bloomberg. Recent quotes from Handler and Friedman.

http://www.bloomberg.com/news/2011-11-17/jefferies-ceo-sees-turmoil-easing-as-mf-global-comparison-fades.html (http://www.bloomberg.com/news/2011-11-17/jefferies-ceo-sees-turmoil-easing-as-mf-global-comparison-fades.html)
Title: Re: JEF - Jefferies Group
Post by: oddballstocks on November 17, 2011, 07:08:45 AM
So I saw Jef is dropping like a rock again this morning.  I've read through this thread and the business seems decent, they unloaded their European Sovereigns eliminating that risk.  So what I'm trying to understand is what is the bear case here?  Why is this stock being punished?

It seems like this is a classic panic play, I don't mind speculating on this, but I can't get my head around why it's so hated if they've worked to cut/eliminate exposure.
Title: Re: JEF - Jefferies Group
Post by: nkp007 on November 17, 2011, 08:29:45 AM
Anyone looking at the debt? Yielding above 10%.

Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 17, 2011, 08:31:03 AM
The debt is an amazing deal. 10% for 10 years. If you leverage up 50% that's 15% return. If debt is yielding this, the stock could yield even better!
Title: Re: JEF - Jefferies Group
Post by: link01 on November 17, 2011, 08:49:39 AM
So I saw Jef is dropping like a rock again this morning.  I've read through this thread and the business seems decent, they unloaded their European Sovereigns eliminating that risk.  So what I'm trying to understand is what is the bear case here?  Why is this stock being punished?

It seems like this is a classic panic play, I don't mind speculating on this, but I can't get my head around why it's so hated if they've worked to cut/eliminate exposure.

couple of things makes jef's risk standout vs the other majors ibanks: they arent a bank holding co , & they're not TBTF (too big to fail). so there's more uncertaintly/vulnerability from that side of things. also, while they cut their euro sovereign debt in half, its the other remaining half that the market is worried & skeptical about.

plus, in highly stressed global market the new watchword for net HEDGED exposure has become: gross is the new NET! fear has undermined trust.

from naked capitalism:

1. Can the institution with CDS exposure afford to collateralize all of their exposures? This was a big factor in why MF Global moved so quickly to bankruptcy – as MF and their exposures got downgraded, MF ran out of available assets to post against their CDS. This is probably why they violated their segregated accounts. This is also what drove AIG to needing a bailout – they lacked sufficient funds to post against their very large exposures. Thus, the problem is not the mechanics of CDS and collateralization, but the fact there is no real limit on how much exposure an institution can take on in CDS relative to assets available for collateral posting.
 2. What is the credit worthiness of the various counterparties? Gross exposure may be netted down via CDS hedges, but what if the counterparties run into an MF Global or AIG situation? If a counterparty is unable to honor its hedge (either through collateral posting or outright), then the value of the hedge is greatly diminished and more likely to yield something like ten cents on the dollar (a typical ISDA auction level for unsecured CDS debt). This is the issue that ZeroHedge has been harping on with Morgan Stanley and Jeffries – i.e. “gross is the new net”. Since the various gross exposures to various European sovereigns is quite large, a legitimate question can be asked about how secure these hedges (and the resulting netting) will be in the event of significant country or institution downgrades. >>

http://www.nakedcapitalism.com/2011/11/on-the-dubious-defenses-of-the-netting-of-4-trillion-of-us-bank-cds-to-the-eurozone.html

http://ftalphaville.ft.com/blog/2011/10/27/713826/how-gross-and-net-cds-notionals-really-work/

Title: Re: JEF - Jefferies Group
Post by: Grenville on November 17, 2011, 09:00:43 AM
So I saw Jef is dropping like a rock again this morning.  I've read through this thread and the business seems decent, they unloaded their European Sovereigns eliminating that risk.  So what I'm trying to understand is what is the bear case here?  Why is this stock being punished?

It seems like this is a classic panic play, I don't mind speculating on this, but I can't get my head around why it's so hated if they've worked to cut/eliminate exposure.

couple of things makes jef's risk standout vs the other majors ibanks: they arent a bank holding co , & they're not TBTF (too big to fail). so there's more uncertaintly/vulnerability from that side of things. also, while they cut their euro sovereign debt in half, its the other remaining half that the market is worried & skeptical about.

plus, in highly stressed global market the new watchword for net HEDGED exposure has become: gross is the new NET! fear has undermined trust.

from naked capitalism:

1. Can the institution with CDS exposure afford to collateralize all of their exposures? This was a big factor in why MF Global moved so quickly to bankruptcy – as MF and their exposures got downgraded, MF ran out of available assets to post against their CDS. This is probably why they violated their segregated accounts. This is also what drove AIG to needing a bailout – they lacked sufficient funds to post against their very large exposures. Thus, the problem is not the mechanics of CDS and collateralization, but the fact there is no real limit on how much exposure an institution can take on in CDS relative to assets available for collateral posting.
 2. What is the credit worthiness of the various counterparties? Gross exposure may be netted down via CDS hedges, but what if the counterparties run into an MF Global or AIG situation? If a counterparty is unable to honor its hedge (either through collateral posting or outright), then the value of the hedge is greatly diminished and more likely to yield something like ten cents on the dollar (a typical ISDA auction level for unsecured CDS debt). This is the issue that ZeroHedge has been harping on with Morgan Stanley and Jeffries – i.e. “gross is the new net”. Since the various gross exposures to various European sovereigns is quite large, a legitimate question can be asked about how secure these hedges (and the resulting netting) will be in the event of significant country or institution downgrades. >>

http://www.nakedcapitalism.com/2011/11/on-the-dubious-defenses-of-the-netting-of-4-trillion-of-us-bank-cds-to-the-eurozone.html

http://ftalphaville.ft.com/blog/2011/10/27/713826/how-gross-and-net-cds-notionals-really-work/

I would encourage anyone interested in JEF to look at their disclosure for derivatives. According to the Q3 10Q, their CDS exposure is to Indexes. Also a large % of their derivatives are exchange traded versus OTC based on fair value data estimating. They seem to run a clean ship based on their ability to lower their exposure to sovereigns as shown last week.

You also have LUK owning 29% of the equity at Jefferies and 50% of JEF high yield platform. Then you have Handler & Friedman who own 8.3% of the equity as well.
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on November 17, 2011, 10:41:49 AM
The debt is an amazing deal. 10% for 10 years. If you leverage up 50% that's 15% return. If debt is yielding this, the stock could yield even better!

It seems like it would be a good deal here to borrow @ 4% - 5% and just load up on the bonds.

If they aren't safe I can't see why.

Sometimes Mr. Market just puts the ball on a tee for you. 8)
Title: Re: JEF - Jefferies Group
Post by: oddballstocks on November 17, 2011, 11:23:37 AM
Just took a look at the bonds

I see the 3/12 has about a 14% YTM, might not be a bad place to put some cash for four months.
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on November 18, 2011, 09:32:55 AM
The debt is an amazing deal. 10% for 10 years. If you leverage up 50% that's 15% return. If debt is yielding this, the stock could yield even better!

It seems like it would be a good deal here to borrow @ 4% - 5% and just load up on the bonds.

If they aren't safe I can't see why.

Sometimes Mr. Market just puts the ball on a tee for you. 8)

http://online.wsj.com/article/SB10001424052970204517204577044460022840008.html

Quote
In other words, even if the Jefferies business is challenged over the next year or so, it is unlikely to crack. That may not be enough to entice investors into the stock, which is likely to remain volatile as the European crisis unfolds. But it does argue in favor of the firm's debt.

Jefferies' 5.125% senior unsecured bonds due April 2018, for example, were trading Thursday below 80 cents on the dollar for a yield of more than 9.5%, according to MarketAxess. Meanwhile, its 5.875% debt due June 2014 was trading at about 85 for a yield of nearly 13%.

Those distressed prices could end up proving lucrative if the concern around Jefferies' European exposure really is being driven by fear rather than fundamentals.
Title: Re: JEF - Jefferies Group
Post by: link01 on November 19, 2011, 08:36:16 AM
Quote
I would encourage anyone interested in JEF to look at their disclosure for derivatives. According to the Q3 10Q, their CDS exposure is to Indexes. Also a large % of their derivatives are exchange traded versus OTC based on fair value data estimating. They seem to run a clean ship based on their ability to lower their exposure to sovereigns as shown last week.

You also have LUK owning 29% of the equity at Jefferies and 50% of JEF high yield platform. Then you have Handler & Friedman who own 8.3% of the equity as well.

you make some very good points here. however, in this environment those hedges are fraught with more than normal risk, no matter how well structured & tested for historical asset/spread relationships.  investors need more than ever to have their eyes WIDE open. jef is still a leveraged business, after all, dependant on the markets for its funding & exposed to counterparty risks etc.

FTalpha really has some insightful articles about some of the risks:

http://ftalphaville.ft.com/blog/2011/11/04/726571/the-jefferies-issue/

http://ftalphaville.ft.com/blog/2011/11/03/725391/jefferies-we-have-to-explain-this-again/

http://ftalphaville.ft.com/blog/2011/11/07/730881/jefferies-2bn-toldjaso/

http://ftalphaville.ft.com/blog/2011/11/04/728711/jefferies-for-the-love-of-a-greek-god-how-many-times-must-we-explain-this/#comments

but perhaps the biggest unknown, unquantifiable risk comes courtesy of zerohedge (useful for its news aggregating abilities tho its extreme anarchist slant on that news needs to be hugely discounted). anyways, it seems jef & its bigger brother ibanks are being sued for fraud for underwriting & peddling MF Global bonds right before they went poof:

http://www.zerohedge.com/news/final-straw-jefferies-and-six-other-banks-sued-fraudulent-mf-global-bond-issuance

personally, i think INTL is the best managed ibank by far, with JEF being a distant 2nd, tho i wont get interested in it again until 16 or so

Title: Re: JEF - Jefferies Group
Post by: Grenville on November 19, 2011, 10:01:39 AM
Quote
I would encourage anyone interested in JEF to look at their disclosure for derivatives. According to the Q3 10Q, their CDS exposure is to Indexes. Also a large % of their derivatives are exchange traded versus OTC based on fair value data estimating. They seem to run a clean ship based on their ability to lower their exposure to sovereigns as shown last week.

You also have LUK owning 29% of the equity at Jefferies and 50% of JEF high yield platform. Then you have Handler & Friedman who own 8.3% of the equity as well.

you make some very good points here. however, in this environment those hedges are fraught with more than normal risk, no matter how well structured & tested for historical asset/spread relationships.  investors need more than ever to have their eyes WIDE open. jef is still a leveraged business, after all, dependant on the markets for its funding & exposed to counterparty risks etc.

FTalpha really has some insightful articles about some of the risks:

http://ftalphaville.ft.com/blog/2011/11/04/726571/the-jefferies-issue/

http://ftalphaville.ft.com/blog/2011/11/03/725391/jefferies-we-have-to-explain-this-again/

http://ftalphaville.ft.com/blog/2011/11/07/730881/jefferies-2bn-toldjaso/

http://ftalphaville.ft.com/blog/2011/11/04/728711/jefferies-for-the-love-of-a-greek-god-how-many-times-must-we-explain-this/#comments

but perhaps the biggest unknown, unquantifiable risk comes courtesy of zerohedge (useful for its news aggregating abilities tho its extreme anarchist slant on that news needs to be hugely discounted). anyways, it seems jef & its bigger brother ibanks are being sued for fraud for underwriting & peddling MF Global bonds right before they went poof:

http://www.zerohedge.com/news/final-straw-jefferies-and-six-other-banks-sued-fraudulent-mf-global-bond-issuance

personally, i think INTL is the best managed ibank by far, with JEF being a distant 2nd, tho i wont get interested in it again until 16 or so

Thanks for all the linked articles.

I agree that times must be much tougher when sizing up counter parties. According to the filings JEF isn't taking large gross exposures via CDS and netting them out neatly like a lot of the major commercial banks. A large percentage of their derivative exposure is through central clearing houses. Also their ability to reduce their sovereign exposure in a stressed market is telling about the structure of their hedges.

In terms of liquidity:
1. JEF has raised equity and debt in a prudent manner, maturities are spread out
a. 4.2bln of debt
b. 3.5bln of stockholder's equity
2. They have financial instruments that can be pledged as collateral
3. Cash & uncommitted lines of credit
a. 2bln of cash
b. 1.7bln of bank lines unused

They do not have the ultimate backstop with the FED as a bank holding company, but they also don't have the regulation risk that comes with it.

In terms of the MF Global Bonds, that doesn't come across very well if you tout working in the best interest of both clients and customers. Some of the fraud and the using of customer funds couldn't have been known by JEF so I find it hard to see them at risk for that. In terms of ultimate exposure, it depends on how long the litigation last and the ultimate outcome which could be years in the future when hopefully normal markets return.

Lastly, there is risk of the unknown since we only get a glimpse of what's going on in the black box when you see the financial filings. It really is a bet on the management and on their track record. The one thing that gives me confidence is that the Leucadia guys have worked with Handler for a long time both on the board since 2008 and through the High Yield platform (since 2000) that is run by Handler. I'm also aware that Leucadia hasn't always sized up their partners given what happened at Fortescue and the litigation there but sometimes its a matter of time before true intentions appear.

I haven't looked at INTL, but LUK owns shares.
Title: Re: JEF - Jefferies Group
Post by: rijk on November 19, 2011, 02:15:14 PM
i am not a legal expert but there are several references to proprietary trading risks in the 10-K (which is referenced in the prospectus), see page 17

regards
rijk

http://www.sec.gov/Archives/edgar/data/1401106/000119312511145663/d10k.htm

Principal transactions incurred through our normal business activities arise when we act as principal in connection with our market making activities or when we facilitate client business. Principal transactions also include proprietary positions that we take in fixed income and related interest rate products, equities, foreign exchange and commodities to monetize our views on future movements in market prices and volatilities in commodities, securities and other instruments and products, which may be affected by, among other things, changes in credit spreads, potential rating changes, and possibility of issuer default. These future movements and events can differ substantially from our expectations (as well as, among other things, any instrument correlations or market conditions that we believed to be existent) and therefore result in substantial losses. For example, in 2010, concerns were raised about certain European countries, including Italy, Spain, Belgium, Portugal and Ireland, regarding perceived weaknesses in their economic and fiscal condition, and the extent to which such weaknesses might affect other economies as well as financial institutions such as ours, which did business with these countries or invested in securities issued by them. For a discussion of these risks, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”. Changes in regulatory and tax rules can also change the expected profitability or outcome of these trades, and in the worst case result in losses. These changes can even be applied retroactively. Additionally, regulatory, liquidity and other capital restrictions may also force us to exit certain positions prematurely, or in adverse market conditions, resulting in significant losses.

Historically, our trading activities have largely been limited to effecting client transactions as a broker, involving minimal principal exposure of generally short duration. As we implement our new strategic plan, we expect to increase our principal trading activities significantly, in connection with facilitating our clients’ transactions, our market-making and our proprietary activities and investing, and as a result, our exposure to market risk and trading losses will increase. Although we expect to increasingly recognize trading income as part of our ongoing activity for our clients and to continue monetizing our market views with unhedged principal transactions, there can be no assurance that we can increase the level of this activity or that it will be profitable. Because of the market risk and issuer risk that we face, we may incur significant losses at any time with respect to any of our principal transactions, including those executed for client facilitation and market making, proprietary activities, or asset-liability management; and particularly in the event of severe market stress.
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 19, 2011, 03:03:23 PM

you make some very good points here. however, in this environment those hedges are fraught with more than normal risk, no matter how well structured & tested for historical asset/spread relationships.  investors need more than ever to have their eyes WIDE open. jef is still a leveraged business, after all, dependant on the markets for its funding & exposed to counterparty risks etc.



I think it's best to keep your eyes wide open when no one else is. I think almost everyone has their eyes open now.
Title: Re: JEF - Jefferies Group
Post by: link01 on November 19, 2011, 03:40:29 PM
Historically, our trading activities have largely been limited to effecting client transactions as a broker, involving minimal principal exposure of generally short duration. As we implement our new strategic plan, we expect to increase our principal trading activities significantly, in connection with facilitating our clients’ transactions, our market-making and our proprietary activities and investing, and as a result, our exposure to market risk and trading losses will increase. Although we expect to increasingly recognize trading income as part of our ongoing activity for our clients and to continue monetizing our market views with unhedged principal transactions, there can be no assurance that we can increase the level of this activity or that it will be profitable. Because of the market risk and issuer risk that we face, we may incur significant losses at any time with respect to any of our principal transactions, including those executed for client facilitation and market making, proprietary activities, or asset-liability management; and particularly in the event of severe market stress.

this is exactly the kind of thing i am not a fan of....at all.  "... we expect to increase our principal trading activities significantly, in connection with facilitating our clients’ transactions, our market-making and our proprietary activities and investing,...". facilitate client transactions etc? isnt that the height of rank disengenuousness? more like SUPPLEMENT, it seems to me. really, i just dont see how thats not a conflict of interest with their own clients all too often.

Title: Re: JEF - Jefferies Group
Post by: Kraven on November 21, 2011, 07:23:18 AM
Open letter posted on Jefferies website from management to clients, shareholders, etc.

http://www.jefco.com/html/OurFirm/NewsRoom/PressReleases/2011/JefGrp_Letter%20to%20Shareholders.pdf
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 21, 2011, 07:42:56 AM
Open letter posted on Jefferies website from management to clients, shareholders, etc.

http://www.jefco.com/html/OurFirm/NewsRoom/PressReleases/2011/JefGrp_Letter%20to%20Shareholders.pdf

Good letter from Handler laying out what sounds to be a short attack and Jefferies responses. It looks like they are doing what is required to build long term value. They are buying back debt and stock.
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 21, 2011, 07:44:33 AM
Let's look a JEF from the big picture.

I do not know how to evaluate JEF. I don't think most people do. We can look at the nitty gritty of things, but I think that makes you miss the big picture too.

What do we know?

Financial firms are like black boxes, a ton of uncertainty but potentially big rewards.

A lot of "professionals" missed out on MF Global, Lehman, etc, etc.

Now a lot of "professionals" are bearish on JEF.

The LUK guys own a big, big stake. And they have been buying more.

So, we must ask ourselves, who knows more - the guys who probably don't have as big of a stake in the company or the guys from LUK? Plus, a lot of the brass at JEF own a lot of the outstanding shares.

Again, this is speculative, because I do not know how to evaluate the firm. However, we rarely ever have perfect information. I would like to think, perhaps naively, that the brass and guys from LUK know more than any of us on the board or the analyst who are folllowing JEF.

Title: Re: JEF - Jefferies Group
Post by: link01 on November 21, 2011, 08:02:10 AM
i have to say, that was a fantastically insightful letter. the level of disclosure is both unprecidented, clear, & transparent. and, blast from the infamous past, necessitated, apparently, by malicious, rumor-mongering short-sellers jockeying for ill-gained profits at the expense of common decency. what a surprise!
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 21, 2011, 08:25:05 AM
I agree that this letter was something else.  I don't think I've seen anything quite like it.  One has to believe that given the current environment and past history with the Lehmans and MF Globals of the world protesting "misinformation" that this letter had a team of lawyers, both internal and external, reviewing every word for veracity and triple checking their work.  The letter is specific enough, that unless Handler is insane, this is the truth as he knows it using his best judgment.  If not, he will be spending time as a guest of the feds for a period of years.  Guaranteed he knows this fact and was advised of it.
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 21, 2011, 08:33:34 AM
I agree that this letter was something else.  I don't think I've seen anything quite like it.  One has to believe that given the current environment and past history with the Lehmans and MF Globals of the world protesting "misinformation" that this letter had a team of lawyers, both internal and external, reviewing every word for veracity and triple checking their work.  The letter is specific enough, that unless Handler is insane, this is the truth as he knows it using his best judgment.  If not, he will be spending time as a guest of the feds for a period of years.  Guaranteed he knows this fact and was advised of it.

I appreciate both your's and Link's comments. I'm adding to my position and it's nice to see other's having a similar read on the letter. I don't want to be overly optimistic, but at the same time the downside seems reasonable.

The bonds are still trading at attractive yields.
Title: Re: JEF - Jefferies Group
Post by: link01 on November 21, 2011, 09:01:45 AM
its probably earsier for me not to become overly optimistic because-- i'll admit it--- i'm cautious in this environment with reagrd to leveraged co's, particularly financials. and to top that off, i'm not a fan of ibanks that engage in principle trading for their own account, as i've said. and then there's that possible lawsuit re their partcipation in peddling mf global bonds shortly before they imploded. thats going to be a high profile case given the apparent hijinks surrounding blns of missing client funds. lawsuits scare me. they're unpredicatble & hard for a pleb like me to quantify.

that said, i stepped up & bought a bit today. the fact that i've long considered them to be the 2nd best managed ibank counts for something, after all. at least at this price, torpedos be damned.
Title: Re: JEF - Jefferies Group
Post by: oddballstocks on November 21, 2011, 09:28:14 AM
Ok, read the letter good stuff, I want to call out a quote:

"By the way, that same analyst also points to our 12.9x leverage at the end of August to be too high, but omits here the further material point that we have been operating successfully and profitably with similar leverage for years, including during the 2008-09 financial meltdown. In addition, he said that our leverage ratio was now higher because our stock was trading lower.   As all of you probably recognize, trading prices are irrelevant to a company’s leverage ratio. Neither our equity, our debt obligations nor the cost to us of our existing debt changes one iota with market prices. What more can we say on this one?"

So my question to the board, is Munger said analyst, and has he been on TV spouting off his nonsense?
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 21, 2011, 09:28:27 AM
$9.99 a share, 43% below tangible book value. Not a bad deal at all.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 09:51:31 AM
Another day, another press release -- very funny.  Confirms management just doesn't get it...   Mr. Market is a weighing machine over the long term and no press release can change the reality of JEF terrible business performance.

The primary risk lies with the business model.  Levered at "only" 13-15x, JEF can barely earn its cost of capital.  Why in the world should a company like Jefferies (2nd tier IB that grossly overpays its executives) be allowed to lever up 13-15x -- insane.  Lenders are realizing the risk and will logically demand higher interest rates in order to borrow their $.

Funny exchange recently on CNBC between Barry Knapp of Barclays and Sean Eagan.  Mr. Eagan reiterated that he believed JEF carried too much debt to which Mr. Knapp responded to the effect of -- "well, if JEF isn't allowed to lever up 13-15x, how do you expect the company to make any money?" 

Mr. Eagan was polite in his response but should have asserted -- if an investment bank needs to lever up 13-15x in order to make money, the capital is clearly better served in other hands.  This fact is true for all investment banks.  Why are they entitled to lever up 13-15x just so they can pay enormous salaries and barely earn more than their cost of capital?  Over time, Mr. Market will surely remind these companies that they enjoy no such entitlement.

As for LUK -- their recent purchases typify the maxim:  there is no such thing as being half pregnant. 

Full disclosure -- not short or long JEF or LUK.  Just enjoying the popcorn. 



Title: Re: JEF - Jefferies Group
Post by: coc on November 21, 2011, 10:09:54 AM
Another day, another press release -- very funny.  Confirms management just doesn't get it...   Mr. Market is a weighing machine over the long term and no press release can change the reality of JEF terrible business performance.

The primary risk lies with the business model.  Levered at "only" 13-15x, JEF can barely earn its cost of capital.  Why in the world should a company like Jefferies (2nd tier IB that grossly overpays its executives) be allowed to lever up 13-15x -- insane.  Lenders are realizing the risk and will logically demand higher interest rates in order to borrow their $.

Funny exchange recently on CNBC between Barry Knapp of Barclays and Sean Eagan.  Mr. Eagan reiterated that he believed JEF carried too much debt to which Mr. Knapp responded to the effect of -- "well, if JEF isn't allowed to lever up 13-15x, how do you expect the company to make any money?" 

Mr. Eagan was polite in his response but should have asserted -- if an investment bank needs to lever up 13-15x in order to make money, the capital is clearly better served in other hands.  This fact is true for all investment banks.  Why are they entitled to lever up 13-15x just so they can pay enormous salaries and barely earn more than their cost of capital?  Over time, Mr. Market will surely remind these companies that they enjoy no such entitlement.

As for LUK -- their recent purchases typify the maxim:  there is no such thing as being half pregnant. 

Full disclosure -- not short or long JEF or LUK.  Just enjoying the popcorn.

If any bank in America has proven they can handle leverage, it's Jefferies. Why they shouldn't be allowed to lever up to 13x is beyond me.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 21, 2011, 11:01:14 AM
"Mr. Market is a weighing machine over the long term and no press release can change the reality of JEF terrible business performance."

Do you know JEF's stock price in 1990? 20 years ago up to today's low of $10/share? Revenues from 150million to 2.5 billion per year (estimated as of this year end). JEF has blown the S&P out of the ballpark. If anything it proves JEF's superb business performance. As an aside, I'm an IB customer and investor and IB is not at all like JEF, not even close.
Title: Re: JEF - Jefferies Group
Post by: Viking on November 21, 2011, 11:09:40 AM
Munger, given the importance of 'reputation' in this business, my view is JEF has no choice and must respond to the acusations. LUK's involvement is interesting; it tells me that JEF likely has the financial backing in the near term to fight through the allegations (LUK likely has the ability to bring other investors in should JEF need to raise money). Heavy insider buying is a positive. The fact the company is repurchasing debt and shares at attractive prices also is positive (meaning they likely do not need capital).

And yes, it is a black box.

This one looks very similar to FFH back in 2003 & 2004. Investment decision looks like it really comes down to do you trust management? For disclosure purposes, after reading the letter (and spending the past week reading up a little) I made a small purchase today.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 11:21:06 AM
Do you know JEF's stock price in 1990?

Look forward not backward.  Kodak was a great company during parts of the last century but that is no reason to own the stock today. 

IB industry economics have changed dramatically for the worse.  During this period, JEF has become a far different company -- diving head first into an industry experiencing a structural decline in economic returns.

 
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 21, 2011, 11:52:17 AM
I would be interested to know why it is an industry experiencing a structural decline (looking forward) in economic returns
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on November 21, 2011, 12:00:19 PM
(http://app.quotemedia.com/quotetools/chartcache/201295.png)

(http://app.quotemedia.com/quotetools/chartcache/182957.png)
Title: Re: JEF - Jefferies Group
Post by: alpha23 on November 21, 2011, 12:41:29 PM
BVH - what is this chart all about exactly?
Title: Re: JEF - Jefferies Group
Post by: Hester on November 21, 2011, 12:44:14 PM
Comparing investment banks to Kodak is powerfully stupid.
Title: Re: JEF - Jefferies Group
Post by: AZ_Value on November 21, 2011, 01:13:02 PM
I would be interested to know why it is an industry experiencing a structural decline (looking forward) in economic returns

Me too. What gives?
Thanks.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 01:17:18 PM
Comparing investment banks to Kodak is powerfully stupid.

LOL -- the passion and anger is so funny.  I do enjoy.

Some might say that not understanding the nature of the comparison is "powerfully stupid."

But for a simpler mind, let me try the following -- Bear Stearns and Lehman Brothers were aggressively guided by "visionary" leaders and had phenomenal 15-20 year runs and then collapsed under the weight of a over-levered business model that didn't adjust to changes in industry economics. 

Maybe those buying the stocks in 2007 based on the "visionary" and aggressive leadership, strong past performance, and high insider ownership were slightly misguided?:)  Here is the primary point for the truly simple -- look forward not backward.

Title: Re: JEF - Jefferies Group
Post by: rranjan on November 21, 2011, 01:19:18 PM
Ok, read the letter good stuff, I want to call out a quote:

"By the way, that same analyst also points to our 12.9x leverage at the end of August to be too high, but omits here the further material point that we have been operating successfully and profitably with similar leverage for years, including during the 2008-09 financial meltdown. In addition, he said that our leverage ratio was now higher because our stock was trading lower.   As all of you probably recognize, trading prices are irrelevant to a company’s leverage ratio. Neither our equity, our debt obligations nor the cost to us of our existing debt changes one iota with market prices. What more can we say on this one?"

So my question to the board, is Munger said analyst, and has he been on TV spouting off his nonsense?

I always feel that those kind of analysts should be singled out by name. If an analyst can come up with this kind of crap then ponitng out will help everyone to take their rest of the views accordingly.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 01:33:23 PM
I would be interested to know why it is an industry experiencing a structural decline (looking forward) in economic returns

Me too. What gives?
Thanks.


Margin compression + higher capital intensity across all businesses.  Further -- major business lines have been impaired just as JEF aggressively pushes into these areas -- e.g., asset backed origination (primarily mortgages), securitization, sales/trading, and proprietary trading drove industry profit growth over the past 10 years...this business has been permanently impaired.   Last (and maybe most important given the leverage) the cost of capital has gone up (for non TBTF companies) and will only go higher over the next 10 years.


And if you really, really had to own an investment bank because you believe the future is bright for this industry, how could anyone in their right mind buy JEF over GS or MS?

Title: Re: JEF - Jefferies Group
Post by: prevalou on November 21, 2011, 01:47:56 PM
If we look forward, why would it be a margin compression ? The sector is consolidating and european banks could throw the towel. Less competition=better ROI.
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 21, 2011, 01:57:26 PM
I would like to know munger's long term returns.   :-X
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 02:04:42 PM
If we look forward, why would it be a margin compression ? The sector is consolidating and european banks could throw the towel. Less competition=better ROI.


True for some business lines but wrong for most.  Further, the primary source of margin compression has not been a proliferation of new companies but the growth of electronic sales/trading.  On the advisory side, none of the major players will be throwing in the towel -- and margins steadily decline in these businesses because much of the "advice" has gotten commoditized.

The biggest problem for all investment banks is that the asset backed business has been seriously impaired -- origination, securitization, sales/trading, proprietary trading of asset backed securities (primarily mortgages) was a major source of profits.   

And for JEF -- a big problem will be the rising cost of capital...which is why the company has frantically tried to restore "confidence."

Given that I have no position in JEF, I'm not going to discuss further -- unless there are new developments for the company. 

Best. 
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 21, 2011, 02:19:06 PM
The growth of electronic/sales has not produced margin compression. Better rotation and less human costs=better margins. For a detailed explanation see Goldman Sachs presentations.

On the advisory side, nobody Will be throwing the towell is far from certain: advisory is now a capital intensive business.

Asset backed business has been impaired but products change and banks as middlemen adapt.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 02:50:47 PM
"The growth of electronic/sales has not produced margin compression"

Only because I view this comment as potentially misleading -- although not questioning what Goldman may have presented or your honesty in relaying their assertion.  I should have been more clear -- absolute margin dollars are down and continue to decrease.  You may disagree, which obviously is entirely your right.  We'll let future results speak for themselves.



Asset backed business has been impaired but products change and banks as middlemen adapt.

Personally I don't believe new profits will be found to replace anything close to prior levels.  Dot com IPO profits were huge at the end of the 90's...when that bubble burst, IBs ramped up asset backed securitization and all the associated businesses, which reached astronomical levels.  Now it's back to reality.

Best. 
     




 

Title: Re: JEF - Jefferies Group
Post by: Hester on November 21, 2011, 03:28:35 PM
Comparing investment banks to Kodak is powerfully stupid.

LOL -- the passion and anger is so funny.  I do enjoy.


No passion or anger. I was very calm and lucid when I typed that. I have no position in Jeffries or Kodak. Comparing an I-Bank to a company that sells technology that is no longer relevant isn't worthy of a response greater than, "no, that's stupid"   

But for a simpler mind, let me try the following -- Bear Stearns and Lehman Brothers were aggressively guided by "visionary" leaders and had phenomenal 15-20 year runs and then collapsed under the weight of a over-levered business model that didn't adjust to changes in industry economics. 

Maybe those buying the stocks in 2007 based on the "visionary" and aggressive leadership, strong past performance, and high insider ownership were slightly misguided?:)  Here is the primary point for the truly simple -- look forward not backward.




I'll let the onlookers decide whether me questioning the comparison between a struggling modestly levered I-Bank and an old camera company with technology that is obsolete makes me simple minded.

In any case Bear and Lehman had 3 times the leverage Jeffries does.
Bear and Lehman had 3 times the leverage Jeffries does.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 03:49:42 PM
Comparing an I-Bank to a company that sells technology that is no longer relevant isn't worthy of a response greater than, "no, that's stupid"  

Hilarious -- so funny...I spelled it out for you and you still don't get it...LOL

guided by "visionary" leaders and had phenomenal 15-20 year runs and then collapsed under the weight of a over-levered business model that didn't adjust to changes in industry economics

I wonder what company could fit that description -- possibly Kodak...:)  And guess who else fits -- Bear and Lehman...

Now let me make it more simple for you -- the challenge facing JEF is not unique in the history of business or specific to any industry...  The comparison was not to highlight the specific dynamics of a tech business model vs an IB business model -- LOL!!!

History is littered with companies that have had fabulous runs and then collapsed under the weight of a over-levered business model that didn't adjust to changes in industry economics.  Will JEF follow the same path? -- it's a risk but only time will tell... 

The example of Kodak, Lehman, and Bear simply drives home the point that Buffett has made on numerous occasions...look forward not backward (past peformance doesn't guarantee future results) -- really very simple.

And when someone accuses another of being "powerfully stupid" as a result of what turns out to be their own ignorance, their original thinking was usually clouded by emotion.  But I guess not in your case...
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 21, 2011, 03:51:56 PM
I would like to know munger's long term returns.   :-X

I'll try this again.

Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 03:53:31 PM
modestly levered I-Bank

OoooooooooooK....13x is modestly levered...got it...LOL

What happens if the asset side of the ledger declines by only 8%?
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 21, 2011, 04:10:16 PM
Munger, you have already proven how little you know about capital and how banks come to the sum of parts of it. No need to make the same mistake twice. Right?

Furthermore you are always the first to make bold statements and then state that you have no position in any of the stocks mentioned. That's a bit easy because this way you can never ultimately lose. If you are right you'll get the credit. If you are wrong you'll just mention that you weren't sure because the companies discussed were "black boxes" and that anything could have happened considering associated risks.

Why don't you just post some of your current holdings that are completely "anti-black boxes"? While you are at it post your long term returns that comes with your brilliant insight like stahleyp asked. It would lower the scepticism of many here.

Btw, posting "Oooooooook" & "LOL" doesn't add to your credibility just like using the color red and all kinds of fonds doesn't really work for Ben Graham (the poster...) and others.
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on November 21, 2011, 05:34:20 PM
If JEF had no issues in Sept./Oct. 2008 then what is the worry now?

Back then even the BUCK was broken...

http://www.usatoday.com/money/perfi/basics/2008-09-16-damage_N.htm

Quote
If you want to know how severe the financial industry crisis is, here's further proof: The share price of the Reserve Primary fund, a money market mutual fund, has fallen below the sacred $1 mark, thanks to the Lehman Bros. meltdown.

Money market funds have been the fund industry's haven for more than three decades, and investors often view them the same way they do bank checking accounts. The funds' safety record has attracted more than $3.5 trillion in assets.

Until now, no money fund open to the general public has ever allowed its share price to dip below a dollar — "breaking the buck," as it's called. (A small institutional money fund, Community Bankers Money fund, broke the buck in 1994.)

Money market funds have long feared that if they broke the buck, thereby shrinking investors' principal, people would shift their money into bank money market accounts or ultrasafe Treasury securities. The question now is whether other money funds will follow the Reserve fund in dipping below $1.

We aren't even CLOSE to such an event now.

Didn't Fairfax suffer the slings and arrows of a huge bear attack back in the day?
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 06:53:34 PM
I've never deemed one of tombgrt 381 prior posts worthy of a direct response -- certainly not going to start now.  Most recent post confirms what I concluded long ago -- his posts aren't even worth reading.  The whole notion that I have any interest in winning "creds" with him is just hilarious -- the height of silly self delusion...this is a message board.  So I would respectfully ask tombgrt that if you don't agree w my opinion, just ignore or do what I typically do to you -- don't even read. 


There are some on this board who really contribute thoughtful opinion -- and I've been happy to even receive direct messages from some.   

I'm done w this thread until new developments w JEF.

Best.
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 21, 2011, 07:19:13 PM
I'm done w this thread until new developments w JEF.

Best.

You've said this twice in the past several hours.  :o
Title: Re: JEF - Jefferies Group
Post by: Hester on November 21, 2011, 07:31:01 PM
modestly levered I-Bank

OoooooooooooK....13x is modestly levered...got it...LOL

What happens if the asset side of the ledger declines by only 8%?

OMG like I think part of the confusion is from the fact that like typically banks are much more levered than the average company and stuff. SOOOOOOOOO a bank like totally borrows money and then like lends it out at higher rates and junk. Whatevs. You can learn more about them here: http://www.businessdictionary.com/definition/bank.html

k bye
Title: Re: JEF - Jefferies Group
Post by: Hester on November 21, 2011, 07:45:38 PM
Comparing an I-Bank to a company that sells technology that is no longer relevant isn't worthy of a response greater than, "no, that's stupid"  

Hilarious -- so funny...I spelled it out for you and you still don't get it...LOL

guided by "visionary" leaders and had phenomenal 15-20 year runs and then collapsed under the weight of a over-levered business model that didn't adjust to changes in industry economics

I wonder what company could fit that description -- possibly Kodak...:)  And guess who else fits -- Bear and Lehman...

Now let me make it more simple for you -- the challenge facing JEF is not unique in the history of business or specific to any industry...  The comparison was not to highlight the specific dynamics of a tech business model vs an IB business model -- LOL!!!

History is littered with companies that have had fabulous runs and then collapsed under the weight of a over-levered business model that didn't adjust to changes in industry economics.  Will JEF follow the same path? -- it's a risk but only time will tell... 

The example of Kodak, Lehman, and Bear simply drives home the point that Buffett has made on numerous occasions...look forward not backward (past peformance doesn't guarantee future results) -- really very simple.

And when someone accuses another of being "powerfully stupid" as a result of what turns out to be their own ignorance, their original thinking was usually clouded by emotion.  But I guess not in your case...

Your logic is that Kodak and Jeffries share 3 random traits and thus Jeffries is thus equal to Kodak, and will spend the next few years on a spiral down like Kodak has. Jeffries is a bank so their business model depends on the use of debt unlike Kodak which could be financed other ways. I-banking faces no technological obscolescence, the single driving force behind Kodak's demise. That fact makes the comparison extremely flawed at best.

Hey Enron had a leader, a lot of debt, and good stock returns at one point. Jeffries must be cooking the books too. Wow this is worse than you thought Munger.

Wait... Berkshire Hathaway also has debt, a visionary leader and good past returns. So DID KODAK. SO DID ENRON.

By your logic I guess Berkshire Hathaway is on a one way track to becoming an obsolete camera maker with bad accounting. Sell Jeffries and Berkshire immediatley because they both share three random traits with Kodak.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 21, 2011, 07:59:02 PM
Your logic is that Kodak and Jeffries share 3 random traits and thus Jeffries is thus equal to Kodak, and will spend the next few years on a spiral down like Kodak has. Jeffries is a bank so their business model depends on the use of debt unlike Kodak which could be financed other ways. I-banking faces no technological obscolescence, the single driving force behind Kodak's demise. That fact makes the comparison extremely flawed at best.

Hey Enron had a leader, a lot of debt, and good stock returns at one point. Jeffries must be cooking the books too. Wow this is worse than you thought Munger.

Wait... Berkshire Hathaway also has debt, a visionary leader and good past returns. So DID KODAK. SO DID ENRON.

By your logic I guess Berkshire Hathaway is on a one way track to becoming an obsolete camera phone maker with bad accounting. Sell Jeffries and Berkshire immediatley because they both share three random traits with Kodak.

OMG like I think part of the confusion is from the fact that like typically banks are much more levered than the average company and stuff. SOOOOOOOOO a bank like totally borrows money and then like lends it out at higher rates and junk. Whatevs. You can learn more about them here:




You're right stahleyp -- but I want to be on the record when such insane posts are specifically directed my way. 

Here is my official response to the above -- he still can't comprehend...LOL -- literal truth as I read his post.  And he obviously doesn't know how to answer the very simple question -- what happens if the asset side of the ledger declines by only 8%?...which triggered another literal LOL as I read his "OMGs," "like totally," and "watevs"...so funny.

This is a forum to ecxhange opinion -- have fun with it...I do. 
 





Title: Re: JEF - Jefferies Group
Post by: prevalou on November 21, 2011, 10:32:44 PM
What happants if the asset side of the ledger declines by 8% can't be answered. It depends on the liabilities side too. The whole balance sheet must be considered.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 22, 2011, 02:47:59 AM
I've never deemed one of tombgrt 381 prior posts worthy of a direct response -- certainly not going to start now.  Most recent post confirms what I concluded long ago -- his posts aren't even worth reading.  The whole notion that I have any interest in winning "creds" with him is just hilarious -- the height of silly self delusion...this is a message board.  So I would respectfully ask tombgrt that if you don't agree w my opinion, just ignore or do what I typically do to you -- don't even read. 


Haha, well I'm sorry if my newbie posts in my third language aren't worthy of your time and effort Munger but I won't lose sleep over it. At least I don't pretend to know things about certain subjects only to make oneself look ridiculously stupid explaining them to others with great certainty and arrogance. Yet I am the one with self-delusion issues.

The creds weren't for me but for the participants in this discussion and its overall quality. I couldn't care less about your person "Munger". Although I must admit you are a remarkable phenomenon.
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 22, 2011, 04:40:43 AM
Here is my official response to the above -- he still can't comprehend...LOL -- literal truth as I read his post.  And he obviously doesn't know how to answer the very simple question -- what happens if the asset side of the ledger declines by only 8%?...which triggered another literal LOL as I read his "OMGs," "like totally," and "watevs"...so funny.

This is a forum to ecxhange opinion -- have fun with it...I do. 
 

Here is the part I don't understand.  You keep referring to the leverage, but as others have pointed out that's inherent in the model for financials.  All financials are levered.  Obviously you don't like that.  So it isn't a question of whether the asset side for JEF declines by 8% but whether the asset side of any financial declines by any similar amount.  JEF has pointed out repeatedly, and most recently yesterday, that their assets are of very high quality.  Assuming what they say is true and I think we have to given the nature of their communication, if the asset side of JEF declines by that amount we might as well kiss the financial system goodbye since other financials will be similarly situated at best and most probably not as well situated.

The annoying point of the post though is that you consistently raise these red flags as if you've divined some hidden risk no one else sees.  That's why a financial never is really worth more than a couple times book in the best of markets.  The risk of the balance sheet is taken into account.  These red flags can certainly be raised with any business.  What if no one shops anymore and decides to grow all their own food and make things at home?  I bet that would probably impact WMT, TGT, etc.  If just 5% of people decided to do it, it would really impact their sales.  What if no one uses technology anymore?  That would probably impact AAPL, MSFT, etc.  You think your issues raised are very insightful when all you've done is raised a basic point that anyone who invests in financials should already take into account.

But you probably won't respond to this since you aren't responding until there is new info on JEF.
Title: Re: JEF - Jefferies Group
Post by: value-is-what-you-get on November 22, 2011, 04:58:15 AM
So tThe asset side can only drop by 8% in a severe market selloff as the vast majority of assets are securities inventory.  In this scenario, and with an eye to value, I would expect the sharp minds running the show would use some of their 2 billion to buy more inventory on sale.  Also ROE would go up. 
Title: Re: JEF - Jefferies Group
Post by: value-is-what-you-get on November 22, 2011, 05:51:11 AM
My last post was a bit lazy.  Here is a more precise answer.  On 12/31/2007 Assets were 27907273.  On 12/31/2008 Assets were 17857414, a drop of 36% yoy.  On 12/31/2007 shareholder equity was 1761544.  On 12/31/2008 shareholder equity was 2121271, or an increase of 20.4%.  Assuming a linear realationship between a dexrease in JEF assets and an increase in their shareholder equity,  an 8% drop in their assets should produce 8/36*20=4.44% increase in shareholder equity.  So there's your answer Fear-Munger.
Title: Re: JEF - Jefferies Group
Post by: coc on November 22, 2011, 10:17:26 AM

OMG like I think part of the confusion is from the fact that like typically banks are much more levered than the average company and stuff. SOOOOOOOOO a bank like totally borrows money and then like lends it out at higher rates and junk. Whatevs. You can learn more about them here: http://www.businessdictionary.com/definition/bank.html

k bye

This post is very funny.
Title: Re: JEF - Jefferies Group
Post by: AZ_Value on November 22, 2011, 10:35:15 AM
 ;

OMG like I think part of the confusion is from the fact that like typically banks are much more levered than the average company and stuff. SOOOOOOOOO a bank like totally borrows money and then like lends it out at higher rates and junk. Whatevs. You can learn more about them here: http://www.businessdictionary.com/definition/bank.html

k bye

This post is very funny.

 ;D
Title: Re: JEF - Jefferies Group
Post by: AZ_Value on November 22, 2011, 10:42:51 AM
Munger, could you tell us if there is any circumstance under which you would consider a financial institution a good company to own?

Maybe that'll help clarify where exactly you're coming from because sometimes oftentimes you don't make much sense.

And if the answer is none and for you banks will always be highly levered black boxes and Jesus himself couldn't understand what is on their balance sheet, then no need to jump on all the threads relating to banks to repeat the same stuff, we got it.
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 22, 2011, 12:50:17 PM
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.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 22, 2011, 06:47:48 PM
The Fox report confirms what I have asserted -- the JEF business model (as currently configured) is not sustainable.  Seems management has now realized.  The world has changed for investment banking -- back to reality.  13x is not "modestly" levered for an IB.

Will be interesting to see how JEF management plays out -- hopefully for current shareholders and employees, managemet acts rationally otherwise could be a disaster.

Title: Re: JEF - Jefferies Group
Post by: philassor on November 22, 2011, 07:09:08 PM
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.

Hum, could the "asset management firm" rumored to be a potential acquirer be LUK ?   ;)
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 22, 2011, 07:18:57 PM
Buffett discusses JEF. He doesn't say much about it. Really just saying that it isn't big enough to buy.

http://www.valuewalk.com/2011/11/warren-buffett-spend-10b-investment/#.TsxkV7Ik67s
Title: Re: JEF - Jefferies Group
Post by: mevsemt on November 23, 2011, 05:52:58 AM
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". 
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 23, 2011, 06:03:24 AM

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?
Title: Re: JEF - Jefferies Group
Post by: value-is-what-you-get on November 23, 2011, 06:16:35 AM
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   
Title: Re: JEF - Jefferies Group
Post by: value-is-what-you-get on November 23, 2011, 06:29:20 AM
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
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 23, 2011, 07:04:27 AM
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.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 07:10:41 AM
“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.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 07:23:18 AM
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.



Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 23, 2011, 07:28:20 AM
“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?
Title: Re: JEF - Jefferies Group
Post by: value-is-what-you-get on November 23, 2011, 07:46:05 AM
“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
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 07:51:02 AM
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.
 
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 07:55:58 AM
Ace Greenberg was actually the one who was considered to have built Bear Stearns.  


Wrong. 
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 23, 2011, 07:58:13 AM
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.   ;)

Title: Re: JEF - Jefferies Group
Post by: mevsemt on November 23, 2011, 08:03:21 AM
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.



Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 23, 2011, 08:04:19 AM
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. "
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 08:05:36 AM
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. 
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 08:09:56 AM
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.
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 23, 2011, 08:14:17 AM
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.

Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 08:29:03 AM
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."


Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 08:33:04 AM
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. 
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 23, 2011, 08:47:04 AM
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.
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 08:53:17 AM
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).         
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 23, 2011, 08:57:55 AM
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. 
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 09:20:59 AM
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. 
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 23, 2011, 09:30:39 AM
concerning Jefferies and Bear stearns, I'd say: "comparaison n'est pas raison"
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 09:39:26 AM
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.
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 23, 2011, 09:52:58 AM


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. 
Title: Re: JEF - Jefferies Group
Post by: Viking on November 23, 2011, 10:01:22 AM
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 (http://blogs.wsj.com/marketbeat/2011/11/23/jefferies-gimme-credit-upgrades-it-to-buy/?mod=yahoo_hs)
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 10:14:12 AM
My point was that the seeds for Bear would be were planted under Ace.


Your point is wrong.

Title: Re: JEF - Jefferies Group
Post by: Ross812 on November 23, 2011, 10:16:13 AM
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!
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 23, 2011, 10:28:59 AM
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)
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 10:40:20 AM
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.
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 23, 2011, 10:45:55 AM
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?
Title: Re: JEF - Jefferies Group
Post by: Munger on November 23, 2011, 11:02:38 AM
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
Title: Re: JEF - Jefferies Group
Post by: stahleyp on November 23, 2011, 11:08:34 AM
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.

Title: Re: JEF - Jefferies Group
Post by: Liberty on November 23, 2011, 11:31:34 AM
Hitting 52wk lows.
Title: Re: JEF - Jefferies Group
Post by: rranjan on November 23, 2011, 11:36:15 AM
Hitting 52wk lows.

Established medium size postion. I will make it large size if it drops more.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 23, 2011, 11:49:16 AM
I bought more today as well. Should be under BV, around 0.9x maybe.
Title: Re: JEF - Jefferies Group
Post by: roughlyright on November 27, 2011, 12:11:42 PM
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?
Title: Re: JEF - Jefferies Group
Post by: prevalou on November 27, 2011, 12:47:26 PM
No insider buying any ?

R Handler bought 61231 shares on november 15
Title: Re: JEF - Jefferies Group
Post by: rijk on November 27, 2011, 01:18:50 PM
check again, those were option awards....

leucadia did buy....

regards
rijk
Title: Re: JEF - Jefferies Group
Post by: tombgrt on November 28, 2011, 06:36:20 AM
http://www.bloomberg.com/video/81699844/

Quote
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)
Title: Re: JEF - Jefferies Group
Post by: Mark Jr. on December 09, 2011, 08:03:31 PM
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?
Title: Re: JEF - Jefferies Group
Post by: robface on December 10, 2011, 11:05:28 AM
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.
Title: Re: JEF - Jefferies Group
Post by: Mark Jr. on December 10, 2011, 05:01:47 PM
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.
Title: Re: JEF - Jefferies Group
Post by: robface on December 10, 2011, 05:52:06 PM
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.
Title: Re: JEF - Jefferies Group
Post by: Grenville on December 11, 2011, 02:20:17 PM
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
Title: Re: JEF - Jefferies Group
Post by: racemize on December 11, 2011, 02:30:01 PM
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?
Title: Re: JEF - Jefferies Group
Post by: Grenville on December 11, 2011, 03:27:32 PM
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%).
Title: Re: JEF - Jefferies Group
Post by: racemize on December 11, 2011, 05:04:57 PM
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.
Title: Re: JEF - Jefferies Group
Post by: racemize on December 14, 2011, 12:15:18 PM
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!
Title: Re: JEF - Jefferies Group
Post by: rkbabang on December 14, 2011, 01:21:03 PM
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!

I doubled my LUK position yesterday, so I certainly won't try to talk you out of it.

If it is a stupid idea, then I am as stupid as you are I guess.
Title: Re: JEF - Jefferies Group
Post by: racemize on December 20, 2011, 07:36:42 AM
http://dealbook.nytimes.com/2011/12/20/jefferies-posts-quarterly-profit-of-39-million/?partner=yahoofinance
Title: Re: JEF - Jefferies Group
Post by: Grenville on December 20, 2011, 08:18:40 AM
Just found this as a good resource to do background research for members of the National Futures Association. They keep track of regulatory proceedings with the CBOT, CME and others. I was lead to this resource as I began reading the CME group's letter to the Senate committee researching MF Global. You can find the regulatory measures against MF Global which they refer to.

Also Jefferies was there too.

http://www.nfa.futures.org/basicnet/ (http://www.nfa.futures.org/basicnet/)
Title: Re: JEF - Jefferies Group
Post by: mevsemt on December 20, 2011, 08:41:38 AM
Whew... I'm glad those storm clouds are starting to dissipate!  This was my largest holding... and that's before today's run-up...

http://mevsemt.blogspot.com/2011/11/couldnt-resist.html

http://mevsemt.blogspot.com/2011/11/reshuffling-deck.html

Title: Re: JEF - Jefferies Group
Post by: racemize on December 20, 2011, 09:08:08 AM
Whew... I'm glad those storm clouds are starting to dissipate!  This was my largest holding... and that's before today's run-up...

http://mevsemt.blogspot.com/2011/11/couldnt-resist.html

http://mevsemt.blogspot.com/2011/11/reshuffling-deck.html

Nice--I just looked through your blog for a while, also very nice.  Keep up the good work.
Title: Re: JEF - Jefferies Group
Post by: rijk on December 20, 2011, 11:40:02 AM
jef pre-announced a decent q4 on nov 21, while the stock was trading at $10.....

"Our fourth quarter and fiscal year end in nine days
on November 30. Anything can happen in any nine-day period in today’s tumultuous
global financial environment, but we expect to record operating results for our fourth
quarter that, although not where we want them to be, will be profitable and stronger than
our third quarter
(excluding the Bache acquisition-related items)."

it's tempting to lock in gains now but the valuation still looks good and the stock is still trading at 20% below leucadia's cost basis and 30% below berkowitz cost basis....

regards
rijk
Title: Re: JEF - Jefferies Group
Post by: Liberty on January 01, 2012, 02:05:11 PM
http://www.marketwatch.com/story/leucadia-national-corporation-completes-acquisition-of-control-of-national-beef-2011-12-30
Title: Re: JEF - Jefferies Group
Post by: rijk on February 07, 2012, 04:58:13 AM
these web sites show that berkowitz/fairholme bought jef in q2 2011

http://whalewisdom.com/filer/fairholme-capital-management-llc
http://www.gurufocus.com/StockBuy.php?GuruName=Bruce+Berkowitz&p=1

while dataroma shows the same purchase in q3 2011

http://www.dataroma.com/m/hist/hist.php?f=fairx&s=JEF

anybody know what is happening here?


in any case, interesting to see that berkowitz abandoned jef in q4, looks like the conviction was not that high after all, i think that his former partners (goodhaven) are still holding jef.....

regards
rijk
Title: Re: JEF - Jefferies Group
Post by: biaggio on February 07, 2012, 05:33:36 AM
RIJK,don t forget that Fairholm had several billion $ of redemptions (AUM down 70%)-so he had to sell something
Title: Re: JEF - Jefferies Group
Post by: racemize on February 07, 2012, 06:04:19 AM
RIJK,don t forget that Fairholm had several billion $ of redemptions (AUM down 70%)-so he had to sell something

This seems like the most reasonable answer.
Title: Re: JEF - Jefferies Group
Post by: txlaw on February 07, 2012, 07:04:03 AM
I'd agree that this is probably a case of selling cheap to buy (or hold) cheaper. 

If Bruce B wanted to keep his AIG, MBIA, BAC, SHLD, LUK, etc., he likely needed to sell off his other holdings due to redemptions.  That's probably why all the i-banks have been jettisoned from his portfolio.
Title: Re: JEF - Jefferies Group
Post by: Grenville on February 07, 2012, 07:38:41 AM
An additional reason I found while reading the Goodhaven report is that mutual funds are not allowed to own more than 5% of a broker/dealer when the position is created.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on February 27, 2012, 11:28:16 AM
Anyone know when our friends at LUK will bring out their 10-K?

Turns out my buy on Nov 23st was 5 cents from the bottom, wish I knew it back then!
Title: Re: JEF - Jefferies Group
Post by: Evolveus on February 27, 2012, 01:35:40 PM
You timed that question as well as that LUK purchase...it came out today.

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000096223&owner=include

The shareholder letter should come out in early to mid April.
Title: Re: JEF - Jefferies Group
Post by: valueinvesting101 on March 06, 2012, 01:56:23 PM
According to 8K posted today it looks like National Beef earned 221 mil + 52 mil(D&A) = 273 mil and since LUK has NOL assets they will not be paying any taxes on this earning. This seems very good deal at the price of 870 mil.
Am I miscalculating something here?
http://www.sec.gov/Archives/edgar/data/96223/000090951812000089/mm03-0512_8kea1991.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951812000089/mm03-0512_8kea1991.htm)
Title: Re: JEF - Jefferies Group
Post by: tombgrt on March 06, 2012, 02:05:14 PM
They only have a 80% ownership of the business. Looks like a great deal, even if those earnings aren't sustainable.

Nice sell off today, I'm thinking of buying more now it is slightly above (?) BV.
Title: Re: JEF - Jefferies Group
Post by: Grenville on March 27, 2012, 06:53:45 PM
A couple of good articles on Jefferies in the FT:

Jefferies to set up Europe financing arm
http://www.ft.com/intl/cms/s/0/9cbafd90-7517-11e1-90d1-00144feab49a.html#ixzz1qLH01PlK (http://www.ft.com/intl/cms/s/0/9cbafd90-7517-11e1-90d1-00144feab49a.html#ixzz1qLH01PlK)

Jefferies puts debt debacle aside
http://www.ft.com/intl/cms/s/0/ffede76e-7748-11e1-baf3-00144feab49a.html#ixzz1qLHM17kh (http://www.ft.com/intl/cms/s/0/ffede76e-7748-11e1-baf3-00144feab49a.html#ixzz1qLHM17kh)

Also, Q1 earnings came out last week. The management call was pretty good. Things look to be back to normal. The company earned 77million. The two recent deals for Bache and Hoare Govett were very opportunistic and and the firm is expanding the Bache commodities platform with new hires.

I like what I've seen and heard so far. The investment banking business is growing and the earnings run rate is also growing with expansion abroad.

Q1 results:
http://www.jefco.com/pdfs/0320121Q12FinancialResults.pdf (http://www.jefco.com/pdfs/0320121Q12FinancialResults.pdf)
Title: Re: JEF - Jefferies Group
Post by: WarrenWatsa on April 03, 2012, 07:01:22 PM
Back within earshot of book.

Ian and Joe getting little respect.
Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on April 03, 2012, 08:56:51 PM
Back within earshot of book.

Ian and Joe getting little respect.

I might add this interesting discussion thread about LUK's NOL's / DTA.

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_L/threadview?m=te&bn=10954&tid=15725&mid=-1&tof=10&rt=2&frt=2&off=1#-1 (http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_L/threadview?m=te&bn=10954&tid=15725&mid=-1&tof=10&rt=2&frt=2&off=1#-1)

<snip>....

LUK - Year Reported NOL's (10-K)

2003 ... $3,550,000,000 [approx]
2004 ... $3,900,000,000 [approx]
2005 ... $5,100,000,000 [approx]
2006 ... $5,200,000,000 [approx]
2007 ... $5,400,000,000
2008 ... $5,745,600,000
2009 ... $5,985,000,000
2010 ... $5,400,500,000
2011 ... $4,738,150,000


2010: used ~ $600m of NOLs

2011: used ~ $660m of NOLs


...<snip>
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 06, 2012, 03:57:27 AM
Thanks berkshiremystery. The january sell of 100,000,000 FMG shares and new earnings from Nat beef should use a big chunck of the DTA again this quarter.

Letter should be out soon too, maybe we hear something new about the FMG note litigation. It's on the books for a fraction of what it is worth* if they rule in favor of leucadia. I have no idea about the odds tho. Anyone got an idea?


(*)LUK's 10-K mentions they earned $214m (before taxes) in interest income in 2011 alone. This was during a year of expansion in its Cloud Break and Christmas Creek operations to a production capacity of 55 million metric tons/year. They plan to expand to 90 million metric tons/year for the area. They sold 46.5 million metric tons in 2011 so if spot prices stay around the 2011 average price level, we are looking at $400m/year in intrest income until august 2019.
Title: Re: JEF - Jefferies Group
Post by: jjsto on April 06, 2012, 07:03:51 AM
So, given the uncertainty regarding the litigation around the FMG note, anyone have any thoughts as to what Leucadia could sell the note for in a private sale? 
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on April 06, 2012, 07:39:48 AM
I think the litigation of the FMG note is no longer an issue at this point - it may be in theory but not in practice. Consider that the reason FMG did it was because it was at a time 2 years ago when it was hard for them to raise money to finance their expansion. However, since then, they have raised money in the junk bond market and have not had to offer the sweetner of a royalty note to other investors. The more this goes on, the less likely that FMG will need to do something that dilutes LUK's interest. Given the DTA, I think the odds of a sale of this note is very low.

Title: Re: JEF - Jefferies Group
Post by: prevalou on April 06, 2012, 07:54:00 AM
What would cost FMG to dilute luk interest in the note ? They could raies money with à low rate, the rest being indirectly paid by luk through dilution. Am i wrong ?
Title: Re: JEF - Jefferies Group
Post by: jjsto on April 06, 2012, 08:31:08 AM
Thanks scorpion.  That's the concept I was trying to wrap my head around.  Why would FMG in practice want to raise money offering royalties dilutive to the LUK note, when that would seem to be a more expensive form of financing?  Maybe if iron-ore prices collapse again, that could be an issue in the future.  I agree the odds of a sale on the note are low.  It always seemed like the idea was to hold on to the note and sell the stock if need be.  Which they have done.  I wonder if LUK would have held on to the stock if the problems with Andrew Forrest had never existed?
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 06, 2012, 09:17:05 AM
Thanks for your insight scorpioncapital, makes sense.

Good question jjsto. I assume that the position was getting too big given the return on the note. They are plenty cyclical already, no need to keep both a $1b+ position and the note. Just a guess tho.

How do you guys estimate IV for LUK? I find it really hard to do and only have a vague idea which is simply related to current book value and future expected BV growth.
Title: Re: JEF - Jefferies Group
Post by: prevalou on April 06, 2012, 09:52:04 AM
If my interpretation is right, you are mistaken about the cost for FMG to issue a note similar to Leucadia. Look at page 22 in the 10 k. Leucadia would be diluted prorata for its 4% interest. So the winner would be FMG and the looser Leucadia. It would cost FMG nothing or near nothing.
Title: Re: JEF - Jefferies Group
Post by: jjsto on April 06, 2012, 10:55:57 AM
So, I guess the relevant paragraph on page 22 states: "In August 2010, the Company was advised that Fortescue is asserting that FMG is entitled to issue additional notes identical to the FMG Note in an unlimited amount. Fortescue further claims that any interest to be paid on additional notes can dilute, on a pro rata basis, the Company’s entitlement to the stated interest of 4% of net revenue." Under that interpretation, Fortescue could issue an unlimited amount of identical notes at a minimal cost that would fully dilute the existing LUK notes?  In that case,  the only thing currently preventing Fortescue from doing that would be the Writ of Summons filed by LUK in Sept 2010?
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 06, 2012, 11:43:33 AM
That was my interpretation of that paragraph as well jjsto. That's why I'm hoping the letter to shareholders brings more clarity about the issue.
Title: Re: JEF - Jefferies Group
Post by: prevalou on April 06, 2012, 12:46:35 PM
It is my interpretation too unless prorata has a signification i ignore
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on April 06, 2012, 01:10:27 PM
-"Fortescue Metals Aims to Raise $1 Billion by Issue of Junk Bonds"

"Fortescue Metals Group Ltd. (FMG.AU) has secured $2 billion through a bond issue for the expansion of its iron ore-mining operations in Western Australia, twice the amount it had set out to raise, the mining company said Thursday. "

"Fortescue last sold bonds in October, when it issued $1.5 billion of 8.25% eight-year senior unsecured notes. "

I think this is exactly what is happening - FMG is able to raise money in debt markets, so diluting the LUK royalty, is a last resort - especially with the litigation. Andrew was probably up against the wall when he thought no other way to raise money except to dilute the royalty to LUK. Since the wall has gone away so far and LUK's aggressive stance, it wouldn't pay to go that route.
Title: Re: JEF - Jefferies Group
Post by: prevalou on April 06, 2012, 01:23:14 PM
FMG can wait until the litigation is over and they prevail (hopefully for them before 2019!) to dilute LUK.
Title: Re: JEF - Jefferies Group
Post by: link01 on April 07, 2012, 05:04:43 AM
According to 8K posted today it looks like National Beef earned 221 mil + 52 mil(D&A) = 273 mil and since LUK has NOL assets they will not be paying any taxes on this earning. This seems very good deal at the price of 870 mil.
Am I miscalculating something here?
http://www.sec.gov/Archives/edgar/data/96223/000090951812000089/mm03-0512_8kea1991.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951812000089/mm03-0512_8kea1991.htm)

not sure you should add back the D&A, at least not the depreciation....adding back depreciation - normalized capex plus amortization assuming, ok. but the NOL's wont need to shield that portion of cash earnings because its not taxable anyway. more importantly NBP was an LLC so its earnings were pass-tru to the partners, i believe, & taxable mostly at the partner level. i think thats why we see only an insignificant income tax liabilty on the NBP staement of income. so those 221mln of earnings taxed at a ordinary 40% fed/state income rate for a C Corp would equate to 137mln after tax. luk's 80% share of that equals 109mln not counting their ability to shield those earnings with their NOL's. so that means luk bought at just under a 8 after tax PE.

i dont have a feel for how sustainable or normalized those 2011 earnings of 221mln are either. i noticed that they earned 143mln in 2009 so they've added almost 80mln to earnings in 2 yrs, a 50% increase. i wonder how the pink slime controvery will affect 2012 earnings?

interestingly, NBP tried to do an IPO in 2009 or 2010 but backed out do to low valuation in the markets. in 2009 they had also accepted a buyout offer from JBS s.a for 560 mln but that was called off for anti trust reasons. that would have been a 3.9 pretax PE purchase, cheaper than luk's today, btw, assuming thay were contemplating a 100% buyout vs luk's 80%. here are 2 links:

http://www.bizjournals.com/kansascity/stories/2009/02/16/daily40.html

http://seekingalpha.com/article/178529-will-investors-be-hungry-for-national-beef-ipo

Title: Re: JEF - Jefferies Group
Post by: link01 on April 07, 2012, 05:17:11 AM
FMG can wait until the litigation is over and they prevail (hopefully for them before 2019!) to dilute LUK.

FMG can wait until the litigation is over and they prevail (hopefully for them before 2019!) to dilute LUK.

well, they'll have to win the lawsuit 1st & then be willing to suffer even more reputational damage if it appears they won on a technicality due to some poor contract agreement wording on luk's part that failed to nail down their INTENT according to the letter of the law. which could be the case judging form luk mngts kind of sheepish tone, imo, that i think i detected in some of their comments. or it could just be that they are annoyed at themselves for misjudging andrew "twiggy" forrest in the beginning.
Title: Re: JEF - Jefferies Group
Post by: prevalou on April 07, 2012, 05:48:52 AM
Anyway, from Leucadia point of view, it seems to be a risk and it is difficult to price this risk, or to dismiss it.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 11, 2012, 04:54:56 AM
In any case, current share price is under BV again. Guessing something of 0.9x not adjusting for DTA and FMG note. I have been looking to buy more but haven't pulled the trigger yet because it's such a big position already.

Reread some annual letters in anticipating of the new one this week or the next. More details on succession plan on the way? We'll see!


Quote from: LUK 2010 AL
Our Board of Directors continues to urge us to provide a succession plan. We have been
working hard on that problem for several years. We have made some progress and hope by next
year it will be more palpable.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on April 11, 2012, 07:40:14 AM
hopefully this friday on the letter.
Title: Re: JEF - Jefferies Group
Post by: Parsad on April 11, 2012, 11:51:21 AM
In any case, current share price is under BV again. Guessing something of 0.9x not adjusting for DTA and FMG note. I have been looking to buy more but haven't pulled the trigger yet because it's such a big position already.

Reread some annual letters in anticipating of the new one this week or the next. More details on succession plan on the way? We'll see!


Quote from: LUK 2010 AL
Our Board of Directors continues to urge us to provide a succession plan. We have been
working hard on that problem for several years. We have made some progress and hope by next
year it will be more palpable.

You can't really teach what they do.  And the stuff they buy isn't as straight forward as the businesses Berkshire, Markel or Fairfax buy where there is management in place and they are businesses that are working just fine.  Succession is going to be very difficult at Leucadia if both are gone.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 11, 2012, 12:49:53 PM
Correct Parsad. On the other hand, their employment agreements won't expire until June 30th 2015. A minimum of 3 years more of their magic plus a price under - imo slightly understated - book value is a good deal if you ask me.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on April 11, 2012, 01:11:31 PM
I disagree, I think LUK owns mostly public shares and profitable private businesses. This is exactly like Berkshire. If Buffett stops buying new companies, Berkshire return = return of existing businesses. Same with LUK. Somebody is always making new investments until they stop - then somebody else has to do it. No guarantee the next person is any good.

I only see a marginal difference in the selling strategy, but the current investments can be held indefinitely either way.
Title: Re: JEF - Jefferies Group
Post by: Parsad on April 11, 2012, 01:38:23 PM
I disagree, I think LUK owns mostly public shares and profitable private businesses. This is exactly like Berkshire. If Buffett stops buying new companies, Berkshire return = return of existing businesses. Same with LUK. Somebody is always making new investments until they stop - then somebody else has to do it. No guarantee the next person is any good.

I only see a marginal difference in the selling strategy, but the current investments can be held indefinitely either way.

Many of their businesses, especially in the past, were distressed turn around situations.  As long as they stick to things like Jefferies, Mueller, National Beef Packing, etc, it will be fine.  But if you find situations where they are buying things that are distressed, in need of a turnaround, or complicated...think Finova or Berkadia...then it is going to be difficult to replicate that ability.  They are the best at what they do...pure Ben Graham distress plays, tax losses, analyzing complex financial structures...two brilliant guys! 

That's much harder to replace than Buffett where the company is slowly being put onto auto-pilot.  Even at Fairfax, with Andy Barnard in place and so much depth at Hamblin-Watsa, Prem is putting together a good succession plan.  What you can't replace with Buffett and Prem is leadership.  And Cummings and Steinberg are also two good leaders.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 13, 2012, 01:34:25 PM
Letter is out!  ;)

http://www.leucadia.com/c-p_letters/luk_c-p2011.pdf

Title: Re: JEF - Jefferies Group
Post by: bookie71 on April 13, 2012, 05:18:06 PM
Thanks for posting
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 19, 2012, 05:11:40 AM
Quote
-- Leucadia National has announced that it expects to win a lawsuit against Fortescue Metals Group. The two companies have been locked in a dispute since 2006 when Leucadia, a former cornerstone investor in the iron ore producer, sued Fortescue after it attempted to replicate a royalty note issued in 2006. Leucadia is trying to prevent the Australian miner from issuing further notes, which provide a 4 percent return on profits at certain projects. Page B3.

http://www.reuters.com/article/2012/04/18/digest-australia-business-idUSL3E8FI7CN20120418?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=43

The dispute isn't from 2006 but ok.. If this is true we can adjust BV a couple of dollars.  8)
Title: Re: JEF - Jefferies Group
Post by: tombgrt on April 19, 2012, 05:47:42 AM
Nothing "new" was announced, just a rehash of what the annual letter said.  :-X

http://www.smh.com.au/business/leucadia-bullish-on-fortescue-row-20120418-1x7lo.html

Title: Re: JEF - Jefferies Group
Post by: txlaw on April 24, 2012, 04:20:09 PM
Mad cow found in Cali.

http://www.bloomberg.com/news/2012-04-24/mad-cow-case-confirmed-in-central-california-usda-says.html

Could potentially have a big impact on National Beef volumes in the short term. 
Title: Re: JEF - Jefferies Group
Post by: txlaw on May 04, 2012, 02:50:43 PM
Results and 10-Q are out:

http://www.sec.gov/Archives/edgar/data/96223/000009622312000019/lnc1stqtr2012pressrelease.htm

http://www.sec.gov/Archives/edgar/data/96223/000009622312000017/lnc1stqtr2012form10q.htm
Title: Re: JEF - Jefferies Group
Post by: racemize on May 04, 2012, 03:19:02 PM
I believe that puts BVPS at 26.35 (above today's price).
Title: Re: JEF - Jefferies Group
Post by: racemize on May 07, 2012, 09:38:21 AM
I'm surprised it is down today, I thought we'd at least get to book.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on May 07, 2012, 12:57:10 PM
Take a look at National Beef "earnings" (seasonality I guess?) and Inmet's stock today.  No need to follow LUK that closely, value will come out over time.  ;)
Title: Re: JEF - Jefferies Group
Post by: PlanMaestro on May 08, 2012, 10:22:07 AM
From Good Haven: less than 4% of assets are Level 3 and that represents 14% of equity.
Title: Re: JEF - Jefferies Group
Post by: txlaw on May 14, 2012, 08:19:03 AM
Jefferies starting to look interesting again.
Title: Re: JEF - Jefferies Group
Post by: racemize on May 14, 2012, 08:24:18 AM
Jefferies starting to look interesting again.

It has pulled LUK down as well--almost back to my last buy-in price.
Title: Re: JEF - Jefferies Group
Post by: Grenville on May 14, 2012, 08:49:52 AM
Jefferies starting to look interesting again.

It's nice to see Jefferies bonds holding up much better this time around. A good sign for the equity.
Title: Re: JEF - Jefferies Group
Post by: txlaw on May 14, 2012, 10:18:20 AM
Jefferies starting to look interesting again.

It's nice to see Jefferies bonds holding up much better this time around. A good sign for the equity.

I'd like to think so.

Interesting to see JEF be the syndication agent for these high profile high yield loans.  First the Harbinger loan.  Now CHK.
Title: Re: JEF - Jefferies Group
Post by: txlaw on May 14, 2012, 10:25:45 AM
Also, if you believe there will be a lot of M&A in the O&G space, as I believe there will be due to low nat gas prices and leveraged companies (such as CHK), Jefferies will certainly benefit from that increased activity.

Let's not forget the recent Samson-KKR deal, as well as the XOM-XTO deal.
Title: Re: JEF - Jefferies Group
Post by: Liberty on May 14, 2012, 11:02:39 AM
Getting really cheap again.
Title: Re: JEF - Jefferies Group
Post by: racemize on May 14, 2012, 11:19:53 AM
yep, though I doubt they are under book now given jef's decline.  Only 1% above my buy in now.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on May 14, 2012, 01:08:51 PM
Irrelevant if you believe JEF is worth more of course. BV going down $1-2 because an undervalued holding drops further doesn't really affect the instrinsic value of LUK of course.  You can buy at 1.1xBV because it's holdings drop more in BV than LUK's shares but get a better deal than at 0.9x after everything ran up.
I'm quite sure it's under BV now tho.
Title: Re: JEF - Jefferies Group
Post by: glider3834 on May 14, 2012, 04:12:27 PM
In any case, current share price is under BV again. Guessing something of 0.9x not adjusting for DTA and FMG note. I have been looking to buy more but haven't pulled the trigger yet because it's such a big position already.

Reread some annual letters in anticipating of the new one this week or the next. More details on succession plan on the way? We'll see!


Quote from: LUK 2010 AL
Our Board of Directors continues to urge us to provide a succession plan. We have been
working hard on that problem for several years. We have made some progress and hope by next
year it will be more palpable.

You can't really teach what they do.  And the stuff they buy isn't as straight forward as the businesses Berkshire, Markel or Fairfax buy where there is management in place and they are businesses that are working just fine.  Succession is going to be very difficult at Leucadia if both are gone.  Cheers!

I agree with Sanjeev. I think you do need to build in a decent margin a safety in buying Leucadia National - I would approach it from the point of view , if Ian Cumming & Joseph Steinberg were not there tomorrow would I still make a nice return & if they do stay for a 3 years or more am I going to make a lot of money? I recently had an experience with Guinness Peat Group (GPG.AX). This listed investment company was formerly run by Ron Brierley & Gary Weiss who achieved extremely high mid digit compounded BVPS growth  and they were removed by a group of short sighted institutional investors in Australia & NZ who are now liquidating the company. Ron Brierley was close to retirement but these institutions no doubt accelerated his departure. The loss of these key people in my mind did materially change my valuation of Guinness Peat and the steal I thought I had bought at a 30% + discount to NTAV turned out to be a disappointing outcome.

Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on May 15, 2012, 07:37:43 AM
Never mind an expanding coupon yield on investment, but JEF is currently trading at close to a 10% *initial* yield. They are earning in the ballpark of $275 million per year and at 2.8 billion market cap are giving an investor a juicy starting return. Even the slightest growth can mean an expanding equity coupon. Sure beats owning a bond with a fixed rate. I suspect that JEF's weakness is partially tied into the JPM fiasco. Remember when MF global went bankrupt? Same thing.
Title: Re: JEF - Jefferies Group
Post by: txlaw on May 15, 2012, 11:09:43 AM
http://www.businessweek.com/news/2012-05-15/chesapeake-oil-asset-may-fetch-an-extra-billion-energy

In addition to originating a $4 billion "bridge loan" to CHK, JEF and GS are advising CHK on the Permian asset sales, and probably other divestitures as well.
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on May 15, 2012, 06:49:09 PM
I attended the Leucadia shareholder meeting today. 

I took some rough notes though much of what I'll write is from memory and/or general feeling. 

I also got a chance to listen to the guys running Nat'l Beef in a small group.  As well as a chance to listen to Justin Wheeler (an heir apparent to Cummings) in a small group. 

So, I'll just throw things in generally (anyone else that was there feel free to add your impression or correct).

I thought a few things seemed pretty important comments:

On Fortescue note:  Cummings: "I'll be appalled if we don't win!!" 

Steinberg does a sort of Munger: Nothing to add -- clear he felt the same way.

On the overall Leucadia portfolio:  Steinberg: "Portfolio of companies at Leucadia is a bet on inflation...If you don't agree with outlook, you should sell your shares."

                                                  Steinberg likes gold / Cummings likes farmland  (my note: together they equal Michael Burry from a few years ago.)

                 Steinberg was pretty adamant that he felt the only way out of this mess was more money printing.  Cummings was somewhat generally negative: "It is scary out there."

                 They want to build this fortress Leucadia and Wheeler, IIRC, said in my group that they sold their Fortescue common because they wanted to reduce debt.  May reduce debt further.

--

They had Justin Wheeler review a bunch of the portfolio (I'll also include here some of what I picked up in my small group sessions):

(1) Nat'l Beef:   

(a) Bet on Global protein demand long term 
(b) Best out of the four remaining large players
(c) possibility to de-comiditize a commodity product (I believe through branding over time?)  (d) in their due diligence, they came up with three possible downsides...Mad Cow, competitors doing stupid things, social media against beef (I lost some of this point but I think the idea was the pretty much right away Mad Cow and Pink Slime happened but no big deal -- perhaps someone else can refine this.)

(in my small group, the guys running Nat'l said that this business is down to four competitors and that the U.S. has grain fed beef [as compared to grass fed in S. America] and this beef is attractive in Asia -- more marbled than S. American beef and that the Hereford and one other type of cattle that produce more marbling do better in N. America. 

They think the Chinese market will eventually open up -- could be relatively soon -- but is a long-term bet anyway.  Said that the Chinese have a huge runway to grow beef consumption. 

They said that Leucadia approached them and the courtship went on for some time and trust eventually built up.  They were not looking to sell.  In fact, they kept a good sized interest in the business. )

(2)  Garcadia (car dealerships): 
                     It is currently experiencing a "Perfect POSITIVE storm".  Lots of competition is gone because of the last few years.  Sales per location are up.  Wheeler said that this business is kind of a razor / razor blade thing.  The manufacturers bear the risk on the cars and, in effect, supply the razors.  The dealer makes it's money on the blades (which aren't the cars themselves) but rather the rest of the business -- maintenance, repairs and parts, auto body, etc.

(3)  Berkadia (servicing partnership with Berkshire):
                      Worst case scenario was that this business was going to be a "melting ice cube".  But, it looks like it will be better than that.  The independent commercial servicing business is doing well -- buy loans on apartments, sell them to the feds, keep the servicing.  They recently bought a portfolio from Key Bank with 5,000 accounts.

(my notes get flakier after this...)

(4)  Mueller
                      Makes things people need to buy (I got the feeling this was like Berkshire's Mi-Tek).  Will do better when construction and economy recover.  There's been industry consolidation.  Focussed on efficiences (I think this was reducing expenses).

(5)  Keen Energy
                      Continues to make money.  Cash flow positive.  Day rates fluctuate, etc.

(6)  Idaho Timber
                      Best quarter in 4 years.

(7)  Crimson (wine)
                      Very happy with new acquisition Seghesio.  Should give them scale / size / reach in the wine industry.

"eight":  Sangart
                       Phase 2b trials going on now.  This one has a bi-modal outcome  (either a home run or a failure is my take).

(9)  Casino
                      Has 99% occupancy.  Considering adding rooms to increase casino take -- standard casino model.

--

There was then a Q&A that Cummings led (some of that is already covered above).

Cummings said he wanted to retire at 75 to spend some time in business with his sons.  Steinberg was non-commital but I got the feeling he is not going anywhere soon.  I also got the feeling that Wheeler is really supposed to replace Cummings as the jocular / charismatic part of Leucadia.  Wheeler, though, is clearly also heavily involved in these businesses as I'm sure that Cummings always was / is.  I just feel that Steinberg doens't want to be out front. 

Cummings said they look for a 15% pre-tax return "and hopefully much larger" (and haven't paid much federal tax in the last 30+ years).

Steinberg said that Mueller, Berkadia, Jefferies, Idaho timber will all do well with inflation.  Said that he would be "happy" if Leucadia could keep up in a high inflation world -- this in response to a question about Buffett's old article "How Inflation Swindles the Equity Investor".

Cummings said that going to Harvard business school was a "ticket" (more than necessarily good for what you might or might not learn).

In my small group, Wheeler indicated that they look at a huge number of deals in a year and only pick a few: "Most go right into the trash." 

The Q&A didn't last that long but I'm leaving some things out.  As I said, anyone else feel free to add.

Title: Re: JEF - Jefferies Group
Post by: biaggio on May 15, 2012, 07:39:35 PM
Kiltacular, thank you very much for posting!

What did you think of Wheeler, overall as  heir apparent?
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on May 15, 2012, 07:53:28 PM
Biaggio,
I liked Wheeler quite a bit in the small group.  Not a promotional type at all.  At one point, someone asked him in this small group how it felt to be the center of attention now?  He actually sort of blushed.  Hard to describe but he gave the right feeling and said that he wasn't there yet but that he enjoys his role, etc.  He's from a small town and seems to combine a small town attitude with a good bit of worldly insight in business. 

He was well versed in all the businesses and said something like "We looked at 3,000 ideas last year".  I think I sort of blurted out something like "Jesus!"  (Please don't let that start another thread on religion !!).  Anyway, he said: "Most go right into the trash."  I liked his response -- he was sort of saying: "Oopps...I didn't mean to make it sound like I was bragging".

Still, it was interesting and I got the feeling he's looking at all of them with the team and that they're giving him some serious experience.  I also realized that sellers / promoters (whatever) are bringing Leucadia tons of stuff to look at -- that can't be a bad thing. 

Overall, I would say that at this point, I think Wheeler is very good based on these impressions.  Obviously, we can't know for sure until much later.  But, given that Cummings isn't going anywhere for three years and I think / got the feeling that at this point Steinberg will stay longer, they seem to be setting things up very intelligently.

In fact, in the Q&A, Cummings said something about how, ultimately, you go with your feeling when you're doing a deal and I think if that's the case, Wheeler is getting a very good chance to see how that works and how to develop the right "gut" response when all is said and done.  (Naturally, a guy like Cummings isn't just shooting form the hip on acquisitions but it was more a "after it passes all the filters" -- I think most investors can relate but you want experience in a guy that is going to be taking over eventually).

I hope Wheeler works out.
Title: Re: JEF - Jefferies Group
Post by: WarrenWatsa on May 15, 2012, 10:34:38 PM
Kiltacular,

As a fellow LUK shareholder who couldn't attend the meeting, I join others here in thanking you for sharing all of your thoughts.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on May 16, 2012, 06:30:25 AM
What do people think about the idea that LUK is a play on inflation and if inflation is long-delayed or does not materialize in any significant fashion, the stock will languish for quite a while?
Title: Re: JEF - Jefferies Group
Post by: racemize on May 16, 2012, 08:19:04 AM
What do people think about the idea that LUK is a play on inflation and if inflation is long-delayed or does not materialize in any significant fashion, the stock will languish for quite a while?

I think it is certainly a possibility.  I'm slightly in the deflation camp, but feel like my relatively small holding in LUK hedges my uncertainty (I have more in FFH).
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on May 16, 2012, 08:30:57 AM
Found this quote from Philip Fisher,

"Philip Fisher on inevitable bond-killing inflation following a recession

What is really important concerning the attractiveness of bonds as long-term investments is whether a similar trend can be expected in the period ahead. It seems to me that if this whole inflation mechanism is studied carefully it becomes clear that major inflationary spurts arise out of wholesale expansions of credit, which in turn result from large government deficits greatly enlarging the monetary base of the credit system. The huge deficit incurred in winning World War II laid such a base. The result was that prewar bondholders who have maintained their positions in fixed-income securities have lost over half the real value of their investments.

As already explained, our laws, and more importantly our accepted beliefs of what should be done in a depression, make one of two courses seem inevitable. Either business will remain good, in which event outstanding stocks will continue to out-perform bonds, or a significant recession will occur. If this happens, bonds should temporarily outperform the best stocks, but a train of major deficit-producing actions will then be triggered that will cause another major decline in the true purchasing power of bond-type investments. It is almost certain that a depression will produce further major inflation; the extreme difficulty of determining when in such a disturbing period bonds should be sold makes me believes that securities of this type are, in our complex economy, primarily suited either to banks, insurance companies and other institutions that have dollar obligations to offset against them, or to individuals with short-term objectives. They do not provide for sufficient gain to the long-term investor to offset this probability of further depreciation in purchasing power.
"
Title: Re: JEF - Jefferies Group
Post by: txlaw on May 16, 2012, 09:10:10 AM
Found this quote from Philip Fisher,

"Philip Fisher on inevitable bond-killing inflation following a recession

What is really important concerning the attractiveness of bonds as long-term investments is whether a similar trend can be expected in the period ahead. It seems to me that if this whole inflation mechanism is studied carefully it becomes clear that major inflationary spurts arise out of wholesale expansions of credit, which in turn result from large government deficits greatly enlarging the monetary base of the credit system. The huge deficit incurred in winning World War II laid such a base. The result was that prewar bondholders who have maintained their positions in fixed-income securities have lost over half the real value of their investments.

As already explained, our laws, and more importantly our accepted beliefs of what should be done in a depression, make one of two courses seem inevitable. Either business will remain good, in which event outstanding stocks will continue to out-perform bonds, or a significant recession will occur. If this happens, bonds should temporarily outperform the best stocks, but a train of major deficit-producing actions will then be triggered that will cause another major decline in the true purchasing power of bond-type investments. It is almost certain that a depression will produce further major inflation; the extreme difficulty of determining when in such a disturbing period bonds should be sold makes me believes that securities of this type are, in our complex economy, primarily suited either to banks, insurance companies and other institutions that have dollar obligations to offset against them, or to individuals with short-term objectives. They do not provide for sufficient gain to the long-term investor to offset this probability of further depreciation in purchasing power.
"

Fisher's thoughts on inflation may very well have been the biggest influence on WEB's views on inflation and equities.

As for LUK, it's unclear whether the stock will languish over the short term due to deflationary pressures.  It could go further down if commodities get slammed.   
Title: Re: JEF - Jefferies Group
Post by: Grenville on May 18, 2012, 06:02:44 AM
Article on Jefferies growth in energy and deals with Chesapeake:

"Chesapeake Turns To Jefferies’ Eads In $28 Billion Deals: Energy"
http://www.bloomberg.com/news/2012-05-17/chesapeake-turns-to-jefferies-eads-in-28-billion-deals-energy.html (http://www.bloomberg.com/news/2012-05-17/chesapeake-turns-to-jefferies-eads-in-28-billion-deals-energy.html)
Title: Re: JEF - Jefferies Group
Post by: racemize on May 31, 2012, 09:40:33 AM
moving this over from the other thread:

I would like to get some of your thoughts on LUK at these levels. Quite amazing to see the steep fall in value over the past few months.

Any thoughts on where BV might currently be?

Personally, I am buying hand over fist at these levels. LUK has never let me down over a 6-12 month horizon.

Scott

I'm now down 10% from my buy in last year, which I thought was historically cheap as well.  Not sure what book value is with mark to market (e.g., based on JEF), but JEF seems undervalued now as well, so I'm not too concerned. 

My main issue, though, is that their commodities bets may have issues.  e.g., see Prem's comments re China/commodities.
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on May 31, 2012, 10:58:44 AM
I think JEF's market position has improved because of MS's fall.

I own LUK, only 40% of the position I want, will add more.
Title: Re: JEF - Jefferies Group
Post by: WarrenWatsa on May 31, 2012, 02:39:37 PM
I note that in 2010 it got down to the low $17s, near its Oct. 2008 low.

It's very cheap. I wonder how much of this drop has to do with succession concerns, and not just the cyclical nature of LUK (or the fact that it's not easy to value).
Title: Re: JEF - Jefferies Group
Post by: Parsad on May 31, 2012, 03:44:10 PM
I note that in 2010 it got down to the low $17s, near its Oct. 2008 low.

It's very cheap. I wonder how much of this drop has to do with succession concerns, and not just the cyclical nature of LUK (or the fact that it's not easy to value).

Not a whole lot.  I think it's more to do with the movement in Jefferies price and then commodity prices.  Right now, it seems it is moving almost directly with Jefferies.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: PlanMaestro on June 01, 2012, 04:47:18 PM
Open letter posted on Jefferies website from management to clients, shareholders, etc.

http://www.jefco.com/html/OurFirm/NewsRoom/PressReleases/2011/JefGrp_Letter%20to%20Shareholders.pdf

The letter is not in the site. Does anyone have a copy?
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 01, 2012, 04:52:22 PM
Open letter posted on Jefferies website from management to clients, shareholders, etc.

http://www.jefco.com/html/OurFirm/NewsRoom/PressReleases/2011/JefGrp_Letter%20to%20Shareholders.pdf

The letter is not in the site. Does anyone have a copy?

http://jefferies.api.edgar-online.com/efx_dll/edgarpro.dll?FetchFilingConvPDF1?SessionID=WNlVFyi4eZWuIUE&ID=8256100&logo=JEF_2C_CMYK_POS_std.gif (http://jefferies.api.edgar-online.com/efx_dll/edgarpro.dll?FetchFilingConvPDF1?SessionID=WNlVFyi4eZWuIUE&ID=8256100&logo=JEF_2C_CMYK_POS_std.gif)

http://jefferies.api.edgar-online.com/efx_dll/edgarpro.dll?FetchFilingHTML1?SessionID=WNlVFyi4eZWuIUE&ID=8256100 (http://jefferies.api.edgar-online.com/efx_dll/edgarpro.dll?FetchFilingHTML1?SessionID=WNlVFyi4eZWuIUE&ID=8256100)

It's filed as an 8K.
Title: Re: JEF - Jefferies Group
Post by: PlanMaestro on June 01, 2012, 08:28:14 PM
Thanks!
Title: Re: JEF - Jefferies Group
Post by: orion on June 29, 2012, 10:51:17 AM
Good article about Jefferies: http://www.economist.com/node/21557761
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 30, 2012, 09:32:46 AM
Good article about Jefferies: http://www.economist.com/node/21557761

Thanks for posting!
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 30, 2012, 09:33:54 AM
Good article about Jefferies: http://www.economist.com/node/21557761
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on July 26, 2012, 05:58:48 AM
Burnham Place the major redevelopment of Washington's Union Station looks like it is finally getting the go ahead.

http://www.globest.com/news/12_402/washington/infrastructure/Union-Station-to-See-8B-in-Development-323697.html

http://www.bizjournals.com/washington/news/2012/07/25/amtrak-unveils-7-billion-union.html

Akridge is LUK's partner in the development.
Title: Re: JEF - Jefferies Group
Post by: Parsad on July 26, 2012, 06:16:47 AM
Burnham Place the major redevelopment of Washington's Union Station looks like it is finally getting the go ahead.

http://www.globest.com/news/12_402/washington/infrastructure/Union-Station-to-See-8B-in-Development-323697.html

http://www.bizjournals.com/washington/news/2012/07/25/amtrak-unveils-7-billion-union.html

Akridge is LUK's partner in the development.

They are also moving ahead with the $3B clean energy gasification project in Chicago that LUK is funding.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on July 28, 2012, 04:27:37 AM
Some interesting video from Leucadia's favorite company JEF.

Battle of the Paychecks: Jefferies Vs. Goldman

http://www.bloomberg.com/video/battle-of-the-paychecks-jefferies-vs-goldman-dgsIMaSbR8GlVRM1u8IkiQ.html

and articles:
http://www.bloomberg.com/news/2012-07-26/jefferies-vies-with-goldman-for-highest-wall-street-pay.html

http://www.businessweek.com/news/2012-07-26/battle-of-the-paychecks-jefferies-vs-dot-goldman
Title: Re: JEF - Jefferies Group
Post by: PlanMaestro on July 28, 2012, 12:00:44 PM
http://www.bloomberg.com/video/79511734-egan-interview-11-3-on-jefferies-credit-grade-downgrade.html

http://dealbook.nytimes.com/2011/09/22/chief-sells-25-million-in-shares-of-jefferies/

http://www.bloomberg.com/video/80931404-tchir-cohan-debate-jefferies-strategy-nov-22.html

http://www.bloomberg.com/video/79636214-jefferies-is-not-out-of-the-woods-cohan-says.html

http://www.bloomberg.com/video/79889310-tchir-on-outlook-for-jefferies-group.html

http://www.bloomberg.com/news/2011-11-02/jefferies-says-it-s-no-mf-global-as-handler-shuns-large-proprietary-bets-.html

http://www.bloomberg.com/video/79511734-egan-interview-11-3-on-jefferies-credit-grade-downgrade.html

http://www.foxbusiness.com/markets/2011/11/07/jefferies-cuts-certain-europe-positions-by-half/

http://www.bloomberg.com/video/81699844-epic-errors-in-egan-s-jefferies-note-kotowski-says.html

http://video.foxbusiness.com/v/1281550910001/egan-jones-president-defends-report-on-jefferies

http://www.businessweek.com/news/2012-04-24/sec-says-egan-jones-made-false-claims-in-regulatory-application

http://www.scribd.com/doc/96232599/Egan-Jones-vs-SEC



Title: Re: JEF - Jefferies Group
Post by: ubuy2wron on July 29, 2012, 10:31:10 AM
Are you suggesting that Egan Jones is highly conflicted cuz as a casual observor that is what I always thought.
Title: Re: JEF - Jefferies Group
Post by: Rabbitisrich on July 29, 2012, 07:23:39 PM
EJ's errors were so easy to catch that it was likely just a mistake. It was a rare opening to push his company to the big three.
Title: Re: JEF - Jefferies Group
Post by: Grenville on July 31, 2012, 07:48:21 AM
Good article on Jefferies growth in commodities and its recent application to upgrade to ring dealing membership on the LME.

http://in.reuters.com/article/2012/07/31/idINL2E8IP9SY20120731 (http://in.reuters.com/article/2012/07/31/idINL2E8IP9SY20120731)
Title: Re: JEF - Jefferies Group
Post by: racemize on August 02, 2012, 07:12:08 AM
10-Q is out.

http://www.sec.gov/Archives/edgar/data/96223/000009622312000025/lnc2ndqtr2012form10q.htm

BVPS = 24.97

still doing work, so don't have much time to analyze if anything significant happened.
Title: Re: JEF - Jefferies Group
Post by: Parsad on August 02, 2012, 09:05:29 AM
It's nice to see exactly how big a business National Beef is.  Take a look at LUK's revenues with Beef in there.  Gives new meaning to "Where's the Beef?"  Cheers!

Title: Re: JEF - Jefferies Group
Post by: bookie71 on August 02, 2012, 10:59:29 AM
Keep in mind that their gross on beef is affected by the price of beef.  More important is that the gross profit has gone from 2.28% to 4.45%.
just a thought.
Title: Re: JEF - Jefferies Group
Post by: jeffmori7 on August 02, 2012, 12:25:37 PM
Sure LUK is cheap right now, but I'm considering selling it to buy more BAC. I'm not sure where LUK is going into the next few years, but I have a tought time deciding to sell under book...

I would like to add to BAC, but for that I have to make choice, and LUK is probably the stock in my ortfolio I am less comfortable holding it. I'm not sure about the succession plan, about their inflation/deflation view, and everything about LUK rely on the capacity to make deal, it has nothing to do with the inherent quality of the business they have, but I haven't seen deals that interesting recently..Maybe I don't show enough patience here!
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on August 02, 2012, 01:14:17 PM
I'm suprised by the market reaction to this report.  Perhaps it is the headline loss (which is meaningless).
Nat'l Beef -- which, granted, they say is highly cyclical -- produced very solid pre-tax numbers of almost $50 million in the first 6 months.  Plus, you can add back the amortization of intangibles for another $12 million in the first half.

Fortescue note produced almost $100 million in first 6 months.  Granted, this could drop if Iron ore pricing gets hammered but off-setting that is huge expansion of Chirstmas Creek.  Since LUK gets their cut off of revenues, this note looks hugely undervalued on the books.

On succession, let's not forget that only Cummings is leaving and that's about 3 years away.  I didn't get the sense at all that Steinberg was on the move.  They both still have an enormous stake in the business.

Anyone else follow this one?  Please let me know if I'm missing something big.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on August 02, 2012, 01:38:04 PM
I am with you Kiltacular. I sold my position some time ago at break-even in pursuit of other investments but will be looking to buy LUK again at some point.

Besides the current stock price discount to BV, LUK also has a great hidden asset with the FMG note.  Adjusted BV is materially higher than stated on the BS. Steinberg and Cummings are great owner-operators and I don't believe that the fact that Cummings will quit in 2015 will be that big of a deal. I also have faith in Justin Wheeler, he's obviously in great hands.

Steinberg and Cummings are always looking at the bigger picture and I think it shows again in their "recent" investments in various metals, beef processing,... They are riding some big trends and are not alone in their convictions. It will all take time to play out but I believe that overall, they will be proven right once again.
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on August 02, 2012, 05:04:23 PM
Tombrgt...Thanks for the input.  I completely agree on the Fortescue deal...they carry the note and prepaid mining interest for something under $300 million.  It seems like they could easily collect more than $1 billion (and possibly much more) over the next 7 years.  They pay no tax. 
Title: Re: JEF - Jefferies Group
Post by: giofranchi on August 03, 2012, 03:29:36 AM
It's nice to see exactly how big a business National Beef is.  Take a look at LUK's revenues with Beef in there.  Gives new meaning to "Where's the Beef?"  Cheers!

Parsad,
first of all, it is a real pleasure to meet (well, actually, “quote”) you!

I think that LUK’s investment in National Beef is one of the best way I have come across, to play Mr. Grantham’s theme of the coming food crises.

“In October the number of people on the globe reached 7 billion and is expanding exponentially.
Humans need protein, we have it!”
- Cummings and Steinberg

I would like to know your opinion about it!
Thank you very much,

giofranchi
Title: Re: JEF - Jefferies Group
Post by: giofranchi on August 03, 2012, 03:50:30 AM
Fortescue note produced almost $100 million in first 6 months.  Granted, this could drop if Iron ore pricing gets hammered

Actually, I am not that comfortable with the Fortescue investment: when something I own is "mentioned" by Mr. Chanos (see attachment), usually that makes me worry...
Any particular insights to prove me wrong?

giofranchi
Title: Re: JEF - Jefferies Group
Post by: JRH on August 03, 2012, 10:14:47 AM
 Leucadia has sold most (~90%?) of their common stock in Fortescue, which makes me worry a lot less ($153m market value remaining).

The "royalty" note ("looks like a royalty, acts like a royalty, but in this case isn't") is unsecured and thus is probably right above  the common in the capital structure.  From the 10q (top of page 16):

"The aggregate book values of the various components of the FMG Note, net of accrued withholding taxes on
interest, totaled $294,616,000 and $290,415,000 at June 30, 2012 and December 31, 2011, respectively"

http://leucadia.com/10q_docs/luk_2012q2.pdf

$153 + $294 = $447m, about $1.82/share.

Not meant to "prove you wrong" that Fortescue is risky; just trying to put the size of the investment into context.

Also, as mentioned before, the money is positively pouring in relative to this valuation.
Title: Re: JEF - Jefferies Group
Post by: prevalou on August 03, 2012, 10:28:45 AM
Leucadia sold the remaining Fortescue stocks in july.
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on August 03, 2012, 11:52:07 AM
As prevalou already pointed out, the recent filing indicates that LUK sold the rest of it's common position in Fortescue stock -- in all, I think this was a 5 bagger.

What is left is the note/pre-paid mining interest with a total carrying value of around $294 million. 

Linked ( http://www.fmgl.com.au/UserDir/FMGPresentations/ASX%20Release%202012%2005%2031%20-%20Australian%20Stockbrokers%20Association%2031%20May%20201253.pdf ) is a recent presentation from Fortescue which shows the huge ramp-up at Christmas Creek (among other mines).  LUK gets paid 4% of revenues (less taxes to Aussie gov't) on two mines -- Chirstmas Creek and Cloud Break.  Eyeballing page 6, you can see that as of June '12, these two mines were producing about 55 mtpa.  But, by the end of this year, they're expecting these two mines to be producing about 90 mtpa.

You can therefore conclude that even if there is an enormous crash in iron ore prices, LUK should still be collecting enough from Fortescue that the note is likely undervalued on their books. 

Of course, there is the lawsuit -- now two years old -- regarding Fortescue's attempts to change dilute LUK's potential on this deal.  But, at the annual meeting, Cummings and Steinberg said that they would be "shocked" if that happened.  There is also the risk that financing / funding falls through for expansion but X-mas Creek is likely far enough along that it won't be affected.

There is no question that there is huge new supply of iron ore coming on in the years ahead and I make no guesses about whether the price could come way down.  But, there appears to be a very large margin of safety w/r/t Leucadia's position.
Title: Re: JEF - Jefferies Group
Post by: cogitator99 on August 03, 2012, 07:12:53 PM
@tombgrt,

curious as to what other opportunity you saw that made you sell off LUK. Because the valuation seems very undemanding at this point? With the sale of the FMG position, they've removed the portion of the port I didn't like. (I think China will slow materially from here.)

@giofranchi,

it sounds good on paper, but I wonder what the cost structure for National Beef will look a few years out, if grain prices are truly on an upward trend, which i think Grantham fears? anyone have insight as to how the beef industry works, government support, etc?   
Title: Re: JEF - Jefferies Group
Post by: bookie71 on August 03, 2012, 08:50:52 PM
Since they are not feeding the beef, but only processing, it really doesn't matter as long as they get their mark up and realize their xxcents per pound for processing it.  It's the guy's growing  and feeding who will be hurt, not the processors.
Title: Re: JEF - Jefferies Group
Post by: giofranchi on August 04, 2012, 01:25:08 AM
bookie71, cogitator99, kiltacular, prevalou, and JRH,
thank you for your insights!
Very helpful!

giofranchi
Title: Re: JEF - Jefferies Group
Post by: link01 on August 04, 2012, 06:40:33 AM
Since they are not feeding the beef, but only processing, it really doesn't matter as long as they get their mark up and realize their xxcents per pound for processing it.  It's the guy's growing  and feeding who will be hurt, not the processors.

nat'l beef & their competitors will certainly be paying much higher prices for a reduced supply. so processors, even assuming they can pass on the cost with higher prices of their own, will probably face a 2 pronged hit in terms of volumes: one from less product, the other from reduced consumer demand as a result of higher prices. and that may cause price discounting from the processors in order to bring lowered supply & demand into balance, imo.
Title: Re: JEF - Jefferies Group
Post by: cogitator99 on August 04, 2012, 07:59:10 AM
Since they are not feeding the beef, but only processing, it really doesn't matter as long as they get their mark up and realize their xxcents per pound for processing it.  It's the guy's growing  and feeding who will be hurt, not the processors.

nat'l beef & their competitors will certainly be paying much higher prices for a reduced supply. so processors, even assuming they can pass on the cost with higher prices of their own, will probably face a 2 pronged hit in terms of volumes: one from less product, the other from reduced consumer demand as a resuly of higher prices. and that may cause price discounting from the processors in order to lowered supply & demand into balance, imo.

this is sort of what I'm afraid of. anyone followed this sector in the past, is this how it's played out historically?
Title: Re: JEF - Jefferies Group
Post by: twacowfca on August 04, 2012, 08:10:08 AM
Since they are not feeding the beef, but only processing, it really doesn't matter as long as they get their mark up and realize their xxcents per pound for processing it.  It's the guy's growing  and feeding who will be hurt, not the processors.

nat'l beef & their competitors will certainly be paying much higher prices for a reduced supply. so processors, even assuming they can pass on the cost with higher prices of their own, will probably face a 2 pronged hit in terms of volumes: one from less product, the other from reduced consumer demand as a resuly of higher prices. and that may cause price discounting from the processors in order to lowered supply & demand into balance, imo.

LIFO accounting smooths the impact of inventory price increases.
Title: Re: JEF - Jefferies Group
Post by: WarrenWatsa on August 04, 2012, 08:48:18 PM
Since they are not feeding the beef, but only processing, it really doesn't matter as long as they get their mark up and realize their xxcents per pound for processing it.  It's the guy's growing  and feeding who will be hurt, not the processors.

nat'l beef & their competitors will certainly be paying much higher prices for a reduced supply. so processors, even assuming they can pass on the cost with higher prices of their own, will probably face a 2 pronged hit in terms of volumes: one from less product, the other from reduced consumer demand as a resuly of higher prices. and that may cause price discounting from the processors in order to lowered supply & demand into balance, imo.

LIFO accounting smooths the impact of inventory price increases.

With LIFO, higher inventory costs hit the P&L immediately. It's an inventory costing method typically used to reduce income (taxable income), assuming an environment where there's at least a little inflation.
Title: Re: JEF - Jefferies Group
Post by: Mikenhe on August 06, 2012, 04:08:29 AM
I like LUK and I think that there is a lot of value in the price right now that isn't being seen in the share price.

my biggest concern is wi;; it ever be? Is this one of those shares that will never get full credit from Mr Market? If so then, regardless of the underlying business, why would I want to buy it? I,m never going to have a big enough share to influence the board to return value to the shareholders so I have to rely on Mr market to force that and I'm not sure that I can.

This might be one that I have to sit back and wait for a drop in price to try to get sufficient value and potential for an increase - and hope that it happens when I have funds available to invest.

right now I'm more comfortable with AIG and BAC because I think they will return better increases in price than LUK - even though LUK appears to be a better run business...


not understanding the value attached to business by the market  seems to be my biggest weakness in investing - well along with procrastination - although at least that can work in my favor occasionally...
Title: Re: JEF - Jefferies Group
Post by: bargainman on August 06, 2012, 09:26:00 AM
I like LUK and I think that there is a lot of value in the price right now that isn't being seen in the share price.

my biggest concern is wi;; it ever be? Is this one of those shares that will never get full credit from Mr Market? If so then, regardless of the underlying business, why would I want to buy it? I,m never going to have a big enough share to influence the board to return value to the shareholders so I have to rely on Mr market to force that and I'm not sure that I can.

Perhaps the other side of this question is "has it ever gotten full credit from Mr. Market?".  If you look back a few years at the point where I sadly bought my first lot, you'll see that it was trading at $35 which at the time was about 2x book value.  Now the past is no guarantee of the future, but at least we know Mr Market has at one time been exuberant about this stock...
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 06, 2012, 09:43:11 PM
Jefferies Early On Was Friend to Knight - WSJ
http://online.wsj.com/article/SB10000872396390443517104577573620011603832.html (http://online.wsj.com/article/SB10000872396390443517104577573620011603832.html)

Jefferies Provided Funding to Knight Capital on Friday -Sources - WSJ
http://online.wsj.com/article/BT-CO-20120806-709824.html?mod=WSJ_latestheadlines (http://online.wsj.com/article/BT-CO-20120806-709824.html?mod=WSJ_latestheadlines)
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 07, 2012, 09:31:48 AM
Jefferies invested 125mln in the 400mln capital raise for Knight Capital Group (convertible at 1.5/share)

Jefferies 100mln
Jefferies High Yield Holdings 25mln

I don't know how much of the convertible preferred will be held by Jefferies or syndicated out.
Title: Re: JEF - Jefferies Group
Post by: hellsten on August 07, 2012, 01:10:33 PM
Quote
JEF has shareholders equity of $3.3 billion so this deal puts almost 8% of that into KCG.  The investment, though was only 4% of equity.  Of course this means that JEF has earned an immediate 4% on book just by doing this deal.  Not a bad day at the office.

Given the low returns on equity these days at investment banks, this will be a nice bump to earnings this year and to book value. 

Of course, this is assuming that KCG can continue as before.

http://brooklyninvestor.blogspot.com/2012/08/knight-capital-group.html
Title: Re: JEF - Jefferies Group
Post by: hellsten on August 08, 2012, 11:11:30 AM
Does anyone here know why Leucadia likes INTL FCStone? Leucadia owns 8.5% of the company and the stock is near 52-week lows… I guess the Knight Capital mess can push it even lower.

And it's not only Leucadia that's interested. Brian Bares (http://greatinvestors.tv/video/?currentPage=2) has 14% of his portfolio in INTL and holds 15% of INTL's shares. I like Bares Capital's (http://greatinvestors.tv/video/small-cap-superinvestor-brian-bares-is-there-such-a-thing-as.html) investment process:
Quote
We prefer companies for our portfolio that are run by talented capital allocators who will maximize returns-on-invested-capital over long periods of time by leveraging some durable competitive advantage.

INTL is also on the Fortune 500 list:
Quote
As you may already know, INTL FCStone is ranked #30 on this year’s prestigious
Fortune 500 list, up from #51 on the 2011 list. 

Most notably, in terms of total return to shareholders over 10 years, INTL FCStone
was ranked number one among all Fortune 500 companies.  The number two
company? Apple.
http://files.intlfcstone.com.s3.amazonaws.com/Fortune500INTLFCStone.pdf

Very impressive revenue growth… I'll have to analyze this one in detail.
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 22, 2012, 08:57:54 AM
Good article on Jefferies growth in commodities and its recent application to upgrade to ring dealing membership on the LME.

http://in.reuters.com/article/2012/07/31/idINL2E8IP9SY20120731 (http://in.reuters.com/article/2012/07/31/idINL2E8IP9SY20120731)

"LME approves Jefferies Bache as ring-dealing member"
http://in.reuters.com/article/2012/08/21/lme-jeffries-idINL6E8JLGE020120821 (http://in.reuters.com/article/2012/08/21/lme-jeffries-idINL6E8JLGE020120821)

Jefferies is hiring floor traders from both Newedge and Natixis which are both retreating from the commodities space.
Title: Re: JEF - Jefferies Group
Post by: JRH on September 19, 2012, 06:50:49 AM
Leucadia has settled its dispute with Fortescue by allowing Fortescue to buy out the royalty note:

http://www.heraldonline.com/2012/09/19/4274926/leucadia-national-corporation.html

"This is, has and will remain a delicious investment." (2010 Annual Report)
Title: Re: JEF - Jefferies Group
Post by: Myth465 on September 19, 2012, 07:03:51 AM
LUK just got a lot less complicated, I wonder what they will do with the case...
Title: Re: JEF - Jefferies Group
Post by: Liberty on September 19, 2012, 07:59:33 AM
They must be pissed  >:(  :-\
Title: Re: JEF - Jefferies Group
Post by: racemize on September 19, 2012, 08:00:24 AM
They must be pissed  >:(  :-\

What do you mean?  Given the state of Fortescue, seems like a great time to get out.
Title: Re: JEF - Jefferies Group
Post by: Liberty on September 19, 2012, 08:02:23 AM
What do you mean?  Given the state of Fortescue, seems like a great time to get out.

We'll see out much it turns out to be worth over the years -  I don't think they looked at it short-term - but just the idea of being apparently screwed by a partner is never fun. Not saying they didn't get good value for it, I don't know exactly since I didn't analyze it and it'll depend a lot on unknown future events.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on September 19, 2012, 08:44:22 AM
They must be pissed  >:(  :-\

What do you mean?  Given the state of Fortescue, seems like a great time to get out.

Also, they made a bunch of money on this investment already.
Title: Re: JEF - Jefferies Group
Post by: Liberty on September 19, 2012, 08:47:27 AM
Sorry I was ambiguous, I didn't mean so much the money as the whole "oh, we'll dilute your royalty, sorry guys" scenario. Maybe it turned out for the best in the end, I don't know.
Title: Re: JEF - Jefferies Group
Post by: racemize on September 19, 2012, 08:56:57 AM
Sorry I was ambiguous, I didn't mean so much the money as the whole "oh, we'll dilute your royalty, sorry guys" scenario. Maybe it turned out for the best in the end, I don't know.

Yeah, I understand what you mean now (and agree)--I wasn't sure if you were referring to the settlement or the situation initially. 
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on September 19, 2012, 08:58:24 AM
I'm adding to my position on this news, they liquidated an illiquid position that was 1) exposed to commodity risk, 2) because of 1, exposed to China, and 3) questionable management. 
Title: Re: JEF - Jefferies Group
Post by: mankap on September 19, 2012, 09:00:22 AM
I think it is still a multibagger for LUK.If you look at both the equity and the revenue note, it has provided the biggest gains to LUK.
It could have been much better if Andrew Forrest had not screwed LUK.
Title: Re: JEF - Jefferies Group
Post by: benhacker on September 19, 2012, 09:04:02 AM
I personally didn't like the FMG common investment, but loved the note.  I bought finally after they started blowing out the common, but I'm a bit surprised they sold the note.  Decent price, but I wasn't too worried about FMG's ability to pay, but I trust LUK so we'll see what they decide to do and how the world unfolds.

Interesting.

Ben
Title: Re: JEF - Jefferies Group
Post by: Dazel on September 19, 2012, 10:09:34 AM

What would have happened had they lost the lawsuit? Big dilution...the note expires as well. It is not like a normal royalty that is paid out until the end of production. Smart move cashing in their chips..it is tax free as well because of their tax loss carry forwards...that helps the decision big time.

Leucadia knocked the ball out of the park with Fortescue...what great investment.

Dazel.
Title: Re: JEF - Jefferies Group
Post by: tombgrt on September 19, 2012, 10:59:46 AM
Agree. The only sad thing is that they already had $1b in cash & equiv. What will they do with this new cash? Pile it up? Could they find a decent acquisition? Special dividend?
Title: Re: JEF - Jefferies Group
Post by: bookie71 on September 19, 2012, 12:06:33 PM
When you are uneasy with your partner, cut your loses and go on to the next opportunity.
In the past, if the opportunities weren't there, they paid out a large special dividend.
Title: Re: JEF - Jefferies Group
Post by: Parsad on September 19, 2012, 04:36:34 PM
Agree. The only sad thing is that they already had $1b in cash & equiv. What will they do with this new cash? Pile it up? Could they find a decent acquisition? Special dividend?

Cash is never a bad situation, as long as you just don't sit on it for years.  They will find a use for it when others need it most.  LUK is the 2nd largest position in our funds after BAC.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: mhdousa on September 19, 2012, 05:47:12 PM
Agree. The only sad thing is that they already had $1b in cash & equiv. What will they do with this new cash? Pile it up? Could they find a decent acquisition? Special dividend?

Cash is never a bad situation, as long as you just don't sit on it for years.  They will find a use for it when others need it most.  LUK is the 2nd largest position in our funds after BAC.  Cheers!

Sanjeev, I thought you had concerns about the lack of successors who could emulate the C&S way.  How did you get comfortable?
Title: Re: JEF - Jefferies Group
Post by: mankap on September 19, 2012, 06:38:40 PM
They will soon find use of cash.Jefferies open lots of doors for them.
I understand that JEF brought Fortescue opportunity to LUK.
Title: Re: JEF - Jefferies Group
Post by: FrankArabia on September 20, 2012, 10:50:57 AM
Jef is still a second tier investment bank...still don't see a reason why they would ever take a huge stake in this mediocre franchise
Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on September 20, 2012, 11:38:34 AM
Agree. The only sad thing is that they already had $1b in cash & equiv. What will they do with this new cash? Pile it up? Could they find a decent acquisition? Special dividend?

Cash is never a bad situation, as long as you just don't sit on it for years.  They will find a use for it when others need it most.  LUK is the 2nd largest position in our funds after BAC.  Cheers!

On pure valuation LUK seems more compelling than BRK currently,... and therefore I own it.
Title: Re: JEF - Jefferies Group
Post by: FrankArabia on September 20, 2012, 11:42:17 AM
I don't think its even fair to compare this to BRK. from what I can see so far, LUK has a bunch of sub par businesses while BRK is backed by some of the world's best. Of course there is going to be a valuation gap but the question is why isn't it bigger?
Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on September 20, 2012, 11:51:12 AM
I don't think its even fair to compare this to BRK. from what I can see so far, LUK has a bunch of sub par businesses while BRK is backed by some of the world's best. Of course there is going to be a valuation gap but the question is why isn't it bigger?

Yup, you are probably right,... but for me it's only the size of the equity base,... simply Darwinian,... who can compound money easier in the next decade, some big $177b King Kong or some smaller $6b turtle ---> Mohnish's thesis. If you would force me to choose at a water pistol gun point,... and threaten me to make me wet,... where I had to choose between these two,... who would more likely outperform over one decade,... BRK vs LUK,... I would purely bet on LUK.
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on September 20, 2012, 11:57:07 AM
With the recent transaction, I'm also thinking of switching from L position to LUK.  L's way of finding investments is to reinvest money through sharebuybacks...LUK has a history of making these transaction's and now they have "fortress LUK" to do it with.  Further, this move would diversify since almost 60% of my portfolio is FFH/MKL/Y from CNA.
Title: Re: JEF - Jefferies Group
Post by: FrankArabia on September 20, 2012, 12:03:43 PM
I looked at Lowes myself. Looks like a bunch of sub par businesses lumped together. Can't see how they're going to be generating great returns in the years to come aside from the share buybacks. I do own one of their subsidiaries Diamond though but I think that is a weak link that needs to be sold.
Title: Re: JEF - Jefferies Group
Post by: giofranchi on September 21, 2012, 09:26:40 AM
The Brooklyn Investor on Leucadia FMG Note Resolution:

http://brooklyninvestor.blogspot.it/2012/09/leucadia-fmg-note-resolution.html

Personally, I feel safer now that LUK is out of it.

giofranchi
Title: Re: JEF - Jefferies Group
Post by: Parsad on September 22, 2012, 02:21:40 AM
Agree. The only sad thing is that they already had $1b in cash & equiv. What will they do with this new cash? Pile it up? Could they find a decent acquisition? Special dividend?

Cash is never a bad situation, as long as you just don't sit on it for years.  They will find a use for it when others need it most.  LUK is the 2nd largest position in our funds after BAC.  Cheers!


Sanjeev, I thought you had concerns about the lack of successors who could emulate the C&S way.  How did you get comfortable?

I became more comfortable with Justin Wheeler after I found out he was the one behind the National Beef acquisition.  I think he would do fine looking for ideas for LUK if something happened to Steinberg & Cummings.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: tombgrt on September 22, 2012, 03:10:57 AM
That's what I already said here before Parsad! ;D I don't think we should underestimate the power of combining a talented guy with the support and training given by Steinberg and Cummings. He'll get plenty of preparation before they leave him all alone. Hell, it could take another 5 years or who knows, even longer... And it's likely that they will stay somewhat involved behind the scenes.

I doubt he'll be anywhere as good as Steinberg and Cummings, but I'm confident that he'll do at least decent and work in shareholders' interests.

Compared to BRK, LUK is small and flexible. They don't need to install a buyback system, invest in capital intensive businesses to secure certain cash flows, sell put options on the markets that expire years from now, ... to secure the future in some way. If they want to continue this great story, the most important thing is training Wheeler to be the best he can be.

Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on September 22, 2012, 04:08:45 AM
That's what I already said here before Parsad! ;D I don't think we should underestimate the power of combining a talented guy with the support and training given by Steinberg and Cummings. He'll get plenty of preparation before they leave him all alone. Hell, it could take another 5 years or who knows, even longer... And it's likely that they will stay somewhat involved behind the scenes.

I doubt he'll be anywhere as good as Steinberg and Cummings, but I'm confident that he'll do at least decent and work in shareholders' interests.

Compared to BRK, LUK is small and flexible. They don't need to install a buyback system, invest in capital intensive businesses to secure certain cash flows, sell put options on the markets that expire years from now, ... to secure the future in some way. If they want to continue this great story, the most important thing is training Wheeler to be the best he can be.

The LUK hamster wheel has a great chance to move for another decade forward,... only with an exchange of hamsters,... and some newly trained champion hamster in it  ;)    ....
Title: Re: JEF - Jefferies Group
Post by: giofranchi on September 22, 2012, 07:16:48 AM
If they want to continue this great story, the most important thing is training Wheeler to be the best he can be.

Well, Mr. Wheeler has already been working with Mr. Steinberg and Mr. Cummings for many years. If he weren't good, why should Mr. Steinberg and Mr. Cummings have given him ever increasing authority and responsabilities? If Mr. Steinberg and Mr. Cummings like Mr. Wheeler, I like him too! And I do not really think he needs much more training!

giofranchi
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on September 22, 2012, 09:15:33 AM
Regarding Wheeler:

Kiltacular made some interesting notes on Wheeler further up in this thread: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/luk-leucadia/80/

Quote
I liked Wheeler quite a bit in the small group.  Not a promotional type at all.  At one point, someone asked him in this small group how it felt to be the center of attention now?  He actually sort of blushed.  Hard to describe but he gave the right feeling and said that he wasn't there yet but that he enjoys his role, etc.  He's from a small town and seems to combine a small town attitude with a good bit of worldly insight in business. 

He was well versed in all the businesses and said something like "We looked at 3,000 ideas last year".  I think I sort of blurted out something like "Jesus!"  (Please don't let that start another thread on religion !!).  Anyway, he said: "Most go right into the trash."  I liked his response -- he was sort of saying: "Oopps...I didn't mean to make it sound like I was bragging".

Still, it was interesting and I got the feeling he's looking at all of them with the team and that they're giving him some serious experience.  I also realized that sellers / promoters (whatever) are bringing Leucadia tons of stuff to look at -- that can't be a bad thing. 

Overall, I would say that at this point, I think Wheeler is very good based on these impressions.  Obviously, we can't know for sure until much later.  But, given that Cummings isn't going anywhere for three years and I think / got the feeling that at this point Steinberg will stay longer, they seem to be setting things up very intelligently.

We now have the experience of the AmeriCredit investment and the acquisition of National Beef. I also think that he must have been involved with the resolution of the FMG note.

We know that the AmeriCredit deal was a very shrewd investment, made alongside Berkowitz and similar in rationale to Buffett´s Clayton Homes investment:

Quote
Indeed, their investment in AmeriCredit has many similarities to Buffett’s acquisition of a manufactured housing company called Clayton Homes in 2003, which Buffett discussed at length in this year’s annual letter to the shareholders of Berkshire Hathaway. It would be instructive to discuss Buffett’s acquisition of Clayton Homes to understand the opportunity Fairholme and Leucadia see in AmeriCredit and also to learn some useful lessons about subprime lending and securitization along the way...
http://sumitshah.com/2009/03/20/learning-from-buffett-what-fairholme-and-leucadia-see-in-americredit/

In the end the investment delivered an IRR of 29%:
Quote
In October 2010, we sold all of our common shares of AmeriCredit in a cash merger
with General Motors Company. Leucadia received $830.6 million for the shares that we
spent $425.8 million to buy. We began purchasing the stock on October 19, 2007 and
sold on October 1, 2010. The $404.8 million gain resulted in a compound annual return
(IRR) of 29%.
http://www.leucadia.com/10k_docs/luk_10k_2010.pdf

Brooklyn Investor also has some interesting notes on the NB investment:

Quote
LUK paid $867.9 million for 78.95%, so the equity was valued at $1.1 billion.   Long term debt outstanding was $360 million so the total enterprise value was $1.46 billion (ignore cash as it's small relative to EV).

 Here are the valuations against various metrics; I will use the 2011 full year figures and the five year average figures to 'normalize' them.  Three years might be a bit short and they have posted some good numbers in the past three years, and maybe ten years is too long as they may be a much better company now than ten years ago.   

 Anyway, here are the metrics:

                                     FY 2011                 Five year average
 EV/EBITDA                4.5x                       6.4x
 Pretax income              4.2x                       6.8x
 EBIT/EV                      18.8%                    12.9%
 EBITDA - Capex          5.7x                       8.2x
   (free cash yield)         17.5%                    12.2%
 Owner earnings            22.3%                    13.7%

 (for EBIT/EV, I actually used operating income)

 So from a pretax income point of view, they paid a price that yields 24% on last year's earnings and close to 15% on the last five years' average earnings.

 This means if they do just as well as they have done in the past five years (with a near depression and rising commodity prices), they can make 15% pretax returns and any upside is a free option; if they expand exports, increase margins on more added value products etc...   this will all come on top of the 15% pretax they already earn.

 Based on free cash (using EBITDA - capex) and on an EV basis, they will earn 17.5% if National Beef keeps doing as well as it has done last year and 12.2% if they do just as well as they have done in the past five years.

 The owner earnings yield (owner earnings here is pretax income plus D&A less capex) is 22.3% based on 2011 and 13.7% for the last five years.  Sorry, the owner earnings didn't make it into the table.
http://brooklyninvestor.blogspot.com/2012/05/national-beef.html

Tom makes an good observation about the size of LUK as a function of opportunities available in the future. I also think the culture is very important and LUK certainly has the desired one. If Wheeler turns out to be as talented as he is promising, I truly think we might be on to something here.

My nose is telling me that surf´s up...
Title: Re: JEF - Jefferies Group
Post by: bargainman on September 22, 2012, 07:34:24 PM
The other difference that I haven't heard anyone point out is the use of float.  LUK doesn't have a large insurance operation the way Buffett did, and yet they were still able to compound BV at an incredible rate.  I suspect that their 'substitute' for float was/is all the tax loss carryforwards they have.  If I remember correctly LUK hasn't paid taxes in a long long time...
Title: Re: JEF - Jefferies Group
Post by: joepublic on September 22, 2012, 08:17:02 PM
>> The other difference that I haven't heard anyone point out is the use of float.  LUK doesn't have a large insurance operation the way Buffett did,
>> and yet they were still able to compound BV at an incredible rate.

They had a substantial insurance operation in the 1990's. There was a company (Colonial Penn) that they purchased for $100 million which the seller was eager to get rid off. The story that I remember reading at the time was that C&S read every single contract in the company's portfolio before they purchased it. A few years later, they sold the company in two pieces for $1.5+ billion. This was another one of their home runs. The buyers were GE Capital and Conseco (which eventually went bankrupt.)

A short time later, there was a special dividend of $12 (at that time, the share price was in the 30s). I also believe that Cumming moved his residence from Utah to Wyoming for tax reasons before the dividend was paid. This investment did make a substantial contribution to the increase in BV.
Title: Re: JEF - Jefferies Group
Post by: bookie71 on September 22, 2012, 09:36:49 PM
If I remember correctly the special dividend was treated as a return of capital.
Title: Re: JEF - Jefferies Group
Post by: thepupil on September 23, 2012, 08:59:40 AM
Have never really looked into Leucadia in depth, but got interested by the Fortescue note sale and lack of market reaction. BV increased and became much more certain and the stock did not move. Also, it gives them capital to make another National Beef like transaction and increase/diversify pretax operating cash flow...or just delever.

I am trying to do a basic net asset valuation here but am having a little trouble figuring out their post Fortescue note NAV. Does anyone have any thoughts? I am getting about 5.8B, conservatively calculated writing some holdings off entirely and taking some haircuts to a few things (even did a -200MM value for Sangart to account for future capital drain)

The opportunity to invest alongside these guys at NAV is intriguing, but I don't understand the Jefferies investment at all.

Does anyone have any more precise thoughts on what the balance of cash and other high quality short term fixed income holdings is?
Title: Re: JEF - Jefferies Group
Post by: biaggio on September 23, 2012, 06:22:03 PM
Have never really looked into Leucadia in depth, but got interested by the Fortescue note sale and lack of market reaction. BV increased and became much more certain and the stock did not move. Also, it gives them capital to make another National Beef like transaction and increase/diversify pretax operating cash flow...or just delever.

I am trying to do a basic net asset valuation here but am having a little trouble figuring out their post Fortescue note NAV. Does anyone have any thoughts? I am getting about 5.8B, conservatively calculated writing some holdings off entirely and taking some haircuts to a few things (even did a -200MM value for Sangart to account for future capital drain)

The opportunity to invest alongside these guys at NAV is intriguing, but I don't understand the Jefferies investment at all.

Does anyone have any more precise thoughts on what the balance of cash and other high quality short term fixed income holdings is?


I think Brooklyn Investor had a decent write ups on LUK


http://brooklyninvestor.blogspot.ca/2012/05/luk-leucadia-national-some-quick-notes.html

http://brooklyninvestor.blogspot.ca/2012/09/leucadia-fmg-note-resolution.html

I think all the write ups on that blog are here    http://brooklyninvestor.blogspot.ca/search/label/LUK
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on September 24, 2012, 04:46:05 AM


Quote
MEMPHIS, Tenn., Sept. 24, 2012 /PRNewswire/ -- Mueller Industries, Inc. (MLI) announced today that it has entered into an agreement to repurchase 10,422,859 shares of Mueller common stock owned by Leucadia National Corporation (and its subsidiaries) (LUK) at a negotiated price per share of $41.00, for an aggregate purchase price of $427,337,219.  The shares to be purchased in the repurchase transaction equate to approximately 27.2% of Mueller's common shares currently outstanding and constitute Leucadia's entire ownership stake in Mueller.  Ian M. Cumming and Joseph S. Steinberg, Leucadia's designees to the Company's Board of Directors, will resign from the Board upon the closing of the repurchase, which is expected to occur on or before September 26, 2012, subject to customary closing conditions.

I wander if something changed their thesis. They acquired for $408m i think in 2011.

Title: Re: JEF - Jefferies Group
Post by: mankap on September 24, 2012, 04:50:53 AM
I never understood the rationale behind MLI investment.
I think LUK has a big purchase lined up and need cash.With the cash coming from MLI , LUK is sitting at more than $1B in cash.
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on September 24, 2012, 05:03:17 AM
I never understood the rationale behind MLI investment.
I think LUK has a big purchase lined up and need cash.With the cash coming from MLI , LUK is sitting at more than $1B in cash.

I think something is definitely up.

Cash (380) + MLI (427) + FMG (715) = 1,522

Have any details been made public as to when they receive the FMG proceedings?

 
Title: Re: JEF - Jefferies Group
Post by: orion on September 24, 2012, 05:29:58 AM
Just wondering: The negotiated price is $41.00 and the last closing price was >$48.00. Is such a large discount usual in such transactions?
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on September 24, 2012, 05:44:42 AM
No.  Depending on what LUK is after and what they think its worth...on the surface this looks like a pretty good deal for MLI.
Title: Re: JEF - Jefferies Group
Post by: matjone on September 24, 2012, 08:06:48 AM
  LUK is the 2nd largest position

Parsad, if you don't mind telling me, what is it that makes you choose LUK over Fairfax at this point?  Just the size difference?  Less leverage?  Don't like insurance?  I would imagine you have more confidence in Prem Watsa than an up and comer like Justin Wheeler, and the price/book ratios aren't that much different for the two companies.
Title: Re: JEF - Jefferies Group
Post by: MVP444300 on September 24, 2012, 01:21:05 PM
http://seekingalpha.com/article/885181-a-rare-undervalued-opportunity-leucadia-is-the-answer
Title: Re: JEF - Jefferies Group
Post by: Parsad on September 24, 2012, 02:21:45 PM
  LUK is the 2nd largest position

Parsad, if you don't mind telling me, what is it that makes you choose LUK over Fairfax at this point?  Just the size difference?  Less leverage?  Don't like insurance?  I would imagine you have more confidence in Prem Watsa than an up and comer like Justin Wheeler, and the price/book ratios aren't that much different for the two companies.

I like Leucadia's bet that the world is going to recover and inflation is going to be more of a problem than deflation.  I also thought that the underlying assets were quite undervalued, whereas the Fairfax's hedges were going to keep things neutral.  I like Fairfax right now, but I'll like it even better if it were a little cheaper.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: Parsad on September 24, 2012, 02:58:32 PM
I never understood the rationale behind MLI investment.
I think LUK has a big purchase lined up and need cash.With the cash coming from MLI , LUK is sitting at more than $1B in cash.

I think something is definitely up.

Cash (380) + MLI (427) + FMG (715) = 1,522

Have any details been made public as to when they receive the FMG proceedings?

I definitely think they have found or negotiated another target company.  The cash from Fortescue is to be received by the middle of December I believe, once Fortescue's new credit line is fully in place.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: giofranchi on September 25, 2012, 01:27:24 AM
  LUK is the 2nd largest position

Parsad, if you don't mind telling me, what is it that makes you choose LUK over Fairfax at this point?  Just the size difference?  Less leverage?  Don't like insurance?  I would imagine you have more confidence in Prem Watsa than an up and comer like Justin Wheeler, and the price/book ratios aren't that much different for the two companies.

I like Leucadia's bet that the world is going to recover and inflation is going to be more of a problem than deflation.  I also thought that the underlying assets were quite undervalued, whereas the Fairfax's hedges were going to keep things neutral.  I like Fairfax right now, but I'll like it even better if it were a little cheaper.  Cheers!

Parsad,
could you please elaborate on your thesis that inflation will be more of a problem than deflation?
I know that we will have inflation, and I know that the world is going to recover… but when? I mean, this is what I see right now:
1) Levels of debt which are still at record high all over the developed world,
2) Asset prices which in general are high, and not many bargains can be found.
Given 1) and 2), why do you rule out a deflationary scare, before inflation and recovery finally kick in for real? I would appreciate your thoughts on this topic very much!
Thank you,

giofranchi
Title: Re: JEF - Jefferies Group
Post by: frog03 on September 26, 2012, 06:26:55 AM
What I currently don't like with Leucadia is that 1/4 of equity is the loss carry forward.  Contrast this with BRK's deferred tax.  With this alone, you go a long way justifying LUK trading at a discount to BV and BRK at a premium.
Title: Re: JEF - Jefferies Group
Post by: A_Hamilton on September 26, 2012, 07:23:31 AM
What I currently don't like with Leucadia is that 1/4 of equity is the loss carry forward.  Contrast this with BRK's deferred tax.  With this alone, you go a long way justifying LUK trading at a discount to BV and BRK at a premium.

Yeah, they seem to be doing everything they can to monetize it as rapidly as possible!

Here is a question on the DTA, why does Leucadia have any debt outstanding when they get no tax shield for having debt? RFP has a DTA that is worth more than its market cap and they are doing everything they can to pay down debt ASAP.

Cheers!
Title: Re: JEF - Jefferies Group
Post by: link01 on September 26, 2012, 08:18:01 AM
What I currently don't like with Leucadia is that 1/4 of equity is the loss carry forward.  Contrast this with BRK's deferred tax.  With this alone, you go a long way justifying LUK trading at a discount to BV and BRK at a premium.

Yeah, they seem to be doing everything they can to monetize it as rapidly as possible!

Here is a question on the DTA, why does Leucadia have any debt outstanding when they get no tax shield for having debt? RFP has a DTA that is worth more than its market cap and they are doing everything they can to pay down debt ASAP.

Cheers!

What I currently don't like with Leucadia is that 1/4 of equity is the loss carry forward.  Contrast this with BRK's deferred tax.  With this alone, you go a long way justifying LUK trading at a discount to BV and BRK at a premium.

Yeah, they seem to be doing everything they can to monetize it as rapidly as possible!

Here is a question on the DTA, why does Leucadia have any debt outstanding when they get no tax shield for having debt? RFP has a DTA that is worth more than its market cap and they are doing everything they can to pay down debt ASAP.

Cheers!

luk funded some of its various investments during less financially repressed times when assets were not only cheap but it was concievable that a return to the formerly inevitable 'normal' business cycle upswing would stack the odds for profit strongly in their favor. in the process they would be able to maximize the value of their NOL's....time is money, after all, even with the monetization of NOL's. but i sense they are seeing, a la pimco's 'new normal' theme, a very uncertain outlook for business worldwide, not to mention relatively elevated assets prices from the Fed's QEternity money printing scheme, & growing political tensions, including class strife which is bound to swing the pendulum in a major way back to the favor of labor (ie, the middle class) at the expense of business which has been the main benficiary of 30 years of unchecked capitalism run amuck, imo.

it will be interesting to see whether luk pays down more of its higher cost debt considering the dearth of values- especially if you believe we've seen a secular peak in profits & margins- & the still abundant competition for them with so much liquidity sloshing around, or whether they sit tight & wait even more patiently for a major drop in asset prices. that's something that has frustrated them for a long time now.

Title: Re: JEF - Jefferies Group
Post by: Parsad on October 09, 2012, 03:30:06 PM
Jefferies 10-Q is out.  Cheers!

http://www.sec.gov/Archives/edgar/data/1084580/000119312512418709/d386929d10q.htm
Title: Re: JEF - Jefferies Group
Post by: jeffmori7 on October 09, 2012, 03:50:25 PM
Could Leucadia be raising cash to buy Jefferies? Would it be interesting for them and would it be feasible?
Title: Re: JEF - Jefferies Group
Post by: JRH on October 11, 2012, 10:29:32 AM
I think something is definitely up.

Cash (380) + MLI (427) + FMG (715) = 1,522

Have any details been made public as to when they receive the FMG proceedings?

I definitely think they have found or negotiated another target company.  The cash from Fortescue is to be received by the middle of December I believe, once Fortescue's new credit line is fully in place.  Cheers!

Are there regulatory or other factors that would constrain or even prevent them from acquiring Jefferies?  Seems to me like they are within strking distance if they wanted to make a cash + stock offer.

I have no special insight into what Leucadia would or wouldn't be after, but they purchased a significant amount at higher prices, and why purchase a single share if you wouldn't purchase the whole thing?
Title: Re: JEF - Jefferies Group
Post by: Parsad on October 11, 2012, 02:16:46 PM
I think something is definitely up.

Cash (380) + MLI (427) + FMG (715) = 1,522

Have any details been made public as to when they receive the FMG proceedings?

I definitely think they have found or negotiated another target company.  The cash from Fortescue is to be received by the middle of December I believe, once Fortescue's new credit line is fully in place.  Cheers!

Are there regulatory or other factors that would constrain or even prevent them from acquiring Jefferies?  Seems to me like they are within strking distance if they wanted to make a cash + stock offer.

I have no special insight into what Leucadia would or wouldn't be after, but they purchased a significant amount at higher prices, and why purchase a single share if you wouldn't purchase the whole thing?

When Leucadia originally made the equity investment in Jefferies, they were restricted from acquiring more than 30% of the company.  I would expect that with board approval, and their cordial relationship, that limit could be lifted if it came to that.  I don't believe there are any other regulations that would prevent Leucadia from acquiring Jefferies, but it would probably still need government approval if a deal came to fruition.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on October 16, 2012, 07:13:42 PM
Maybe a LUK takeover would be cheaper now:

http://www.moodys.com/research/Moodys-downgrades-Jefferies-to-Baa3--PR_257696

Quote
The downgrade of Jefferies' senior unsecured rating to Baa3 reflects Moody's concerns regarding the challenges Jefferies faces in preserving its risk management culture and managing risk concentrations, and better incorporates risks presented by institutional capital markets activities and the challenges of operating the investment banking model. These business model challenges are some of the factors that led Moody's to downgrade the unsupported baseline credit assessments of many global investment banks into the Baa range in June 2012.

Moody's believes that concentration risks are inherent in the capital markets business and can arise either through important banking relationships or through competitive pressures. Preserving a firm's risk management culture through periods of opportunistic growth is particularly challenging, the rating agency noted.

Since the onset of the financial crisis in 2007, Jefferies has grown significantly and opportunistically, gaining market share in investment banking and diversifying its fixed income platform. As a result, Jefferies relative competitive position has improved. However, this growth also introduces risks as the firm integrates the people and operations that it has acquired, and establishes long-term discipline around risk taking. Being a mid-sized firm has enabled Jefferies' most senior management to remain highly engaged in this process, and this is positive. However, in Moody's view it also points to key-people risk. As the firm continues on its growth path, the ability of its senior leaders to remain as highly involved will diminish, and this longer-term risk is incorporated into the firm's ratings.
Title: Re: JEF - Jefferies Group
Post by: JRH on October 17, 2012, 11:20:50 AM
Maybe a LUK takeover would be cheaper now:

http://www.moodys.com/research/Moodys-downgrades-Jefferies-to-Baa3--PR_257696

Also possible Leucadia could provide cash flow diversification/stability to lower the interest rate Jefferies pays for its long-term debt.
Title: Re: JEF - Jefferies Group
Post by: biaggio on October 19, 2012, 05:03:27 AM
http://biz.yahoo.com/e/121019/luk8-k.html

On October 17, 2012, the Company sold its oil and gas drilling subsidiary, Keen Energy Services, LLC, for cash consideration of $100,000,000, and a $40,000,000 four-year interest bearing promissory note issued by the purchaser. The Company will also retain Keen's net working capital, principally cash, receivables and payables. Keen had been classified as a discontinued operation. The Company recorded a pre-tax loss on sale of discontinued operations of approximately $19,300,000.
Title: Re: JEF - Jefferies Group
Post by: mankap on October 19, 2012, 07:23:58 AM
They already got $715m cash from FMG, sooner than I was expecting.They got another 100m from keen energy.What are  they upto?.They have collected so much cash in last one month.Are they buying Rescap.I am so tempted to but some calls.


On October 18, 2012, Leucadia National Corporation (the "Company") received the payment of $715,000,000 as a result of the consummation of the transactions contemplated by the previously disclosed Deed of Release, Termination and Settlement dated 19 September 2012 between Fortescue Metals Group Ltd (Fortescue) and Chichester Metals Pty Ltd (Chichester), and John Andrew Henry Forrest (Forrest) and Leucadia National Corporation (Leucadia) and Baldwin Enterprises Inc. (Baldwin). As a result, the Company expects to record a pre-tax gain of approximately $526,000,000 in the fourth quarter of 2012.

On October 17, 2012, the Company sold its oil and gas drilling subsidiary, Keen Energy Services, LLC, for cash consideration of $100,000,000, and a $40,000,000 four-year interest bearing promissory note issued by the purchaser. The Company will also retain Keen's net working capital, principally cash, receivables and payables. Keen had been classified as a discontinued operation. The Company recorded a pre-tax loss on sale of discontinued operations of approximately $19,300,000.

Title: Re: JEF - Jefferies Group
Post by: JRH on October 19, 2012, 07:59:24 AM
They already got $715m cash from FMG, sooner than I was expecting.They got another 100m from keen energy.What are  they upto?.They have collected so much cash in last one month.Are they buying Rescap.I am so tempted to but some calls.

The timing and clumped nature of these liquidations support the idea.

"The sales, which are subject to higher bids, could generate more than $4 billion for ResCap's estate, a price that ResCap said was high enough to justify the millions in bonuses. Berkshire's bid for the legacy loans is $1.7 billion, while Nationstar's bid for the existing mortgage platform is $2.5 billion. The "legacy" loans being bid on by Warren Buffett's Berkshire are mortgages being held for sale."

http://www.nasdaq.com/article/judge-approves-rescap-bonuses-auctions-set-for-next-week-20121017-01001#.UIFoc29JMuc

They're within sneezing distance of the Berkshire bid by themselves.  Also possible they are partnering with Berkshire in some form or another.  Who knows.
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on October 19, 2012, 08:31:16 AM
Doing Rescap (likely with Berkshire) makes more sense to me than a buyout of JEF if for only the reason that if they were going to try to buy out JEF there wouldn't be this sudden need to do it.

They are selling / cutting deals on their biggest positions (aside from JEF) and some smaller ones (Keen) very rapidly.  They obviously didn't get their best price for the MLI share sale.

My guess is that they think (or know?) they have a very, very good shot at getting something done and that something is happening soon. 

Either that, or they think the world is coming to an end.
Title: Re: JEF - Jefferies Group
Post by: valuecfa on October 19, 2012, 08:57:18 AM
Doing Rescap (likely with Berkshire) makes more sense to me than a buyout of JEF if for only the reason that if they were going to try to buy out JEF there wouldn't be this sudden need to do it.

They are selling / cutting deals on their biggest positions (aside from JEF) and some smaller ones (Keen) very rapidly.  They obviously didn't get their best price for the MLI share sale.

My guess is that they think (or know?) they have a very, very good shot at getting something done and that something is happening soon. 

Either that, or they think the world is coming to an end.

Or they are just finding few attractive deals relative to the rates their credit rating provides and they are comfortable at the time being earning mediocre returns implied by their current borrowing rates and just redeeming debt
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on October 19, 2012, 09:06:27 AM
Quote
Or they are just finding few attractive deals relative to the rates their credit rating provides and they are comfortable at the time being earning mediocre returns implied by their current borrowing rates and just redeeming debt

So you don't find the rapidity with which they are doing these sales surprising?  Buyers from them must be getting the idea that they are in a good negotiating position, no? 
Title: Re: JEF - Jefferies Group
Post by: tombgrt on October 19, 2012, 09:14:13 AM
Doing Rescap (likely with Berkshire) makes more sense to me than a buyout of JEF if for only the reason that if they were going to try to buy out JEF there wouldn't be this sudden need to do it.

They are selling / cutting deals on their biggest positions (aside from JEF) and some smaller ones (Keen) very rapidly.  They obviously didn't get their best price for the MLI share sale.

My guess is that they think (or know?) they have a very, very good shot at getting something done and that something is happening soon. 

Either that, or they think the world is coming to an end.

Or they are just finding few attractive deals relative to the rates their credit rating provides and they are comfortable at the time being earning mediocre returns implied by their current borrowing rates and just redeeming debt

No need to sell the MLI position at such a discount then no?
Title: Re: JEF - Jefferies Group
Post by: valuecfa on October 19, 2012, 09:20:19 AM
Doing Rescap (likely with Berkshire) makes more sense to me than a buyout of JEF if for only the reason that if they were going to try to buy out JEF there wouldn't be this sudden need to do it.

They are selling / cutting deals on their biggest positions (aside from JEF) and some smaller ones (Keen) very rapidly.  They obviously didn't get their best price for the MLI share sale.

My guess is that they think (or know?) they have a very, very good shot at getting something done and that something is happening soon. 


Either that, or they think the world is coming to an end.

Or they are just finding few attractive deals relative to the rates their credit rating provides and they are comfortable at the time being earning mediocre returns implied by their current borrowing rates and just redeeming debt

No need to sell the MLI position at such a discount then no?

That is a good point. I suspect they are raising cash for an specific opportunity. But at times where there are limited attractive deals it makes sense for them to redeem debt given their circumstance of limited op cash flows and poorer credit rating.
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on October 19, 2012, 09:29:30 AM
Quote
But at times where there are limited attractive deals it makes sense for them to redeem debt given their circumstance of limited op cash flows and poorer credit rating.


Valuecfa,

I agree with you and given what they said at their annual meeting -- regarding it's "scary" out there, etc. -- at first that is all I thought they were doing when they did the Fortescue deal...just closing that one down opportunistically and possibly worried that Chinese demand for ore was headed in the wrong direction longer term.

My comment about the world coming to an end was facetious. 

So, you could be right that they are just pulling in their horns.

I may be guilty of just "hoping" here.  But, it does seem like they hope they've got something big brewing.

They always fund to watch, in any case.
Title: Re: JEF - Jefferies Group
Post by: Parsad on October 19, 2012, 10:33:57 AM
Quote
But at times where there are limited attractive deals it makes sense for them to redeem debt given their circumstance of limited op cash flows and poorer credit rating.


Valuecfa,

I agree with you and given what they said at their annual meeting -- regarding it's "scary" out there, etc. -- at first that is all I thought they were doing when they did the Fortescue deal...just closing that one down opportunistically and possibly worried that Chinese demand for ore was headed in the wrong direction longer term.

My comment about the world coming to an end was facetious. 

So, you could be right that they are just pulling in their horns.

I may be guilty of just "hoping" here.  But, it does seem like they hope they've got something big brewing.

They always fund to watch, in any case.

I'm pretty sure they've got something big brewing.  We'll know soon enough.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on October 20, 2012, 11:48:41 AM
Look at the 2011 annual letter. The wording of the letter about MLI and the FMG note suggests they had absolutely no intention of selling around April 2012. They considered them good medium term investments.

I'm not sure how wise it is to sell assets to bid on auction you may not win - what happens if you lose?

I'm thinking they either have a signed agreement on something (or the odds are far higher than 50% of a deal being made) or their view of the climate has changed.
Title: Re: JEF - Jefferies Group
Post by: Parsad on October 20, 2012, 02:04:11 PM
Look at the 2011 annual letter. The wording of the letter about MLI and the FMG note suggests they had absolutely no intention of selling around April 2012. They considered them good medium term investments.

I'm not sure how wise it is to sell assets to bid on auction you may not win - what happens if you lose?

I'm thinking they either have a signed agreement on something (or the odds are far higher than 50% of a deal being made) or their view of the climate has changed.

FMG needed to buy their note, so that they could issue more debt in the future.  Without LUK's approval, no new debt could be issued.  But yes, with MLI, they had no plans on selling.  From everything I know about these guys, they have either a new target or they are buying more of something they already own.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: JRH on October 31, 2012, 07:18:57 AM
More speculation on a Leucadia takeover target - Whitehaven Coal in Australia:

http://www.businessspectator.com.au/bs.nsf/Article/Nathan-Tinkler-Whitehaven-board-Endcoal-Elders-Rur-pd20121030-ZJRCF?OpenDocument

And a little more background info on the situation:

http://www.reuters.com/article/2012/10/31/us-australia-whitehaven-idUSBRE89U0BI20121031
Title: Re: JEF - Jefferies Group
Post by: Grenville on October 31, 2012, 08:05:37 AM
More speculation on a Leucadia takeover target - Whitehaven Coal in Australia:

http://www.businessspectator.com.au/bs.nsf/Article/Nathan-Tinkler-Whitehaven-board-Endcoal-Elders-Rur-pd20121030-ZJRCF?OpenDocument

And a little more background info on the situation:

http://www.reuters.com/article/2012/10/31/us-australia-whitehaven-idUSBRE89U0BI20121031

Thanks for the links and the post. Will be interesting to see how LUK puts their liquidity to work.
Title: Re: JEF - Jefferies Group
Post by: shoeless on October 31, 2012, 08:37:03 AM
http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs

"Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant."

Title: Re: JEF - Jefferies Group
Post by: racemize on October 31, 2012, 08:51:25 AM
http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs

"Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant."

from the article:
Quote
LCCE was awarded $1.56 billion of Gulf Opportunity Zone ("GO Zone") and Hurricane Ike taxexempt bonds by the Louisiana State Bond Commission. The issuance of these bonds demonstrates the state of Louisiana's strong financial support for the project. The low-cost GO Zone financing provided by the state was a large incentive to develop the project in Lake Charles.

It also says it will cost 2 billion over the 25 years, so I wonder how much Leucadia had to put up front given those data points.
Title: Re: JEF - Jefferies Group
Post by: JRH on October 31, 2012, 08:54:04 AM
http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs

"Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant."

From the 2010 Annual Report (released spring 2011):

"Each of these projects is extremely capital intensive and highly vulnerable to interest rates, inflation, current and expected long-term natural gas prices, and final receipt of various regulatory, permitting and financing approvals.  Given that each of these projects range in size from $2.3 billion to $2.6 billion, or more, Leucadia may begin to seek partners sometime this year to share the costs."

The article you posted is the first substantive mention with additional information I recall seeing since that time:

"The release states that a final investment decision in the project remains subject to third party financing and board approval by Leucadia National Corporation. As part of its financing efforts, Lake Charles Clean Energy has retained Credit Suisse AG and its affiliates, Citigroup and its affiliates, and Jefferies & Company, Inc. and its affiliates to provide advisory services related to potential placement of project equity.

According to the release, the project represents a capital investment of more than $2.5 billion..."


Sounds like Leucadia is looking for partners?  It'll be interesting to see a number finalized on Leucadia's share of the equity investment...
Title: Re: JEF - Jefferies Group
Post by: Grenville on October 31, 2012, 09:30:52 AM
http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs

"Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant."

Thanks! Interesting.

Here's a link to the projects website.
http://www.lakecharlescleanenergy.com (http://www.lakecharlescleanenergy.com)
Title: Re: JEF - Jefferies Group
Post by: shoeless on October 31, 2012, 11:05:59 AM
Time to read up on methanol a bit. Came across this
http://www.blogvesting.com/2008/09/27/taking-a-position-in-methanex-meoh/
Title: Re: JEF - Jefferies Group
Post by: txlaw on October 31, 2012, 11:47:44 AM
LCCE is expected to be one of the world's lowest-cost producers of methanol and hydrogen and a low-cost producer of other products used in the chemical and refining industries. In addition to extraordinary limitations on emissions of Criteria Pollutants, the plant is designed to capture, compress and sell 90 percent of its carbon dioxide ("CO2") production for use in Enhanced Oil Recovery ("EOR") in the US Gulf Coast," a news release from LCCE states.

See, I love this. 

I once looked into ZINC after I saw it in Pabrai's portfolio.  They are also a low-cost producer of products that use waste/byproduct materials as a feedstock.  But the problem I had with ZINC is that it was just a couple of plants, and if those things blew up or something happened to them, it would be game over, and I was never able to get in at a price that I liked to compensate me for that risk.

Now the great thing about owning LUK is that you get a low cost producer like this in a portfolio of assets that generate wealth that will be corporate tax free.  Once again, these guys prove they are the smartest guys in the room -- but for real, not like those Enron d-bags.

Really interested to see how they are going to finance this project.
Title: Re: JEF - Jefferies Group
Post by: txlaw on October 31, 2012, 11:50:17 AM
http://www.netl.doe.gov/publications/factsheets/project/FE0002314.pdf

Damn government and their subsidies to industry!
Title: Re: JEF - Jefferies Group
Post by: Dazel on October 31, 2012, 12:59:25 PM


Leucadia guys are brilliant!

You gotta love how smart they are.

Title: Re: JEF - Jefferies Group
Post by: motownsf on October 31, 2012, 02:23:48 PM
Wonder who would work on it with them? On second thought, a PE fund isn't likely due to duration of the project. Leukadia will need someone more longterm.
Title: Re: JEF - Jefferies Group
Post by: Hawk4value on October 31, 2012, 04:24:27 PM
Wonder who would work on it with them? On second thought, a PE fund isn't likely due to duration of the project. Leukadia will need someone more longterm.

How about Warren???
Title: Re: JEF - Jefferies Group
Post by: Parsad on October 31, 2012, 06:22:29 PM
Wonder who would work on it with them? On second thought, a PE fund isn't likely due to duration of the project. Leukadia will need someone more longterm.

How about Warren???

If it's a good idea and there is money to be made, you can bet Berkshire or MAE would work with them.  On another note, how about another guy named Watsa?  Cheers!
Title: Re: JEF - Jefferies Group
Post by: OracleofCarolina on November 06, 2012, 02:55:41 PM
LUK results

http://finance.yahoo.com/news/leucadia-national-corporation-announces-nine-222400741.html
Title: Re: JEF - Jefferies Group
Post by: Parsad on November 06, 2012, 03:12:59 PM
Walmart is pulling their case-ready business from National Beef.  No impairment yet, but they may take one at some point if they cannot find replacement business for their two case-ready facilities.  Accounts for about 7% of sales, but higher on the net margin side for those products.  A bit of a hit, but not too significant.  I suspect they will replace some of that space with new customers.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: frog03 on November 07, 2012, 08:42:41 AM
Deferred tax asset still a huge portion of BVPS.  Excluding the tax asset, the book value as of Q3 is about $19.
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on November 07, 2012, 09:37:22 AM
Deferred tax asset still a huge portion of BVPS.  Excluding the tax asset, the book value as of Q3 is about $19.

Yes, you could look at it that way.  But to value Leucadia like this doesn't recognise that the post-tax profitability of Leucadia's businesses (or its post-tax capital gains) will be higher than they would otherwise be in the absence of the DTA.  Perhaps you are of the view that Leucadia won't make sufficient profits to utilise all the DTA, but I'm willing to bet they will.

Regardless of how you take my argument above, you should note that the zero coupon bonds issue wasn't sorted until after the balance sheet date.  This was a pre-tax gain of $526m.  I'm not sure how much tax they'll have to pay on that, but even assuming 15% capital gains tax rate it gives them $450m additional equity.  This adds $1.8 per share to book value, unless I've got my sums wrong.  Without wanting so split hairs, Inmet and Jefferies are up somewhat on their end-September valuations, which adds around another bit to book value.  Making the above adjustments puts tangible equity, notwithstanding my above comments, at around $21.5.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 07, 2012, 10:41:52 AM
"This was a pre-tax gain of $526m"

Maybe they don't pay any? I think I read once that cap gains are included in the DTA and can be used against that just as much as income.
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 12, 2012, 04:09:33 AM
Leucadia buying Jefferies.  0.81 shares of LUK for each share of JEF.  At current price around $17.65 for JEF; aggregate around $3.7 bil. 
Title: Re: JEF - Jefferies Group
Post by: orion on November 12, 2012, 04:55:56 AM
Their presentation: http://www.leucadia.com/presentations/presentation_11_12_12.pdf
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on November 12, 2012, 05:08:44 AM

Quote
Jefferies currently pays substantial Federal income taxes and thus its expected ongoing pre-tax earnings will materially accelerate utilization of Leucadia’s net operating losses, creating incremental value for all shareholders.

Quote
Leucadia will continue to operate in its current form, except that the merger agreement contemplates that Leucadia’s Crimson Wine Group, with a book value of $197 million, will be spun out in a distribution that is intended to be tax-free to current Leucadia shareholders prior to the completion of the merger.

Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on November 12, 2012, 05:13:23 AM
I guess you could call it 'obvious', but it never is until it happens.  My thoughts so far:

They've sorted out the succession issue anyway, with Richard Handler coming in as Leucadia CEO.  And in Handler / Friedman, you've got two guys with significant Leucadia stock, so their interests are aligned (unlike say Justin Wheeler).

The argument for putting a discount on Leucadia for the $1.4bn DTA is also lessening.  Jefferies makes c.$450m pre-tax; at 35% that's $160m of tax a year.

I'm not a fan of leveraged financials as a rule, mainly it's because of the complexity and the inability of Outside Passive Minority Investors to be able to see what the assets and liabilities are, and what the risks around them are.  At least by owning 100% of Jefferies, Leucadia management will know exactly what it holds and should be better able to manage risks and value the business.

One disappointment for me is that Leucadia is using its own stock to fully fund the deal.  In my opinion Leucadia is very cheap!  But I trust the Leucadia guys and besides they need cash for the gasification project....

Hopefully we'll get more info on the call this morning....
Title: Re: JEF - Jefferies Group
Post by: hellsten on November 12, 2012, 06:59:22 AM
The market doesn't seem to be very happy about this acquisition. LUK -5%. Somehow I'm not surprised. I guess the market puts 2 and 2 together and thinks the future is not very bright for JEF and LUK:
Quote
Since 1990:
JEF 15.9% CAGR
LUK 13.1% CAGR

Since 2000:
JEF 9.2% CAGR
LUK 9.4% CAGR
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on November 12, 2012, 07:12:10 AM
Can anyone guess why they've decided to spin Crimson Wine? 

I've not focused on this business much up to now and know nothing about wine.  Anyone??
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 12, 2012, 07:22:57 AM
Based on the ways things are trading, you can buy LUK on the cheap through JEF shares.

1 JEF share = 0.81 LUK
or $16 for 0.81 LUK ~ $19.8/ LUK share
Title: Re: JEF - Jefferies Group
Post by: bmichaud on November 12, 2012, 07:31:06 AM
I'm lost - what is the point of the buyback simultaneous with share issuance?
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 12, 2012, 07:31:44 AM
Wow, this is great.

The ratio of LUK shares per JEF share seems just about right to me.
Title: Re: JEF - Jefferies Group
Post by: enoch01 on November 12, 2012, 07:35:53 AM
I'm lost - what is the point of the buynback simultaneous with share issuance?

It's what you want to do if you want to buyback cheap shares, and save cash when you make the Jefferies acquisition.
Title: Re: JEF - Jefferies Group
Post by: bmichaud on November 12, 2012, 07:51:37 AM
I still don't understand the mathematics - are proforma-LUK shares now suddenly cheaper AFTER paying a premium for JEF shares not owned? Wouldn't they have been better off buying $500mm more JEF shares on the open mkt before taking it over?    Perhaps it's a neat financial engineering trick - I'm curious...
Title: Re: JEF - Jefferies Group
Post by: JRH on November 12, 2012, 07:54:27 AM
I'm lost - what is the point of the buynback simultaneous with share issuance?

It's what you want to do if you want to buyback cheap shares, and save cash when you make the Jefferies acquisition.

The buyback grants them optionality during and after the merger process.  I'm happy to see it, given that I believe the Leucadia pricipals display good opportunistic judgment.
Title: Re: JEF - Jefferies Group
Post by: JRH on November 12, 2012, 07:56:39 AM
I still don't understand the mathematics - are proforma-LUK shares now suddenly cheaper AFTER paying a premium for JEF shares not owned? Wouldn't they have been better off buying $500mm more JEF shares on the open mkt before taking it over?    Perhaps it's a neat financial engineering trick - I'm curious...

They are limited to 30% ownership.  I think the materials today state they were at 28.6% (due to share grants, I would guess).  I guess they could have sneaked in a few more shares to get back to 30%.
Title: Re: JEF - Jefferies Group
Post by: link01 on November 12, 2012, 09:48:18 AM
I still don't understand the mathematics - are proforma-LUK shares now suddenly cheaper AFTER paying a premium for JEF shares not owned? Wouldn't they have been better off buying $500mm more JEF shares on the open mkt before taking it over?    Perhaps it's a neat financial engineering trick - I'm curious...

i think the rationale is simple: they bagged a big operating co that will ensure luk maximizes monetization of their NOL's, most importanntly, accelerating the utilization of them.

they also go far to address  the leadership sccession issue. it seems to me that cummings was especially ready to pass the baton.

i have to admit i'm not too fond of the operating model of i-banks, tho. especially in the new normal...
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 12, 2012, 09:56:03 AM
Good conference call. (~40mins)

Richard Handler, Brian Friedman, Peg Broadbent, Joe Orlando, Justin Wheeler, and Joe Steinberg ("coaxed onto the call and not an avid fan of conference calls") were on the conference call.

Richard Handler and Brian Friedman answered all the questions though.
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on November 12, 2012, 10:24:07 AM
Quote
Based on the ways things are trading, you can buy LUK on the cheap through JEF shares.

1 JEF share = 0.81 LUK
or $16 for 0.81 LUK ~ $19.8/ LUK share

Does anyone disagree with this?

You'd think this spread would have closed by now today.
Title: Re: JEF - Jefferies Group
Post by: Sullivcd on November 12, 2012, 10:30:15 AM
What is the spread if Crimson Wine is spun off prior to the merger?
Title: Re: JEF - Jefferies Group
Post by: Parsad on November 12, 2012, 12:15:12 PM
Quote
Based on the ways things are trading, you can buy LUK on the cheap through JEF shares.

1 JEF share = 0.81 LUK
or $16 for 0.81 LUK ~ $19.8/ LUK share

Does anyone disagree with this?

You'd think this spread would have closed by now today.

No, you are correct.  We bought a bunch of JEF this morning.  The spread is still there because there is always the remote possibility the deal will be shot down by shareholders.  I don't think that is likely. 

It's a very good deal for both companies, and I think JEF under Leucadia could really start to take some market share away from the big boys over the ensuing 20 years, while Leucadia in one fell swoop has deepened their bench and solved any possible succession issues.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: A_Hamilton on November 12, 2012, 12:27:17 PM
Quote
Based on the ways things are trading, you can buy LUK on the cheap through JEF shares.

1 JEF share = 0.81 LUK
or $16 for 0.81 LUK ~ $19.8/ LUK share

Does anyone disagree with this?

You'd think this spread would have closed by now today.


Assuming Crimson is worth BV, you are talking about reduction needing to be applied to JEF.

No, you are correct.  We bought a bunch of JEF this morning.  The spread is still there because there is always the remote possibility the deal will be shot down by shareholders.  I don't think that is likely. 

It's a very good deal for both companies, and I think JEF under Leucadia could really start to take some market share away from the big boys over the ensuing 20 years, while Leucadia in one fell swoop has deepened their bench and solved any possible succession issues.  Cheers!

Sorry to disagree guys, but a buyer of LUK today receives LUK inclusive of Crimson Wine Group. A buyer of JEF receives 0.81 shares of LUK ex-crimson wine group.

It has a material effect on the arb spread.

Title: Re: JEF - Jefferies Group
Post by: Kraven on November 12, 2012, 12:34:55 PM
Quote
Based on the ways things are trading, you can buy LUK on the cheap through JEF shares.

1 JEF share = 0.81 LUK
or $16 for 0.81 LUK ~ $19.8/ LUK share

Does anyone disagree with this?

You'd think this spread would have closed by now today.


Assuming Crimson is worth BV, you are talking about reduction needing to be applied to JEF.

No, you are correct.  We bought a bunch of JEF this morning.  The spread is still there because there is always the remote possibility the deal will be shot down by shareholders.  I don't think that is likely. 

It's a very good deal for both companies, and I think JEF under Leucadia could really start to take some market share away from the big boys over the ensuing 20 years, while Leucadia in one fell swoop has deepened their bench and solved any possible succession issues.  Cheers!

Sorry to disagree guys, but a buyer of LUK today receives LUK inclusive of Crimson Wine Group. A buyer of JEF receives 0.81 shares of LUK ex-crimson wine group.

It has a material effect on the arb spread.

Anyone have a sense of what Crimson is worth?  I just did a quick look in the K and it appears that it's about 75 cents of BV for each LUK share.  Sales for 2011 were around $36 mil.  I didn't see any info on the profitability.
Title: Re: JEF - Jefferies Group
Post by: A_Hamilton on November 12, 2012, 12:39:03 PM
Quote
Based on the ways things are trading, you can buy LUK on the cheap through JEF shares.

1 JEF share = 0.81 LUK
or $16 for 0.81 LUK ~ $19.8/ LUK share

Does anyone disagree with this?

You'd think this spread would have closed by now today.


Assuming Crimson is worth BV, you are talking about reduction needing to be applied to JEF.

No, you are correct.  We bought a bunch of JEF this morning.  The spread is still there because there is always the remote possibility the deal will be shot down by shareholders.  I don't think that is likely. 

It's a very good deal for both companies, and I think JEF under Leucadia could really start to take some market share away from the big boys over the ensuing 20 years, while Leucadia in one fell swoop has deepened their bench and solved any possible succession issues.  Cheers!

Sorry to disagree guys, but a buyer of LUK today receives LUK inclusive of Crimson Wine Group. A buyer of JEF receives 0.81 shares of LUK ex-crimson wine group.

It has a material effect on the arb spread.

Anyone have a sense of what Crimson is worth?  I just did a quick look in the K and it appears that it's about 75 cents of BV for each LUK share.  Sales for 2011 were around $36 mil.  I didn't see any info on the profitability.

I don't know what is worth. Seems like BV is generous for a pretty difficult business/trophy business. That said, do you want to be short an illiquid name as part of trying to arb the spread?
Title: Re: JEF - Jefferies Group
Post by: Kraven on November 12, 2012, 12:43:24 PM
Quote
Based on the ways things are trading, you can buy LUK on the cheap through JEF shares.

1 JEF share = 0.81 LUK
or $16 for 0.81 LUK ~ $19.8/ LUK share

Does anyone disagree with this?

You'd think this spread would have closed by now today.


Assuming Crimson is worth BV, you are talking about reduction needing to be applied to JEF.

No, you are correct.  We bought a bunch of JEF this morning.  The spread is still there because there is always the remote possibility the deal will be shot down by shareholders.  I don't think that is likely. 

It's a very good deal for both companies, and I think JEF under Leucadia could really start to take some market share away from the big boys over the ensuing 20 years, while Leucadia in one fell swoop has deepened their bench and solved any possible succession issues.  Cheers!

Sorry to disagree guys, but a buyer of LUK today receives LUK inclusive of Crimson Wine Group. A buyer of JEF receives 0.81 shares of LUK ex-crimson wine group.

It has a material effect on the arb spread.

Anyone have a sense of what Crimson is worth?  I just did a quick look in the K and it appears that it's about 75 cents of BV for each LUK share.  Sales for 2011 were around $36 mil.  I didn't see any info on the profitability.

I don't know what is worth. Seems like BV is generous for a pretty difficult business/trophy business. That said, do you want to be short an illiquid name as part of trying to arb the spread?

I'm not arbing anything.  Just asking a question, my friend.  It wasn't intended to be directed to you. 
Title: Re: JEF - Jefferies Group
Post by: joepublic on November 12, 2012, 12:46:43 PM
I am not sure what it is worth, but we have a precedent.

About 10 years ago, Leucadia spun off a company called HomeFed (HOFD). It is very illiquid and the current quote is around 25. It has 2 land areas in California that are going to become master planned communities (I am not sure what stage of development they are in.)

At the time of the spinoff, it traded for about $4/share (around book value as in LUK's balance sheet.) It is currently around $25. It reached as high as $60 dollars around 2006.

I am hoping for a similar run-up in the price. I do not believe that a company of this size in the wine industry will trade as an independent for long.
Title: Re: JEF - Jefferies Group
Post by: JRH on November 12, 2012, 01:30:01 PM
Interesting liquidity guidelines Leucadia has identified (slide 30). 

Looks like they currently have more than adequate liquidity, although I don't think it is necessarily apparent just from this whether their recent FMG, MLI, Keen sales are related solely to meeting those conditions for the JEF merger.  It is interesting to note that they are stating that they will not make new equity investments in excess of 10% of book value "at time of investment".  Also:

"Leucadia will target (i) a minimum liquid assets / parent debt ratio >1.0x (current ratio of 3.0x) and (ii) minimum cash and cash equivalents equal to 10% of book value (excluding Jefferies)."

(ii) seems to imply ~$520M is an operating cash buffer (same slide + supplement on 32 shows adjusted book value of ~$5.2B without Crimson and Jefferies).  They announced an authorization to buyback <=25M shares (~$500M).  That gives them as little as a half billion and as much as a billion in cash to work with, depending on actual number of shares bought back.

Seems to me like the merger prompted a re-assessment of their holdings on a marginal benefit basis against what they expect to be able to make on the opportunity flow from Jefferies.  That would explain past and future (Crimson) liquidations.
Title: Re: JEF - Jefferies Group
Post by: Liberty on November 12, 2012, 01:37:34 PM
http://www.theglobeandmail.com/globe-investor/baby-berkshire-leucadia-matures-with-jefferies-deal/article5203491/
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on November 12, 2012, 01:59:35 PM
Quote
Sorry to disagree guys, but a buyer of LUK today receives LUK inclusive of Crimson Wine Group. A buyer of JEF receives 0.81 shares of LUK ex-crimson wine group.

It has a material effect on the arb spread.

I think this is correct, as Crimson has a book of $197mm and there are almost 245mm shares of LUK outstanding pre-merger.  Also, it sounded like LUK might pay a 25cent dividend in December of this year which JEF holders obviously won't get -- it wasn't crystal clear on the call.  Still, there may be some space in there on the basis that Parsad was talking about. 

Thinking out loud, I'd wonder if either or both of Cummings / Steinberg wants control of Crimson for "fun" -- if so, likely Cummings.  It doesn't matter much but may be worth watching, post spin, as joepublic mentions.

Quote
Interesting liquidity guidelines Leucadia has identified (slide 30). 

Looks like they currently have more than adequate liquidity, although I don't think it is necessarily apparent just from this whether their recent FMG, MLI, Keen sales are related solely to meeting those conditions for the JEF merger.  It is interesting to note that they are stating that they will not make new equity investments in excess of 10% of book value "at time of investment".  Also:

"Leucadia will target (i) a minimum liquid assets / parent debt ratio >1.0x (current ratio of 3.0x) and (ii) minimum cash and cash equivalents equal to 10% of book value (excluding Jefferies)."

(ii) seems to imply ~$520M is an operating cash buffer (same slide + supplement on 32 shows adjusted book value of ~$5.2B without Crimson and Jefferies).  They announced an authorization to buyback <=25M shares (~$500M).  That gives them as little as a half billion and as much as a billion in cash to work with, depending on actual number of shares bought back.

Seems to me like the merger prompted a re-assessment of their holdings on a marginal benefit basis against what they expect to be able to make on the opportunity flow from Jefferies.  That would explain past and future (Crimson) liquidations.

I noticed this too. All the selling / capital raising LUK did pre-merger makes sense if (1) Leucadia wanted to buyback shares but (2) also wanted to figure out a way to accelerate the use of the loss carryforwards.  Plus, they help solidify succession.  JEF gets a parent that has capital and this may help with ratings, etc.

All in all, at this point, it looks like a very interesting deal as long as Handler doesn't go off the reservation.  I'd like to see / know that, at least, Steinberg is keeping his shares.  If Cummings keeps most or all of his, that's a bonus in my book. 

Let's keep those incentives aligned.
Title: Re: JEF - Jefferies Group
Post by: Viking on November 12, 2012, 03:19:10 PM
When asked on the conference call why now, the answer:
1.) LUK in great shape
2.) JEF in great shape
3.) supports managment transition for LUK
4.) supports growth of JEF; see investment banking competition shrinking and significant opportunities moving forward (take advantage of volatility versus it being a negative for JEF like last year)

The question that was not really answered: "Was the price being paid for JEF not too low?" The answer provided (my interpretation) was both companies are selling at low valuations so it is a wash for JEF shareholders. 

Here is an interesting take: http://www.cnbc.com/id/49795381?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo (http://www.cnbc.com/id/49795381?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo)

When you look at LUK, the two big issues were management transition and how they were going to utilize the tax loss carryforwards. This transaction looks to address both those concerns. The transaction also looks to be of great value to JEF, given the current finacial strength of LUK. Interesting that LUK is trading lower on the news.

Probably the most important question is how good Handler is, the new CEO. If he is above average the stock has a lot of upside over the next decade. Is this an opportunity to get in on the ground floor, similar to purchasing LUK in the 80's or BRK back in the 70's? Love these type of opportunities and one of the reasons I am happy to sit on a large amount of cash (at times). Will be reading lots over the next days. 
Title: Re: JEF - Jefferies Group
Post by: matjone on November 12, 2012, 06:38:15 PM
If I haven't made any mistakes (doubtful premise), then it looks like you can get this thing  for about $1.05 cheaper buying JEF vs buying LUK, but doing it that way you don't get the $0.25 dividend or crimson which has a bv of .81/luk shr.  So the difference seems about right if crimson is worth BV.

Like Viking said the million dollar question is how good Handler and co will do going forward.

Title: Re: JEF - Jefferies Group
Post by: Parsad on November 12, 2012, 06:48:20 PM
If I haven't made any mistakes (doubtful premise), then it looks like you can get this thing  for about $1.05 cheaper buying JEF vs buying LUK, but doing it that way you don't get the $0.25 dividend or crimson which has a bv of .81/luk shr.  So the difference seems about right if crimson is worth BV.

Like Viking said the million dollar question is how good Handler and co will do going forward.

Cummings and Steinberg aren't going anywhere.  Cummings is just removing himself from day to day duties, but he will be on the board.  As far as I know, Justin Wheeler isn't going anywhere either.  So, you've got the best of Leucadia and the best of Jefferies working for Leucadia shareholders now...with twice as many ideas to share and make money from.  Remember, it was Handler who brought Fortescue to Leucadia, and that may have been the best large investment ever made by LUK.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: rimm_never_sleeps on November 12, 2012, 07:04:59 PM
this should make luk a much more volatile equity in the future. that could be good for people who have confidence in mgmt and understand the company.
Title: Re: JEF - Jefferies Group
Post by: glider3834 on November 13, 2012, 03:46:13 AM
I haven't looked at all the details, but this looks all about succession plannning for Leucadia first & foremost. Rich Handler is a proven performer but matching S & C's  record would be a serious achievement!
Title: Re: JEF - Jefferies Group
Post by: Viking on November 13, 2012, 09:51:12 AM
Globe & Mail article from today: http://www.theglobeandmail.com/globe-investor/investment-ideas/jefferies-deal-logic-driven-by-accountancy/article5204183/ (http://www.theglobeandmail.com/globe-investor/investment-ideas/jefferies-deal-logic-driven-by-accountancy/article5204183/)
Title: Re: JEF - Jefferies Group
Post by: roundball100 on November 13, 2012, 06:14:21 PM
Have followed LUK for a while (have held it in past).  Many on this forum worship these guys.  Fantastic track record and long-term vision.  JEF merger seems entirely in line with LUK's record of opportunism.  A perhaps over-simplified view here is this solves both the succession plan issue and expedites utilization of tax-loss assets.  But, it seems this comes with the very significant cost of LUK becoming much less diversified, and more beholden to the unseen risks inherent in major banking.   While presently appears to be quite attractive for both value and owner-operator reasons, to me it would be much more so if not accompanied by such major changes in the company ... I guess I need to understand more about what risks come along with JEF.   For those who see JEF-LUK as a win-win, how do you so easily accept the uncertainties that the investment banking exposure brings? 
Title: Re: JEF - Jefferies Group
Post by: Partner24 on November 13, 2012, 06:38:30 PM
Even if you buy LUK at a good price, in the end, what you buy is trust in people that manage it. You have to do it in every business that you buy, but especially with LUK. You have to trust that they made a good decision with that transaction. But that trust is far from being blind: they have a long track record of both stewardship and talent and I don't see why they would want to scrap their decades of work to build their masterpiece with that transaction.

But again, in the end, buying LUK is a matter of trust.



Title: Re: JEF - Jefferies Group
Post by: Grenville on November 13, 2012, 10:04:02 PM
Have followed LUK for a while (have held it in past).  Many on this forum worship these guys.  Fantastic track record and long-term vision.  JEF merger seems entirely in line with LUK's record of opportunism.  A perhaps over-simplified view here is this solves both the succession plan issue and expedites utilization of tax-loss assets.  But, it seems this comes with the very significant cost of LUK becoming much less diversified, and more beholden to the unseen risks inherent in major banking.   While presently appears to be quite attractive for both value and owner-operator reasons, to me it would be much more so if not accompanied by such major changes in the company ... I guess I need to understand more about what risks come along with JEF.   For those who see JEF-LUK as a win-win, how do you so easily accept the uncertainties that the investment banking exposure brings?

Based on my understanding of JEF, it's run much more conservatively than most investment banks. JEF has never had the luxury of low cost deposits so they have had to be mindful of their balance sheet and funding sources. One example of the quality of their funding and model was how they were able to survive a real world stress test when rumors were thrown around last November in the midst of the MF Global bankruptcy.

Also JEF has less prop trading as a driver of its revenue. Most of the business is client flow based. Also, the derivative book is simpler and a good deal of it is exchange traded. There are more details in the JEF investment thread as well.
Title: Re: JEF - Jefferies Group
Post by: giofranchi on November 13, 2012, 11:39:13 PM
Have followed LUK for a while (have held it in past).  Many on this forum worship these guys.  Fantastic track record and long-term vision.  JEF merger seems entirely in line with LUK's record of opportunism.  A perhaps over-simplified view here is this solves both the succession plan issue and expedites utilization of tax-loss assets.  But, it seems this comes with the very significant cost of LUK becoming much less diversified, and more beholden to the unseen risks inherent in major banking.   While presently appears to be quite attractive for both value and owner-operator reasons, to me it would be much more so if not accompanied by such major changes in the company ... I guess I need to understand more about what risks come along with JEF.   For those who see JEF-LUK as a win-win, how do you so easily accept the uncertainties that the investment banking exposure brings?

February 22, 1936
It is said about the wealthy banker Gorge F. Baker of New York:
1. He always bought sound stocks and bonds when they were offered below intrinsic value.
2. He always had liquid cash for such a purpose.
3. After he bought such stocks and bonds he held on “until the cows came home.” He never made a practice of speculative buying and selling and never tried to catch the market swings. He simply bought when bargains were offered. He never sold unless the stock market was going bad or the price offered was too good to refuse.

The Great Depression A Diary – Benjamin Roth

Investment Banking is like Insurance: in the wrong hands they both might lead to disaster. Vice versa, if you know the owner-manager, if he has an outstanding track-record, and, most important of all, if you understand his process and agree with it, both Investment Banking and Insurance could be great!

giofranchi
Title: Re: JEF - Jefferies Group
Post by: hellsten on November 14, 2012, 03:05:25 AM
Great analysis of the LUK and JEF merger:
http://brooklyninvestor.blogspot.com/2012/11/leucadia-jeffries-merger.html
Title: Re: JEF - Jefferies Group
Post by: giofranchi on November 14, 2012, 03:23:01 AM
Great analysis of the LUK and JEF merger:
http://brooklyninvestor.blogspot.com/2012/11/leucadia-jeffries-merger.html

Yes! Very good indeed!
Thank you for posting,

giofranchi
Title: Re: JEF - Jefferies Group
Post by: Junto on November 14, 2012, 05:00:18 AM


February 22, 1936
It is said about the wealthy banker Gorge F. Baker of New York:
1. He always bought sound stocks and bonds when they were offered below intrinsic value.
2. He always had liquid cash for such a purpose.
3. After he bought such stocks and bonds he held on “until the cows came home.” He never made a practice of speculative buying and selling and never tried to catch the market swings. He simply bought when bargains were offered. He never sold unless the stock market was going bad or the price offered was too good to refuse.

The Great Depression A Diary – Benjamin Roth

Investment Banking is like Insurance: in the wrong hands they both might lead to disaster. Vice versa, if you know the owner-manager, if he has an outstanding track-record, and, most important of all, if you understand his process and agree with it, both Investment Banking and Insurance could be great!

giofranchi
[/quote]

If interested, I would recommend the book (if you can find it) George F. Baker and his Banks 1840-1955. He had his hands in founding many of the largest commercial banks. Good read for the banking types.
Title: Re: JEF - Jefferies Group
Post by: giofranchi on November 14, 2012, 05:06:57 AM
If interested, I would recommend the book (if you can find it) George F. Baker and his Banks 1840-1955. He had his hands in founding many of the largest commercial banks. Good read for the banking types.

Junto,
I know you won’t believe it… but I have just bought that book this morning!! :)
I am not really “the banking type”, but I think it will be a very good read anyway!
Thank you,

giofranchi
Title: Re: JEF - Jefferies Group
Post by: PlanMaestro on November 14, 2012, 09:35:27 AM
Maybe you guys knew this already but I found it interesting.

http://www.leucadia.com/presentations/presentation_11_12_12.pdf

Jefferies and Leucadia’s relationship has been built over twenty years. Jefferies and Leucadia have worked together and partnered on countless financings and strategic  transactions, including Jefferies High Yield Funds (2000 – 2007), Jefferies High Yield Holdings joint  venture (2007 – ongoing) and the Fortescue investment (2006 – 2012).
Title: Re: JEF - Jefferies Group
Post by: PlanMaestro on November 15, 2012, 03:01:59 PM
http://www.economist.com/news/finance-and-economics/21566648-strange-combination-conglomerate-and-investment-bank-theres-beef
Title: Re: JEF - Jefferies Group
Post by: zippy1 on November 17, 2012, 02:23:19 AM
New Barron's article, similar conclusion as the Economists one.
http://online.barrons.com/article/SB50001424052748704526104578117311538206332.html?mod=BOL_hpp_mag (http://online.barrons.com/article/SB50001424052748704526104578117311538206332.html?mod=BOL_hpp_mag)
Title: Re: JEF - Jefferies Group
Post by: boilermaker75 on November 23, 2012, 06:47:29 AM
I took the arbitrage route this morning writing JEF 16-strike puts. The Decembers for $0.40 and the Januarys for $0.75.
Title: Re: JEF - Jefferies Group
Post by: cpan on November 24, 2012, 09:02:16 AM
Regarding JEF's business, it looks pretty good given the historical book value growth.   Could someone share what they would worry about JEF's business?  Does the business have to be run lemming like where you are forced to do the worst deal that your competitor is willing to write?  Or is it because risk management will never have good control over the deal makers?  Can't they just be the middle man or is the competition too tough to do that?   I know the reliance on short term funding issue which maybe LUK merger may or may not resolve given LUK doesn't have a reliable earning stream either (or maybe the cows does come home :-)).   I appreciate any insight you may have. 
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on November 24, 2012, 11:41:01 AM
Having transitioned to a role within the capital markets over the past 6 months and heading into bonus time in the next 3 months I can say a couple of things:

1.  Expectations are lowered every month or so.
2.  The addition of clawbacks on bonuses with a 5 year tail make it very hard to do something stupid just to push up your compensation.
3.  Every group has a respective pool.  DCM, IB, Structured Products, S&T.

I don't know how it's done at JEF, but Handler will own a lot of combined LUK.  The disasters that happened with the other IB's, the compensation was mostly up front with some stock compensation.  It's definitely a good question to ask at the annual meeting. 

Ideally, what I'd like to see from LUK/JEF is a business that has two engines, not both of them need to work at the same time, business can be great at JEF and ok at LUK during the really good times and ok at JEF and great for LUK (because you would think capital would be redeployed from JEF to LUK to buy cheap assets). 

About 14% of my portfolio consists of the LUK/JEF combination. 
Title: Re: JEF - Jefferies Group
Post by: Myth465 on November 25, 2012, 03:08:09 PM
Would you guys buy LUK or JEF now. I know I am being lazy. I am sure someone has already done the math. I am very interested, now that they have cleaned up the portfolio and have a business which throws off consistent cash. I plan to buy a position and follow for the next few years to learn about IB.
Title: Re: JEF - Jefferies Group
Post by: boilermaker75 on November 26, 2012, 06:28:35 AM
Would you guys buy LUK or JEF now. I know I am being lazy. I am sure someone has already done the math. I am very interested, now that they have cleaned up the portfolio and have a business which throws off consistent cash. I plan to buy a position and follow for the next few years to learn about IB.


JEF is trading at a discount to what you will obtain IF the merger goes through. So if you think there is a high certainty of the merger happening you would gain a little more in the long run by buying JEF.
Title: Re: JEF - Jefferies Group
Post by: gfp on November 26, 2012, 07:46:23 AM
Would you guys buy LUK or JEF now. I know I am being lazy. I am sure someone has already done the math. I am very interested, now that they have cleaned up the portfolio and have a business which throws off consistent cash. I plan to buy a position and follow for the next few years to learn about IB.


JEF is trading at a discount to what you will obtain IF the merger goes through. So if you think there is a high certainty of the merger happening you would gain a little more in the long run by buying JEF.

The deal is very likely to go through, but don't forget to factor in the Crimson Wine spin-off.  JEF holders won't get Crimson shares, LUK holders will.
Title: Re: JEF - Jefferies Group
Post by: LC on November 26, 2012, 09:58:54 AM
Would you guys buy LUK or JEF now. I know I am being lazy. I am sure someone has already done the math. I am very interested, now that they have cleaned up the portfolio and have a business which throws off consistent cash. I plan to buy a position and follow for the next few years to learn about IB.


JEF is trading at a discount to what you will obtain IF the merger goes through. So if you think there is a high certainty of the merger happening you would gain a little more in the long run by buying JEF.

The deal is very likely to go through, but don't forget to factor in the Crimson Wine spin-off.  JEF holders won't get Crimson shares, LUK holders will.

Thanks for reminding...I was thinking about a buy JEF/sell LUK arbitrage opportunity until you reminded me of the Crimson divestiture.

For the interested, the trade would have been:

-Merger terms: JEF owners receive .81 shares of LUK after transaction
-LUK trades @ $20.88 as of this writing
-Implies a JEF share price of ($20.88 * .81) or $16.91
-JEF trades at $15.97

Therefore: Sell LUK / Buy JEF in equal dollar amounts.
Title: Re: JEF - Jefferies Group
Post by: BargainValueHunter on November 26, 2012, 10:44:58 AM
Credit:onefamilysblog.com

(http://4.bp.blogspot.com/-DFtmxj3Vs5o/UKdjzs30srI/AAAAAAAAIs8/jL4e7KWUhlo/s1600/Ian-Cumming-Leucadia-National-Corp-Q3-2012-13F-Summary.jpg)

 
Title: Re: JEF - Jefferies Group
Post by: mcliu on November 26, 2012, 01:00:02 PM
I think you should subtract the $0.81 and the $0.25 missed dividend from the current trading price of LUK before multiplying by the conversion factor.

So example, $20.88 - $0.81 (Crimson Spinoff) - $0.25 (Missed Dividend) = $19.82 x 0.81 = $16.05 implied price of JEF

Does anyone have any details or opinions on some of LUK's operating assets like National Beef, Conwed, and some of their more esoteric assets, like Sangart and the Gasification projects? I'm curious as to the thesis behind the biotech/energy initiatives and what the potential returns are. As an investor in JEF, I feel more comfortable with the investment bank and some of their operating assets, but less comfortable with these random projects.
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 28, 2012, 09:12:09 AM
Getco makes offer for KCG.

http://www.businessweek.com/news/2012-11-28/getco-proposes-buying-knight-capital-at-3-dot-50-a-share

Title: Re: JEF - Jefferies Group
Post by: abcd on November 28, 2012, 09:32:35 AM
I think you should subtract the $0.81 and the $0.25 missed dividend from the current trading price of LUK before multiplying by the conversion factor.

So example, $20.88 - $0.81 (Crimson Spinoff) - $0.25 (Missed Dividend) = $19.82 x 0.81 = $16.05 implied price of JEF

Does anyone have any details or opinions on some of LUK's operating assets like National Beef, Conwed, and some of their more esoteric assets, like Sangart and the Gasification projects? I'm curious as to the thesis behind the biotech/energy initiatives and what the potential returns are. As an investor in JEF, I feel more comfortable with the investment bank and some of their operating assets, but less comfortable with these random projects.

Don't you have to add at least one $.075 (actually it should be approximately 30% more, so about $.0975) that you are likely to get from Jeffries?
Title: Re: JEF - Jefferies Group
Post by: matjone on November 28, 2012, 12:15:45 PM
 My broker  says the last dividend was on 11/15 and no other dividends have been declared.  So they haven't declared one, but I don't know if that means they won't pay one.  If they stay on schedule they will pay one.  So the formula if you value crimson at BV is

LUk price-0.25-0.81 = (JEF price -.075)/.81

that's without doing any time discounting of course.

Is that how the rest of you have it figured?

The people who bought JEF at 11 after the MF global scandal certainly got LUK  cheap, assuming the deal goes through.
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on November 28, 2012, 12:40:37 PM
I'm assuming once the merger is closed 1Q13, the dividend will be .0625/quarter.  This will be the last 0.25 dividend. 

"Leucadia's Board of Directors has indicated its intention to continue to pay dividends at the annual rate of $0.25 per common share, but on a quarterly basis following the merger."

Quote
Sachin Shah
Analyst, Tullett Prebon Financial Services LLC Q
I just wanted to follow up on the dividend question, so you guys – just to be clear – you guys are going to be
continuing your dividend policy until the deal gets completed

Richard B. Handler
Chairman & Chief Executive Officer, Jefferies Group, Inc. A
Jefferies will continue its dividend policy and Jefferies' board will decide – and Leucadia's board will decide their
dividend policy, but we're giving guidance that we're thinking maintaining it at $0.25 on a quarterly basis.

I already owned LUK, post announcement I purchased JEF because if you assume that Crimson is spun off and there will be a large shareholder base that may sell the position, that should have some discount to it.  I have my doubts on how long Crimson stays public.
Title: Re: JEF - Jefferies Group
Post by: matjone on November 28, 2012, 01:15:37 PM
Ok thanks for posting that.  I just realized I wasn't very clear in my last post, but I was talking about the JEF dividend and not the LUK dividend.  Looks like buying JEF is the cheaper way to buy, but not by much.
Title: Re: JEF - Jefferies Group
Post by: compoundinglife on November 28, 2012, 01:35:10 PM
I already owned LUK, post announcement I purchased JEF because if you assume that Crimson is spun off and there will be a large shareholder base that may sell the position, that should have some discount to it.  I have my doubts on how long Crimson stays public.

I don't know much about wine other than reading about Crimson in the annual reports, but I have a friend who is a "Master of Wine" http://en.wikipedia.org/wiki/Master_of_Wine. I have some time scheduled with him to get his opinion on their products and their reputation. Will be interested to see how it trades.
Title: Re: JEF - Jefferies Group
Post by: Shane on November 28, 2012, 01:59:44 PM
It seems everyone is taking Crimson at book value, but I wonder if it is not reasonable to expect them to be spun off at a premium to BV  They will now be selling 200k cases of wine after their expansion.  I bought LUK but am of the same opinion of Shahkhezri.  I'll likely sell Crimson immediately and look to buy back if it becomes a value play.

FWIW: TWE sells at 2xBV
Title: Re: JEF - Jefferies Group
Post by: biaggio on November 28, 2012, 02:41:56 PM
http://business.financialpost.com/2012/11/28/inmet-rejects-first-quantum-bid/

Inmet rejects First Quantum takeover bid (at $70 per share)

LUK owns 5.6 million shares
Title: Re: JEF - Jefferies Group
Post by: Parsad on November 28, 2012, 02:46:57 PM
Knight deal could add to Jefferies windfall as lead rescuer.  Cheers!

http://blogs.wsj.com/deals/2012/11/28/knight-deal-could-add-to-jefferies-windfall-as-lead-rescuer/?mod=yahoo_hs
Title: Re: JEF - Jefferies Group
Post by: biaggio on November 28, 2012, 03:33:12 PM
More good news for LUK/JEF

http://blogs.wsj.com/deals/2012/11/28/knight-deal-could-add-to-jefferies-windfall-as-lead-rescuer/?mod=WSJBlog&mod=

Jefferies Group Inc. stands to collect a big return for its dual role as embattled Knight Capital Group Inc.’s lead rescuer and now financier to its possible new owner, Getco LLC.


Courtesy of Jefferies
The projected windfall, which could be about $184 million–including advisory fees Knight previously paid Jefferies–reflects mark-to-market gains from Jefferies’ initial $125 million investment in Knight more than three months ago.

Jefferies would also be providing about $950 million in financing to Getco in the Knight deal, according to people familiar with the situation.
Title: Re: JEF - Jefferies Group
Post by: txlaw on November 28, 2012, 03:34:54 PM
And I suppose the deal will close after the LUK/JEF transaction does, making the gains tax free?
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on November 28, 2012, 05:09:09 PM
Inmet turns down First Quantum bid, adopts rights plan
* Inmet says offer values company at C$70 a share

* Inmet says First Quantum bid not in shareholders' best interests

* Inmet shares close up 17.65 percent at C$62 on TSX

http://www.reuters.com/article/2012/11/28/inmet-firstquantum-idUSL1E8MSBGS20121128?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=43

Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on November 30, 2012, 07:23:12 AM
So just this week the monetization of JEF's KCG and LUK's IMN will raise over ~$600MM, if both transactions close.  Pretty impressive.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on December 03, 2012, 06:24:46 PM

Interesting take on LUK's petcoke to methanol project; however, the author doesnt add in the additional CO2 and H contracts with Denbury and BP.

INSIGHT: A new pitch in North American methanol

ICIS News : 19-Nov-12 15:00


HOUSTON (ICIS)--A new category has surfaced in North American methanol, that of an old idea which never quite arrived but is being pitched again. This is a project that never made it off the drawing board to commissioning, like a binder that is being dusted off once more.

A prime example occurred in late October with the announcement by US-based Lake Charles Clean Energy (LCCE) that it has lined up long-term contracts for a petroleum-coke-to-methanol project in Louisiana. Making methanol from petcoke is the idea being dusted off. The parent company of LCCE, Leucadia National, has three such projects in the works.

Petcoke is the sludgy, hydrocarbon residue left after crude oil has been cracked, and extracting methanol and other chemicals is done through gasification. Gasification projects for making other chemicals were more popular before the price of US natural gas plunged from the development of shale gas reserves.

US-based Eastman Chemical announced a gasification project in 2007 to be built in Beaumont, Texas, but abandoned it two years later, citing high capital costs, uncertain US regulations and the likely persistence of a smaller spread between prices for natural gas and oil and petroleum coke.

LCCE said its proposed $2.5bn ($1.95bn) plant in Lake Charles would be the first ever methanol-to-petcoke plant in the US, and the cost says a lot about the economics of making petcoke from methanol. The company says it has already covered about 75% of the plant construction cost with state and federal financing, with the largest portion from $1.5bn in tax-exempt bonds from the Louisiana State Bond Commission.

Add to that another $261m in grants from the US Department of Energy, and $128m in federal investment tax credits. That still leaves LCCE about $500m short, though. The company says it is still working on third-party financing and will not make a final decision until next year.

That project’s cost is a few multiples of what producers are spending in North America on restart plant projects. Methanex spent approximately $60m restarting Medicine Hat, OCI spent a similar amount restarting a plant in Beaumont Texas, and LyondellBasell plans on spending $150m to restart a unit near Houston.

The most expensive restart project is Methanex’s plan to ship one of its idle plants in Chile to Louisiana for $550m, and the company said recently that it may be able to ship another one - if and when that decision is made - for $450m. Celanese’s new plant in Clear Lake is the only start-from-scratch project that has been announced and will cost an estimated $500m-$1bn. The company has said it is looking for a partner to share the expense.

So Methanex could pack two of its 1m tonne/year plants in Chile, put them in crates, load them on ships and transport them from the tip of South America to the Gulf of Mexico for only 40% of the cost of building the first-ever petcoke-to-methanol plant in the US.

The reason why it would be the first is that, while the price of methanol may follow crude over the long run, producers prefer natural gas as a major feedstock because of its cost. Even when US natural gas prices shot up to $15/MMBtu in 2005, producers decided to close their US plants and move to where there was cheaper gas, in Trinidad and Venezuela and Africa, rather than shift to making methanol from oil.

Now that US natural gas is cheap again - or at least relatively cheap, below $4/MMBtu - producers are restarting some of those mothballed plants that were closed seven or eight years ago.

Methanol industry veterans cited similar gasification projects in California and Texas that failed because the favourable economics were not there. One source remembered the Lake Charles project as dating back almost a decade. He said he could not see how gasified coke could compete with natural gas, given the capital cost to gasify and the abundance of reasonably priced natural gas. Said another source: “It is a project for the future, the distant future.”

Industry veteran Deo Van Wijk, who put the deal together to restart the Eastman plant in Beaumont, said making methanol is technically feasible, but at a cost. “To me it looks like trying it the hard way versus natural gas or shale gas, both of which are abundantly available and the plant would be substantially cheaper,” Van Wijk said.

Another gasification project promoted by LCCE’s parent, Leucadia National, met firm political resistance earlier this year. The company wanted to build a coal and petcoke project on the southeast side of Chicago, but Illinois Governor Pat Quinn vetoed the project in August for financial reasons. Quinn also raised the spectre of cheaper shale gas when he explained his veto of a project that had been percolating for decades.

“Current natural gas prices are at historic lows, and many indicators suggest prices will remain low for years to come,” Quinn said. “These new facts require further scrutiny, and a revisiting of the economics of this 30-year project.” 

One can see the economic conflict in Leucadia’s annual letter to shareholders, which also touched on the economics of natural gas posing a threat to the company’s petcoke projects, not just in Louisiana but also in Mississippi, Indiana and Illinois.

“Our ability to get these projects to the starting line is being slowed by the current low price of natural gas,” says the Leucadia letter, written in the easy-to-read style of Warren Buffett’s annual letter to shareholders of Berkshire Hathaway. The Leucadia letter even praises a Leucadia executive steering the projects “despite the challenges of the shale revolution.”

Whatever the chances of Leucadia’s Louisiana project, the company owns so many different businesses that making methanol from petcoke seems to be just one among many on its idea list. Last week, Leucadia bought the investment banking firm Jefferies Group for $2.8bn in stock, almost as much it will cost to build a petcoke plant in Louisiana. New stories on the deal called Leucadia a “baby Berkshire,” because of its similarity to the company operated by Buffett.
Title: Re: JEF - Jefferies Group
Post by: Grenville on December 07, 2012, 03:20:23 PM
New refreshed website. Nice update.

http://www.jefferies.com (http://www.jefferies.com)
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on December 11, 2012, 01:51:12 PM
http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html (http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html)


Jefferies Vows Immediate All-Cash Bonuses as Bigger Banks Defer



Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), said it will pay year-end bonuses in immediately available cash, according to a memo to employees.


Title: Re: JEF - Jefferies Group
Post by: zippy1 on December 11, 2012, 02:00:55 PM
http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html (http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html)


Jefferies Vows Immediate All-Cash Bonuses as Bigger Banks Defer



Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), said it will pay year-end bonuses in immediately available cash, according to a memo to employees.

Is this the standard practice for this kind of situation?  Somehow this reminds me of BAC-ML case? Any comments from board members who work in this field?
Title: Re: JEF - Jefferies Group
Post by: Parsad on December 11, 2012, 03:20:06 PM
http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html (http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html)


Jefferies Vows Immediate All-Cash Bonuses as Bigger Banks Defer



Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), said it will pay year-end bonuses in immediately available cash, according to a memo to employees.

Is this the standard practice for this kind of situation?  Somehow this reminds me of BAC-ML case? Any comments from board members who work in this field?

No, I think this more of quelling rumors among staff, that their bonuses would be deferred or paid out in the new year.  Sometimes during deals, the staff aren't always sure what is happening, and you start to get rumors flying about what is actually happening to the company, jobs, pensions, bonuses, etc. 

Also, while bigger institutions are tightening compensation policies, some of those key employees at top firms may be willing to jump ship to a smaller competitor, who has a ton of room to grow and is going to treat them better in terms of compensation.  Cheers! 
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on December 11, 2012, 05:32:12 PM
Depending on how they are structured even though it's "all cash", sometimes there are clawbacks. 
Title: Re: JEF - Jefferies Group
Post by: zippy1 on December 12, 2012, 01:11:48 PM
ShahKhezri and Parsad,

         Thanks a lot for taking the time to explain this to me.     
Title: Re: JEF - Jefferies Group
Post by: Kraven on December 12, 2012, 01:25:47 PM
http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html (http://www.bloomberg.com/news/2012-12-11/jefferies-vows-immediate-all-cash-bonuses-as-bigger-banks-defer.html)


Jefferies Vows Immediate All-Cash Bonuses as Bigger Banks Defer



Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), said it will pay year-end bonuses in immediately available cash, according to a memo to employees.

Is this the standard practice for this kind of situation?  Somehow this reminds me of BAC-ML case? Any comments from board members who work in this field?

No, I think this more of quelling rumors among staff, that their bonuses would be deferred or paid out in the new year.  Sometimes during deals, the staff aren't always sure what is happening, and you start to get rumors flying about what is actually happening to the company, jobs, pensions, bonuses, etc. 

Also, while bigger institutions are tightening compensation policies, some of those key employees at top firms may be willing to jump ship to a smaller competitor, who has a ton of room to grow and is going to treat them better in terms of compensation.  Cheers!

I would say that the "all cash" portion of this is unusual especially after the financial crisis.  Typically lots of stock involved.  I have no idea in this case what the exact ramifications of doing that would be given the LUK acquisition though.  Either way, JEF bankers will have a nice holiday and at the very least will have something to spend as opposed to deferred paper.
Title: Re: JEF - Jefferies Group
Post by: OracleofCarolina on December 16, 2012, 12:05:24 PM
First Quantum Increases Inmet Offer 2.9% to $5.18 Billion

First Quantum Minerals Ltd. (FM), a producer of copper in Africa, raised its bid for Inmet Mining Corp. (IMN) for a second time to about C$5.1 billion ($5.18 billion) as it seeks to gain control of the Cobre Panama project.

It’s offering C$72 in a mixture of stock and cash for each Inmet share, Vancouver-based First Quantum said in a statement today. That’s 36 percent more than Inmet’s share closing share price on Nov. 27, the day before the company said publicly that it had rejected two earlier, unsolicited offers from First Quantum. The latest bid is also 2.9 percent more than First Quantum’s previous offer of C$70 a share.

Cobre Panama is the second-largest undeveloped copper deposit, according to data compiled by Bloomberg. Toronto-based Inmet plans to spend $6.2 billion developing the mine to produce an average of 266,000 tons a year of the metal. Copper prices have more than quadrupled over the past 10 years as demand at times outpaced supply.

In addition to its project in Panama, Inmet operates mines in Finland, Spain and Turkey. Leucadia National Corp. (LUK), based in New York, owns 16 percent of Inmet and Temasek Holdings Pte Ltd., Singapore’s state investment company, has 11 percent, according to data compiled by Bloomberg.

The deal would create a metals producer “with leading growth in copper production and cash flow generation,” First Quantum Chairman and Chief Executive Officer Philip Pascall said in the statement. “We know that this vision is shared by key shareholders of Inmet.”

Flora Wood, a spokeswoman for Inmet, did not immediately respond to a request for comment.

Congo Assets

First Quantum, founded in 1996 by Pascall, operates the Kansanshi copper mine in Zambia, the Guelb Moghrein copper and gold mine in Mauritania and the Ravensthorpe nickel mine Australia.

In 2009, the Congolese government stripped First Quantum of rights to the Kolwezi copper project. London-based Eurasian Natural Resources Corp. bought rights to Kolwezi the following year and First Quantum began legal action against ENRC. The dispute was settled in 2012 when ENRC agreed to pay First Quantum $1.25 billion for First Quantum’s share of the Kolwezi and two other Congolese assets.

First Quantum is the world’s 13th-biggest copper producer and predicts it will become the sixth-biggest in 2016, it said in a February presentation.

To contact the reporter on this story: Simon Casey in New York at scasey4@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/


Sent from my iPhone
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on December 16, 2012, 03:12:26 PM
First Quantum Increases Inmet Offer 2.9% to $5.18 Billion

First Quantum Minerals Ltd. (FM), a producer of copper in Africa, raised its bid for Inmet Mining Corp. (IMN) for a second time to about C$5.1 billion ($5.18 billion) as it seeks to gain control of the Cobre Panama project.

It’s offering C$72 in a mixture of stock and cash for each Inmet share, Vancouver-based First Quantum said in a statement today. That’s 36 percent more than Inmet’s share closing share price on Nov. 27, the day before the company said publicly that it had rejected two earlier, unsolicited offers from First Quantum. The latest bid is also 2.9 percent more than First Quantum’s previous offer of C$70 a share.

Cobre Panama is the second-largest undeveloped copper deposit, according to data compiled by Bloomberg. Toronto-based Inmet plans to spend $6.2 billion developing the mine to produce an average of 266,000 tons a year of the metal. Copper prices have more than quadrupled over the past 10 years as demand at times outpaced supply.

In addition to its project in Panama, Inmet operates mines in Finland, Spain and Turkey. Leucadia National Corp. (LUK), based in New York, owns 16 percent of Inmet and Temasek Holdings Pte Ltd., Singapore’s state investment company, has 11 percent, according to data compiled by Bloomberg.

The deal would create a metals producer “with leading growth in copper production and cash flow generation,” First Quantum Chairman and Chief Executive Officer Philip Pascall said in the statement. “We know that this vision is shared by key shareholders of Inmet.”

Flora Wood, a spokeswoman for Inmet, did not immediately respond to a request for comment.

Congo Assets

First Quantum, founded in 1996 by Pascall, operates the Kansanshi copper mine in Zambia, the Guelb Moghrein copper and gold mine in Mauritania and the Ravensthorpe nickel mine Australia.

In 2009, the Congolese government stripped First Quantum of rights to the Kolwezi copper project. London-based Eurasian Natural Resources Corp. bought rights to Kolwezi the following year and First Quantum began legal action against ENRC. The dispute was settled in 2012 when ENRC agreed to pay First Quantum $1.25 billion for First Quantum’s share of the Kolwezi and two other Congolese assets.

First Quantum is the world’s 13th-biggest copper producer and predicts it will become the sixth-biggest in 2016, it said in a February presentation.

To contact the reporter on this story: Simon Casey in New York at scasey4@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/


Sent from my iPhone

Sweet, more value for LUK's investment.

Title: Re: JEF - Jefferies Group
Post by: Liberty on December 16, 2012, 04:43:08 PM
(http://financialpostbusiness.files.wordpress.com/2012/12/bz1217-inmet.jpg?w=620)

Las Cruces. Just thought it was a nice photo.
Title: Re: JEF - Jefferies Group
Post by: Liberty on December 16, 2012, 04:52:02 PM
Quote
Analysts have noted that Inmet could be a tough company to acquire because it has a tight shareholding structure. Roughly 27% of the shares are held by just two investors: Leucadia National Corp. and Temasek Holdings Ltd., which is Singapore’s state-owned investment company.

First Quantum said it has received “a number of approaches” from Inmet’s key shareholders, who were excited about the proposal and would like to see a “constructive dialogue” between the two companies.

[...]

First Quantum is arranging a US$2.5-billion acquisition facility in order to make this offer. The company’s financial advisors are Goldman Sachs, Jefferies International and RBC Capital Markets.

Interesting that Jefferies is an advisor in that deal :)
Title: Re: JEF - Jefferies Group
Post by: roundball100 on December 16, 2012, 04:58:14 PM
Quote
Analysts have noted that Inmet could be a tough company to acquire because it has a tight shareholding structure. Roughly 27% of the shares are held by just two investors: Leucadia National Corp. and Temasek Holdings Ltd., which is Singapore’s state-owned investment company.

First Quantum said it has received “a number of approaches” from Inmet’s key shareholders, who were excited about the proposal and would like to see a “constructive dialogue” between the two companies.

[...]

First Quantum is arranging a US$2.5-billion acquisition facility in order to make this offer. The company’s financial advisors are Goldman Sachs, Jefferies International and RBC Capital Markets.

Interesting that Jefferies is an advisor in that deal :)

Can Jefferies really advise on this, without a serious conflict of interest?   
Title: Re: JEF - Jefferies Group
Post by: Parsad on December 17, 2012, 10:06:10 PM
Quote
Analysts have noted that Inmet could be a tough company to acquire because it has a tight shareholding structure. Roughly 27% of the shares are held by just two investors: Leucadia National Corp. and Temasek Holdings Ltd., which is Singapore’s state-owned investment company.

First Quantum said it has received “a number of approaches” from Inmet’s key shareholders, who were excited about the proposal and would like to see a “constructive dialogue” between the two companies.

[...]

First Quantum is arranging a US$2.5-billion acquisition facility in order to make this offer. The company’s financial advisors are Goldman Sachs, Jefferies International and RBC Capital Markets.

Interesting that Jefferies is an advisor in that deal :)

Can Jefferies really advise on this, without a serious conflict of interest?

The same question is arising around the Knight Capital deal too.  I guess apparently Jefferies can advise, but some people are questioning it.  Cheers!

http://finance.yahoo.com/news/knight-capitals-board-said-split-053120065.html;_ylt=Ak_OgcZwHe0zGtfml3sll1OiuYdG;_ylu=X3oDMTRwOG8ycHBqBG1pdANGaW5hbmNlIEZQIFRvcCBTdG9yaWVzIG1peGVkIGxpc3QEcGtnAzNhMjVkNjU0LTM1OGItM2QxZS04MjA0LTRmMDg1MTc5NjM5YgRwb3MDMgRzZWMDTWVkaWFCTGlzdE1peGVkTFBDQVRlbXAEdmVyAzY2OThlOTIwLTQ4ZDQtMTFlMi1hZmMwLTc2ZmMzZWNmNjdlMQ--;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on December 18, 2012, 07:13:14 AM
http://professional.wsj.com/article/SB10001424127887324407504578187141899534544.html?mod=WSJ_hp_LEFTWhatsNewsCollection (http://professional.wsj.com/article/SB10001424127887324407504578187141899534544.html?mod=WSJ_hp_LEFTWhatsNewsCollection)


Jefferies Group Profit Up 48%


Jefferies Group Inc.'s fiscal fourth-quarter earnings rose 48% as revenue rose sharply and as the year-earlier period was affected by questions about its European exposure following the bankruptcy of MF Global MFGLQ -8.16%.

In the latest period, Jefferies' fixed-income trading revenue more than doubled to $293 million in the latest quarter. Investment-banking revenue grew 8.3% to $283 million.

Jefferies, the first U.S. investment bank to report fourth-quarter results, is often viewed as a barometer for reports from larger rivals because its fiscal period ends a month earlier.

Jefferies recently agreed to be bought by Leucadia National Corp. LUK +0.80%in a stock deal that is expected to close in the first quarter of next year.

Chairman and Chief Executive Richard B. Handler on Tuesday said "2013 will mark the beginning of a new era for Jefferies. We believe our imminent merger with Leucadia will result in an even stronger Jefferies, as well as making us even more distinguished from our bank holding company competitors."

For the quarter ended Nov. 30, Jefferies reported a profit of $72 million, or 31 cents a share, up from $48 million, or 21 cents a share, a year earlier. Excluding merger-related costs, a year-earlier debt-extinguishment-related gain and other items, adjusted earnings were up at 35 cents from 17 cents.

Revenue climbed 37% to $760.6 million.

Analysts polled by Thomson Reuters most recently projected earnings of 32 cents on revenue of $723 million.

Title: Re: JEF - Jefferies Group
Post by: Parsad on December 18, 2012, 05:33:23 PM
Knight to be sold to Getco with Jefferies assisting in the financing.  Cheers!

http://www.cnbc.com/id/100325960
Title: Re: JEF - Jefferies Group
Post by: Grenville on December 19, 2012, 08:39:45 AM
Here's the official release from Knight regarding the merger.

http://www.knight.com/investorRelations/pressReleases.asp?compid=105070&releaseID=1768498 (http://www.knight.com/investorRelations/pressReleases.asp?compid=105070&releaseID=1768498)

Cash and stock deal w/cash at 3.75/share.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on December 19, 2012, 10:04:06 AM
http://www.bloomberg.com/news/2012-12-18/knight-backs-getco-bid-ending-saga-that-began-with-trade-mishap.html (http://www.bloomberg.com/news/2012-12-18/knight-backs-getco-bid-ending-saga-that-began-with-trade-mishap.html)



Knight Capital Group Inc. (KCG)’s decision to pursue a takeover by Getco LLC gives its shareholders, mostly Wall Street firms, an opportunity for stock appreciation while surrendering the certainty of cash.

Knight, pushed to the brink of bankruptcy in August by a trading error, chose Getco’s proposal yesterday over a competing offer from Virtu Financial LLC, three people with direct knowledge of the matter said yesterday. The Chicago-based high- frequency trader offered $3.75 a share for Knight, one-third of it in stock, for a total value of $1.4 billion, according to a statement from Knight today. Virtu’s offer was all-cash.

...

Under the terms of the agreement today, existing Knight shareholders can receive $3.75 per share in cash or one share in the combined firm. The payout will be pro-rated if shareholders elect to receive more than $720 million in cash. Jefferies, which provided financing to Getco, agreed to limit the cash portion to 50 percent of their Knight shares, according to the statement
Title: Re: JEF - Jefferies Group
Post by: Myth465 on December 19, 2012, 01:46:52 PM
I hope someone has been buying back shares. This is the gift that keeps on giving. I have been looking to get into LUK for the better part of a year and now its a much simpler investment. Its also has less dingy assets and is less commodity focused. There is alot of embedded upside that has been released over the last few weeks.
Title: Re: JEF - Jefferies Group
Post by: valueinvesting101 on December 24, 2012, 07:28:30 AM
Does any one know what relationship between Leucadia and Pershing Square Capital. As per http://www.jefferies.com/CMSFiles/Jefferies.com/files/PressReleases/2012/Leucadia-Jefferies%20Presentation_12%2007%2012(1).pdf

looks like Leucadia as redeemed their investment in Pershing as of 09/30/2012.

Any details about when this was done exactly? I read somewhere, they had invested $200 millions during Target turnaround/takeover by Pershing.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on December 25, 2012, 07:49:48 AM
Google Ackman and Leucadia.

They were the original backer of PS. But Leucadia's association with Ackman goes back farther to 1995 when they partnered on a shareholder proposal for Rockefeller Center Properties, which is a whole nother story involving Japanese owners, the Rockefeller family, Goldman, and Sam Zell.
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on January 09, 2013, 03:35:10 AM
"First Quantum Minerals Ltd. (FM), a producer of copper in Africa, took its C$5.1 billion ($5.17 billion) bid for Inmet (IMN) Mining Corp. straight to shareholders as it seeks control of a project in Panama.
First Quantum’s C$72-a-share offer in cash and stock is 36 percent more than Inmet’s closing price on Nov. 27, the day before Toronto-based Inmet said it had rejected two unsolicited proposals. The bid will expire Feb. 14 and requires acceptance by holders of 66 percent of Inmet shares, First Quantum said today in a statement."

....

"First Quantum made an offer of C$62.50 a share for Inmet on Oct. 28 and another at C$70 on Nov. 25, before announcing Dec. 16 it would take a sweetened C$72 a share bid straight to Inmet shareholders.

The cash component of the latest offer will be financed through existing cash resources, undrawn financing facilities of $1.25 billion and a $2.5 billion acquisition facility provided by Standard Chartered Bank, the company said today.

Inmet said Nov. 28 it adopted a shareholder-rights plan, or poison pill, to block an unsolicited bid.

Goldman Sachs Group Inc., Jefferies Group Inc. and RBC Capital Markets are advising First Quantum."


http://www.bloomberg.com/news/2013-01-09/first-quantum-takes-c-5-1-billion-bid-for-inmet-mining-hostile.html?cmpid=yhoo

How is it not a conflict of interest that Jeffries is an advisor to First Quantum?
Title: Re: JEF - Jefferies Group
Post by: Kraven on January 09, 2013, 09:00:48 AM
How is it not a conflict of interest that Jeffries is an advisor to First Quantum?

I have no idea about the details on this matter, but note that most conflicts of interest can be waived by the applicable parties. 
Title: Re: JEF - Jefferies Group
Post by: Parsad on January 09, 2013, 10:25:09 AM
Berkadia update:

http://www.bloomberg.com/news/2013-01-09/berkshire-venture-buys-hendricks-in-buffett-apartment-bet.html?cmpid=yhoo

Cheers!
Title: Re: JEF - Jefferies Group
Post by: Grenville on January 10, 2013, 10:18:48 AM
Berkadia update:

http://www.bloomberg.com/news/2013-01-09/berkshire-venture-buys-hendricks-in-buffett-apartment-bet.html?cmpid=yhoo

Cheers!

Thanks for the post!

Here is the release from Berkadia:
Berkadia Acquires One of the Nation's Largest Multifamily Investment Sales and Research Firms, Hendricks & Partners
http://www.berkadia.com/newsandresearch/SitePages/NewsRead.aspx?storyID=259 (http://www.berkadia.com/newsandresearch/SitePages/NewsRead.aspx?storyID=259)

"Since the company was formed back in 2009, Berkadia has been able to steadily grow its strength and presence in the commercial real estate industry," said Warren Buffett, Berkshire Hathaway Inc. Chairman and CEO. "We see Berkadia's acquisition of Hendricks as another significant step in the growth of their multifamily expertise and services."



Also while looking around the Berkadia site I found these interesting nuggets:
1.Randall Jenson
"Randall Jenson is president, chief financial officer and a member of the Executive Committee.  In this role he is responsible for the finance, accounting, treasury, process improvement and risk divisions as well as mergers and acquisitions and general management. Prior to joining Berkadia, Mr. Jenson spent nine years with Ranch Capital, LLC as co-founder and president.  Ranch identified the investment in Berkadia and introduced it to Leucadia and Berkshire.  While at Ranch he also worked as interim chief financial officer of Hawaiian Holdings, Inc., the parent company of Hawaiian Airlines, a Ranch Capital portfolio company, and currently serves on the board of directors for Hawaiian Holdings, and several private companies.  Prior to joining Ranch, he held various positions at Leucadia National Corporation, including business development and president and CEO of Banking and Lending Operations for more than five years. Mr. Jenson is a Certified Public Accountant and has a Bachelor of Arts degree in accounting from the University of Utah and an MBA degree from Harvard Business School."

2.India Ops
"Mark E. McCool is an executive vice president and member of the Executive Committee of Berkadia Commercial Mortgage, one of the largest commercial real estate finance companies in the nation. Berkadia, a privately held company in which Berkshire Hathaway Inc. and Leucadia National Corporation each hold a 50 percent ownership interest, acquired the loan origination and servicing businesses of Capmark Financial Group Inc. in December 2009.

Mr. McCool currently oversees all Servicing Operations as well as Strategic Initiatives with management responsibility of Asset & Portfolio Management, Servicing Administration, Offshore Administration, BPO Administration, Strategic Initiatives and Banking for a $215 billion portfolio.

Mr. McCool joined GMAC Commercial Mortgage in January 1998 as Vice President of Negotiated Transactions where he was responsible for the valuation of servicing rights and the negotiation of structured finance and servicing agreements. Prior to this position, he served from 1987 as a manager in various capacities for GMAC Financial Services and has more than 20 years’ experience in the commercial real estate business.

He actively participates in various industry trade groups, task forces and committees, CREF-C Board of Governors and the CREF-C Executive Committee, is a former Co-Chairman of the Freddie Mac Seller/Servicer Advisory Council and currently sits on the Board of Directors of Berkadia’s wholly owned India subsidiary, Berkadia Services India Pvt. Ltd. Mr. McCool holds a B.S. from the University of Scranton. "
--> The office is in Hyderabad India
Title: Re: JEF - Jefferies Group
Post by: Parsad on January 10, 2013, 12:40:06 PM
Leucadia will tender Inmet Mining shares barring any other superior offer.  Cheers!

http://finance.yahoo.com/news/leucadia-national-corporation-indicates-current-201100668.html
Title: Re: JEF - Jefferies Group
Post by: Parsad on January 15, 2013, 01:12:02 PM
Jefferies increases bond offering to $1B.  Taking advantage of the rates.  Cheers!

http://www.bloomberg.com/news/2013-01-15/jefferies-said-to-plan-750-million-of-bonds-in-first-since-2011.html?cmpid=yhoo
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on January 29, 2013, 09:53:45 AM
Jefferies Grants CEO Handler $58 Million in 2012, Future Pay


http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html (http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html)

Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), paid Chief Executive Officer Richard Handler $19 million for fiscal 2012 and approved $39 million in restricted stock awards for the next three years.

Title: Re: JEF - Jefferies Group
Post by: plato1976 on January 29, 2013, 10:58:59 AM
while I recognize that Handler is an exceptional CEO
sometimes I wonder if such a pay is really in line with the contribution
I guess it's a tradition in the  IB sector but I really don't like it
20M per year is a very big percentage of the profit itself ...
This is probably one of the reasons that I am keeping the LUK position small in my portfolio

Jefferies Grants CEO Handler $58 Million in 2012, Future Pay


http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html (http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html)

Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), paid Chief Executive Officer Richard Handler $19 million for fiscal 2012 and approved $39 million in restricted stock awards for the next three years.
Title: Re: JEF - Jefferies Group
Post by: twacowfca on January 29, 2013, 11:09:28 AM
while I recognize that Handler is an exceptional CEO
sometimes I wonder if such a pay is really in line with the contribution
I guess it's a tradition in the  IB sector but I really don't like it
20M per year is a very big percentage of the profit itself ...
This is probably one of the reasons that I am keeping the LUK position small in my portfolio

Jefferies Grants CEO Handler $58 Million in 2012, Future Pay


http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html (http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html)

Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), paid Chief Executive Officer Richard Handler $19 million for fiscal 2012 and approved $39 million in restricted stock awards for the next three years.


Don't disagree.  I think he did, however, voluntarily waive his bonuses in 2011 when Jefferies was the target of unfounded rumors about major exposure to MF Global fallout.
Title: Re: JEF - Jefferies Group
Post by: Parsad on January 29, 2013, 11:42:56 AM
while I recognize that Handler is an exceptional CEO
sometimes I wonder if such a pay is really in line with the contribution
I guess it's a tradition in the  IB sector but I really don't like it
20M per year is a very big percentage of the profit itself ...
This is probably one of the reasons that I am keeping the LUK position small in my portfolio

Jefferies Grants CEO Handler $58 Million in 2012, Future Pay


http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html (http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html)

Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), paid Chief Executive Officer Richard Handler $19 million for fiscal 2012 and approved $39 million in restricted stock awards for the next three years.


Don't disagree.  I think he did, however, voluntarily waive his bonuses in 2011 when Jefferies was the target of unfounded rumors about major exposure to MF Global fallout.

I'm also not a big fan of these huge compensation packages, but let's take a look at what shareholders are getting.  The combined vehicle will have equity of $9B or so (I can't be bothered to read the presentation at this second), but assume that Handler achieves 12% on that equity into the future...that's about $1.08B pre-tax for shareholders to start with.  Of which, Handler will be the largest, or at least one of the largest shareholders, in the combined vehicle.  His compensation works out to about $20M a year. 

Nothing like Buffett or Munger's, Jim Sinegal, nor even Prem's, but relative to what he's achieved in the past, the industry in general, and the solution to Leucadia's succession plan...it seems to be fair.  I would have loved to see him take a $1M dollar salary with no bonuses, but those guys are few and far between.  Cheers!   
Title: Re: JEF - Jefferies Group
Post by: twacowfca on January 29, 2013, 12:56:19 PM
while I recognize that Handler is an exceptional CEO
sometimes I wonder if such a pay is really in line with the contribution
I guess it's a tradition in the  IB sector but I really don't like it
20M per year is a very big percentage of the profit itself ...
This is probably one of the reasons that I am keeping the LUK position small in my portfolio

Jefferies Grants CEO Handler $58 Million in 2012, Future Pay


http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html (http://www.bloomberg.com/news/2013-01-29/jefferies-grants-ceo-58-million-in-2012-pay-future-incentives.html)

Jefferies Group Inc. (JEF), the investment bank that agreed to sell itself to Leucadia National Corp. (LUK), paid Chief Executive Officer Richard Handler $19 million for fiscal 2012 and approved $39 million in restricted stock awards for the next three years.


Don't disagree.  I think he did, however, voluntarily waive his bonuses in 2011 when Jefferies was the target of unfounded rumors about major exposure to MF Global fallout.

I'm also not a big fan of these huge compensation packages, but let's take a look at what shareholders are getting.  The combined vehicle will have equity of $9B or so (I can't be bothered to read the presentation at this second), but assume that Handler achieves 12% on that equity into the future...that's about $1.08B pre-tax for shareholders to start with.  Of which, Handler will be the largest, or at least one of the largest shareholders, in the combined vehicle.  His compensation works out to about $20M a year. 

Nothing like Buffett or Munger's, Jim Sinegal, nor even Prem's, but relative to what he's achieved in the past, the industry in general, and the solution to Leucadia's succession plan...it seems to be fair.  I would have loved to see him take a $1M dollar salary with no bonuses, but those guys are few and far between.  Cheers!


Are we perhaps a  little off on the decimal places?  ???
Title: Re: JEF - Jefferies Group
Post by: Parsad on January 29, 2013, 01:25:37 PM
Tim?  In reference to ROE or equity...?  Cheers!
Title: Re: JEF - Jefferies Group
Post by: twacowfca on January 29, 2013, 02:17:26 PM
Tim?  In reference to ROE or equity...?  Cheers!

Sorry, I misread your statement.
Title: Re: JEF - Jefferies Group
Post by: Parsad on January 29, 2013, 02:23:01 PM
No worries.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: biaggio on January 29, 2013, 04:17:23 PM
Compensation package is disappointing.

I am going to take a wait and see approach.

While I would take a 12% return, I would not think he would be worth this pay for such a return.

Very much like how FFH has it set up.

Would have preferred a decent base salary with a sizable stock holding with "bonus" being distributed to everyone via buy back or dividend.

Now if he were to return 20% per year- that would be another $720 million which would make it a decent return on $20 million- though I would think the rest of his management team would have to be given some credit.

I am mindful of what I think Mr Buffett was quoted as saying that it is hard to overpay a really capable operator/manager.
Title: Re: JEF - Jefferies Group
Post by: Parsad on January 29, 2013, 05:12:57 PM
Compensation package is disappointing.

I am going to take a wait and see approach.

While I would take a 12% return, I would not think he would be worth this pay for such a return.

Very much like how FFH has it set up.

Would have preferred a decent base salary with a sizable stock holding with "bonus" being distributed to everyone via buy back or dividend.

Now if he were to return 20% per year- that would be another $720 million which would make it a decent return on $20 million- though I would think the rest of his management team would have to be given some credit.

I am mindful of what I think Mr Buffett was quoted as saying that it is hard to overpay a really capable operator/manager.

Hi Bill, I agree with you, but Buffett tends to agree with huge pay packages at times too.  I was quite disappointed with the huge payout the CEO of Gillette received when they sold to Proctor & Gamble, but he was perfectly happy at the time. 

I think Handler's pay is what the market would pay him.  My opinion would be that if he owns so much, then his salary and bonus should be lower, but the business industry in general does not feel that way.  Buffett, Prem, Patrick Byrne, etc aren't that common.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on January 29, 2013, 05:27:06 PM
I also think they have some traders/MD's that make north of $1MM, part of the industry. 
Title: Re: JEF - Jefferies Group
Post by: twacowfca on January 29, 2013, 05:45:09 PM
Compensation package is disappointing.

I am going to take a wait and see approach.

While I would take a 12% return, I would not think he would be worth this pay for such a return.

Very much like how FFH has it set up.

Would have preferred a decent base salary with a sizable stock holding with "bonus" being distributed to everyone via buy back or dividend.

Now if he were to return 20% per year- that would be another $720 million which would make it a decent return on $20 million- though I would think the rest of his management team would have to be given some credit.

I am mindful of what I think Mr Buffett was quoted as saying that it is hard to overpay a really capable operator/manager.

Hi Bill, I agree with you, but Buffett tends to agree with huge pay packages at times too.  I was quite disappointed with the huge payout the CEO of Gillette received when they sold to Proctor & Gamble, but he was perfectly happy at the time. 

I think Handler's pay is what the market would pay him.  My opinion would be that if he owns so much, then his salary and bonus should be lower, but the business industry in general does not feel that way.  Buffett, Prem, Patrick Byrne, etc aren't that common.  Cheers!

The greatest NA industrialist in the 19th cent, Andrew Carnegie, put such a premium on capable management that his managers became enormously wealthy.  If a manager is truly exceptional, it is hard to overpay. 
Title: Re: JEF - Jefferies Group
Post by: biaggio on January 29, 2013, 06:40:51 PM
Agree with you guys. Hopefully he comes through. Will feel better and less critical then.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on January 30, 2013, 12:48:13 PM
more JEF CEO pay news

http://dealbook.nytimes.com/2013/01/30/the-rich-math-behind-the-handler-handout/ (http://dealbook.nytimes.com/2013/01/30/the-rich-math-behind-the-handler-handout/)

One of Wall Street’s relative minnows is getting a whale-size paycheck. The Jefferies Group is paying its boss, Richard B. Handler, $19 million for the year to November 2012.

That might not sound too rich considering that the Goldman Sachs chief executive, Lloyd C. Blankfein, raked in $21 million. But Jefferies is a much smaller firm, meaning Mr. Handler’s compensation equates to a huge 5.9 percent of earnings
Title: Re: JEF - Jefferies Group
Post by: Grenville on January 30, 2013, 01:22:24 PM
My two cents on Richard Handler's pay:

1. Read Handler's 10 page letter during the misinformation attack in Nov 2011.

2. Brian Friedman and Handler devised and executed a plan that saved Knight Capital and grossed the firm a huge mark to market profit.

3. Friedman and Handler requested their bonus to be 0 in 2011.

4. For 2012 they asked for their bonus to be reduced.

5. Joseph Steinberg & Ian Cumming are both on the compensation committee for JEF.

2012 10K:
According to the Pay for Performance program for Mr. Handler, his bonus should have been $8,116,669, but Mr. Handler volunteered to reduce his bonus compensation to $5,000,000, for a reduction of $3,116,669. The subcommittee of the Compensation Committee accepted Mr. Handler’s proposal and awarded him a $5,000,000 cash bonus for fiscal 2012.

According to the Pay for Performance program for Mr. Friedman, his bonus should have been $6,087,502, but Mr. Friedman volunteered to reduce his bonus compensation to $3,750,000, for a reduction of $2,337,502, which was proportionately commensurate with Mr. Handler’s voluntary reduction. The subcommittee of the Compensation Committee accepted Mr. Friedman’s proposal and awarded him a $3,750,000 cash bonus for fiscal 2012.

2011 proxy:
"In early 2011, the Committee established a 2011 Pay for Performance program for Mr. Handler that included a Base Salary, Cash Bonus and Long-Term Equity Incentive. According to the Pay for Performance program for Mr. Handler, his bonus would have been $4,879,565, but Mr. Handler requested that the Committee exercise its negative discretion to reduce this award to zero. "
Title: Re: JEF - Jefferies Group
Post by: twacowfca on January 30, 2013, 01:58:18 PM
My two cents on Richard Handler's pay:

1. Read Handler's 10 page letter during the misinformation attack in Nov 2011.

2. Brian Friedman and Handler devised and executed a plan that saved Knight Capital and grossed the firm a huge mark to market profit.

3. Friedman and Handler requested their bonus to be 0 in 2011.

4. For 2012 they asked for their bonus to be reduced.

5. Joseph Steinberg & Ian Cumming are both on the compensation committee for JEF.

2012 10K:
According to the Pay for Performance program for Mr. Handler, his bonus should have been $8,116,669, but Mr. Handler volunteered to reduce his bonus compensation to $5,000,000, for a reduction of $3,116,669. The subcommittee of the Compensation Committee accepted Mr. Handler’s proposal and awarded him a $5,000,000 cash bonus for fiscal 2012.

According to the Pay for Performance program for Mr. Friedman, his bonus should have been $6,087,502, but Mr. Friedman volunteered to reduce his bonus compensation to $3,750,000, for a reduction of $2,337,502, which was proportionately commensurate with Mr. Handler’s voluntary reduction. The subcommittee of the Compensation Committee accepted Mr. Friedman’s proposal and awarded him a $3,750,000 cash bonus for fiscal 2012.

2011 proxy:
"In early 2011, the Committee established a 2011 Pay for Performance program for Mr. Handler that included a Base Salary, Cash Bonus and Long-Term Equity Incentive. According to the Pay for Performance program for Mr. Handler, his bonus would have been $4,879,565, but Mr. Handler requested that the Committee exercise its negative discretion to reduce this award to zero. "

Outstanding!
Title: Re: JEF - Jefferies Group
Post by: Kraven on January 31, 2013, 04:07:50 AM
In my view all the consternation about Handler's pay package is a lot of wasted energy.  Here is a truism for you - Wall Street overpays it's people and pays them more than generously.  JEF is an investment bank.  Handler runs JEF.  Therefore, handler will be overpaid and be paid more than generously.  If you don't like it, don't invest in JEF (or now LUK).  I mean what's the thought, that he is going to be some guy that takes $100k a year?  Come on, what's the difference between making $20 mil and making $18 mil as far as the angst is concerned?
Title: Re: JEF - Jefferies Group
Post by: biaggio on January 31, 2013, 07:33:24 AM
In my view all the consternation about Handler's pay package is a lot of wasted energy.  Here is a truism for you - Wall Street overpays it's people and pays them more than generously.  JEF is an investment bank.  Handler runs JEF.  Therefore, handler will be overpaid and be paid more than generously.  If you don't like it, don't invest in JEF (or now LUK).  I mean what's the thought, that he is going to be some guy that takes $100k a year?  Come on, what's the difference between making $20 mil and making $18 mil as far as the angst is concerned?

Kraven, you re a wise man + you are probably right.

Its just that I would rather have the CEO, "my partner" as Giofranco" would put it, to be concerned with the financial well being of the organization as a whole rather than just enriching himself. I want him to make money with me not off of me (or off of share holder capital). I prefer the frugal partner. At the same time I don t want to be stupid about it.

20 million or 18 million no big deal. Every year for the next 10 years? As long as I am enriched as well I probably will overlook this most likely.

It concerns me that you would need to pay your CEO so much. Kind of the opposite of what you normally look for - a good business that any "idiot" could run. Investment banking, insurance, capital allocating- all operations where the management is very important + probably smart to pay them well.
Title: Re: JEF - Jefferies Group
Post by: Kraven on January 31, 2013, 07:58:13 AM
In my view all the consternation about Handler's pay package is a lot of wasted energy.  Here is a truism for you - Wall Street overpays it's people and pays them more than generously.  JEF is an investment bank.  Handler runs JEF.  Therefore, handler will be overpaid and be paid more than generously.  If you don't like it, don't invest in JEF (or now LUK).  I mean what's the thought, that he is going to be some guy that takes $100k a year?  Come on, what's the difference between making $20 mil and making $18 mil as far as the angst is concerned?

Kraven, you re a wise man + you are probably right.

Its just that I would rather have the CEO, "my partner" as Giofranco" would put it, to be concerned with the financial well being of the organization as a whole rather than just enriching himself. I want him to make money with me not off of me (or off of share holder capital). I prefer the frugal partner. At the same time I don t want to be stupid about it.

20 million or 18 million no big deal. Every year for the next 10 years? As long as I am enriched as well I probably will overlook this most likely.

It concerns me that you would need to pay your CEO so much. Kind of the opposite of what you normally look for - a good business that any "idiot" could run. Investment banking, insurance, capital allocating- all operations where the management is very important + probably smart to pay them well.

I can't disagree with anything you said at all.  All very true.  I just think one needs to think about the arena in which they are applying their ideals.  Why do middling right fielders make $13 mil a year?  That's just how it is.  People don't like it, don't go to baseball games and don't watch them on tv.  Pretty soon the revenue will drop and those kinds of salaries won't be able to be paid.

JEF is an investment bank.  Bankers want to get paid.  That's the environment.  It's tough for me to really think about whether one gauges more than another, it's kind of all the same.  It's very hard to apply the Buffett ideals to IBs.  Handler isn't your partner.  He runs a business you (may) happen to have a share in.  He doesn't care about you.  It is what it is.  There's plenty of other businesses, but IBs are going to have over the top pay structures.  It will never change.  Even when they mess around with making it seem like everyone is taking less, it just gets picked up somewhere else with a wink and nod.
Title: Re: JEF - Jefferies Group
Post by: roundball100 on January 31, 2013, 09:12:00 AM

[...]  Why do middling right fielders make $13 mil a year?  That's just how it is.  People don't like it, don't go to baseball games and don't watch them on tv.  Pretty soon the revenue will drop and those kinds of salaries won't be able to be paid.


Something must be going right if there is $13m/player per year available in the system.  Perhaps the analogy to draw here is that in both ML baseball, and investment banking, there are strong barriers to entry.  Otherwise, everyone would be launching their own ML team or league, or bank.
Title: Re: JEF - Jefferies Group
Post by: racemize on February 01, 2013, 02:32:03 PM
Crimson Wine spinoff:

http://finance.yahoo.com/news/leucadia-national-corporation-declares-spin-210500459.html
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on February 02, 2013, 06:35:05 AM
What about when a company founder or leader who develops the business gets shares out of thin air? And then sells it on the open market later on because he wants $$$ to spend? The sums there are much, much larger than any yearly compensation I've ever seen.

Title: Re: JEF - Jefferies Group
Post by: sampr01 on February 02, 2013, 09:49:35 AM
I have LUK options, what happens to those option when they have spin off.

Thanks
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 02, 2013, 12:52:16 PM
I have LUK options, what happens to those option when they have spin off.

Thanks

Nothing.  With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: bargainman on February 02, 2013, 01:26:28 PM
I have LUK options, what happens to those option when they have spin off.

Thanks

Nothing.  With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water.  Cheers!

hmm, this is not always true.  often times the current option will become an option on the combined entity.  I believe this was the case with SHLD when the did the OSH spinoff.  But each case is different.  Best to check with your broker. 
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 02, 2013, 01:33:43 PM
I have LUK options, what happens to those option when they have spin off.

Thanks

Nothing.  With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water.  Cheers!

hmm, this is not always true.  often times the current option will become an option on the combined entity.  I believe this was the case with SHLD when the did the OSH spinoff.  But each case is different.  Best to check with your broker.

You could be right Bargainman.  May be best to contact Leucadia IR.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: racemize on February 02, 2013, 02:05:30 PM
I have LUK options, what happens to those option when they have spin off.

Thanks

Nothing.  With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water.  Cheers!

hmm, this is not always true.  often times the current option will become an option on the combined entity.  I believe this was the case with SHLD when the did the OSH spinoff.  But each case is different.  Best to check with your broker.

You could be right Bargainman.  May be best to contact Leucadia IR.  Cheers!

Greenblatt indicated you got both in "You can be a Stock Market Genius"
Title: Re: JEF - Jefferies Group
Post by: EdWatchesBoxing on February 02, 2013, 07:26:07 PM
I remember having an option position in Cardinal Health, before their spin off of Carefusion. I believe I was entitled to options in both. I was pretty sure I got information regarding options treatment from the OCC website.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on February 04, 2013, 09:00:48 AM
http://www.bloomberg.com/news/2013-02-04/jefferies-hefty-compensation-is-credit-negative-moody-s-says.html (http://www.bloomberg.com/news/2013-02-04/jefferies-hefty-compensation-is-credit-negative-moody-s-says.html)


Jefferies Group Inc. (JEF)’s plan to pay two executives $78 million in future incentive compensation poses a negative threat to the firm’s bondholders, Moody’s Investors Service said.

“While Jefferies has outperformed its peers, an excessive focus on short-term compensation has been at the root of many outsized trading, credit and litigation losses at investment banks,” Moody’s said today in a report.




Even though the awards are subject to three-year vesting, risks can take longer than that to appear, Moody’s said. Jefferies’s board may also be “insensitive” to the concerns of regulators regarding compensation levels, the ratings firm wrote.

Title: Re: JEF - Jefferies Group
Post by: jay21 on February 18, 2013, 05:30:36 AM
I want to dig more into LUK and now JEF is the biggest part of LUK.  Two quick questions:

1.  How comfortable are people with Handler?  What have you read about him and what has he done that makes you think he will be a good CEO of the combined company?  I know he brought LUK the Fortescue deal, so maybe he does have a good eye for deals. 

2.  Everyone mentioned the compensation ratio is high as they are luring talent to the Company.  Is this easy to bring down?  Will normalized earnings look better?
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 18, 2013, 09:30:50 AM
I want to dig more into LUK and now JEF is the biggest part of LUK.  Two quick questions:

1.  How comfortable are people with Handler?  What have you read about him and what has he done that makes you think he will be a good CEO of the combined company?  I know he brought LUK the Fortescue deal, so maybe he does have a good eye for deals. 

2.  Everyone mentioned the compensation ratio is high as they are luring talent to the Company.  Is this easy to bring down?  Will normalized earnings look better?

1)  He has a very good track record at JEF.  Take a look at some of the earlier presentations.

2)  I'm of the opinion that if you own a significant portion of the business, you should have enough motivation to perform your best regardless of any other compensation.  Unfortunately, not everyone feels this way, and Handler is getting compensation on par with any other financial firm.  So either you are ok with it, or you aren't.  I think he'll do very well for LUK over time, so I am ok with it for now, as I've become accustomed to seeing this type of plan for CEO's.  Doesn't mean I have to like it, nor do shareholder's have to put up with it if he does not perform.

Cheers!
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 19, 2013, 01:54:35 PM
Leucadia continues to spinoff or sell non-core assets.  Empire Insurance is being sold to White Mountains.  No price given.  Cheers!

http://finance.yahoo.com/news/white-mountains-solutions-acquire-empire-213000982.html
Title: Re: JEF - Jefferies Group
Post by: jay21 on February 23, 2013, 03:06:56 PM
I am starting to dig into LUK again (so I will probably be posting a good amount of questions/thoughts).  The first time I looked at them I thought I was out of my circle of competence with some their assets.  After re-reading some letters I feel a little more comfortable with what they are doing; it seems like there is a ton of optionality in their assets. But I still have plenty of questions and want to scrutinize all the assets they own  and hopefully hear other's opinion.

The one slide in the presentation was really good at breaking down the assets that LUK will own once the merger goes through.  The combined BV will be 9.1b.  Of that ~3b will be net cash and DTA.  Thats seems pretty straight forward.  Some haircut should probably be applied the DTA.

4b will be JEF, which itself requires plenty of analysis and I may have to ask questions in the JEF thread.

The remaining 2.4b is all the other subs.  National beef seems to be worth the most at first glance.  Spits out ~$100m pre-tax this year and historically higher.  The shareholder letters say National Beef is levered towards growing protein consumption in the world.  I think I specifically heard mention of opportunities for growth in China.  I thought there might be optionality here in a re-inflationary environment.  However, they describe National Beef as a spread business (which makes sense given their low margins).  So if there is re-inflation or growing demand in emerging markets, National Beef's volume will increase, but more investment will need to be made in PPE.  I don't see this as moated company so I imagine the ROIC is low.  Is there something I am missing here?  Is there option value here or will the nature of the business only result in more PPE with normal ROIC?  Or will there be spread widening do to the increased demand?  I think LUK described National Beef as the best in their space, so maybe the moat is in good management and good operations?

Title: Re: JEF - Jefferies Group
Post by: jay21 on February 24, 2013, 10:18:59 AM
....But I still have plenty of questions and want to scrutinize all the assets they own  and hopefully hear other's opinion.....

LUK has become my largest position (about 30%). I do not scrutinize each and every asset (do not get into "analysis paralysis") since I trust mangement's abilities, integrity and their judgement, and their track record. The only thing I look for is entry points where I can add more at a good discount.

I agree for the most part.  This is an investment where it is necessary to have a lot of faith in management (much more than maybe any investment I have come across).  But, they also have a history of buying distressed and selling them when they become more fully valued.  So its important to look at their assets to see where they are in the value realization process.  Also, they said they are changing their acquisition philosophy to look for more moated companies.  So I think you definitely need to scrutinize the moated assets to see if there is a moat.  Are National Beef and Jefferies pillars in the new fortress LUK?
Title: Re: JEF - Jefferies Group
Post by: cogitator99 on February 24, 2013, 10:59:33 PM
Just looking simplistically at the valuation of LUK @ P/B 1.1, would you rather own this or GS? Or perhaps even FFH?

Given that we know that Handler will not be like Cumming/Steinberg, and will probably push LUK to be more IB-like in how it is run, would you consider this to be higher quality than its IB peers?

Or is it a "simpler" investment because of the bricks-and-mortar businesses from legacy LUK and thus should trade at a premium?   

Title: Re: JEF - Jefferies Group
Post by: jay21 on February 25, 2013, 12:36:10 PM
10-K:  http://www.sec.gov/Archives/edgar/data/96223/000009622313000013/lnc2012form10k.htm
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on February 26, 2013, 10:19:27 AM
I don't, yet, believe that Handler is simply planning on spinning everything off and leaving JEF as the new LUK.

In the presentation regarding the merger they mentioned that this wasn't the plan.

But, I think it is worth watching carefully.  No reason the worry yet, though. 

I will also be watching to make sure that C&S keep their stake in LUK.

--

In the 10k, I noted that Nat'l Beef had pre-tax income of $59 million.  But, this number is net of more than $45 million of "amortization of identifiable intangible assets".  This is huge.  Adding this back, and Nat'l Beef had cash flow of $114 million in 2012.

That $114 million is net of depreciation and, because of the NOL carryforwards, is effectively after tax.

The Wal-Mart issue looks like it will hurt but it is hard to tell how much.  They say they sell 10% of all of Nat'l Beef's production to Wal-Mart.

But, I don't think they're losing all of that.  I read the 10k as saying that they are losing just their "case ready" sales to Wal-Mart.  They also say that TOTAL "case ready" business for all of Nat'l Beef is 7% of total sales.

They do not make it clear how much of their case ready sales go to Wal-Mart. 

In any case, Nat'l Beef produced some huge returns for Leucadia.  If Handler doesn't screw anything up, LUK still appears very cheap to me.
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 26, 2013, 10:40:57 AM
Book is now at $27.60 or so, and they are quite liquid.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: Ross812 on February 26, 2013, 12:02:03 PM
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on February 26, 2013, 12:07:58 PM
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...

Which brokerage are you using?
Title: Re: JEF - Jefferies Group
Post by: Ross812 on February 26, 2013, 12:10:31 PM
Interactive Brokers. I received one share of Crimson Wine for every ten shares of Leucadia I own. YahooFinance:

http://finance.yahoo.com/q?s=cwgl&ql=1
Title: Re: JEF - Jefferies Group
Post by: compoundinglife on February 26, 2013, 12:50:13 PM
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...

Which brokerage are you using?

Mine showed up in schwab, fidelity and etrade today.
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 26, 2013, 12:57:24 PM
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...

Which brokerage are you using?

Mine showed up in schwab, fidelity and etrade today.

Mine have not shown up yet at UBS and RBC Dominion.  Probably tomorrow.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on February 26, 2013, 01:11:52 PM
I just looked at my account and noticed a new stock symbol in there. My first thought was I can't believe I fat fingered a trade when I was inputing buy orders on Fiat yesterday. Then I figured out they are the new shares of Crimson Wine (CWGL). This was a much better surprise. CWGL appears to be off to a good start! Up 17% today...

Which brokerage are you using?

Mine showed up in schwab, fidelity and etrade today.

Mine have not shown up yet at UBS and RBC Dominion.  Probably tomorrow.  Cheers!

I haven't seen mine yet at my cheap discount brokerage, TradeKing...
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on February 27, 2013, 07:38:34 AM
Yay I got my 10 shares of Crimson...
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 27, 2013, 12:56:46 PM
Got them at UBS.  Still nothing at RBC Dominion, yet.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: compoundinglife on February 27, 2013, 01:03:33 PM
Got them at UBS.  Still nothing at RBC Dominion, yet.  Cheers!

Maybe they are held up in customs :)
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 27, 2013, 01:08:46 PM
Got them at UBS.  Still nothing at RBC Dominion, yet.  Cheers!

Maybe they are held up in customs :)

Californian wine company, so they want to put duty on the shares.  No way Canadian's are getting a discount on anything California-related!   ;D  Cheers!
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on February 27, 2013, 04:27:36 PM
Wow over a million shares traded and closed at $8.55.  I wonder if Cummings and Steinberg are accumulating?
Title: Re: JEF - Jefferies Group
Post by: bookie71 on February 28, 2013, 09:30:24 AM
Sounds like maybe they are profitable for the last quarter
http://biz.yahoo.com/e/130226/crswv8-k.html
Title: Re: JEF - Jefferies Group
Post by: Parsad on February 28, 2013, 10:27:01 AM
Have any Canadian boardmembers received their Crimson shares in their Canadian brokerage accounts yet?  We still have not gotten ours at RBC Dominion.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: Partner24 on February 28, 2013, 12:55:32 PM
Yes, I've received them two days ago in my Scotia ITrade account.
Title: Re: JEF - Jefferies Group
Post by: Grenville on March 01, 2013, 09:44:47 AM
Merger completed:

LEUCADIA NATIONAL CORPORATION AND JEFFERIES GROUP, INC. MERGER TO BE EFFECTIVE MARCH 1, 2013
NEW YORK, February 28, 2013 – Leucadia National Corporation (NYSE:  LUK) and Jefferies Group, Inc. (NYSE:  JEF) today announced that the stockholders of Jefferies Group, Inc. and the shareholders of Leucadia National Corporation overwhelmingly approved the merger between the two companies pursuant to which Jefferies’ stockholders will receive 0.81 of a share of Leucadia common stock for each share of Jefferies common stock they held and that the merger will be consummated effective March 1, 2013.  In connection with the merger, Jefferies is also converting to a limited liability company, Jefferies Group LLC, which will be a subsidiary of Leucadia and will continue to be an SEC reporting company, regularly filing annual, quarterly, and periodic financial reports.

Richard Handler, in addition to continuing in his role as Chief Executive Officer and Chairman of Jefferies, will become the Chief Executive Officer of Leucadia and one of its Directors.  Brian Friedman, in addition to continuing in his role as Chairman of the Executive Committee of Jefferies, will become Leucadia’s President and one of its Directors.  Joseph Steinberg, in addition to continuing to work full-time as an executive of Leucadia, will become Chairman of the Board of Leucadia.  Ian Cumming will retire as Chairman of the Board and Chief Executive Officer of Leucadia but will continue in his role as a director of Leucadia.

Leucadia will continue its 35-year track record of acquiring and owning businesses and investments and will be able to additionally leverage the knowledge base, opportunity flow and execution capabilities of the combined company.  Jefferies will continue to operate in a manner consistent with its historical business model and remain a client-focused, conservatively capitalized, and full-service global investment banking firm.
Title: Re: JEF - Jefferies Group
Post by: Parsad on March 01, 2013, 10:19:09 AM
Merger completed:

LEUCADIA NATIONAL CORPORATION AND JEFFERIES GROUP, INC. MERGER TO BE EFFECTIVE MARCH 1, 2013
NEW YORK, February 28, 2013 – Leucadia National Corporation (NYSE:  LUK) and Jefferies Group, Inc. (NYSE:  JEF) today announced that the stockholders of Jefferies Group, Inc. and the shareholders of Leucadia National Corporation overwhelmingly approved the merger between the two companies pursuant to which Jefferies’ stockholders will receive 0.81 of a share of Leucadia common stock for each share of Jefferies common stock they held and that the merger will be consummated effective March 1, 2013.  In connection with the merger, Jefferies is also converting to a limited liability company, Jefferies Group LLC, which will be a subsidiary of Leucadia and will continue to be an SEC reporting company, regularly filing annual, quarterly, and periodic financial reports.

Richard Handler, in addition to continuing in his role as Chief Executive Officer and Chairman of Jefferies, will become the Chief Executive Officer of Leucadia and one of its Directors.  Brian Friedman, in addition to continuing in his role as Chairman of the Executive Committee of Jefferies, will become Leucadia’s President and one of its Directors.  Joseph Steinberg, in addition to continuing to work full-time as an executive of Leucadia, will become Chairman of the Board of Leucadia.  Ian Cumming will retire as Chairman of the Board and Chief Executive Officer of Leucadia but will continue in his role as a director of Leucadia.

Leucadia will continue its 35-year track record of acquiring and owning businesses and investments and will be able to additionally leverage the knowledge base, opportunity flow and execution capabilities of the combined company.  Jefferies will continue to operate in a manner consistent with its historical business model and remain a client-focused, conservatively capitalized, and full-service global investment banking firm.

Yay!  Now go make money Handler!   ;D  Cheers!
Title: Re: JEF - Jefferies Group
Post by: menlo on March 04, 2013, 10:14:00 AM
Anyone hearing/seeing anything about the LUK decline today?  Something post-merger, perhaps?

Title: Re: JEF - Jefferies Group
Post by: Parsad on March 04, 2013, 10:30:43 AM
Anyone hearing/seeing anything about the LUK decline today?  Something post-merger, perhaps?

No news.  Their credit rating was actually upgraded.  I think some people are just taking profits after the deal closed.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: jay21 on March 07, 2013, 12:38:38 PM
So far I like what I see here, but I still feel in over my head when analyzing the FS.  Does anyone have a good primer on valuation of IBs or reading their FS?
Title: Re: JEF - Jefferies Group
Post by: Grenville on March 26, 2013, 11:05:21 AM
2013 AGM Date posted: July 25,2013

"As previously announced, Leucadia National Corporation (the “Company”) will hold its 2013 annual meeting of shareholders (the “Annual Meeting”) on July 25, 2013.  The Company’s shareholders of record at the close of business on June 5, 2013 will be entitled to notice of the Annual Meeting and to vote upon matters to be considered at the meeting."

http://www.sec.gov/Archives/edgar/data/96223/000090951813000102/mm03-2213_8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951813000102/mm03-2213_8k.htm)

The release says previously announced, does anyone know where they announced this info before?
Title: Re: JEF - Jefferies Group
Post by: jay21 on April 09, 2013, 01:59:15 PM
http://www.sec.gov/Archives/edgar/data/1084580/000119312513147623/d489655d10q.htm

10-Q is out.  Still trying to wrap my head around IB FS.  Noted there was $166m in stock repurchases.
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 09, 2013, 02:21:06 PM
http://www.sec.gov/Archives/edgar/data/1084580/000119312513147623/d489655d10q.htm

10-Q is out.  Still trying to wrap my head around IB FS.  Noted there was $166m in stock repurchases.

I wonder if this means that there will be no quarterly conference calls for JEF.
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 09, 2013, 02:35:45 PM

I wonder if this means that there will be no quarterly conference calls for JEF.

I spoke to soon:

LEUCADIA AND JEFFERIES ANNOUNCE 2013 AND 2014 CALENDAR OF INVESTOR AND SHAREHOLDER MEETINGS
NEW YORK, April 9, 2013 – Leucadia National Corporation (“Leucadia”) and Jefferies Group LLC (“Jefferies”) today announced a calendar of investor and shareholder meetings for 2013 and 2014 for Leucadia and Jefferies.  These meetings will provide a basis for Leucadia and Jefferies to communicate with shareholders and investors beyond quarterly regulatory filings.
July 25, 2013 – Leucadia Annual Shareholder Meeting

October 10, 2013 – Jefferies Investor Day

March 4, 2014 – Combined Leucadia and Jefferies Shareholder and Investor Discussion recapping 2013 performance and giving a high-level overview of strategies and plans for 2014

May 14, 2014 – Leucadia Annual Shareholder Meeting

August 7, 2014 – Leucadia Investor Day

October 9, 2014 – Jefferies Investor Day
“These four meetings per calendar year going forward provide an opportunity for Leucadia and Jefferies shareholders, bondholders, analysts, and counterparties to hear from senior management about financial results, the operating environment and overall corporate strategies beyond our regularly scheduled regulatory filings.  We will continue to be accessible, transparent and responsive to all of our constituencies,” said Richard B. Handler, Chief Executive Officer of both Leucadia and Jefferies.
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 09, 2013, 02:39:35 PM
New creditor presentation just posted for JEF for Q1 2013:

http://investor-relations.jefferies.com/file.aspx?IID=102756&FID=1001174483 (http://investor-relations.jefferies.com/file.aspx?IID=102756&FID=1001174483)
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on April 09, 2013, 05:34:18 PM
http://www.bloomberg.com/news/2013-04-09/jefferies-posts-one-day-of-trading-losses-in-quarter.html (http://www.bloomberg.com/news/2013-04-09/jefferies-posts-one-day-of-trading-losses-in-quarter.html)

Jefferies Posts One Day of Trading Losses in Quarter
Title: Re: JEF - Jefferies Group
Post by: tengen on April 11, 2013, 01:46:25 PM
http://www.bloomberg.com/news/2013-04-09/jefferies-posts-one-day-of-trading-losses-in-quarter.html (http://www.bloomberg.com/news/2013-04-09/jefferies-posts-one-day-of-trading-losses-in-quarter.html)

Jefferies Posts One Day of Trading Losses in Quarter

Sounds good but how does it compare to their peers?
Title: Re: JEF - Jefferies Group
Post by: twacowfca on April 12, 2013, 12:39:35 PM
http://www.bloomberg.com/news/2013-04-09/jefferies-posts-one-day-of-trading-losses-in-quarter.html (http://www.bloomberg.com/news/2013-04-09/jefferies-posts-one-day-of-trading-losses-in-quarter.html)

Jefferies Posts One Day of Trading Losses in Quarter

Sounds good but how does it compare to their peers?

That's noise, not much information other than that their spreads narrowed last quarter.
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 16, 2013, 09:44:08 AM
Found this on my feed, I haven't found a good way to verify it, but it seems legit:


http://hereisthecity.com/2013/04/15/its-all-about-culture-not-fortress-balance-sheets/ (http://hereisthecity.com/2013/04/15/its-all-about-culture-not-fortress-balance-sheets/)

Here's something interesting sent to clients last week by Jefferies CEO Richard Handler and President Brian Friedman.

At the End of the Day, It Is All About Culture

What makes a business thrive and be sustainable across cycles ? Why are some companies able to constantly reinvent themselves in an ever-changing world, while others remain complacent with products, strategies and services that worked yesterday ? Who is responsible for making sure capital expenditures, acquisitions and investments are smart, targeted, and capital and cost efficient ? Who is responsible for convincing clients and investors that the firm’s foundation is strong, honest and trustworthy ?

The answers to these and countless other questions that define and determine the success of every business rest in the hands of the most vital asset within every business: the people. People across our industry speak about 'fortress' balance sheets. We all know that one weak individual guarding even the largest fort can allow the course of history to change instantly. People talk about businesses with incredible barriers to entry. Without the right people leading innovation and continuously taking smart, calculated chances, every barrier becomes porous, and even the best business models become vulnerable. How many businesses have we seen in recent years with world-class brands that were the envy of competitors ? Well, how many of those companies fell because the people entrusted as stewards were arrogant or complacent ? And then, when hope was lost, when the right team of people get together with a broken brand, often there is a rebirth and a new chapter begins.

Between the two of us, we have been at Jefferies (and now Leucadia) for 33 years. We have watched the competitive landscape evolve in a multitude of directions. We live in a very competitive industry that often feels like 'the Land of the Giants'. We succeed without a trillion-dollar balance sheet, a multi-trillion-dollar over-the-counter derivatives portfolio, our name on a sports arena, ATM machines on every street corner or a reliance on massive bank deposits from individual customers to fund ourselves. We are not too big to fail and we do not have the Federal Reserve or taxpayers standing by to protect us from ourselves if we take excessive risk.

We do have something that today appears to be a more valuable and scarcer resource than ever: we have a real culture of caring. Caring about our clients, caring about the value and differentiation we provide them, caring about the integrity of our profession, caring about the implicit promises we make in our work and caring about each other. We are 3,841 employee-partners around the world who have come together to form the foundation and core of Jefferies. We operate as a team and, as a firm, we greatly value the individual. None of our clients needs to do business with Jefferies (nor any other single investment banking firm or commercial bank, for that matter). The vast majority of our principal competitors believe the source of their strength and competitive position is their balance sheet or name.

We believe our foundation rests primarily in our people, who are the ones who get the job done every day. Don’t get us wrong, we have tons of capabilities. Our parent company, Leucadia, is a $10-billion-market-value enterprise with less than $1 billion of parent-level long-term debt. Leucadia’s brand of 35 years of smart investing and remarkable shareholder results is wonderful to be associated with. Jefferies has a $38 billion balance sheet aimed at serving our clients. We are a full-service investment banking firm with every product and service one needs to meet your needs.

All that said, our only secret weapon is our people. We will remain a strong firm so long as our culture maintains its foundation of being honest, hardworking, transparent, client focused, devoid of politics, humble, aggressive and creative. The day we rest on our enhanced balance sheet, our brand or a belief that our clients cannot do without us, that will be the day we begin our decline - and it might not be a slow one.

We ask you, our clients, as our most important constituency, to remind us every day of our commitments to you and to hold us accountable to the high standards we aspire to consistently reach. Honest and timely feedback allows us to learn and, when necessary, make the right adjustments. What we ask for in return is that - if we are indeed treating you as a long-term client versus a short-term counterparty - you return the favor and treat us accordingly. It is a long race and we intend to win, in partnership with you and our 3,841 culture-bearing employee-partners.

Sincerely, Rich and Brian
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 16, 2013, 09:44:26 AM
Found this on my feed, I haven't found a good way to verify it, but it seems legit:


http://hereisthecity.com/2013/04/15/its-all-about-culture-not-fortress-balance-sheets/ (http://hereisthecity.com/2013/04/15/its-all-about-culture-not-fortress-balance-sheets/)

Here's something interesting sent to clients last week by Jefferies CEO Richard Handler and President Brian Friedman.

At the End of the Day, It Is All About Culture

What makes a business thrive and be sustainable across cycles ? Why are some companies able to constantly reinvent themselves in an ever-changing world, while others remain complacent with products, strategies and services that worked yesterday ? Who is responsible for making sure capital expenditures, acquisitions and investments are smart, targeted, and capital and cost efficient ? Who is responsible for convincing clients and investors that the firm’s foundation is strong, honest and trustworthy ?

The answers to these and countless other questions that define and determine the success of every business rest in the hands of the most vital asset within every business: the people. People across our industry speak about 'fortress' balance sheets. We all know that one weak individual guarding even the largest fort can allow the course of history to change instantly. People talk about businesses with incredible barriers to entry. Without the right people leading innovation and continuously taking smart, calculated chances, every barrier becomes porous, and even the best business models become vulnerable. How many businesses have we seen in recent years with world-class brands that were the envy of competitors ? Well, how many of those companies fell because the people entrusted as stewards were arrogant or complacent ? And then, when hope was lost, when the right team of people get together with a broken brand, often there is a rebirth and a new chapter begins.

Between the two of us, we have been at Jefferies (and now Leucadia) for 33 years. We have watched the competitive landscape evolve in a multitude of directions. We live in a very competitive industry that often feels like 'the Land of the Giants'. We succeed without a trillion-dollar balance sheet, a multi-trillion-dollar over-the-counter derivatives portfolio, our name on a sports arena, ATM machines on every street corner or a reliance on massive bank deposits from individual customers to fund ourselves. We are not too big to fail and we do not have the Federal Reserve or taxpayers standing by to protect us from ourselves if we take excessive risk.

We do have something that today appears to be a more valuable and scarcer resource than ever: we have a real culture of caring. Caring about our clients, caring about the value and differentiation we provide them, caring about the integrity of our profession, caring about the implicit promises we make in our work and caring about each other. We are 3,841 employee-partners around the world who have come together to form the foundation and core of Jefferies. We operate as a team and, as a firm, we greatly value the individual. None of our clients needs to do business with Jefferies (nor any other single investment banking firm or commercial bank, for that matter). The vast majority of our principal competitors believe the source of their strength and competitive position is their balance sheet or name.

We believe our foundation rests primarily in our people, who are the ones who get the job done every day. Don’t get us wrong, we have tons of capabilities. Our parent company, Leucadia, is a $10-billion-market-value enterprise with less than $1 billion of parent-level long-term debt. Leucadia’s brand of 35 years of smart investing and remarkable shareholder results is wonderful to be associated with. Jefferies has a $38 billion balance sheet aimed at serving our clients. We are a full-service investment banking firm with every product and service one needs to meet your needs.

All that said, our only secret weapon is our people. We will remain a strong firm so long as our culture maintains its foundation of being honest, hardworking, transparent, client focused, devoid of politics, humble, aggressive and creative. The day we rest on our enhanced balance sheet, our brand or a belief that our clients cannot do without us, that will be the day we begin our decline - and it might not be a slow one.

We ask you, our clients, as our most important constituency, to remind us every day of our commitments to you and to hold us accountable to the high standards we aspire to consistently reach. Honest and timely feedback allows us to learn and, when necessary, make the right adjustments. What we ask for in return is that - if we are indeed treating you as a long-term client versus a short-term counterparty - you return the favor and treat us accordingly. It is a long race and we intend to win, in partnership with you and our 3,841 culture-bearing employee-partners.

Sincerely, Rich and Brian
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 16, 2013, 09:48:04 AM
I just found the original source:

http://www.jefferies.com/CMSFiles/Jefferies.com/files/Insights/JefferiesInsights_April2013.pdf (http://www.jefferies.com/CMSFiles/Jefferies.com/files/Insights/JefferiesInsights_April2013.pdf)
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 16, 2013, 09:48:47 AM
I just found the original source:

http://www.jefferies.com/CMSFiles/Jefferies.com/files/Insights/JefferiesInsights_April2013.pdf (http://www.jefferies.com/CMSFiles/Jefferies.com/files/Insights/JefferiesInsights_April2013.pdf)
Title: Re: JEF - Jefferies Group
Post by: FFHfan on April 16, 2013, 10:11:25 AM
thanks  :)
Title: Re: JEF - Jefferies Group
Post by: Dazel on April 16, 2013, 01:48:14 PM



Anyone own any bonds or know what their current yield is? Save me the trouble...

Thanks,

Dazel.
Title: Re: JEF - Jefferies Group
Post by: robface on April 16, 2013, 02:28:18 PM
I hear that the salt lake office is being "restructured" unfortunately.  Has Handler said much about how he's going to incorporate Leucadia and Jefferies?  How long will other long-timers (Joe and Tom Mara) be around?
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 16, 2013, 03:39:51 PM
I hear that the salt lake office is being "restructured" unfortunately.  Has Handler said much about how he's going to incorporate Leucadia and Jefferies?  How long will other long-timers (Joe and Tom Mara) be around?

I am very curious! What do you mean by "restructured"? I assumed that Handler would try to keep most of the legacy LUK folks in their roles given LUK historical track record.
Title: Re: JEF - Jefferies Group
Post by: BRK IN MKE on April 24, 2013, 06:40:17 AM
Does anyone know when the LUK shareholder letter is going to be released? Usually it comes out around this time in April.
Title: Re: JEF - Jefferies Group
Post by: racemize on April 24, 2013, 06:41:12 AM
Does anyone know when the LUK shareholder letter is going to be released? Usually it comes out around this time in April.

I've also been waiting for it--I was hoping for this weekend.  (Actually, I was hoping for the past two weekends, but it seems like it has to happen this one?)
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 24, 2013, 07:17:21 AM
I'm not sure when it will come out either. It might be delayed given the fact that the annual meeting isn't till July when it's normally held in May.
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 24, 2013, 07:25:31 AM
Short article about Indian firms listing outside India, commentary about Jefferies in India, and commentary from a Jefferies MD in India who also runs Investment Banking there.

http://www.bloomberg.com/news/2013-04-22/u-s-lures-firms-with-ipos-as-home-demand-drops-corporate-india.html?cmpid=yhoo (http://www.bloomberg.com/news/2013-04-22/u-s-lures-firms-with-ipos-as-home-demand-drops-corporate-india.html?cmpid=yhoo)
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 25, 2013, 01:01:26 PM
JEFFERIES EXPANDS EQUITIES BUSINESS THROUGH AN ALLIANCE WITH ASIA PLUS SECURITIES IN THAILAND
http://www.jefferies.com/News/PressReleases/201/309 (http://www.jefferies.com/News/PressReleases/201/309)

Quote
NEW YORK, LONDON, HONG KONG and BANGKOK, April 25, 2013 – Jefferies today announced that it is entering into an alliance with Asia Plus Securities Public Company Limited (“Asia Plus”).  Under the agreement, Asia Plus will provide equity research on companies in Thailand, which Jefferies will distribute on a co-branded basis to the firm’s global base of institutional clients.  The alliance, in which Asia Plus will also provide local equity broking services to Jefferies clients, is expected to begin operating before the end of the year.

...
Title: Re: JEF - Jefferies Group
Post by: txlaw on April 25, 2013, 01:15:57 PM
JEFFERIES EXPANDS EQUITIES BUSINESS THROUGH AN ALLIANCE WITH ASIA PLUS SECURITIES IN THAILAND
http://www.jefferies.com/News/PressReleases/201/309 (http://www.jefferies.com/News/PressReleases/201/309)

Quote
NEW YORK, LONDON, HONG KONG and BANGKOK, April 25, 2013 – Jefferies today announced that it is entering into an alliance with Asia Plus Securities Public Company Limited (“Asia Plus”).  Under the agreement, Asia Plus will provide equity research on companies in Thailand, which Jefferies will distribute on a co-branded basis to the firm’s global base of institutional clients.  The alliance, in which Asia Plus will also provide local equity broking services to Jefferies clients, is expected to begin operating before the end of the year.

...

Very, very interesting. 

Is this a new strategy for JEF -- to go into emerging economy capital markets that the bulge bracket firms aren't focusing on?  Does anyone know what the i-banking market looks like in Thailand?
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 29, 2013, 10:12:15 PM
Update on the board of directors at LUK. Ian Cumming is retiring from the board. I assumed he would stay on as a director. Only two directors remain from LUK's former board: Joseph Steinberg & Jeffrey Keil.

Here's the filing:
http://www.sec.gov/Archives/edgar/data/96223/000090951813000116/mm04-2613_8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951813000116/mm04-2613_8k.htm)
Quote
On April 25, 2013, the Board of Directors of Leucadia National Corporation (the “Company”) nominated for election as directors of the Company at its 2013 annual meeting of shareholders, two new nominees, Robert P. Beyer and Stuart H. Reese, along with the following seven current directors, W. Patrick Campbell, Brian P. Friedman, Richard B. Handler, Robert E. Joyal, Jeffrey C. Keil, Michael T. O’Kane and Joseph S. Steinberg.  Mr. Beyer, Chairman of Chaparal Investments, LLC, a private investment firm and holding company, is currently a director of The Allstate Corporation and The Kroger Co.  Mr. Beyer previously had been Chief Executive Officer and a member of the board of directors of The TCW Group, Inc. (Trust Company of the West), a global investment management firm.   Mr. Reese is the former President and Chief Executive Officer of Massachusetts Mutual Life Insurance Company and was a member of the Board of Directors of the Federal Reserve Bank of Boston.
 
In addition, each of the following current members of the Company’s Board of Directors advised the Company that he has decided not to stand for re-election as a director:  Ian M. Cumming, Richard G. Dooley, Paul M. Dougan, Alan J. Hirschfield, James E. Jordan, Jesse Clyde Nichols III and Michael Sorkin (collectively, the “Retiring Directors”).  Each of the Retiring Directors will complete his term and retire following election of directors at the Company’s 2013 annual meeting, which will be held on July 25, 2013.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on April 30, 2013, 08:05:22 AM
It's odd he's retiring as director as the previous release said he would stay on. It really seems like a major change in control and a new future. I'm not even sure there will be a letter this year, hope there is to get a sense of the future.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on April 30, 2013, 08:20:52 AM
I was really hoping the old guard stay on to keep Handler in check and mentor him some more. I knew JEF was relatively well managed but still...
Title: Re: JEF - Jefferies Group
Post by: jay21 on April 30, 2013, 08:26:46 AM
I was really hoping the old guard stay on to keep Handler in check and mentor him some more. I knew JEF was relatively well managed but still...

I am not worried.  Handler brought them Fortescue, made a great investment in Knight, and bought back bonds and stock during JEF's turmoil.  Wheeler brought in National Beef Packing.  So even though we will miss the old guard, Handler and Wheeler have made the bigger deals in recent history and have proven themselves as capital allocators.

Title: Re: JEF - Jefferies Group
Post by: rjstc on April 30, 2013, 09:00:47 AM
I was really hoping the old guard stay on to keep Handler in check and mentor him some more. I knew JEF was relatively well managed but still...

I am not worried.  Handler brought them Fortescue, made a great investment in Knight, and bought back bonds and stock during JEF's turmoil.  Wheeler brought in National Beef Packing.  So even though we will miss the old guard, Handler and Wheeler have made the bigger deals in recent history and have proven themselves as capital allocators.

+1  I think the absolute last thing the old guard would have done is turn things over to a bunch of dunces. Plus I imagine they still have a lot of skin in the game.
Title: Re: JEF - Jefferies Group
Post by: Grenville on May 02, 2013, 05:19:30 PM
A little more detail on the board changes in the WSJ:

"Leucadia to Slash Size of Its Board"
http://online.wsj.com/article/SB10001424127887323528404578455542470712644.html (http://online.wsj.com/article/SB10001424127887323528404578455542470712644.html)

Robert Beyer (new director) was a colleague of Richard Handler at Drexel. Stuart Reese was a former CEO of Mass Mutual which has a lending JV with JEF.
Title: Re: JEF - Jefferies Group
Post by: berkshiremystery on May 10, 2013, 06:51:14 AM
Leucadia National Corporation Announces First Quarter 2013 Results

http://finance.yahoo.com/news/leucadia-national-corporation-announces-first-142500814.html

Leucadia National Corporation (LUK) today announced its operating results for the three month period ended March 31, 2013. Net income attributable to Leucadia National Corporation common shareholders for the three month periods ended March 31, 2013 and 2012 was $305,103,000 ($1.08 per diluted common share) and $490,877,000 ($1.97 per diluted common share), respectively. These results do not reflect the operations of Jefferies Group LLC and its subsidiaries, which was acquired in March 2013. Jefferies results of operations will initially be included in the Company’s consolidated results of operations commencing with the quarter ending June 30, 2013.
Title: Re: JEF - Jefferies Group
Post by: jay21 on June 11, 2013, 02:44:31 PM
I am not an energy expert so I am hoping someone can help me out in determining how big this is:

http://finance.yahoo.com/news/oregon-lng-files-export-application-203300858.html;_ylt=Al3G.FjYxW1UpLjG8gXVgqeiuYdG;_ylu=X3oDMTIxM2U0bjg5BG1pdANXaWRlIFF1b3RlcyBNb2R1bGUEcG9zAzM2BHNlYwNNZWRpYVJlY2VudFF1b3Rlc1BvcnRmb2xpb3NXaWRl;_ylg=X3oDMTFkcW51ZGliBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3BtaA--;_ylv=3

Thanks
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on June 11, 2013, 04:01:35 PM
Tough to say, these are complex, expensive projects. View them as free options with potential ig payoffs but low chances of success.

Lake Charles, La. Pet coke to methanol looks to be progressing.

Indiana, and Chicago projects were looking good last year but both are now dead due to political oppo. - governors in both states killed them.

Miss. gasification is still alive but I haven't seen anything recently.

Oregon LNG is sure to get significant environmental and state oppo. 

Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 12, 2013, 11:37:20 PM
Muscleman sent me the following PM:

Quote
Hi gio,
Since you really like great capital allocators, I am curious if LUK fits your taste, and if you have any opinions on it? It is trading below book value as of this week, though it is still far above tangible book.


Thanks!
Muscleman

Hi muscleman,
First of all, I don’t care about “tangible book”. Tangible book per se is meaningless and might even be very often deceiving. As always, you must know and understand the business. There is no substitute for that.
Second, truth be told, I don’t like change… because change decreases my knowledge and understanding of the business. Imo, Mr. Cumming and Mr. Steinberg were Leucadia National. Are they so out of the business to not even put out the shareholders letter for year 2012? Well, I fear that my knowledge and understanding of the business has decreased… a lot! So, LUK might certainly be cheap, if it still were the business that I used to know. But, what if it is no longer that business? It might still be “statistically” cheap… But statistically cheap things are for traders, when I invest (I mean, when I buy something for the next 10 years, with no intention of selling), I NEED and REQUIRE to know and understand the business. No matter what the price is, because there is no substitute for knowledge and understanding.
I stay away for now, while I try to watch the new management very closely and get to understand them better. If in time I still like what I see very much, I will be glad to invest in LUK once again! :)

giofranchi
Title: Re: JEF - Jefferies Group
Post by: racemize on June 13, 2013, 05:28:13 AM
I am similarly cautious with luk right now, but am still holding on to my old position given handler's own bvps record.
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 13, 2013, 06:49:58 AM
Are they so out of the business to not even put out the shareholders letter for year 2012?

I was wondering about this as well.

I asked IR at JEF if there was a LUK AR/letter coming out along with the proxy. They replied that the annual report with chairman/president's letter will be mailed out the week of June 24th because the AGM is July 25th.

Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 13, 2013, 07:43:59 AM
I asked IR at JEF if there was a LUK AR/letter coming out along with the proxy. They replied that the annual report with chairman/president's letter will be mailed out the week of June 24th because the AGM is July 25th.

Thank you Grenville,
good news! I will certainly read that letter with the utmost attention and, as always, with much pleasure. :)

giofranchi
Title: Re: JEF - Jefferies Group
Post by: premfan on June 13, 2013, 08:35:37 AM
I think people put too much importance on a candid letter. Yes having a long candid letter is a great luxury for the shareholders cause we are "programmed" to think the more candid the letter and longer the letter the more its like berkshire so it gathers more trust  Track record and business economics i feel are the most important for future growth. Luk is a much stronger company now with jef and handler's track record is very good. Investors questioning luk based on not having a letter out yet doesnt reasonate with how real bussiness's are run.  Candid letters can easily be faked. A  track record cant be faked.  Ingredients of a candid letter with someone with not a established track record

1.) Mention Intrinsic Value
2.) Reference Buffet
3.) " will forgo short term gain for long term value"
4.) At least 8 pages long

Cue motley fool articles " the next warren buffet of x" .



Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 13, 2013, 08:46:40 AM
premfan,
believe me: I don’t care much about a “candid letter”. What I want is to understand a business. Saying that LUK is much stronger now with JEF, though it might certainly be true, doesn’t help me understand it any better. Is LUK a new animal? If so, please, give me something useful to understand its new behavior. Otherwise, it is unpredictable to me, and I don’t invest in unpredictable things.
A good, long, well-reasoned, and stacked with news, letter might lend a hand and provide some help. Though far from me saying it would be enough!

giofranchi
Title: Re: JEF - Jefferies Group
Post by: premfan on June 13, 2013, 09:19:42 AM
premfan,
believe me: I don’t care much about a “candid letter”. What I want is to understand a business. Saying that LUK is much stronger now with JEF, though it might certainly be true, doesn’t help me understand it any better. Is LUK a new animal? If so, please, give me something useful to understand its new behavior. Otherwise, it is unpredictable to me, and I don’t invest in unpredictable things.
A good, long, well-reasoned, and stacked with news, letter might lend a hand and provide some help. Though far from me saying it would be enough!

giofranchi

This wasnt directed at you . Its been a thought i been having recently where there are alot of books on how to write the perfect shareholder letter. People evolve by doing things more intelligently and its so easy to write a fake candid letter.  Knowing that the letter will trigger trust and the feelings of finding the next big thing. My research has shown me great companies or great anything is great from the start. Greatness doesnt wait. Greatness constantly evolves. Being static is a sign of something not being great. Greatness keeps on moving, evolving, and learning. Also greatness is defined by product/service that has a system of abnormal economics that is repeatable ( I use CROIC coined by joe ponzio for abnormal economics). Sorry i went on a tangent lol and i'm not a luk expert. Although, adding a well run investment bank with handlers track record really cant be a negative thing. It gives luk a more stable source of cash flow to reinvest into different assets in the upcoming decades. Last thought is everything is inherently unpredictable. I think people should accept this and continue to evolve instead of having false ideas of something being predictable.
Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 13, 2013, 10:04:47 AM
Last thought is everything is inherently unpredictable. I think people should accept this and continue to evolve instead of having false ideas of something being predictable.
Well, I guess it depends on anyone's idea of predictabily. My idea of predictability is different from my idea if certainty. I define a business predictable, whenever I possess a very clear idea of how and why it could achieve a high compounded return on invested capital for many years into the future. This doesn't mean it will actually achieve such a result. It simply means that it might, and that I have recognized how and why. This is the process I follow managing my own businesses: I say yes to the activities that I understand, and I say no to those that I don't understand. And you kown what? Until now I have never experienced very unpleasant surprises!
Why should I invest differently?
And management counts! To fully grasp the true potential of any business, management matters a lot!

giofranchi
Title: Re: JEF - Jefferies Group
Post by: mcliu on June 13, 2013, 11:07:40 AM
I guess your true concern is whether Handler has the investment acumen of Cumming/Steinberg, which is a valid concern.

On the asset side, the changes haven't been that drastic. Weighting to JEF has increased, and Crimson was spun-off, otherwise, it's mostly the same collection of assets.
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 13, 2013, 11:26:26 AM
Thank you Gio!
I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.
What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?
Title: Re: JEF - Jefferies Group
Post by: twacowfca on June 13, 2013, 04:28:13 PM
I asked IR at JEF if there was a LUK AR/letter coming out along with the proxy. They replied that the annual report with chairman/president's letter will be mailed out the week of June 24th because the AGM is July 25th.

Thank you Grenville,
good news! I will certainly read that letter with the utmost attention and, as always, with much pleasure. :)

giofranchi

Yes! The letter is very important.  The power of words to create or destroy is not always appreciated.  Cumming & Steinberg's letters are classics in the all too rare straight shooter genre. They will be tough to equal.  :)
Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 13, 2013, 11:07:59 PM
Thank you Gio!
I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.
What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

giofranchi
Title: Re: JEF - Jefferies Group
Post by: rjstc on June 14, 2013, 03:15:41 PM
Thank you Gio!
I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.
What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

giofranchi

Giofranchi. As I have told you before I really respect your thinking.
   I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.
   Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron
Title: Re: JEF - Jefferies Group
Post by: twacowfca on June 14, 2013, 08:12:37 PM
Thank you Gio!
I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.
What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

giofranchi

Giofranchi. As I have told you before I really respect your thinking.
   I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.
   Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron

I agree.  The jury is still out, but the extradinordinary action of turning over the keys to Handler is inconsistent with any other sensible hypothesis than the idea that Steinberg and Cumming hold a  firm conviction, based on close observation, that  Handler is as good a value investor, holding the same values, as they are.  :)
Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 15, 2013, 02:10:25 AM
Thank you Gio!
I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.
What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

giofranchi

Giofranchi. As I have told you before I really respect your thinking.
   I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.
   Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron

I agree.  The jury is still out, but the extradinordinary action of turning over the keys to Handler is inconsistent with any other sensible hypothesis than the idea that Steinberg and Cumming hold a  firm conviction, based on close observation, that  Handler is as good a value investor, holding the same values, as they are.  :)

Ron and twacowfca,
yours is good reasoning indeed. No doubt about it! Anyway, I think conviction about a business is something not entirely rational… I might be very well wrong about this, but let me ask you a question: if we agree on all the facts and numbers, do you think that it automatically entails we share the same degree of conviction about a business? Though I am an engineer and I tend to rely heavily on facts and numbers, I have gradually come to the conclusion that the right answer is: not necessarily. And yet, think of how easily you can buy and sell a business today… just a few clicks on your mouse are required… And that’s the reason why you MUST have conviction! Because, otherwise, you are going to commit errors. Imo, no one who lacks conviction will be spared! That’s exactly why
Quote
investing is most intelligent when it is most businesslike
I “feel” I need to watch Mr. Handler and Mr. Wheeler a little bit longer, to get back to the same degree of conviction I had when Mr. Cumming and Mr. Steinberg were at the helm. At the same time I understand that your “feeling”, and therefore your behavior and investment choices, might be different. I respect them. :)

giofranchi
Title: Re: JEF - Jefferies Group
Post by: twacowfca on June 15, 2013, 03:42:51 AM
Thank you Gio!
I see people comparing LUK to BRK and said LUK is a mini-BRK. BRK has free insurance float to invest, but LUK does not have that luxury.
What kind of synergy should we expect from the merger of LUK and JEF? More efficient deal making?

Those are good questions. And the fact LUK lacks the luxury of having free insurance float to invest is a valid point. As twacowfca’s remark that Cumming & Steinberg will be tough to equal is also certainly true (I would add not only in straight shooting communication with shareholders…). Simply put, I still ignore the answers, or I don’t feel comfortable enough with them yet. Both Mr. Handler and Mr. Wheeler are young and there will be plenty of time to watch them carefully and to get more confident with the new management, both their strengths and weaknesses.

giofranchi

Giofranchi. As I have told you before I really respect your thinking.
   I own LUK and have for a while. In fact it is one of my larger positions. I trusted Cumming & Steinberg with investing my money and was very confident in their acumen.
   Just like my belief in Buffett, & Watsa I just can't see them just haphazardly turning over their portraits without being VERY confident in their successor choices. I also suspect that they are still very in tune with the continuing brush strokes being made. Ron

I agree.  The jury is still out, but the extradinordinary action of turning over the keys to Handler is inconsistent with any other sensible hypothesis than the idea that Steinberg and Cumming hold a  firm conviction, based on close observation, that  Handler is as good a value investor, holding the same values, as they are.  :)

Ron and twacowfca,
yours is good reasoning indeed. No doubt about it! Anyway, I think conviction about a business is something not entirely rational… I might be very well wrong about this, but let me ask you a question: if we agree on all the facts and numbers, do you think that it automatically entails we share the same degree of conviction about a business? Though I am an engineer and I tend to rely heavily on facts and numbers, I have gradually come to the conclusion that the right answer is: not necessarily. And yet, think of how easily you can buy and sell a business today… just a few clicks on your mouse are required… And that’s the reason why you MUST have conviction! Because, otherwise, you are going to commit errors. Imo, no one who lacks conviction will be spared! That’s exactly why
Quote
investing is most intelligent when it is most businesslike
I “feel” I need to watch Mr. Handler and Mr. Wheeler a little bit longer, to get back to the same degree of conviction I had when Mr. Cumming and Mr. Steinberg were at the helm. At the same time I understand that your “feeling”, and therefore your behavior and investment choices, might be different. I respect them. :)

giofranchi

Feeling is important. This is an aspect of what separates us from computer algorithms.  Numbers and algorithms should be more objective, and often they are.  What's behind the numbers is what really counts. Words are rich in  meaning with the power to create or destroy. I believe our world was created through words, imbued with meaning and purpose far deeper than mere algorithms.

Steinberg and Cumming are a tough act to follow.  Handler has demonstrated excellence in one domain.  Does he understand the power of words to build value in another?  Lets read his first Leucadia shareholders letter.
Title: Re: JEF - Jefferies Group
Post by: rjstc on June 15, 2013, 12:51:00 PM
Steinberg and Cumming are a tough act to follow.  Handler has demonstrated excellence in one domain.  Does he understand the power of words to build value in another?  Lets read his first Leucadia shareholders letter.
  " Agreed".

giofranchi. If I could split my investible funds equally between you and twacowfca I "feel" that I would be perfectly satisfied with the results. In that I have great conviction. Until proven otherwise.

Leaning on the next alternatives available I have conviction investing with Buffett, Watsa, Cummings/Steinberg (now their chosen successors), Gayner, Parames & a few others. I had been a very early investor with Berkowitz and Van Den Berg but I came to have less conviction with them so I no longer invest with them for various reasons.

I also understand and respect your rational ideas about LUK now. I think in the end we pretty much end up in the same place. I'm not great at math. The numbers I use are simple, what have you shown me. The conviction is would I like to be in business with you as a partner or absent that who you pick to carry on for you, until proven otherwise.  Ron
   
Title: Re: JEF - Jefferies Group
Post by: bargainman on June 16, 2013, 10:30:55 PM
Parames & a few others.

Just curious, is there any way to invest with Parames?  Just read a bit about him, would like to hear more.. Maybe we could start another thread?
Title: Re: JEF - Jefferies Group
Post by: rjstc on June 16, 2013, 11:05:41 PM
Parames & a few others.

Just curious, is there any way to invest with Parames?  Just read a bit about him, would like to hear more.. Maybe we could start another thread?

You can invest in the funds he is involved in but I find them a little expensive. What I do is follow what he's doing & if I like what I see I follow. Such as BMW preferred and EXOR & Wolters Kluwer which have done well since I've bought them.
Title: Re: JEF - Jefferies Group
Post by: twacowfca on June 17, 2013, 03:17:55 AM
Parames & a few others.

Just curious, is there any way to invest with Parames?  Just read a bit about him, would like to hear more.. Maybe we could start another thread?

You can invest in the funds he is involved in but I find them a little expensive. What I do is follow what he's doing & if I like what I see I follow. Such as BMW preferred and EXOR & Wolters Kluwer which have done well since I've bought them.

Following what Parames is doing is a very good strategy.  Based on valuation,  Parames rotates in and out of maybe 80 or so mostly European companies he has identified as being better businesses with family ownership and/or ethical management.  He pretty much does what Buffett did up until the 1980's wham a change in the tax law made it expensive for corporations to flip stock investments.

 In Europe, there is absolutely no taxable event when funds like Parames sell shares they bought for a profit. Taxation of profits is delayed until an investor in his funds sells his shares in the fund at a profit.  Even then, shares in one of his funds can be rolled over to another fund tax free.  :)

As a result of the favorable tax regime,, Parames gets in and out of the  stocks in the set that he likes a lot more frequently than Buffett did when he employed that same strategy. :)
Title: Re: JEF - Jefferies Group
Post by: frog03 on June 17, 2013, 04:25:16 AM
Following what Parames is doing is a very good strategy.  Based on valuation,  Parames rotates in and out of maybe 80 or so mostly European companies he has identified as being better businesses with family ownership and/or ethical management.  He pretty much does what Buffett did up until the 1980's wham a change in the tax law made it expensive for corporations to flip stock investments.

 In Europe, there is absolutely no taxable event when funds like Parames sell shares they bought for a profit. Taxation of profits is delayed until an investor in his funds sells his shares in the fund at a profit.  Even then, shares in one of his funds can be rolled over to another fund tax free. 

As a result of the favorable tax regime,, Parames gets in and out of the  stocks in the set that he likes a lot more frequently than Buffett did when he employed that same strategy.
**********

Twa, this is not quite true for the capital gains.  Some countries, like Spain where Parames is based, have nominal capital gains for funds when they sell their stocks, about 1% if my memory serves me right.  In France, on the other hand there are no such gains.  For European investors it is usually a good thing to hold a top performing fund as you get both market beating performance and much better tax treatment.

Parames gets good recognition for good reason but his track record is not as good as Thierry Flecchia leading the Flinvest Entrepreneurs fund and before this a couple Oddo funds.   Flecchia has better net performance than Parames despite higher fees.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 18, 2013, 08:49:44 AM
http://www.crainsnewyork.com/article/20130616/FINANCE/306169990
Title: Re: JEF - Jefferies Group
Post by: buylowersellhigh on June 19, 2013, 07:54:11 AM
Any news on LUK lately?  Has come down to almost book value.

Title: Re: JEF - Jefferies Group
Post by: jouni1 on June 19, 2013, 08:06:43 AM
Any news on LUK lately?  Has come down to almost book value.

jefferies net profit dropped 34%. on another note; this is why i read this forum. been beating myself up for missing this ever since the p/b started running away.

guess i'll start building a position. i'm almost certain handler can give me 10+% a year at book value.

http://blogs.wsj.com/moneybeat/2013/06/18/jefferies-second-quarter-net-drops-34/?mod=yahoo_hs
Title: Re: JEF - Jefferies Group
Post by: plato1976 on June 19, 2013, 09:54:52 AM
What the estimation of the current book value per share and the tangible book value per share in Q2 ?
I was lucky to get out weeks ago - now feel this one may fall into value zone quickly

Any news on LUK lately?  Has come down to almost book value.

jefferies net profit dropped 34%. on another note; this is why i read this forum. been beating myself up for missing this ever since the p/b started running away.

guess i'll start building a position. i'm almost certain handler can give me 10+% a year at book value.

http://blogs.wsj.com/moneybeat/2013/06/18/jefferies-second-quarter-net-drops-34/?mod=yahoo_hs
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 19, 2013, 12:32:25 PM
LUK reduces stake in INTL FCStone by 700K, now hold 918K shares (4.8%)

http://www.sec.gov/Archives/edgar/data/96223/000090951813000164/mm06-1913ifcstone_sc13da7.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951813000164/mm06-1913ifcstone_sc13da7.htm)

Title: Re: JEF - Jefferies Group
Post by: muscleman on June 19, 2013, 12:49:36 PM
What the estimation of the current book value per share and the tangible book value per share in Q2 ?
I was lucky to get out weeks ago - now feel this one may fall into value zone quickly

Any news on LUK lately?  Has come down to almost book value.

jefferies net profit dropped 34%. on another note; this is why i read this forum. been beating myself up for missing this ever since the p/b started running away.

guess i'll start building a position. i'm almost certain handler can give me 10+% a year at book value.

http://blogs.wsj.com/moneybeat/2013/06/18/jefferies-second-quarter-net-drops-34/?mod=yahoo_hs

Do you want to wait until it reaches tangible book value? Companies like BAC currently already trade at tangible book, though I understand that the ROE of LUK may be higher than BAC.
Sorry to ask these newbie questions because I started to track LUK only recently. Is there any sum of parts valuation number?
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 19, 2013, 04:45:30 PM
There is no doubt LUK is in the "recharging the elephant gun phase". It's ROE is pitiful at the moment. It is trading slightly below tangible book. It has sold and liquidated many of its public investments and owns a few large private businesses. Therefore, the thing to watch is what they are going to do with their resources in the next little while both at investing HQ and at Jefferies HQ. With 10 billion in equity, to achieve a 20% ROE which is what would lead to a 20% growth in book value, they must produce $2 billion per year of gains and/or income. They are nowhere close to that...I would say that the current "complex" can produce - in a stretch , no better than 1 billion per year, so the other billion must come from new investments.
Title: Re: JEF - Jefferies Group
Post by: jay21 on June 20, 2013, 05:26:10 AM
Has anyone seen a compelling SOTP valuation analysis on LUK?  If so, could you please post it?  Thanks.
Title: Re: JEF - Jefferies Group
Post by: racemize on June 20, 2013, 05:38:14 AM
Has anyone seen a compelling SOTP valuation analysis on LUK?  If so, could you please post it?  Thanks.

I'm not sure there would be an up-to-date one--LUK has a lot of asset churn, so in the past, you were buying the machine, not really the parts.  If you buy at near NAV, and they compound at anywhere close to historic rates, then you do very well.

I find it a bit more uncertain with the old guard leaving, so I haven't added.
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 20, 2013, 09:58:53 AM
LUK's tangible book per share is around $21, according to the latest 10-Q.
BAC is already trading at tangible book value. Which one is better? Are we sure LUK can continue to compound at 20% per year after Handler takes over?
Title: Re: JEF - Jefferies Group
Post by: racemize on June 20, 2013, 10:50:21 AM
LUK's tangible book per share is around $21, according to the latest 10-Q.
BAC is already trading at tangible book value. Which one is better? Are we sure LUK can continue to compound at 20% per year after Handler takes over?

I don't think it is very easy to compare LUK and BAC directly, at least in this manner.  With BAC, the thesis is that underlying earning's power will emerge, e.g., at the 1.85 to 2.00 range, in the relatively near future, and with that the price should increase to 18-20 dollars correspondingly.  After that occurs, I think we will all have to think pretty hard about whether to keep holding it (probably compounding returns will drop down to 10% range?).  Some may hold until it gets to normalized environment for all banks, but some may drop out sooner.  Holding banks for very long periods seems to be a dangerous thing to do, since they all jump off a cliff every 10 or 20 years.  Thus, BAC is a return to average thesis, which is much shorter term than LUK. 

LUK, on the other hand, is a compounding machine, but it isn't based on earnings that much, or at least it wasn't in the past.  Now that they own all of Jefferies, it may be a bit different, and so I'm curious as to what it will be like (but do note that Jefferies was able to compound their book very well, even better than LUK in corresponding time periods).

Additionally, I would not estimate that LUK can compound at 20% per year going forward, though it may be possible.  Personally, I view lots of these compounders (e.g., BRK/FFH/MKL) as somewhere in the 12-15% compounding range, over long periods of time, if bought at the right prices.
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 20, 2013, 11:46:33 AM
LUK's tangible book per share is around $21, according to the latest 10-Q.
BAC is already trading at tangible book value. Which one is better? Are we sure LUK can continue to compound at 20% per year after Handler takes over?

I don't think it is very easy to compare LUK and BAC directly, at least in this manner.  With BAC, the thesis is that underlying earning's power will emerge, e.g., at the 1.85 to 2.00 range, in the relatively near future, and with that the price should increase to 18-20 dollars correspondingly.  After that occurs, I think we will all have to think pretty hard about whether to keep holding it (probably compounding returns will drop down to 10% range?).  Some may hold until it gets to normalized environment for all banks, but some may drop out sooner.  Holding banks for very long periods seems to be a dangerous thing to do, since they all jump off a cliff every 10 or 20 years.  Thus, BAC is a return to average thesis, which is much shorter term than LUK. 

LUK, on the other hand, is a compounding machine, but it isn't based on earnings that much, or at least it wasn't in the past.  Now that they own all of Jefferies, it may be a bit different, and so I'm curious as to what it will be like (but do note that Jefferies was able to compound their book very well, even better than LUK in corresponding time periods).

Additionally, I would not estimate that LUK can compound at 20% per year going forward, though it may be possible.  Personally, I view lots of these compounders (e.g., BRK/FFH/MKL) as somewhere in the 12-15% compounding range, over long periods of time, if bought at the right prices.

If BAC can restore profitability and become a WFC type franchise, then it will be very good. Buffet holds WFC for very long term and did pretty well, though I like the shorter term thesis better.
What confuses me about LUK is where the synergy will come from. BRK/MKL/FFH have free insurance float to invest, but LUK does not have that.
Title: Re: JEF - Jefferies Group
Post by: racemize on June 20, 2013, 12:02:17 PM
If BAC can restore profitability and become a WFC type franchise, then it will be very good. Buffet holds WFC for very long term and did pretty well, though I like the shorter term thesis better.
What confuses me about LUK is where the synergy will come from. BRK/MKL/FFH have free insurance float to invest, but LUK does not have that.

That would certainly be ideal (re BAC), but I am still fairly cautious on indefinite holding periods for banks--of course, they tend to pay good dividends, over time, and if you bought at dirt-cheap prices, you are getting a lot of dividends off of your tax-free loan from the government, which might entice you to hold on forever, depending on what type of investor you are.

Re LUK's competitive advantage--they've just been really good at moving in and out of investments, in a value-oriented manner, so you have to trust their judgement to do things really, really well.  Since there's management changes, that makes the investment quite a bit different, hence the caution several of us have been talking about.  That being said, Jefferies should beable to eat up all those NOLs that they have, which is very nice and should give some nice returns.  (I guess the NOLs has been some of the secret sauce for LUK, similar to float, to answer your question).
Title: Re: JEF - Jefferies Group
Post by: jay21 on June 20, 2013, 01:31:18 PM

If BAC can restore profitability and become a WFC type franchise, then it will be very good. Buffet holds WFC for very long term and did pretty well, though I like the shorter term thesis better.
What confuses me about LUK is where the synergy will come from. BRK/MKL/FFH have free insurance float to invest, but LUK does not have that.

Plenty of companies/investment vehicles have high ROEs that do not have float.
Title: Re: JEF - Jefferies Group
Post by: twacowfca on June 20, 2013, 02:52:59 PM
Following what Parames is doing is a very good strategy.  Based on valuation,  Parames rotates in and out of maybe 80 or so mostly European companies he has identified as being better businesses with family ownership and/or ethical management.  He pretty much does what Buffett did up until the 1980's wham a change in the tax law made it expensive for corporations to flip stock investments.

 In Europe, there is absolutely no taxable event when funds like Parames sell shares they bought for a profit. Taxation of profits is delayed until an investor in his funds sells his shares in the fund at a profit.  Even then, shares in one of his funds can be rolled over to another fund tax free. 

As a result of the favorable tax regime,, Parames gets in and out of the  stocks in the set that he likes a lot more frequently than Buffett did when he employed that same strategy.
**********

Twa, this is not quite true for the capital gains.  Some countries, like Spain where Parames is based, have nominal capital gains for funds when they sell their stocks, about 1% if my memory serves me right.  In France, on the other hand there are no such gains.  For European investors it is usually a good thing to hold a top performing fund as you get both market beating performance and much better tax treatment.

Parames gets good recognition for good reason but his track record is not as good as Thierry Flecchia leading the Flinvest Entrepreneurs fund and before this a couple Oddo funds.   Flecchia has better net performance than Parames despite higher fees.

Thank you for the clarification and the info about Flecchia.  :)
Title: Re: JEF - Jefferies Group
Post by: Christopher1 on June 25, 2013, 08:18:01 AM
Link to the last LUK shareholder letter signed by Cumming and Steinberg:

https://materials.proxyvote.com/Approved/527288/20130605/AR_173639.PDF
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 25, 2013, 08:25:56 AM
There is no doubt LUK is in the "recharging the elephant gun phase". It's ROE is pitiful at the moment. It is trading slightly below tangible book. It has sold and liquidated many of its public investments and owns a few large private businesses. Therefore, the thing to watch is what they are going to do with their resources in the next little while both at investing HQ and at Jefferies HQ. With 10 billion in equity, to achieve a 20% ROE which is what would lead to a 20% growth in book value, they must produce $2 billion per year of gains and/or income. They are nowhere close to that...I would say that the current "complex" can produce - in a stretch , no better than 1 billion per year, so the other billion must come from new investments.

Is it trading already below tangible book? From the latest 10-Q, the tangible book is about $7.6 bn. The current market cap is 9.11 bn.
Regarding Rich Handler, I remember Bruce mentioned somewhere before that he thinks Rich is the best investment banker on Wall Street, but I can't find the source anymore. Anyone?
Note that top IBs like GS is currently trading at about 10% above tangible book, while LUK is currently at 19% above book.
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 25, 2013, 08:32:14 AM
Link to the last LUK shareholder letter signed by Cumming and Steinberg:

https://materials.proxyvote.com/Approved/527288/20130605/AR_173639.PDF

Awesome! Thanks for posting. They posted the proxy on the sec site as well.
http://www.sec.gov/Archives/edgar/data/96223/000090951813000167/mm06-2413_def14a.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951813000167/mm06-2413_def14a.htm)
Title: Re: JEF - Jefferies Group
Post by: rjstc on June 25, 2013, 08:34:24 AM
Link to the last LUK shareholder letter signed by Cumming and Steinberg:

https://materials.proxyvote.com/Approved/527288/20130605/AR_173639.PDF

Great read. Going to miss their reports like we'll someday miss Buffetts.
Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 25, 2013, 08:44:48 AM
Link to the last LUK shareholder letter signed by Cumming and Steinberg:

https://materials.proxyvote.com/Approved/527288/20130605/AR_173639.PDF

Grazie Cristoforo! E a presto! :)

Giovanni
Title: Re: JEF - Jefferies Group
Post by: rjstc on June 25, 2013, 09:03:56 AM
From reading the letter it sure looks like Steinberg & Cummings have done a good job of picking their successors and one will still be involved in being there for advice.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on June 25, 2013, 09:24:23 AM
These guys will be missed!
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 25, 2013, 02:33:25 PM
Link to the last LUK shareholder letter signed by Cumming and Steinberg:

https://materials.proxyvote.com/Approved/527288/20130605/AR_173639.PDF

Enjoyed the letter! I liked the recap of history along with the stories of their successes and failures. The background adds a bunch to the past letters, a good amount of detail not found in the old letters. Whoever writes the letter is very good!

I do wish they had more details on the operating businesses outside of JEF. Each letter has been helpful in assessing the businesses and their potential future value. They do talk about the gasification project briefly and the creation of an auto finance business. Also they talk at length about Jefferies and the new leadership which will be a large chunk of the go forward value of LUK.

I am surprised that they still haven't put a link to the new AR and letter on the Leucadia website. Thanks again for posting the proxyvote link.
Title: Re: JEF - Jefferies Group
Post by: mcliu on June 25, 2013, 02:48:37 PM
Thanks for the link. Has anyone updated their model/valuation of the company and are willing to share? :)
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 25, 2013, 03:06:27 PM
The wildcard is Handler. From what we know, since he took over management of Jefferies in 1990, he has compounded book value at 22% per year. This is "Buffet" territory returns. I am wondering what the future holds for LUK and his plans. Obviously, investment banking is only one of two major pillars. The other one is investing the large amounts of capital and equity that LUK has into investments that give good returns. In this respect, we don't know his experience outside of investment banking. Another possibility is bolt-on aquisitions in investment banking as opposed to the more electic investing in stocks, and "unrelated" businesses.
Title: Re: JEF - Jefferies Group
Post by: hellsten on June 25, 2013, 03:21:16 PM
Really good letter and funny too:
Quote
Shortly after the acquisition one of us got a call from a gentleman who introduced himself as
David Mitchell, President of “our” power companies. We demurred saying we owned no power
companies, but David insisted, telling us that buried in the files of Baldwin United were stock
certificates representing controlling ownership positions in Barbados Power and Light,
El Salvador Electric, and Bolivia Power. To say the least, we were astounded. We were a utility!
One of us seized the day and became Chairman of all three and for years worked on maximizing
the value of these companies.

These guys earned a lot of money on bad businesses like telecom and mining…
Title: Re: JEF - Jefferies Group
Post by: twacowfca on June 25, 2013, 04:08:25 PM
There is no doubt LUK is in the "recharging the elephant gun phase". It's ROE is pitiful at the moment. It is trading slightly below tangible book. It has sold and liquidated many of its public investments and owns a few large private businesses. Therefore, the thing to watch is what they are going to do with their resources in the next little while both at investing HQ and at Jefferies HQ. With 10 billion in equity, to achieve a 20% ROE which is what would lead to a 20% growth in book value, they must produce $2 billion per year of gains and/or income. They are nowhere close to that...I would say that the current "complex" can produce - in a stretch , no better than 1 billion per year, so the other billion must come from new investments.

Is it trading already below tangible book? From the latest 10-Q, the tangible book is about $7.6 bn. The current market cap is 9.11 bn.
Regarding Rich Handler, I remember Bruce mentioned somewhere before that he thinks Rich is the best investment banker on Wall Street, but I can't find the source anymore. Anyone?
Note that top IBs like GS is currently trading at about 10% above tangible book, while LUK is currently at 19% above book.


I thinkI heard him say that recently on a panel at a conference, maybe Ira Sohn
Title: Re: JEF - Jefferies Group
Post by: racemize on June 25, 2013, 04:35:59 PM
I wonder if Handler et al. will continue the tradition of picking up NOLs from companies to achieve the tax benefits?
Title: Re: JEF - Jefferies Group
Post by: mcliu on June 25, 2013, 06:21:48 PM
Have you guys taken a look at the 10-Q for Q1? I was wondering, how do you separate the Jefferies assets from the Leucadia assets?
Specifically, there's $2.3B in available-for-sale fixed income securities. Is that part of Jefferies' trading book or is that part of Leucadia's investment portfolio?
Also, the $3.1B in cash, is that part of Leucadia's portfolio?
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 25, 2013, 10:09:12 PM
I believe they said they are going to publish a "look through" balance sheet of LUK owning JEF, but I'm not sure if that's in Q2 or a supplementary...
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 25, 2013, 10:45:23 PM
Have you guys taken a look at the 10-Q for Q1? I was wondering, how do you separate the Jefferies assets from the Leucadia assets?
Specifically, there's $2.3B in available-for-sale fixed income securities. Is that part of Jefferies' trading book or is that part of Leucadia's investment portfolio?
Also, the $3.1B in cash, is that part of Leucadia's portfolio?

Just compare JEF Q1 10Q with LUK Q1 10Q and you can subtract out the JEF BS to get the LUK BS ex JEF. For example, the cash at LUK is 122,463. The AFS portfolio is all LUK, trading assets is JEF.

Hope that helps.

Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 26, 2013, 12:45:34 AM
From reading the letter it sure looks like Steinberg & Cummings have done a good job of picking their successors and one will still be involved in being there for advice.

Ron,
I am a romantic! And I have no problem at all to admit that I enjoyed the letter immensely… and that I even shed a tear! :'(
But… when it comes to understand a business, I suddenly become as unemotional and detached as possible. That is the way I am done, and I like stories, but I find them of little use.
Sincerely, I had hoped I would have found out more about the future of LUK than about its past… This was supposed to be the missive with which Mr. Cumming and Mr. Steinberg officially introduced Mr. Handler and Mr. Friedman to LUK’s shareholders.
Though, in the first two pages of the letter they write about Jefferies, there is very little we didn’t already know… Then, we are left with 8 pages of “memorabilia”… don’t get me wrong: 8 wonderful pages!… But, unfortunately, not very useful (with the possible exception of “A Major Future Opportunity”).
Though I would sentimentally like to say that I feel more confident now about LUK’s future prospects, I must acknowledge that it would not be based upon any new substantial piece of information…
Very interesting price right now: no doubt about that, and I am sure a lot of you are buying! But I must wait. Because I require conviction first, then I look at the price! Otherwise, I know I will make mistakes.

giofranchi
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on June 26, 2013, 03:01:27 AM
gio,

You are right.  There was not a lot of new information in the letter, though I at least learned that C&S first came across Handler in 1987, whereas I had thought they first started their relationship in 2000 with the setting up of the Jefferies Partners Opportunity Fund.  I take a huge amount of comfort from their long, long association.

However, your main disappointment appears to be that "I had hoped I would have found out more about the future of LUK".  Was this a realistic expectation?  Is it right to think that they should paint the canvas of their successors?  Or, given that C&S know and trust their successors -- and we know and trust C&S -- shouldn't they seal their lips and let the new maestros do their thing?
Title: Re: JEF - Jefferies Group
Post by: giofranchi on June 26, 2013, 03:34:45 AM
However, your main disappointment appears to be that "I had hoped I would have found out more about the future of LUK".  Was this a realistic expectation?  Is it right to think that they should paint the canvas of their successors?  Or, given that C&S know and trust their successors -- and we know and trust C&S -- shouldn't they seal their lips and let the new maestros do their thing?

Hi WhoIsWarren,
maybe you are right… and mine was too selfish a wish!
Anyway, what can I say? I am like a spoiled kid, and very difficult to satisfy! ;D
Probably, that’s why the more I study and research, the more my “circle of competence” tends to shrink, instead of getting larger… Very few new businesses get inside, while many are thrown out! Like it is now happening with LUK… although only temporarily, I hope! ;)

giofranchi
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on June 26, 2013, 03:48:51 AM
Probably, that’s why the more I study and research, the more my “circle of competence” tends to shrink, instead of getting larger… Very few new businesses get inside, while many are thrown out!
giofranchi

Oh, I definitely find that problem too! ;D ;D

For now, Leucadia is still in the circle, but I am very conscious that they have changed leadership at the same time as they have radically changed the nature of the business (an investment / merchant bank).

As I said earlier, I trust C&S and they trust H&F, so I have a high level of (but not full) trust in H&F.
Title: Re: JEF - Jefferies Group
Post by: Packer16 on June 26, 2013, 04:10:05 AM
How have folks gotten comfortable with inherent conflicts that occur when you are both a principal ( distressed investor) and an agent (an investment bank)?  As a principal, LUK previously, it was pretty clear what the focus was.  Now what is it?  How do I-bank customers get comfortable that their interests versus the banks come first.  Will this become like a GS type company?  Will the firm provide capital back to shareholders when there is excess as in the past or will the capital be trapped in the i-bank for regulatory reasons?  Has this model been successful for other firms in terms of growing BV/share?

Packer
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on June 26, 2013, 04:15:36 AM
How have folks gotten comfortable with inherent conflicts that occur when you are both a principal ( distressed investor) and an agent (an investment bank)?  As a principal, LUK previously, it was pretty clear what the focus was.  Now what is it?  How do I-bank customers get comfortable that their interests versus the banks come first.  Will this become like a GS type company?  Will the firm provide capital back to shareholders when there is excess as in the past or will the capital be trapped in the i-bank for regulatory reasons?  Has this model been successful for other firms in terms of growing BV/share?

Packer

Exactly my concerns as well. It seems like such a clear cut conflict of interest.
Title: Re: JEF - Jefferies Group
Post by: Shane on June 26, 2013, 04:39:04 AM
FWIW, I've met a number of analysts/brokers who used to work at Jeffries but are now are larger shops... All of them said something along the lines of 'Chandler is outstanding/incredible'.  The conflict is concerning, however, I do trust they have thought this through.
Title: Re: JEF - Jefferies Group
Post by: Kraven on June 26, 2013, 04:51:09 AM
On Wall Street there are no conflicts of interest unless someone loses money. Then conflicts are rampant and everyone knew it (or was hoodwinked) and can't believe the matter went forward. Hilarity ensues.
Title: Re: JEF - Jefferies Group
Post by: jay21 on June 26, 2013, 05:54:00 AM
The wildcard is Handler. From what we know, since he took over management of Jefferies in 1990, he has compounded book value at 22% per year. This is "Buffet" territory returns. I am wondering what the future holds for LUK and his plans. Obviously, investment banking is only one of two major pillars. The other one is investing the large amounts of capital and equity that LUK has into investments that give good returns. In this respect, we don't know his experience outside of investment banking. Another possibility is bolt-on aquisitions in investment banking as opposed to the more electic investing in stocks, and "unrelated" businesses.

This is not true imo.  Handler was instrumental in Fortescue and his work with Knight Capital was great.  Combined with how he handled the bear attack, I think he has shown himself to be quite capable.

How have folks gotten comfortable with inherent conflicts that occur when you are both a principal ( distressed investor) and an agent (an investment bank)?  As a principal, LUK previously, it was pretty clear what the focus was.  Now what is it?  How do I-bank customers get comfortable that their interests versus the banks come first.  Will this become like a GS type company?  Will the firm provide capital back to shareholders when there is excess as in the past or will the capital be trapped in the i-bank for regulatory reasons?  Has this model been successful for other firms in terms of growing BV/share?

Packer

It is somewhat concerning but IBs can act as a principal or agent anyways.  Was them retaining a big investment in Knight a conflict of interest?

I wonder if Handler et al. will continue the tradition of picking up NOLs from companies to achieve the tax benefits?

It's possible.  However, they were trying to build a "Fortress Leucadia" so it may be less likely.  Maybe they will take a Buffett approach and look for companies that are tax advantaged such as railroads and utilities.
Title: Re: JEF - Jefferies Group
Post by: jay21 on June 26, 2013, 06:10:00 AM
Some highlights:

"They didn’t want to sell Jefferies at the bottom of a cycle; a stock for stock deal enabled them to do well by their shareholders while providing increased protection for their bondholders and creating long term stability for their employees and clients. Leucadia shareholders picked up a great asset at a fortuitous time for both companies and we solved our succession challenge. Combined, we have a world class investment banking firm, with a merchant banking focus, tax efficiency and a pile of cash."

They think that JEF is worth much more than when the transaction went through.  The primary assets of the combined company are JEF and cash (and probably National Beef).  JEF will help them use their NOL much faster, which increases the value of the NOL.

"We recently started a new auto finance company, Foursight Capital, which is financing customers of our auto dealerships."

Very interesting.  I do not have a good view of the auto finance market right now.  This should only be a very tiny piece of Leucadia though.

"A Major Future Opportunity"

I have no idea what the returns would look like on this project.
Title: Re: JEF - Jefferies Group
Post by: rjstc on June 26, 2013, 06:21:38 AM
Probably, that’s why the more I study and research, the more my “circle of competence” tends to shrink, instead of getting larger… Very few new businesses get inside, while many are thrown out!
giofranchi

Oh, I definitely find that problem too! ;D ;D

For now, Leucadia is still in the circle, but I am very conscious that they have changed leadership at the same time as they have radically changed the nature of the business (an investment / merchant bank).

As I said earlier, I trust C&S and they trust H&F, so I have a high level of (but not full) trust in H&F.

Gio. Who is Warren says it almost perfectly for me. I'm to a large extent a "Gut" investor. That and I shamelessly attach myself to owner, operators whose honesty I trust, investing acumen I trust, & rationality I've learned to get comfortable with. I accept that over the long run there will be ups and downs so I'm like turtle slow when it comes to making changes.  :) :)
   
Title: Re: JEF - Jefferies Group
Post by: rjstc on June 26, 2013, 06:25:09 AM
However, your main disappointment appears to be that "I had hoped I would have found out more about the future of LUK".  Was this a realistic expectation?  Is it right to think that they should paint the canvas of their successors?  Or, given that C&S know and trust their successors -- and we know and trust C&S -- shouldn't they seal their lips and let the new maestros do their thing?

Hi WhoIsWarren,
maybe you are right… and mine was too selfish a wish!
Anyway, what can I say? I am like a spoiled kid, and very difficult to satisfy! ;D
Probably, that’s why the more I study and research, the more my “circle of competence” tends to shrink, instead of getting larger… Very few new businesses get inside, while many are thrown out! Like it is now happening with LUK… although only temporarily, I hope! ;)

giofranchi

You're an engineer. You can't help yourself. ;D ;D ;D
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 26, 2013, 07:32:57 AM
gio,

You are right.  There was not a lot of new information in the letter, though I at least learned that C&S first came across Handler in 1987, whereas I had thought they first started their relationship in 2000 with the setting up of the Jefferies Partners Opportunity Fund.  I take a huge amount of comfort from their long, long association.

However, your main disappointment appears to be that "I had hoped I would have found out more about the future of LUK".  Was this a realistic expectation?  Is it right to think that they should paint the canvas of their successors?  Or, given that C&S know and trust their successors -- and we know and trust C&S -- shouldn't they seal their lips and let the new maestros do their thing?

Regarding Jefferies Partners Opportunity Fund, I am wondering why Ian mentioned only from 2000 to 2007 the return was 22%? Did he redeem all the money in 2007 at market peak? Or was the return not so great after 2007 that he didn't feel comfortable to let shareholders know?
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on June 26, 2013, 07:59:27 AM
Regarding Jefferies Partners Opportunity Fund, I am wondering why Ian mentioned only from 2000 to 2007 the return was 22%? Did he redeem all the money in 2007 at market peak? Or was the return not so great after 2007 that he didn't feel comfortable to let shareholders know?

Oh ye of little faith!!  ;D

From the 2008 10-K:

Jefferies Partners Opportunity Fund II, LLC (“JPOF II”) and Jefferies High Yield Holdings, LLC (“JHYH”)

During 2000, the Company invested $100,000,000 in the equity of JPOF II, a limited liability company, which was a registered broker-dealer. JPOF II was managed by Jefferies. JPOF II invested in high yield securities,special situation investments and distressed securities and provided trading services to its customers and clients. For the period from January 1, 2007 through March 31, 2007 (date of termination), and for the year ended December 31, 2006, the Company recorded pre-tax income from this investment under the equity method of accounting of $3,000,000 and $26,200,000, respectively. These earnings were distributed by JPOF II as dividends shortly after the end of each period.

During 2007, the Company and Jefferies formed JHYH, a newly formed entity, and the Company and Jefferies each initially committed to invest $600,000,000.
Title: Re: JEF - Jefferies Group
Post by: Partner24 on June 26, 2013, 08:35:40 AM
Unfortunately, businesses are theoricaly permanent, but people are surely not. Don't care about stock splits, but I would like to split the age of C&S in two!

A very good "Farewell" letter, but I agree that I would have liked to have more information regarding the new managers of the business. I first tought that the letter would be splitted in two...a section by C&S and a section for the new managers.



Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on June 26, 2013, 08:54:28 AM
http://dealbook.nytimes.com/2013/06/26/from-leucadia-a-final-letter-to-shareholders/ (http://dealbook.nytimes.com/2013/06/26/from-leucadia-a-final-letter-to-shareholders/)

From Leucadia, a Final Letter to Shareholders
Title: Re: JEF - Jefferies Group
Post by: mcliu on June 26, 2013, 09:08:03 AM
Have you guys taken a look at the 10-Q for Q1? I was wondering, how do you separate the Jefferies assets from the Leucadia assets?
Specifically, there's $2.3B in available-for-sale fixed income securities. Is that part of Jefferies' trading book or is that part of Leucadia's investment portfolio?
Also, the $3.1B in cash, is that part of Leucadia's portfolio?

Just compare JEF Q1 10Q with LUK Q1 10Q and you can subtract out the JEF BS to get the LUK BS ex JEF. For example, the cash at LUK is 122,463. The AFS portfolio is all LUK, trading assets is JEF.

Hope that helps.

Thanks. That's helpful.
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 26, 2013, 11:15:10 AM
How have folks gotten comfortable with inherent conflicts that occur when you are both a principal ( distressed investor) and an agent (an investment bank)?  As a principal, LUK previously, it was pretty clear what the focus was.  Now what is it?  How do I-bank customers get comfortable that their interests versus the banks come first.  Will this become like a GS type company?  Will the firm provide capital back to shareholders when there is excess as in the past or will the capital be trapped in the i-bank for regulatory reasons?  Has this model been successful for other firms in terms of growing BV/share?

Packer

Exactly my concerns as well. It seems like such a clear cut conflict of interest.

Have you guys read Seth Klarman's book?
He said merchant banking has the most conflict of interest within the IB industry.

From another book, I remember the author said that IBs usually have the sale side people to be on a different floor than the buy side people, and they are not allowed to talk to each other. This will supposedly gain imaginary compliance. :)
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 26, 2013, 11:16:53 AM
FWIW, I've met a number of analysts/brokers who used to work at Jeffries but are now are larger shops... All of them said something along the lines of 'Chandler is outstanding/incredible'.  The conflict is concerning, however, I do trust they have thought this through.

I remember Bruce Berkowitz said before that JEF's leaders are the best Investment Bankers, but I couldn't find the source anymore.
Do you see any chance JEF would grow to be the same size as GS, or at least MS?
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 26, 2013, 11:34:13 AM
FWIW, I've met a number of analysts/brokers who used to work at Jeffries but are now are larger shops... All of them said something along the lines of 'Chandler is outstanding/incredible'.  The conflict is concerning, however, I do trust they have thought this through.

I remember Bruce Berkowitz said before that JEF's leaders are the best Investment Bankers, but I couldn't find the source anymore.
Do you see any chance JEF would grow to be the same size as GS, or at least MS?

"On the Jeffries/Leucadia Merger:

In favor of it. Says Rich Handler, CEO of Jeffries, best Wall Street executive out there. Brilliant succession plan for Leucadia. Great way for Jeffries to have Fort Knox balance sheet."
https://www.welchcap.com/csima-conference-notes-part-2-bruce-berkowitz/ (https://www.welchcap.com/csima-conference-notes-part-2-bruce-berkowitz/)
Title: Re: JEF - Jefferies Group
Post by: Parsad on June 26, 2013, 03:05:21 PM
Leucadia locks up Justin Wheeler's services as well.  Smart, young guy who has brought Leucadia their best investments in the last few years.  Nice to see him staying on with a change in succession.  Cheers!

http://biz.yahoo.com/e/130626/luk8-k.html
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 26, 2013, 03:31:42 PM
Leucadia locks up Justin Wheeler's services as well.  Smart, young guy who has brought Leucadia their best investments in the last few years.  Nice to see him staying on with a change in succession.  Cheers!

http://biz.yahoo.com/e/130626/luk8-k.html

Interesting! Good to see that he's moving to NY, closer to HQ.
Title: Re: JEF - Jefferies Group
Post by: ShahKhezri on June 26, 2013, 04:47:42 PM
FWIW, I've met a number of analysts/brokers who used to work at Jeffries but are now are larger shops... All of them said something along the lines of 'Chandler is outstanding/incredible'.  The conflict is concerning, however, I do trust they have thought this through.

I remember Bruce Berkowitz said before that JEF's leaders are the best Investment Bankers, but I couldn't find the source anymore.
Do you see any chance JEF would grow to be the same size as GS, or at least MS?

IMO, there's no such thing as best ibankers.  I'm positive that every decent sized ibank pitches the very same debt/equity/spinoff/etc idea.  It's just a matter of whether you're MD went to school with so and so company's CEO or decision maker or your existing relationship and how entrenched it is with the Company.  Ibanking is glorified arts & crafts.  That's why league tables rarely change, rarely does a "star" or "genius" ibanker go to a no name place and get to the top of the tables.  Syndicate/Ibanking positions are high turnover positions because the work/life balance is nonexistent your first 10-15 years.  Those that stay either a) absolutely love it, b) think they are impacting the world in a positive way (and there are a lot who think that), c) live a lifestyle that demands the $.

With that said, balance sheet is key and there is a first mover advantage in coverage of an industry/sector that is either shunned or deemed risky.  Financials are one of the most commoditized businesses out there.  The key is, will JEF be able to successfully avoid going crazy at the top to keep from selling the family jewels at the bottom.  If Handler is able to do that, everything else is blind faith; the balance sheets are subject to a lot of assumptions.  If you don’t think Handler is Fuld or Prince, this investment will work out fine. 

No position in LUK.
Title: Re: JEF - Jefferies Group
Post by: muscleman on June 27, 2013, 09:06:41 AM
There is no doubt LUK is in the "recharging the elephant gun phase". It's ROE is pitiful at the moment. It is trading slightly below tangible book. It has sold and liquidated many of its public investments and owns a few large private businesses. Therefore, the thing to watch is what they are going to do with their resources in the next little while both at investing HQ and at Jefferies HQ. With 10 billion in equity, to achieve a 20% ROE which is what would lead to a 20% growth in book value, they must produce $2 billion per year of gains and/or income. They are nowhere close to that...I would say that the current "complex" can produce - in a stretch , no better than 1 billion per year, so the other billion must come from new investments.

Is it trading already below tangible book? From the latest 10-Q, the tangible book is about $7.6 bn. The current market cap is 9.11 bn.
Regarding Rich Handler, I remember Bruce mentioned somewhere before that he thinks Rich is the best investment banker on Wall Street, but I can't find the source anymore. Anyone?
Note that top IBs like GS is currently trading at about 10% above tangible book, while LUK is currently at 19% above book.


I thinkI heard him say that recently on a panel at a conference, maybe Ira Sohn

I can't find any source. Link?

This is what I found from the SEC filings:
http://www.sec.gov/Archives/edgar/data/96223/000093041313000410/c71828_424b3.htm

Page 72, Sum-of-the-Parts Analysis.

In performing the sum-of-the-parts analysis Citi also performed a sensitivity analysis of the valuation of certain of Leucadia’s assets, based on discussions with Leucadia management and as described above, that applied low and high range valuations to the applicable book values or net present values of such assets provided or reported by Leucadia. Based on this analysis and the assumptions and methodologies described above, Citi derived an implied range of equity values of Leucadia common shares of $20.68-$26.84 per share, as compared to the Leucadia Adjusted Pre-Announcement Share Price of $20.99.

Page 75, Pro forma analysis
This analysis indicated that the pro forma book value and tangible book value of Leucadia at June 30, 2012 would be $24.51 and $20.07 per share, respectively (compared to the Leucadia book value and tangible book value (adjusted to account for the estimated impact of the redemption of certain securities and divestiture of certain assets held by Leucadia during the second half of 2012) as of June 30, 2012 provided to Citi of $26.31 and $22.82 per share, respectively), which, following application of the exchange ratio of 0.81x.


What do you think? :)
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on June 27, 2013, 09:26:04 AM
And now for something completely different......

From the 2006 Leucadia shareholder letter:

"We have a two-pronged approach to our succession problem -- merge or acquire a large company not dependent on our investment skills and/or/also find and nurture talented investment types who have good deal skills -- whether inside or outside the Company."

I'm just reflecting on the tie-up with Jefferies: did they end up in the first camp or the second (or maybe a combination of both)?

My initial thinking was that, yeah Handler was instrumental in the Fortescue, he's an investment banker / deal maker, so clearly they've gone for the second camp.

But reading the 2012 letter, digesting Leucadia's pretty wild history, the wide and varied deals they got involved in, it's obvious that C&S were truly amazing investors.  Is it clear that 'new' Leucadia has good deal skills?  Did Handler cherry pick the Fortescue investment opportunity for C&S, or perhaps he was firing them over deals willy nilly, hoping that something would pique their interest. [After all, Jefferies gets paid on volume, not quality.]

So in that context, perhaps C&S settled on the first camp?  That's to say, they've merged with a large company (and probably a good one at that) not dependent on their investment skills, and the 'old' Leucadia will over time become the stub, as they harvest current investments and do not have the necessary skill set to find replacements?

Oh, perhaps it doesn't matter.  Just some rambling thoughts really......don't mind me.....

 :-X
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 27, 2013, 03:31:09 PM
I think as long as Steinberg is still Chairman there is a good prospect of cultivating existing investments and making new "good" ones. When it's his turn to retire, we will have more information on what the "young guys" have been doing. I'm going to give it a five year horizon to see what happens. It's too soon to tell anything. However, I am cautioned and made optimistic by two other companies and their evolution.

Brookfield - the young Mr. Flatt has really done very well when he took over from the older generation who ran the conglomerate. It feels like Handler is like a peer of Flatt, although Handler is about 10 years older.

Loews - this is the cautionary tale. When the parents gave control to the 4 sons, the sons didn't do anything special and the stock has , in my opinion, gone nowhere and done very poorly. More in management mode than entrepreneurial mode.

I can't  help feeling that C&S see something of their relationship in Handler and Friedman. I hope they are right.
Title: Re: JEF - Jefferies Group
Post by: Pensionguy on June 28, 2013, 06:57:30 AM
Annual Report out.  Nice summary history, and then end of an era to be sure. 

However, the letter surely left me craving any information about how the underlying business units are doing.  I assume the analyst days will enlighten us as to how the new mgmt team want to communicate with shareholders going forward.
Title: Re: JEF - Jefferies Group
Post by: giofranchi on July 20, 2013, 02:05:52 AM
A recent article.

giofranchi
Title: Re: JEF - Jefferies Group
Post by: Saidal on July 25, 2013, 01:48:05 PM
Did anyone attend the Leucadia AGM today? Below is the link to the presentation.

http://www.sec.gov/Archives/edgar/data/96223/000119312513301497/d573558dex991.htm
Title: Re: JEF - Jefferies Group
Post by: jay21 on July 25, 2013, 04:28:11 PM
Did anyone attend the Leucadia AGM today? Below is the link to the presentation.

http://www.sec.gov/Archives/edgar/data/96223/000119312513301497/d573558dex991.htm

Interesting.  Thanks for posting.

The business that I learned more about was Garcadia.  I thought it was just going to be a buyer of distressed dealerships that popped up in the recession, but it seems like they might be more ambitious then that.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on July 25, 2013, 06:38:46 PM
If Leucadia goes where nobody else likes to go, then a used car salesman makes perfect sense :)


Title: Re: JEF - Jefferies Group
Post by: Grenville on July 26, 2013, 02:25:08 PM
Here are some thorough notes from the AGM:

http://brooklyninvestor.blogspot.com/2013/07/leucadia-national-annual-meeting-2013.html (http://brooklyninvestor.blogspot.com/2013/07/leucadia-national-annual-meeting-2013.html)
Title: Re: JEF - Jefferies Group
Post by: ajc on July 26, 2013, 02:34:08 PM
Here are some thorough notes from the AGM:

http://brooklyninvestor.blogspot.com/2013/07/leucadia-national-annual-meeting-2013.html (http://brooklyninvestor.blogspot.com/2013/07/leucadia-national-annual-meeting-2013.html)

Thanks.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on August 01, 2013, 11:47:34 AM
http://www.latimes.com/business/money/la-fi-mo-ground-beef-sold-recall-20130731,0,6268520.story (http://www.latimes.com/business/money/la-fi-mo-ground-beef-sold-recall-20130731,0,6268520.story)

50,000 pounds of ground beef is recalled, may be tainted by E. coli
Title: Re: JEF - Jefferies Group
Post by: Parsad on August 01, 2013, 11:52:29 AM
http://www.latimes.com/business/money/la-fi-mo-ground-beef-sold-recall-20130731,0,6268520.story (http://www.latimes.com/business/money/la-fi-mo-ground-beef-sold-recall-20130731,0,6268520.story)

50,000 pounds of ground beef is recalled, may be tainted by E. coli

That's nothing...probably a week's worth of deliveries to Walmart.  If it was 50,000 tonnes, then I would have been worried!   ;D  Cheers!
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 06, 2013, 09:15:48 AM
LUK Q2 results and 10Q out:

http://www.leucadia.com/10q_docs/luk_2013q2.pdf (http://www.leucadia.com/10q_docs/luk_2013q2.pdf)
Title: Re: JEF - Jefferies Group
Post by: no_free_lunch on August 23, 2013, 06:33:58 AM
Anyone have a sense for how Leucadia's options work?  I am seeing some strange pricing which must mean that the options aren't trading 100% against the stock.

E.g.

Jan 2015 $20 calls have bid/ask spread of $2.7/3.00 on a stock that is over $25.   How can this be?
Title: Re: JEF - Jefferies Group
Post by: gfp on August 23, 2013, 06:44:29 AM
I believe it got adjusted for the Crimson wine spin-off.  So some LUK options are for 95% (95) shares of LUK after the split if I am understanding it correctly.  The math seems to support the 95 number as well.
Title: Re: JEF - Jefferies Group
Post by: no_free_lunch on August 23, 2013, 06:56:50 AM
Global,

I am trying to figure out how it works still.  My brokerage says it is for 81 shares, so okay.

So does that mean when I pay say $1.25 for the $25 call, that it will be $1.25*100 = $1250 for 81 shares?
Title: Re: JEF - Jefferies Group
Post by: gfp on August 23, 2013, 07:15:59 AM
That sounds correct - sorry for posting an incorrect number above.  If your broker says it's 81 shares per contract, use that number.
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 23, 2013, 09:13:11 AM
LUK just released an amendment to their retention agreement with Tom Mara, Justin Wheeler and Joe Orlando. The timing is a bit funny so I hope none of them are thinking about leaving.

from the filing:
http://www.sec.gov/Archives/edgar/data/96223/000090951813000203/mm08-2313_8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951813000203/mm08-2313_8k.htm)
Quote
As a result of the transaction with Jefferies Group LLC and Richard B. Handler becoming Chief Executive Officer of the Company, each executive had the right under the agreements to receive the Payment were he to terminate his employment within six months of March 1, 2013.

That would put the last date for payment at September 1, 2013. Why one would amend it on Aug 21 is a bit curious, but I'm sure I'm missing something and hoping its nothing.
Title: Re: JEF - Jefferies Group
Post by: Parsad on August 23, 2013, 10:22:35 AM
LUK just released an amendment to their retention agreement with Tom Mara, Justin Wheeler and Joe Orlando. The timing is a bit funny so I hope none of them are thinking about leaving.

from the filing:
http://www.sec.gov/Archives/edgar/data/96223/000090951813000203/mm08-2313_8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951813000203/mm08-2313_8k.htm)
Quote
As a result of the transaction with Jefferies Group LLC and Richard B. Handler becoming Chief Executive Officer of the Company, each executive had the right under the agreements to receive the Payment were he to terminate his employment within six months of March 1, 2013.

That would put the last date for payment at September 1, 2013. Why one would amend it on Aug 21 is a bit curious, but I'm sure I'm missing something and hoping its nothing.

That is very weird and unusual!  It's almost like a repricing of options, just on the compensation agreement.  If any leave before September 1st, I would not be surprised to see some outcry from shareholders.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: twacowfca on August 23, 2013, 10:55:13 AM
LUK just released an amendment to their retention agreement with Tom Mara, Justin Wheeler and Joe Orlando. The timing is a bit funny so I hope none of them are thinking about leaving.

from the filing:
http://www.sec.gov/Archives/edgar/data/96223/000090951813000203/mm08-2313_8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951813000203/mm08-2313_8k.htm)
Quote
As a result of the transaction with Jefferies Group LLC and Richard B. Handler becoming Chief Executive Officer of the Company, each executive had the right under the agreements to receive the Payment were he to terminate his employment within six months of March 1, 2013.

That would put the last date for payment at September 1, 2013. Why one would amend it on Aug 21 is a bit curious, but I'm sure I'm missing something and hoping its nothing.

That is very weird and unusual!  It's almost like a repricing of options, just on the compensation agreement.  If any leave before September 1st, I would not be surprised to see some outcry from shareholders.  Cheers!

It may simply be that they are merely eliminating a perverse incentive for them to leave.
Title: Re: JEF - Jefferies Group
Post by: Parsad on August 23, 2013, 11:33:40 AM
Sorry, I think Twa is correct...it says "had" the right, not "has" the right.  They are removing the clause.  Thanks Twa...that's what you get paid the big bucks for!  Cheers!
Title: Re: JEF - Jefferies Group
Post by: twacowfca on August 23, 2013, 11:59:20 AM
Sorry, I think Twa is correct...it says "had" the right, not "has" the right.  They are removing the clause.  Thanks Twa...that's what you get paid the big bucks for!  Cheers!

Thanks for the compliment, Sanjeev.  Please send your extra supermarket coupons to Tim.  He'll forward them to my sweetheart to add to our growing treasure chest.  She's the reason for our success.  :)
Title: Re: JEF - Jefferies Group
Post by: Grenville on September 04, 2013, 01:50:32 PM
New signage around 520 Madison, JEF HQ. If someone could confirm or share some pictures for us non NYers that would be great.

"The Jefferies name is now all over 520 Madison Avenue"
http://hereisthecity.com/2013/09/03/why-and-not-why-the-jefferies-name-is-now-all-over-520-madison-a/ (http://hereisthecity.com/2013/09/03/why-and-not-why-the-jefferies-name-is-now-all-over-520-madison-a/)

Quote
Here's an email sent over the long holiday weekend to all Jefferies employees / partners by CEO Richard Handler and President Freidman:

'For those of us coming to work this week in our New York Global Headquarters, you will notice something new on OUR building. Here are some thoughts from the two of us. 
.....
Title: Re: JEF - Jefferies Group
Post by: dcollon on September 17, 2013, 11:56:50 AM
Jefferies Profit Tumbles 83% on Plunge in Bond Trading

http://www.bloomberg.com/news/2013-09-17/jefferies-profit-tumbles-83-as-bond-trading-revenue-plunges.html
Title: Re: JEF - Jefferies Group
Post by: jay21 on September 18, 2013, 06:12:00 AM
8-K:  http://www.sec.gov/Archives/edgar/data/1084580/000115752313004440/a50710907ex_99.htm

Interesting quarter.  I am still wrapping my head around IB F/S so take my comments with a grain of salt, but I found a few interesting things:

Obviously, the headline numbers are the poor net income and low fixed income numbers.  Principal transactions were negative so I think that a good chunk of the low revenue is due to their inventory being marked down.

IB posted a good quarter compared to last quarter and last year.  Advisory was up substantially since last quarter.  Also, they made the following comments: "Since Labor Day, client flows have been stronger and fixed income performance has markedly improved to more normal levels. Momentum in Investment Banking appears to be building for our fourth-quarter and into 2014, as our backlog is strong and improving."  This was a bright point as rate volatility is generally bad for deal execution and they had a good quarter.  Guidance seems to be good as well.

The most interest point: compensation expense.  This quarter ~293m, last quarter ~373m, and last year, ~440m.  I am not sure if there is any reason for this huge drop in expense from last year, but I hope they are getting on the right track of lowering their comp expense.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on September 19, 2013, 11:35:22 AM
http://www.breakingviews.com/jefferies-shows-fixed-income-isnt-for-everyone/21108284.article (http://www.breakingviews.com/jefferies-shows-fixed-income-isnt-for-everyone/21108284.article)

Jefferies shows fixed income isn't for everyone
Title: Re: JEF - Jefferies Group
Post by: Gopinath on September 27, 2013, 01:37:43 PM
It looks like Leucadia acquired 13.2% of Harbinger Group.

http://secfilings.com/searchresultswide.aspx?link=2&filingid=9528037
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on September 27, 2013, 02:30:55 PM
Phil Falcone vehicle.  Holds Spectrum Brands stake and a life insurer Fidelity and Guaranty.

Harbinger Group Inc. operates as a diversified holding company. The company, through its subsidiaries, offers various branded consumer products, such as consumer batteries, including alkaline and zinc carbon batteries, rechargeable batteries and chargers, hearing aid batteries, and other specialty batteries, as well as portable lighting products; small appliances comprising small kitchen appliances and home product appliances; pet supplies consisting of aquatic equipment and supplies, dog and cat treats, small animal foods, clean up and training aids, health and grooming products, and bedding products; home and garden control products, including household insect controls, insect repellents, and herbicides; electric shaving and grooming devices; and electric and wet personal care, and styling devices. Its brand portfolio includes Rayovac, VARTA, Beltone, Miracle Ear, Starkey, George Foreman, Black & Decker, Russell Hobbs, Farberware, Juiceman, Breadman, Toastmaster, Tetra, Marineland, Whisper, Jungle, Instant Ocean, FURminator, 8-in-1, Dingo, Firstrax, Nature’s Miracle, Wild Harvest, Littermaid, Hot Shot, Cutter, Repel, Black Flag, TAT, Spectracide, Real-Kill, Garden Safe, Remington, Carmen, and Andrew Collinge. The company sells its products through retailers, wholesalers and distributors, hearing aid professionals, industrial distributors, and original equipment manufacturers to home improvement centers, mass merchandisers, hardware stores, home and garden distributors, food and drug retailers, and pet stores. It also provides life insurance and annuity products through independent agents, managing general agents, and specialty brokerage firms; and secured asset-based loans to entities in various industries with additional financing throughout the capital structure. The company was formerly known as Zapata Corporation and changed its name to Harbinger Group Inc. in December 2009. Harbinger Group Inc. was founded in 1954 and is headquartered in New York, New York.

Title: Re: JEF - Jefferies Group
Post by: rogermunibond on September 27, 2013, 02:44:12 PM
http://www.bloomberg.com/news/2013-08-30/falcone-insurer-said-to-seek-1-billion-valuation-in-ipo.html

F&G listing 10% in an IPO.
Title: Re: JEF - Jefferies Group
Post by: VersaillesinNY on September 27, 2013, 05:09:49 PM
"Three funds run by Harbinger Capital Partners LLC sold a combined 18.6 million shares of Harbinger Group, a publicly traded holding company run by Falcone, for $8.50 a share".

http://www.bloomberg.com/news/2013-09-27/falcone-s-funds-sell-harbinger-group-shares-to-leucadia.html?cmpid=yhoo
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on October 03, 2013, 05:07:08 AM
Investor presentation - Oktober 2013

http://www.leucadia.com/luk_presentation_10-02-13.pdf
Title: Re: JEF - Jefferies Group
Post by: jay21 on October 03, 2013, 05:29:28 AM
Investor presentation - Oktober 2013

http://www.leucadia.com/luk_presentation_10-02-13.pdf

This was good. Thanks.

I'm looking over the presentation and a lot of what they are doing seems to be smart, but I am having trouble coming up with what I think each business is worth.

Here's the businesses they always high light and their BV:

Jefferies - 5.2b
National Beef - 877m
Berkadia - 188m
Garcadia - 122m

Berkadia and Garcadia are ~1% to 2% of BV positions and are hardly going to move the needle.  So this is still comes down to a bet on Jef, National Beef, and what the jockeys do with the cash.

I'll probably add more, just want to think this one over so more.
Title: Re: JEF - Jefferies Group
Post by: HJ on October 03, 2013, 06:08:39 AM
Investor presentation - Oktober 2013

http://www.leucadia.com/luk_presentation_10-02-13.pdf

This was good. Thanks.

I'm looking over the presentation and a lot of what they are doing seems to be smart, but I am having trouble coming up with what I think each business is worth.

Here's the businesses they always high light and their BV:

Jefferies - 5.2b
National Beef - 877m
Berkadia - 188m
Garcadia - 122m

Berkadia and Garcadia are ~1% to 2% of BV positions and are hardly going to move the needle.  So this is still comes down to a bet on Jef, National Beef, and what the jockeys do with the cash.

I'll probably add more, just want to think this one over so more.

It seems that the BV on Berkadia, Garcadia and National Beef all understates the value of those businesses.  As for Jefferies, we can all have our own opinions on the proper valuation.
Title: Re: JEF - Jefferies Group
Post by: thepupil on October 03, 2013, 06:12:09 AM
I 100% agree. Something that gives you $191MM of distributions in 4 or so years is not worth $188MM. Berkadia's growth is very likely to slow however, given Walker Dunlop's recent announcement

http://finance.yahoo.com/news/walker-dunlop-plunges-loan-outlook-151838964.html

 Leucadia’s original investment was $217 million. As of July 15, 2013,
cumulative cash distributions to Leucadia have been $191 million, with
substantial value going forward
Title: Re: JEF - Jefferies Group
Post by: Grenville on October 03, 2013, 08:52:14 AM
Any thoughts on why they are filing an S3 and the presentation. Are they raising capital or something else?
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on October 03, 2013, 04:16:34 PM
http://www.sec.gov/Archives/edgar/data/96223/000093041313004834/c75184_424b5.htm

Relates to Jefferies convertible senior debentures
Title: Re: JEF - Jefferies Group
Post by: jay21 on October 05, 2013, 04:41:50 PM
Investor presentation - Oktober 2013

http://www.leucadia.com/luk_presentation_10-02-13.pdf

This was good. Thanks.

I'm looking over the presentation and a lot of what they are doing seems to be smart, but I am having trouble coming up with what I think each business is worth.

Here's the businesses they always high light and their BV:

Jefferies - 5.2b
National Beef - 877m
Berkadia - 188m
Garcadia - 122m

Berkadia and Garcadia are ~1% to 2% of BV positions and are hardly going to move the needle.  So this is still comes down to a bet on Jef, National Beef, and what the jockeys do with the cash.

I'll probably add more, just want to think this one over so more.

It seems that the BV on Berkadia, Garcadia and National Beef all understates the value of those businesses.  As for Jefferies, we can all have our own opinions on the proper valuation.

I agree too. But, my point for Berkadia and Garcadia is that they need to be many multiples of book to have an a material impact on the valuation for me.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on October 09, 2013, 11:10:34 AM
http://www.bloomberg.com/news/2013-10-09/jefferies-posts-18-days-of-trading-losses-most-since-11.html (http://www.bloomberg.com/news/2013-10-09/jefferies-posts-18-days-of-trading-losses-most-since-11.html)

Jefferies Posts 18 Days of Trading Losses, Most Since ’11
Title: Re: JEF - Jefferies Group
Post by: Grenville on October 15, 2013, 08:53:07 PM
Leucadia raising 750mln in Senior Notes at 5.5% due 2023

http://www.sec.gov/Archives/edgar/data/96223/000093041313004943/c75331_fwp.htm (http://www.sec.gov/Archives/edgar/data/96223/000093041313004943/c75331_fwp.htm)

Press release:

http://www.marketwatch.com/story/leucadia-national-corporation-announces-pricing-of-senior-notes-offering-2013-10-15?reflink=MW_news_stmp (http://www.marketwatch.com/story/leucadia-national-corporation-announces-pricing-of-senior-notes-offering-2013-10-15?reflink=MW_news_stmp)

Quote
Leucadia National Corporation Announces Pricing of Senior Notes Offering

NEW YORK, Oct 15, 2013 (BUSINESS WIRE) -- Leucadia National Corporation LUK +0.10%  today announced the pricing of its public offering of $750,000,000 principal amount of its 5.50% Senior Notes due 2023 (the "senior notes") at an issue price of 98.641%. The offering is expected to close on October 18, 2013.

The Company intends to use the net proceeds from the proposed offering for the repayment, repurchase and/or redemption of its 8(1)/8% senior notes maturing in 2015 and general corporate purposes.

The offering is being made pursuant to an effective registration statement filed by Leucadia National Corporation with the Securities and Exchange Commission on October 2, 2013.

Jefferies LLC is acting as sole bookrunner for the proposed offering. Interested parties may obtain a written prospectus relating to the senior notes offering from the following: Debt Capital Markets, Jefferies LLC, 520 Madison Avenue, 8th Floor, New York, NY 10022, (212) 284-3417.
Title: Re: JEF - Jefferies Group
Post by: Myth465 on October 15, 2013, 09:21:02 PM
Very nice rate reduction.
Title: Re: JEF - Jefferies Group
Post by: twacowfca on October 16, 2013, 01:59:12 AM
Very nice rate reduction.

Interesting.  Leucadia, our fourth largest investee is now paying about the same rate as Lancashire on their recent ten year notes.  I think the credit analysts are starting to appreciate the increased financial strength of the Leucadia - Jefferies combination.  :)
Title: Re: JEF - Jefferies Group
Post by: Myth465 on October 16, 2013, 03:14:16 AM
I hate paying taxes, and plan to hold LUK in a taxable account and increase it overtime. LRE is in a Roth IRA because of those pesky special dividends.

I like Jefferies Management but still dont quite understand investment banks. I think Owning LUK could be a good way to get comfortable with them.

TWA what else do you hold? Are you still in Freddie / Fannie?
Title: Re: JEF - Jefferies Group
Post by: zippy1 on November 07, 2013, 12:27:38 PM
Luk Q3 results out
http://finance.yahoo.com/news/leucadia-national-corporation-announces-nine-200000946.html
Quote
Net income attributable to Leucadia National Corporation common shareholders for the nine month periods ended September 30, 2013 and 2012 was $360,686,000 ($1.06 per diluted common share) and $400,300,000 ($1.62 per diluted common share), respectively. These results reflect the inclusion of the operations of Jefferies Group LLC and its subsidiaries since its acquisition on March 1, 2013.
Title: Re: JEF - Jefferies Group
Post by: Christopher1 on November 07, 2013, 02:05:59 PM
No more funds for Sangart:
"In October 2013, the Company concluded that it would no longer continue to fund Sangart’s research and development activities, and commenced an orderly shut-down of its operations.  The Company estimates future expenses related to Sangart’s final operating activities and shut-down costs are approximately $15.0 million, which are likely to be recorded during the fourth quarter of 2013."
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 07, 2013, 02:37:46 PM
No more funds for Sangart:
"In October 2013, the Company concluded that it would no longer continue to fund Sangart’s research and development activities, and commenced an orderly shut-down of its operations.  The Company estimates future expenses related to Sangart’s final operating activities and shut-down costs are approximately $15.0 million, which are likely to be recorded during the fourth quarter of 2013."

Thanks for the nugget on Sangart.

Ian Cumming sold a good chunk of stock and dropped below reporting requirements. I doubt we'll see his holdings in the proxy.

He sold 4.2mln shares of 22mln at $28 on 11/1/13.

I would have preferred he stay a holder of LUK. I wonder who picked up his shares.

http://www.sec.gov/Archives/edgar/data/96223/000093041313005196/c75504_sc13da.htm (http://www.sec.gov/Archives/edgar/data/96223/000093041313005196/c75504_sc13da.htm)
Title: Re: JEF - Jefferies Group
Post by: james22 on November 16, 2013, 07:01:15 AM
Leucadia National Corp. (LUK) is a diversified holding company that has an excellent track record of creating value for shareholders over the last 30 years. Currently the Company is in a period of leadership transition and is under-followed by Wall Street analysts. Valuation has compressed significantly in recent years, which has arguably left Leucadia National undervalued by 20-30%.

http://seekingalpha.com/article/1838582-leucadia-national-sotp-points-to-20-30-upside
Title: Re: JEF - Jefferies Group
Post by: jay21 on December 10, 2013, 12:43:11 PM
http://www.bloomberg.com/news/2013-12-06/jefferies-increases-kcg-stake-by-49-to-16-5-million-shares.html?cmpid=yhoo

Buying more KCG
Title: Re: JEF - Jefferies Group
Post by: skanjete on December 16, 2013, 06:12:14 AM
Biloxi is being sold, $25m above book :

http://biz.yahoo.com/e/131216/luk8-k.html
Title: Re: JEF - Jefferies Group
Post by: jay21 on December 17, 2013, 06:17:41 AM
http://www.bloomberg.com/news/2013-12-06/jefferies-increases-kcg-stake-by-49-to-16-5-million-shares.html?cmpid=yhoo

Buying more KCG

 Highlights for the three months ended November 30, 2013:

    Net revenues of $936 million
    Net earnings of $120 million
    Investment banking net revenues of $417 million
    Equities net revenues of $294 million
    Fixed Income net revenues of $212 million

Richard B. Handler, Chairman and Chief Executive Officer of Jefferies, commented: “Our results reflect exceptional quarterly performance in our investment banking efforts, a solid performance from our core global equity businesses, and a very significant improvement in our fixed income results versus the third-quarter. Our investment banking performance benefited from a strong equities and leveraged finance new issues market and demonstrates our significant market presence and value added capabilities. Our equities results include the impact of $110 million in pre-tax unrealized mark-to-market gains on our holdings of shares of Knight Capital and Harbinger Group. Fixed income customer flows improved significantly from last quarter. While our results for the full fiscal year 2013 were below those of 2012, primarily due to the difficult mid-year fixed income environment, we believe the strong finish to the year, combined with the continued positive momentum in all of our core businesses, positions us well for 2014. We thank our clients, our employees, our bondholders and all our business partners for their continued support.”

KCG continues to look like a smart investment.  Also, appears that JEF was behind Harbinger as well.

http://www.sec.gov/Archives/edgar/data/96223/000115752313005786/a50770134ex99.htm
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on December 17, 2013, 10:58:03 AM
So ex-unrealized gains in KCG and HRG they made net $10 million?
Title: Re: JEF - Jefferies Group
Post by: jay21 on December 17, 2013, 11:09:07 AM
So ex-unrealized gains in KCG and HRG they made net $10 million?

More than that.  The $110 gain was given pre tax.

Ex-this it looks like they are close to PY results, however with a higher comp expense.  It seems like this is a play on if those compensation investments will pay off and revenue will increase and their comp ratio will go down.
Title: Re: JEF - Jefferies Group
Post by: ajc on December 21, 2013, 12:35:36 PM
Indiana Supreme Court hands Leucadia a win

"The Indiana Supreme Court has handed the developers of a controversial coal-to-gas plant planned for Rockport a decisive victory in a battle over whether a deal to build it complied with state law.

The 5-0 ruling eliminates a significant hurdle for Leucadia National, the plant's developer, which had all but given up the project after legislative action made it likely it would need a new review. But the Supreme Court's decision essentially makes that moot.
"We won a complete and total victory," said Mark Lubbers, project manager for Leucadia.

Still, company officials weren't ready to talk about when or if they'll move forward with the plant.
Instead, Lubbers pointed to an April 30 statement in which the company said that even if it won in the courts, "only a clear reversal of position by the governor would enable the project to go forward."
The statement came just after Gov. Mike Pence had said he would sign a bill into law that was meant to provide a new review of the project. On Tuesday, a spokeswoman for Pence did not immediately respond to questions about the project or the court ruling.

The $2.8 billion Indiana Gasification project is the result of a sort of public-private partnership brokered by the company with the administration of former Gov. Mitch Daniels, for whom Lubbers had once been a top adviser..."

http://www.nuvo.net/indianapolis/indiana-supreme-court-hands-leucadia-a-win/Content?oid=2730625#.UrX509JdVBM (http://www.nuvo.net/indianapolis/indiana-supreme-court-hands-leucadia-a-win/Content?oid=2730625#.UrX509JdVBM)
Title: Re: JEF - Jefferies Group
Post by: jay21 on December 30, 2013, 12:36:34 PM
Indiana Supreme Court hands Leucadia a win

"The Indiana Supreme Court has handed the developers of a controversial coal-to-gas plant planned for Rockport a decisive victory in a battle over whether a deal to build it complied with state law.

The 5-0 ruling eliminates a significant hurdle for Leucadia National, the plant's developer, which had all but given up the project after legislative action made it likely it would need a new review. But the Supreme Court's decision essentially makes that moot.
"We won a complete and total victory," said Mark Lubbers, project manager for Leucadia.

Still, company officials weren't ready to talk about when or if they'll move forward with the plant.
Instead, Lubbers pointed to an April 30 statement in which the company said that even if it won in the courts, "only a clear reversal of position by the governor would enable the project to go forward."
The statement came just after Gov. Mike Pence had said he would sign a bill into law that was meant to provide a new review of the project. On Tuesday, a spokeswoman for Pence did not immediately respond to questions about the project or the court ruling.

The $2.8 billion Indiana Gasification project is the result of a sort of public-private partnership brokered by the company with the administration of former Gov. Mitch Daniels, for whom Lubbers had once been a top adviser..."

http://www.nuvo.net/indianapolis/indiana-supreme-court-hands-leucadia-a-win/Content?oid=2730625#.UrX509JdVBM (http://www.nuvo.net/indianapolis/indiana-supreme-court-hands-leucadia-a-win/Content?oid=2730625#.UrX509JdVBM)

I'm still trying to wrap my head around the energy projects.  I do not know anything about energy and even rudimentary commentary may help me.  Does anyone have any insight they could share?

I found this on yahoo finance that is taking a stab at the potential earnings power:

http://finance.yahoo.com/mbview/threadview/;_ylt=AqGrHVmFa3ERYbCYD52_r23eAohG;_ylu=X3oDMTB2OWFnODMyBHBvcwM3OARzZWMDTWVkaWFNc2dCb2FyZHNYSFJVbHQ-;_ylg=X3oDMTBhYWM1a2sxBGxhbmcDZW4tVVM-;_ylv=3?&bn=19ae4497-92fa-3786-aa7d-551fc38c08ed&tid=1372196839396-cb9be200-56b3-4260-851c-59e5226b5cd0&tls=la%2Cd%2C39%2C0
Title: Re: JEF - Jefferies Group
Post by: ajc on December 30, 2013, 02:55:19 PM
Leucadia Agrees With The State Of Oregon To Extend The Review Of Its CZMA Application To April 3rd

Near-term completion of State review expected. Record $6.3 billion investment in Oregon would provide critical construction jobs, state and local tax benefits, and a more reliable supply of natural gas to the Pacific Northwest.

In a statement issued in Portland today, Oregon LNG applauded the execution of a three-month stay agreement between Oregon LNG and the Department of Land Conservation and Development (DLCD) of the state of Oregon with respect to its completed Coastal Zone Management Act (CZMA) application. Oregon LNG has proposed a $6-plus billion liquefied natural gas (LNG) terminal and associated pipeline which will be sited near the mouth of the Columbia River in Warrenton, Oregon. Peter Hansen, CEO of Oregon LNG, stated: "The project remains on track to receive most of its federal permits by the end of 2014, making Oregon LNG one of the first LNG export projects on the West Coast of North America. We are excited about the economic progress, exports, and clean energy that this project will provide to the Pacific Northwest and the world."

http://www.4-traders.com/LEUCADIA-NATIONAL-CORP-13437/news/Leucadia-National-Corp--Oregon-LNG-Agrees-with-the-State-of-Oregon-to-Extend-to-April-3-2014-the-17736788/ (http://www.4-traders.com/LEUCADIA-NATIONAL-CORP-13437/news/Leucadia-National-Corp--Oregon-LNG-Agrees-with-the-State-of-Oregon-to-Extend-to-April-3-2014-the-17736788/)
Title: Re: JEF - Jefferies Group
Post by: ajc on December 30, 2013, 04:32:53 PM
I'm still trying to wrap my head around the energy projects.  I do not know anything about energy and even rudimentary commentary may help me.  Does anyone have any insight they could share?

I found this on yahoo finance that is taking a stab at the potential earnings power:

http://finance.yahoo.com/mbview/threadview/;_ylt=AqGrHVmFa3ERYbCYD52_r23eAohG;_ylu=X3oDMTB2OWFnODMyBHBvcwM3OARzZWMDTWVkaWFNc2dCb2FyZHNYSFJVbHQ-;_ylg=X3oDMTBhYWM1a2sxBGxhbmcDZW4tVVM-;_ylv=3?&bn=19ae4497-92fa-3786-aa7d-551fc38c08ed&tid=1372196839396-cb9be200-56b3-4260-851c-59e5226b5cd0&tls=la%2Cd%2C39%2C0

Thanks for posting, and +1 (any help here would be appreciated).

According to this (http://www.youtube.com/watch?v=fc_5-iqalQ8 (http://www.youtube.com/watch?v=fc_5-iqalQ8)), natural gas sells for up to $16 per 1000 cubic feet in Japan with US production and overseas shipping costs coming in at a combined $8/$9 per 1000 cubic feet.
So, I think Oregon might simply be a play on that disparity.

Regarding coal gasification, I have no idea. From the bits I've read, the flexibility it provides is key and the US has massive coal reserves which need to be used in a clean way - hence gasification. Also, the main cost-inefficiency seems to be the upfront costs of building the plant, but Leucadia have been able to strike a reasonably good deal in that respect if I'm not mistaken.

I've just found these via some googling, not sure what use they'll be (if any):

- The Economics Of Gasification: A Market-Based Approach www.mdpi.com/1996-1073/2/3/662/pdf (http://www.mdpi.com/1996-1073/2/3/662/pdf)

- Cost Estimates Of Coal Gasification For Chemical And Motor Fuels http://www.intechopen.com/books/gasification-for-practical-applications/cost-estimates-of-coal-gasification-for-chemicals-and-motor-fuels (http://www.intechopen.com/books/gasification-for-practical-applications/cost-estimates-of-coal-gasification-for-chemicals-and-motor-fuels)

- Coal Gasification Could Unlock Coal’s Future http://www.energybiz.com/article/13/04/coal-gasification-could-unlock-coal-s-future (http://www.energybiz.com/article/13/04/coal-gasification-could-unlock-coal-s-future)
Title: Re: JEF - Jefferies Group
Post by: jay21 on January 01, 2014, 10:56:35 AM
I'm reading XOM's energy outlook: http://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-reportsEnergy

Here's their writeup on LNG:

Shale, LNG continue to reshape natural gas market

Two significant developments in natural gas — shale gas production in North America and the growth of the global LNG market — are likely to play a major role in expanding and reshaping natural gas supplies over the coming decades.

Unconventional gas — including shale gas, tight gas and coalbed methane — accounts for about 40 percent of the world’s remaining recoverable gas resource, according to IEA estimates. Unconventional development is expected to play an increasing role in the global gas supply.

Advances in technology and favorable market conditions have unlocked North America’s vast resources of shale gas and other unconventional sources such as tight gas and tight oil. From 2010 to 2040, unconventional gas production in North America is expected to grow by around 65 billion cubic feet per day, which is about the size of total U.S. gas production today. This abundant supply is expected to enable North America to shift from a net importer to a net exporter of natural gas by 2020 as production outpaces demand.

There is also large potential for unconventional gas production in other parts of the world, notably Asia Pacific. Australia, China and Indonesia, along with Argentina and other nations, are actively promoting exploration and development of their unconventional gas resources, aspiring to replicate North America’s success. In each country, the pace of development will depend on geology, appropriate technology adaptations, governing policies and development economics.

About 65 percent of the growth in natural gas supplies through 2040 is expected to be from unconventional sources, which will account for one-third of global production by 2040. North America will lead unconventional gas production, accounting for more than half the growth through most of the Outlook period.

Like oil, natural gas is often found in remote areas, far from large, urban energy demand centers. LNG, or liquefied natural gas, can be transported by ship, enabling gas to be delivered economically to more distant markets than can be reached by pipeline.

All around the world — from the highlands of Papua New Guinea, to the deep water off east Africa, to frigid far east Russia, to the U.S. Gulf Coast — LNG projects are in various stages of planning and development to produce gas destined for faraway ports. These projects will bring jobs and economic opportunity to gas-rich regions, while supplying much-needed cleaner energy to burgeoning cities.

An increasing share of global natural gas demand through 2040 is expected to be met by gas imported as LNG.

LNG volume is expected to triple over the Outlook period to meet approximately 15 percent of global gas demand. The growth of the LNG market will facilitate trade between regions, helping to balance global supply and demand of natural gas.

Overall, international trade of natural gas in 2040 is expected to be 2.5 times the 2010 level, growing from about 15 percent of gas demand in 2010 to 25 percent by 2040. Most of this traded volume will be LNG, particularly in Asia Pacific. By 2040, about 40 percent of Asia Pacific’s natural gas demand will be satisfied by LNG, with another 10 percent supplied by pipeline imports. Europe’s regional gas imports are also likely to increase from about 45 to 60 percent as local production declines.
Title: Re: JEF - Jefferies Group
Post by: ajc on January 01, 2014, 02:58:22 PM
I'm reading XOM's energy outlook: http://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-reportsEnergy

Thanks jay21.

That seems like the Oregon bet in a nutshell.

Again, I don't know enough about energy to have a worthwhile opinion at this point but if there is one global region with people and a need for energy over the next century then Asia is it.
The Pacific Northwest is obviously well located to take advantage of North America's low-cost energy producer status in that regard.

My inexpert view of it is that it's fundamentally a long-term arbitrage opportunity.
Demand in Asia is going to rise far quicker than supply there, and the US has the cheapest gas.
That's my neophytic view on it anyway.

Also, I think you might find this interesting: http://www.gasification.org/page_1.asp?a=8 (http://www.gasification.org/page_1.asp?a=8)
Mind the sales pitch, but there's still some useful stuff in there besides.

My thoughts on the coal gasification deals is that from what I've read those plants can convert multiple resources into electricity (plus of course, there's the CO2 and other by-products that can be sold).

Maybe I'm being too clever by half here, but if gas prices fall drastically then you can use that to produce power or if coal prices slump then you can use that.
If you can get reasonable upfront terms like Leucadia seem to be getting for the construction aspect, then for the production part you're able to keep costs low at all times because of the flexibility that coal gasification plants offer.

Perhaps, that's incorrect though. I really don't claim to have much energy-related expertise.

Finally, here's just a snapshot of some Leucadia gasification production projections (click on the right for the others): http://www.globalccsinstitute.com/project/mississippi-gasification-leucadia (http://www.globalccsinstitute.com/project/mississippi-gasification-leucadia)

I think from those we could get a range of values for what each plant might earn annually.
   
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on January 03, 2014, 03:59:36 PM
Cattle prices rising.  National Beef may not see improvement in 2014.

http://online.wsj.com/news/articles/SB10001424052702304325004579298392616017708
Title: Re: JEF - Jefferies Group
Post by: bookie71 on January 03, 2014, 09:00:49 PM
Shouldn't hurt them as they are like a bookie in they get the spread.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on January 04, 2014, 05:50:48 AM
It would hurt them on volume and revs (offset by replacing Walmart business) depending on how much the price rises reduce beef demand from consumers. Plus, the spread is the lowest its been over the past ten years. We're going to need a few years before cattle herds expand.

From the recent 10-Q

The USDA reports market values for cattle, beef, offal and other products produced by ranchers, farmers and beef processors.  Generally, National Beef expects its profitability to improve as the ratio of the USDA comprehensive boxed beef cutout (a weekly reported measure of the total value of all USDA inspected beef primal cuts, grind and trim produced from fed cattle) to the USDA 5-area weekly average slaughter cattle price increases and for profitability to decline as the ratio decreases.  The ratio during the nine months of 2012 was the lowest for the corresponding periods during the past ten years and was largely unchanged during the nine months of 2013.

Revenues were largely unchanged during 2013 as compared to 2012 due primarily to slightly higher selling prices but fewer cattle processed.  Cost of sales per head increased during 2013 as compared to 2012 as cattle prices rose to record high levels, due in part to the declining U.S. cattle herd, which was exacerbated by drought conditions across key cattle raising areas in 2012.


Title: Re: JEF - Jefferies Group
Post by: greenwave on January 21, 2014, 10:56:29 AM
Anyone have thoughts on significant volume increase in LUK  today ?

Over 6 M. shares traded . Possibly  related to Berkowitz recent disclosure in his hedge fund ?

--------

greenwave
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on January 21, 2014, 11:20:01 AM
http://business.financialpost.com/2014/01/13/new-york-based-oregon-lng-applies-to-export-canadian-natural-gas/

Oregon LNG applying to export Canadian nat gas
Title: Re: JEF - Jefferies Group
Post by: Grenville on January 21, 2014, 12:06:59 PM
Anyone have thoughts on significant volume increase in LUK  today ?

Over 6 M. shares traded . Possibly  related to Berkowitz recent disclosure in his hedge fund ?

--------

greenwave

My guess is it's Ian Cumming selling more stock. He's below reporting thresholds now, so we won't get confirmation if it is him.
Title: Re: JEF - Jefferies Group
Post by: gfp on January 21, 2014, 12:08:42 PM
The share blocks definitely look to be initiated by the seller rather than the buyer(s).
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on January 21, 2014, 12:11:21 PM
What are people thoughts about LUK post merger?  The merger closed for a few quarters now.
With an ibank in the mix, I'm just not sure how to think about the whole company.
Title: Re: JEF - Jefferies Group
Post by: adesigar on January 21, 2014, 01:41:29 PM
What are people thoughts about LUK post merger?  The merger closed for a few quarters now.
With an ibank in the mix, I'm just not sure how to think the whole company.

Not as great as it once was with C&S in charge. Nice leadership handover to Richard Handler and Brian Friedman. I think they will focus more on the big parts of LUK and sell of the small bits and pieces. Should make it easier to understand and value. Will stay undervalued because it now considered a financial so will be linked to book value. Very high chance of continued long term outperformance relative to market and financials.
Title: Re: JEF - Jefferies Group
Post by: Myth465 on January 21, 2014, 04:19:14 PM
A decent Value Inventor who has owned it for years think they will build up the IB, and sell it in a bull market for 2x BV once the cycle turns.
I have a small bit of LUK and like that they are leaving the smaller bits and pieces. Will hold and add overtime.
Title: Re: JEF - Jefferies Group
Post by: Liberty on January 21, 2014, 05:03:32 PM
A decent Value Inventor who has owned it for years think they will build up the IB, and sell it in a bull market for 2x BV once the cycle turns.

Interesting. Personally, I would be seriously surprised if that happened.

With Handler and Friedman both coming from Jeffries where they were big shareholders and helped build the business over many years, I think they're probably more familiar and more attached to it than to anything else in LUK. I see it as a permanent part of the business now, kind of like the insurance operations of Berkshire or the BNSF now.
Title: Re: JEF - Jefferies Group
Post by: constructive on January 21, 2014, 05:05:09 PM
A decent Value Inventor who has owned it for years think they will build up the IB, and sell it in a bull market for 2x BV once the cycle turns.
I have a small bit of LUK and like that they are leaving the smaller bits and pieces. Will hold and add overtime.

I think completely the opposite - all other businesses are for sale at the right price but not Jefferies.

Handler is an investment banker at heart, not a beef processor.
Title: Re: JEF - Jefferies Group
Post by: Grenville on January 21, 2014, 06:47:58 PM
I agree. I don't see Jefferies leaving LUK as long as Handler and Friedman are around unless they spin it off to shareholders as a separate company.
Title: Re: JEF - Jefferies Group
Post by: Myth465 on January 21, 2014, 10:14:40 PM
I believe it was this guy.

http://www.bengrahaminvesting.ca/Resources/Video_Presentations/Guest_Speakers/2013/Robotti_2013.htm

Theoretically they wouldnt have to sell Jefferies, but he said it gives LUK shareholders a more liquid security which will eventually be repriced at 2x book value.

I really liked the thesis and like that they are highgrading the portfolio.

Title: Re: JEF - Jefferies Group
Post by: Sportgamma on January 22, 2014, 05:07:59 AM
What are people thoughts about LUK post merger?  The merger closed for a few quarters now.
With an ibank in the mix, I'm just not sure how to think the whole company.

The way I view LUK is that is becoming a collection of businesses that process stuff (transactions of corporate assets, mortages, autos, beef, ) without having to carry much inventory.

Its undervalued and cash rich.

Regarding Jefferies, they did pass that real-life stress test of 2008 with flying colours and by looking at the multiples LUK was acquiring shares of JEF, it seems C&S thought 2x book was fair value.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on January 22, 2014, 09:50:01 AM
True they were fine in 08-09 but really the MF Global and Egan Jones smear job almost did them in. Does point to the fragility of an IB book value multiple.
Title: Re: JEF - Jefferies Group
Post by: ValueBuff on January 24, 2014, 09:24:24 AM
True they were fine in 08-09 but really the MF Global and Egan Jones smear job almost did them in. Does point to the fragility of an IB book value multiple.

That will not matter in 10 years.  Any multiple wrothy will be back on the business.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on January 31, 2014, 11:01:06 AM
http://www.bloomberg.com/news/2014-01-31/leucadia-beef-unit-to-close-plant-with-1-300-workers.html

Closing Brawley CA plant.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on January 31, 2014, 01:08:13 PM
"In comparison, Cargill Inc's Plainview, Texas plant, which closed in a year ago because of tight cattle supplies, boasted a daily slaughter capacity of about 4,500 head."

Talk about being behind the curve, their competitor saw the writing on the wall at least a year before.
Title: Re: JEF - Jefferies Group
Post by: robface on February 05, 2014, 04:32:37 PM
probably a more complex issue than that as cattle stock seems more regional and the stock is different

ie SoCal probably has more dairy cattle, so vs. Cargill's Texas plan probably a different situation
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on February 05, 2014, 07:56:34 PM
I also remember Buffet's statement that they seldom give up on a business unless it's going to lose money indefinitely. Not easy to make these decisions for sure.
Title: Re: JEF - Jefferies Group
Post by: bookie71 on February 06, 2014, 09:11:09 AM
Don't know if they process pork or not, but if they do this could have contributed to their decision:
http://www.foxnews.com/us/2014/01/11/widespread-pig-virus-threatens-to-bump-pork-prices/
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on February 07, 2014, 04:44:33 PM
http://www.ivpressonline.com/news/local/iid-to-consider-reduced-energy-rate-for-national-beef/article_d25f6b1c-8e32-11e3-8fec-001a4bcf6878.html?mode=jqm

Perhaps the plant closing wasn't so bad.
Title: Re: JEF - Jefferies Group
Post by: thepupil on February 28, 2014, 02:00:13 PM
Letter and 10-K out today, as well as exchange of some legacy RE assets for shares of HOFD

https://www.bamsec.com/filing/9622314000008?cik=96223
https://www.bamsec.com/filing/90951814000103?cik=96223
https://www.bamsec.com/filing/9622314000006?cik=96223
Title: Re: JEF - Jefferies Group
Post by: constructive on February 28, 2014, 03:01:46 PM
I like that letter a lot. Handler seems like a worthy successor to Steinberg and Cumming. (Although, it would be nice if investment bankers paid themselves a little less.)
Title: Re: JEF - Jefferies Group
Post by: racemize on February 28, 2014, 03:03:20 PM
I'm sad that they cut the BVPS page.  I wonder if they still consider that relevant?  Seems like they would?
Title: Re: JEF - Jefferies Group
Post by: Liberty on February 28, 2014, 04:06:08 PM
I'm sad that they cut the BVPS page.  I wonder if they still consider that relevant?  Seems like they would?

Yeah, that's too bad.

Maybe they felt it wasn't their track record and wanted to start fresh..?
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on February 28, 2014, 05:18:58 PM
Well, they do say that excluding a bad year data point does wonders for your track record  :)

However, I got the impression from the letter they are loading the gun, lots of cash to deploy and a few concentrated assets held long term. I'm just wondering if it's worth holding a full position for the new future investments over the next five years. The last five years have seen the sp500 trounce leucadia. Is the next five years likely to do the opposite or should one be more pro active? Views?

Title: Re: JEF - Jefferies Group
Post by: robface on March 02, 2014, 10:46:57 AM
Read the letter...glad to see they are keeping up the tradition, but wish there was more market and general commentary...also, they mentioned MLI was "sold where future value creation did not meet our return expectations"...I think it was sold as a block trade at $42 when the stock was trading at $48 and now its at $62...could be wrong, but seems like there was a chunk of value left on the table
Title: Re: JEF - Jefferies Group
Post by: skanjete on March 03, 2014, 03:30:18 AM
I can't say I'm impressed with the letter, on the contrary.
 
I miss quantification of results, evaluation criteria and evaluation itself.
Title: Re: JEF - Jefferies Group
Post by: jouni1 on March 03, 2014, 05:00:40 AM
yep, it wasn't as easy to make an assumption of the worth and condition of the businesses. i have faith in handler and think he's going to make the right choices but i felt a bit left out after reading the letter.
Title: Re: JEF - Jefferies Group
Post by: Liberty on March 18, 2014, 03:25:07 PM
Quote
Richard Handler’s Leucadia National Corp. (LUK) added $253 million to its investment in Philip Falcone’s Harbinger Group Inc., more than doubling a bet on the owner of businesses from consumer goods to insurance.

Leucadia agreed to buy 23 million preferred securities in Harbinger Group from Falcone’s hedge funds for $11 apiece, Harbinger Group said today in a statement. That adds to common stock Leucadia acquired last year, now valued at $244 million.
Title: Re: JEF - Jefferies Group
Post by: Grenville on March 18, 2014, 03:44:10 PM
"Upon acquisition of the Preferred Interest, together with the 18.6 million shares of HGI common stock acquired in September 2013 and previous purchases, we will beneficially own (including as a result of our right to sell the HGI Shares into which the Preferred Interest is exchangeable) 41.6 million common shares of HGI representing approximately 28.6% of HGI’s currently outstanding common stock and 20.1% of HGI’s common stock assuming the conversion of all of HGI’s outstanding Series A and Series A-2 Participating Preferred Stock. Upon the exchange of the Preferred Interest into the HGI Shares, our total net purchase price of the HGI Shares and the 18.6 million shares of HGI common stock purchased in September 2013 will be $406.5 million, or $9.77 per share."



from sec filing regarding the transaction:
http://www.sec.gov/Archives/edgar/data/96223/000090951814000126/mm03-1714_8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951814000126/mm03-1714_8k.htm)
Title: Re: JEF - Jefferies Group
Post by: Grenville on March 25, 2014, 11:18:42 AM
"Leucadia Invests in Harley-Davidson Leasing Company"
http://www.digitaljournal.com/pr/1810621 (http://www.digitaljournal.com/pr/1810621)

Quote
Chrome Capital, the nation's leading lessor of pre-owned Harley-Davidson motorcycles, has completed a $20 million equity investment from Leucadia National Corporation, a publicly listed diversified holding company (NYSE: LUK). The investment, which was completed on March 10, 2014, may be increased to $86M to fund Chrome Capital's growth plans.
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 02, 2014, 09:58:47 AM
Proxy is out.

Thought this was interesting, they show Ian Cumming's ownership.

13,451,242  3.7%

http://www.sec.gov/Archives/edgar/data/96223/000093041314001565/c77050_def14a.htm (http://www.sec.gov/Archives/edgar/data/96223/000093041314001565/c77050_def14a.htm)
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on April 02, 2014, 09:59:39 AM
Handler, Leucadia’s Chief, Takes Pay Cut in New Role


http://dealbook.nytimes.com/2014/04/02/handler-leucadias-new-chief-takes-pay-cut-in-new-role/?module=BlogPost-Title&version=Blog Main&contentCollection=Investment Banking&action=Click&pgtype=Blogs&region=Body (http://dealbook.nytimes.com/2014/04/02/handler-leucadias-new-chief-takes-pay-cut-in-new-role/?module=BlogPost-Title&version=Blog Main&contentCollection=Investment Banking&action=Click&pgtype=Blogs&region=Body)



Quote
Mr. Handler, who became chief executive of Leucadia after the merger last year, earned $3.1 million in 2013, according to a regulatory filing on Wednesday. The previous year, his compensation totaled $19 million, higher than that of Jamie Dimon, the chief executive of JPMorgan Chase.
 
A primary driver of the lower pay was the disappointing performance of the Jefferies subsidiary, where Mr. Handler is still chief executive.

The performance of Jefferies fell short of a predetermined target but above a minimum threshold, producing a bonus for Mr. Handler of $1.8 million, the filing showed. If Jefferies had done better, Mr. Handler might have received up to $12 million.
 
As in past years, Mr. Handler took a base salary of $1 million for 2013. The rest of his compensation included items like a driver and the personal use of company aircraft.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on April 09, 2014, 03:33:16 PM
Leucadia National Corporation CFO to Retire for Health Reasons


http://www.reuters.com/article/2014/04/09/ny-leucadia-national-idUSnBw096273a+100+BSW20140409 (http://www.reuters.com/article/2014/04/09/ny-leucadia-national-idUSnBw096273a+100+BSW20140409)



Quote
Leucadia National Corporation (NYSE:LUK) today announced that Joseph A. Orlando, its Chief Financial Officer, intends to retire by August 31, 2014, due to orthopedic health issues that require his attention. A search is underway to recruit Mr. Orlando’s successor.
Title: Re: JEF - Jefferies Group
Post by: Grenville on April 09, 2014, 03:44:51 PM
Leucadia National Corporation CFO to Retire for Health Reasons


http://www.reuters.com/article/2014/04/09/ny-leucadia-national-idUSnBw096273a+100+BSW20140409 (http://www.reuters.com/article/2014/04/09/ny-leucadia-national-idUSnBw096273a+100+BSW20140409)



Quote
Leucadia National Corporation (NYSE:LUK) today announced that Joseph A. Orlando, its Chief Financial Officer, intends to retire by August 31, 2014, due to orthopedic health issues that require his attention. A search is underway to recruit Mr. Orlando’s successor.

Sad to see another member of the old guard depart.
Title: Re: JEF - Jefferies Group
Post by: thefatbaboon on April 13, 2014, 02:33:50 PM
Is there something weird with the pricing of the puts&calls Jan 2015 expiry?  $25 strike put bid at 4.3 asked 4.7. $25 call bid at 0.4 asked at 0.75.  The put seems expensive and the call absurdly cheap.
Title: Re: JEF - Jefferies Group
Post by: no_free_lunch on April 13, 2014, 02:48:50 PM
There is a post earlier on the leaps.
Title: Re: JEF - Jefferies Group
Post by: gfp on April 13, 2014, 06:04:49 PM
I think the options you are looking at are old Jefferies options that are now based on .81 of a LUK share [81 shares per contract], that's why the pricing looks odd.  LUK2 vs LUK.

http://www.cboe.com/publish/TTStockSM/13-086.pdf

http://www.ise.com/assets/documents/optionsExchange/productNotices/equity_corp_actions/2013/2013-026$Jefferies_Group_Inc_(JEF)_-_Merger_With_Leucadia_National_Corporation_(LUK)$20130228.pdf
Title: Re: JEF - Jefferies Group
Post by: woltac on April 13, 2014, 07:04:34 PM
I can't say I'm impressed with the letter, on the contrary.
 
I miss quantification of results, evaluation criteria and evaluation itself.

I could not agree more. 

The fact that Premier Entertainment was sold for $250 million is meaningless without a recap of the cash flow that when into it. Just one example of many of what is missing from the letter.

Hopefully, Mr. Handler will gravitate toward the style of letters written by Mr. Cummings and Mr. Steinberg in years past before writing the 2014 letter.
Title: Re: JEF - Jefferies Group
Post by: Myth465 on April 13, 2014, 08:14:02 PM
I dont think they need to provide more detail. They give alot of details in the rolling PPT updates. Perhaps just different styles.
Title: Re: JEF - Jefferies Group
Post by: jouni1 on April 19, 2014, 01:04:00 AM
any fresh thoughts on leucadia? seems that it could be cheap here. jefferies will probably have a great year. i also like the portfolio now. good, basic businesses that might benefit from being part of the group (access to capital etc). i think handler might be the real thing. seems humble (for a banker) and i have a feeling he's going to be in the billionaire club when he's done with banking. he gets paid a lot but he is the man to run this. also holds a quarter billion worth of stock.

handler said he's going to be opportunistic with buybacks, but having seen none probably means:

1) it's not cheap
2) there's better places to put the money (garcadia, berkadia?) or
3) he doesn't want to do a possibly "overpriced" buyback so soon after the merger, as if to not give a bad impression

i like it at these prices, even though i sold mine for a bit less. it would just be so easy to start buying if they were doing buybacks. it just feels like the market hates it now, and it might go to 0.6x book on some bad news.
Title: Re: JEF - Jefferies Group
Post by: thefatbaboon on April 19, 2014, 02:46:43 AM
I think the options you are looking at are old Jefferies options that are now based on .81 of a LUK share [81 shares per contract], that's why the pricing looks odd.  LUK2 vs LUK.

http://www.cboe.com/publish/TTStockSM/13-086.pdf

http://www.ise.com/assets/documents/optionsExchange/productNotices/equity_corp_actions/2013/2013-026$Jefferies_Group_Inc_(JEF)_-_Merger_With_Leucadia_National_Corporation_(LUK)$20130228.pdf

Sorry, should have checked the thread.  Thanks
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on April 19, 2014, 10:53:58 AM
I think many investors have a misperception about stock buybacks. Buybacks have many motives and purposes but one that is seldom spoken about is the purpose of covering up inability to grow and poor returns on investment. Inability to grow, in turn, impacts valuations and prospects. Therefore a distinction should be made between returning money to shareholders and opportunity. They are inversely related. I've seen several financial firms buy back stock to mask the fact that they aren't able to find opportunities to reinvest at a decent return. I at least applaud LUK for not doing that. The financial sector has provided poor returns in the last few years (look at JPM and GS) but that can quickly change.

This chart suggests a substantial opportunity - http://lakecharlescleanenergy.com/wp-content/uploads/2014/03/LCCE-Timeline.jpg

I expect an announcement sometime this year on the board of directors signing off on this project. I have seen estimates that this business can generate $200-$400 million per year in income. At the low end, on an equity investment of $500 million, is a 40% ROI. I don't think the market is pricing in the value of this project at all. It could be worth $2-3 billion or about $6-8 per Leucadia share.

Likewise, the carrying book value of Garcadia & Berkadia underestimates their current earning power, although National Beef's carrying value may overestimate it's earning power at the moment. Linkem is also an interesting animal. It very well could see an IPO and is growing fast.

Tangentially related, Greenspan's new book, 'The map and the territory' is an excellent read. It tries to answer the question of why there is a hesitancy to invest in long-lived assets and he argues that the uncertainty of social security liabilities and future tax rates is causing companies to build up cash and be fearful to invest in these long-range projects. This has a host of implications for unleashing some inflation. He also makes the interesting comment that we are not in a bubble because there is still substantial uncertainty and a prerequisite for bubble formation is a long period of relative calm and stability.
Title: Re: JEF - Jefferies Group
Post by: jouni1 on April 19, 2014, 12:07:13 PM
yeah lake charles and a year after that hopefully oregon lng export build starting up. it's going to be huge for the company.

even without the new facilities, i think it could be a decent investment at these prices.
Title: Re: JEF - Jefferies Group
Post by: thefatbaboon on April 19, 2014, 12:26:53 PM
Any recommendations regarding how we should be calculating book value?  There's $1.7bn of goodwill from the JEF acquisition - you leave that it or take it out?  Also, I guess we have to adjust shares outstanding for the 14m odd RSUs?  They're all non-pay as far as I can tell so that's pure dilution with no cash offset.

I'd be interested in thoughts on how JEF is performing.  Looking at last year if I back out the gains from Harbinger, Knight, and acquisition accounting debt premiums, they scarcely seem to have made any money at all. 
Title: Re: JEF - Jefferies Group
Post by: thefatbaboon on April 20, 2014, 12:04:01 AM
http://www.nydailynews.com/new-york/wall-streeter-sues-view-blocking-rooftop-construction-article-1.1300836

Title: Re: JEF - Jefferies Group
Post by: LC on April 20, 2014, 11:33:11 AM
Poor baby :/
Title: Re: JEF - Jefferies Group
Post by: racemize on May 09, 2014, 09:06:57 AM
10-Q is out:
http://finance.yahoo.com/news/leucadia-national-corporation-announces-first-130600380.html
http://www.sec.gov/Archives/edgar/data/96223/000009622314000016/lnc1stqtr2014form10q.htm

I previously thought we'd get some decent earnings from Jefferies (on a per share basis), but earnings and growth in BVPS have been pretty low over the last year.  Hopefully they will find some good use for the capital...
Title: Re: JEF - Jefferies Group
Post by: mcliu on May 09, 2014, 10:44:48 AM
I thought Jefferies is actually doing pretty well. $200M before tax is pretty good results in this environment.

The beef business is really dragging down results. I wish there's more disclosure on how they're planning to turn National Beef around..
Title: Re: JEF - Jefferies Group
Post by: OracleofCarolina on May 13, 2014, 08:07:00 AM
http://www.sec.gov/Archives/edgar/data/96223/000119312514195955/d728050dex99.htm

Slides for today's annual meeting.
Title: Re: JEF - Jefferies Group
Post by: ajc on May 13, 2014, 08:43:55 AM

http://www.sec.gov/Archives/edgar/data/96223/000119312514195955/d728050dex99.htm

Slides for today's annual meeting.

Thanks.

Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on May 13, 2014, 09:07:43 AM
They seem to be getting active. They own about a half billion of Harbinger. KCG was not mentioned in the slides, probably cause it's held by Jefferies Group subsidiary but they own about 20% of that. I see at least 1 billion of new investments. Expect Lake Charles announcement this year regarding commencement of construction and final funding as per http://lakecharlescleanenergy.com/wp-content/uploads/2014/03/LCCE-Timeline.jpg . I estimate this project is worth at least 2-3 billion.
Title: Re: JEF - Jefferies Group
Post by: tiddman on May 13, 2014, 10:10:28 AM
They show HomeFed with a value of $226 million.  They own 9.4 million shares, so that is about $24/share.  HOFD is currently at $51/sh making their stake worth more like $479 million, unless I'm missing something.
Title: Re: JEF - Jefferies Group
Post by: tiddman on May 13, 2014, 11:14:38 AM
I count $660M of new investments since March 2013 not including KCG.  Wonder why they didn't mention KCG?  They mention other new investments as small as $5M.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on May 13, 2014, 11:35:51 AM
It's tucked away in Jefferies trading assets - "We have elected the fair value option for Jefferies investment in Knight Capital Group, Inc., acquired by Jefferies during 2012.  On July 1, 2013, Knight Capital completed its previously announced merger with GETCO Holding Company, LLC; as a result KCG Holdings, Inc. became the new public parent of both entities.  Although no longer subject to the equity method of accounting, KCG Holdings continues to be accounted for at fair value consistent with the election made for all of Jefferies trading assets.  The change in the fair value of this investment was $(1.0) million for the three months ended March 31, 2014."

Jefferies owns 22.5m shares or 19.6% of KCG
Title: Re: JEF - Jefferies Group
Post by: OracleofCarolina on May 13, 2014, 11:38:20 AM
I realize the Juneau Energy is tiny, but kind of neat they are working with Juneau.  I use to follow/own Contango and Juneau was Ken Peak's partner in that company.
Title: Re: JEF - Jefferies Group
Post by: greenwave on May 14, 2014, 06:46:27 PM
I realize the Juneau Energy is tiny, but kind of neat they are working with Juneau.  I use to follow/own Contango and Juneau was Ken Peak's partner in that company.
----------------

Just noticed at least one “insider “ is confident that Leucadia is a good value at current prices.

Francisco Borges  ( Director) bought 10,000 shares at $25.58 totaling $ 255,777  today  (May 14 , 2014) .

greenwave
Title: Re: JEF - Jefferies Group
Post by: Grenville on May 14, 2014, 08:51:08 PM
I realize the Juneau Energy is tiny, but kind of neat they are working with Juneau.  I use to follow/own Contango and Juneau was Ken Peak's partner in that company.
----------------

Just noticed at least one “insider “ is confident that Leucadia is a good value at current prices.

Francisco Borges  ( Director) bought 10,000 shares at $25.58 totaling $ 255,777  today  (May 14 , 2014) .

greenwave

Good catch! Thanks for posting.
Title: Re: JEF - Jefferies Group
Post by: thepupil on May 19, 2014, 07:10:06 PM
Some recent things:

LUK tried to buy Depfa
http://www.reuters.com/article/2014/05/13/idUSWEB00N5N20140513

Jana Partners put 2.5% of their portfolio in LUK, 7.7MM shares, which makes them the 2nd largest non-indexer shareholder. Haven't really seen any commentary in press  and I don't think Jana has said anything publicly.

http://whalewisdom.com/stock/luk

Don't think activism is necessary here, but I wouldn't mind them getting bigger in LUK and ruffling some feathers (HOFD spin/share swap, Berkadia monetization, something to highlight the energy assets/optionality there). But I think Rosenstein is probably  just in this as an OPMI.

Anyways, LUK looks cheap here.




Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on May 24, 2014, 09:51:57 AM
pink slime is back, we like our low price ground beef too much


http://online.wsj.com/news/articles/SB10001424052702303749904579579991127674958 (http://online.wsj.com/news/articles/SB10001424052702303749904579579991127674958)

 'Pink Slime' Makes Comeback as Beef Prices Spike

Surging U.S. Beef Prices Revive Ingredient That Nearly Disappeared Two Years Ago
Title: Re: JEF - Jefferies Group
Post by: ajc on May 29, 2014, 09:17:11 AM

Quote
Berkadia Commercial Mortgage LLC, the joint venture of Berkshire Hathaway Inc. (BRK/A) and Leucadia National Corp. (LUK), added $2 billion to its loan-servicing portfolio with the purchase of Phoenix-based Keystone Commercial Capital.

Keystone, with mortgage-banking offices in Boston and San Diego as well as Phoenix, will continue to be overseen by co-founder and managing partner Charlie Williams, Berkadia said today in a statement. Berkadia picks up 16 employees with the purchase.

“Berkadia has invested significant time in developing relationships -- particularly with life-insurance companies -- to expand our financing capabilities,” Ernie Katai, head of production, said in the statement. “This demonstrates our continued commitment to that expansion.”

Berkadia, the third-largest U.S. commercial and multifamily mortgage servicer, had a portfolio of more than $229 billion as of March 31, according to the statement. Servicers collect payments from borrowers and pass them on to mortgage lenders or investors, minus fees. They can also handle foreclosures when borrowers don’t pay.


http://www.bloomberg.com/news/2014-05-28/berkadia-boosts-loan-servicing-by-2-billion-with-deal.html (http://www.bloomberg.com/news/2014-05-28/berkadia-boosts-loan-servicing-by-2-billion-with-deal.html)


Title: Re: JEF - Jefferies Group
Post by: racemize on May 30, 2014, 12:42:39 PM
from Tweedy's last AR:

Quote
We also pared back our positions in Google, Henkel, Leucadia, Unifirst, Wal-Mart, and Sysco, all of which were trading at, or getting nearer to, estimated intrinsic value.
Title: Re: JEF - Jefferies Group
Post by: Sportgamma on May 30, 2014, 01:06:50 PM
from Tweedy's last AR:

Quote
We also pared back our positions in Google, Henkel, Leucadia, Unifirst, Wal-Mart, and Sysco, all of which were trading at, or getting nearer to, estimated intrinsic value.

I don´t really get that...LUK went as high as 32 around the merger, now they are around 25.60 and I for one am pretty satisfied with what they have been doing in the mean time.
Title: Re: JEF - Jefferies Group
Post by: racemize on May 30, 2014, 04:34:48 PM
I thought it was a bit strange as well.
Title: Re: JEF - Jefferies Group
Post by: Parsad on May 30, 2014, 05:51:27 PM
from Tweedy's last AR:

Quote
We also pared back our positions in Google, Henkel, Leucadia, Unifirst, Wal-Mart, and Sysco, all of which were trading at, or getting nearer to, estimated intrinsic value.

I don´t really get that...LUK went as high as 32 around the merger, now they are around 25.60 and I for one am pretty satisfied with what they have been doing in the mean time.

Tweedy is well off what LUK's intrinsic value is.  I wouldn't pay attention.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: Spekulatius on May 30, 2014, 06:16:11 PM
Quote
Tweedy is well off what LUK's intrinsic value is.  I wouldn't pay attention.  Cheers

I think the Jeffries reverse takeover made the stock less interesting. I owned some LUK but sold when the Jeffries merger was annouced. National Beef did not work out. I don't know how to value Lake Charles and the Oregon LNG terminal and my concern was and still is, that these could become huge money pits, because I think that LUK does not have the expertise to really manage such huge projects. I know the idea is to partner but even though, I still think they are risky and current NPV us close to zero.

If these projects come to pass with good economics, they could be a gamechanger.
Title: Re: JEF - Jefferies Group
Post by: Parsad on May 30, 2014, 07:23:34 PM
Quote
Tweedy is well off what LUK's intrinsic value is.  I wouldn't pay attention.  Cheers

I think the Jeffries reverse takeover made the stock less interesting. I owned somd LUK but sold when the Jeffries merger was annouced. National Beef did not work out. I don't know how to value Lake Charles and the Oregon LNG terminal and my concern was and still is, that these could become huge money pits, because I think that LUK does not have the expertise to really manage such huge projects. I know the idea is to partner but even though, I still think they are risky and current NPV us close to zero.

If these projects come to pass with good economics, they could be a gamechanger.

I think the Jefferies deal is one of the smartest deals they ever pulled.  It resolved a number of issues, while allowing them to acquire the best mid-tier investment bank in the industry for a very fair price.  The value of which won't appear probably for another 5-10 years.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: matjone on May 31, 2014, 06:49:02 AM
I think valuing this is way out of my league,  but I decided to buy some during the merger because it seemed like I could get a good deal on LUK by buying JEF and then I'd just let Cumming/Steinberg work their magic.  Alright, that didn't work out but Handler's record is impressive and I am going to let it ride, and in fact I'm tempted to buy more. 

LUK is at 90% of book and just glancing at their report and looking what these businesses are earning  it seems like they like to carry things conservatively on their balance sheet. They haven't made much on national beef so far, but I think it's too soon to judge whether that was a smart deal or not.  They have said it is the toughest time in the last decade for beef processing, and they are earning a really small margin.  Tyson says earning a 2.5%-4.5% margin on beef processing is a reasonable expectation.  If that happens then national beef may turn out to be a good deal after all.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on May 31, 2014, 07:25:54 AM
Oregon LNG is a big maybe. No ferc approval yet, and no construction till at least 2015-2016. I would consider it zero for now, those Oregon environmentalists are extremely confrontational about protecting Nature.

Lake Charles is in my mind a done deal. Financial closing and the $500m investment is imminent this year although I hear an echo of Greenspan who said that boards are reluctant to approve ready to go long term capital investments if they can't know future tax rates and the inflation environment. Investment in long lived assets is not paying off (that is why Greenspan believes we are nowhere close to a bubble - bubbles form when all is well with the world. That 20-30 year assets are not being invested in suggests a dysfunctional market, hence no bubble)

 Even if you earn 10% on your $8.5 billion of tangible equity, that's $2.3/share being added each year. I see IV at $35/share without much excitement happening. Pretty much everything LUK owns is pretty cyclical. I can't think of one business that isn't. Cyclical businesses are up and down. It's no Berkshire. National Beef is down. Jefferies is down too (most investment banks are down, returning hardly 10% on equity). It would be best to read up on how to value cyclical businesses because that is what we have here ...plus a few new projects. Now what I want to understand is compensation in cyclical companies. It seems LUK is paying as if it assumes an average over the cycle because one can't justify such high compensation during the low parts and I think this is evidenced by the large block of 'no' votes for a compensation-related vote at the latest AGM.
Title: Re: JEF - Jefferies Group
Post by: Spekulatius on May 31, 2014, 08:59:05 AM
Yes, LUK for me is an investment bank with some mostly mediocre business attached to it, trading at 1.1 x tangible book.

That is roughly the same multiple than GS is trading at, but GS has a lower PE and probably is a better franchise than Jeffries. I own a little GS and I think it is the better deal relative to LUK.
Title: Re: JEF - Jefferies Group
Post by: bookie71 on May 31, 2014, 09:24:52 AM
I had been in LUK for many years, but since the merger, I just didn't feel comfortable so I closed out my position.
Title: Re: JEF - Jefferies Group
Post by: jay21 on May 31, 2014, 10:05:58 AM
Pretty much everything LUK owns is pretty cyclical. I can't think of one business that isn't. Cyclical businesses are up and down. It's no Berkshire. National Beef is down. Jefferies is down too (most investment banks are down, returning hardly 10% on equity). It would be best to read up on how to value cyclical businesses because that is what we have here ...plus a few new projects. Now what I want to understand is compensation in cyclical companies. It seems LUK is paying as if it assumes an average over the cycle because one can't justify such high compensation during the low parts and I think this is evidenced by the large block of 'no' votes for a compensation-related vote at the latest AGM.

This is close to how I see LUK.  A lot of these businesses can earn significantly more than what they currently are.

There are quite a few reasons why I got comfortable with LUK after the merger:

1. JEF bought back stock and debt during the rating agency situation
2. Knight Capital
3. Harbinger
4. All 3 above were lead by JEF people
5. JEF was instrumental in fortescue
6. Berkadia and Garcadia - they don't move the needle but were incredibly smart and are doing well. 
7. >$2b to deploy
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on May 31, 2014, 10:53:26 AM
Now if I had only invested in BAM...5x the return of LUK over last 5 years and 4x over 10 years, all in similar fields, real estate, energy, asset management, resources.
Title: Re: JEF - Jefferies Group
Post by: matjone on May 31, 2014, 12:08:51 PM
I was looking the other day at these holding company stocks with good track records and seeing how you would have done buying at book, sitting for 10 yrs, and then selling at book. BAM was by far the best of the ones I looked at, but they all did relatively well.

The interesting thing to me is that you could put together a portfolio of these things today and most of them are reasonably close to BV.  I could just buy them and sit on them and feel safe, and incur zero costs doing so.  Maybe Gio has the right idea with this strategy.
Title: Re: JEF - Jefferies Group
Post by: plato1976 on May 31, 2014, 03:36:08 PM
Are we sure this down cycle of investment bank purely cyclical or somehow structural?

Pretty much everything LUK owns is pretty cyclical. I can't think of one business that isn't. Cyclical businesses are up and down. It's no Berkshire. National Beef is down. Jefferies is down too (most investment banks are down, returning hardly 10% on equity). It would be best to read up on how to value cyclical businesses because that is what we have here ...plus a few new projects. Now what I want to understand is compensation in cyclical companies. It seems LUK is paying as if it assumes an average over the cycle because one can't justify such high compensation during the low parts and I think this is evidenced by the large block of 'no' votes for a compensation-related vote at the latest AGM.

This is close to how I see LUK.  A lot of these businesses can earn significantly more than what they currently are.

There are quite a few reasons why I got comfortable with LUK after the merger:

1. JEF bought back stock and debt during the rating agency situation
2. Knight Capital
3. Harbinger
4. All 3 above were lead by JEF people
5. JEF was instrumental in fortescue
6. Berkadia and Garcadia - they don't move the needle but were incredibly smart and are doing well. 
7. >$2b to deploy
Title: Re: JEF - Jefferies Group
Post by: VersaillesinNY on May 31, 2014, 05:58:20 PM
I attended the Leucadia annual meeting a couple weeks ago. I didn't take many notes because I believed that the Brooklyn Investor (Blog) would post his. Pardon the poor quality of my recollections and comments. They should not be relied upon.

This year’s meeting took place at the Axa auditorium midtown Manhattan. Joe Steinberg, Richard Handler and Brian Friedman were on stage while the other Board members were sitting on the front row. Leucadia's primarily male Board of Directors finally includes one female and one Afro-American. Board diversity in corporate America is in progress.

Meeting slides

http://www.sec.gov/Archives/edgar/data/96223/000119312514195955/d728050dex99.htm

History

Joe Steinberg reminded us that the company was founded in 1854 in Connecticut as a factory selling to the U.S. Army. In 1979 Talcott National manufacturing business was sold when Ian and Joe took control. More on the topic:
http://www.fundinguniverse.com/company-histories/leucadia-national-corporation-history/

Leucadia is now a holding company with an entrepreneurial spirit.

Richard Handler’s comments

-   We like strategic partners, we have dry power. Every 3-5 years we face extreme dislocations on the market. We like to keep cash for opportunities.
-   We see opportunities on Oil & Gas projects. We now own 20.1% Harbinger with Joint Ventures such as Exco ressources.
-   JEF increased its ownership in Homefed to 65 %. There is a lot of value in real estate assets.
-   Berkadia now has 700 employees in India.
-   Garcadia: US sales of vehicles are as high as 2006.
-   Eventually interest rates will go up.
-   We are success fee oriented.

Brian Friedman's comments

-   We have a long term orientation not like private equity firms.

Q&A

-   Can you illuminate us on the Harbinger/ Phil Falcone deal?
Harbinger has a $ 14.82 NAV (slide 11) while we bought it at $ 9.
Spectrum Brand was created through debt.

-   Does political atmosphere favors exports of LNG?
We hope.

-   Would you consider share repurchases?
The Board authorized a $ 25 M share buyback. We will deploy capital depending on opportunities. We are all long term shareholders.

-   As Ian and Joe mentioned in the past, is Leucadia built for an inflation environment?
We have an hedge against inflation.
With current rates, fixed income is tuff.
There will be a period in time when we will get our cash back.

-   Leucadia’s Book Value has been flat for 4 years?
Richard Handler says that he is sorry for that but that they are trying their best through blood sweat and tears. Richard & Brian are also shareholders.

Although my truncated notes only give a superficial idea of the meeting. I feel that Richard & Brian make a talented duo mentored by Joe Steinberg. They seem frustrated with the current stock price but are patient value investors who will deploy cash at the right time and place. I might be wrong but Leucadia's best days lie ahead. 
Title: Re: JEF - Jefferies Group
Post by: greenwave on May 31, 2014, 08:09:10 PM
I attended the Leucadia annual meeting a couple weeks ago. I didn't take many notes because I believed that the Brooklyn Investor (Blog) would post his. Pardon the poor quality of my recollections and comments. They should not be relied upon.

This year’s meeting took place at the Axa auditorium midtown Manhattan. Joe Steinberg, Richard Handler and Brian Friedman were on stage while the other Board members were sitting on the front row. Leucadia's primarily male Board of Directors finally includes one female and one Afro-American. Diversity in corporate America is in progress.

Meeting slides

http://www.sec.gov/Archives/edgar/data/96223/000119312514195955/d728050dex99.htm

History

Joe Steinberg reminded us that the company was founded in 1854 in Connecticut as a factory selling to the U.S. Army. In 1979 Talcott National manufacturing business was sold when Ian and Joe took control. More on the topic:
http://www.fundinguniverse.com/company-histories/leucadia-national-corporation-history/

Leucadia is now a holding company with an entrepreneur spirit.

Richard Handler’s comments

-   We like strategic partners, we have dry power. Every 3-5 years we face extreme dislocations on the market. We like to keep cash for opportunities.
-   We see opportunities on Oil & Gas projects. We now own 20.1% Harbinger with Joint Ventures such as Exco ressources.
-   JEF increased its ownership in Homefed to 65 %. There is a lot of value in real estate assets.
-   Berkadia now has 700 employees in India.
-   Garcadia: US sales of vehicles are as high as 2006.
-   Eventually interest rates will go up.
-   We are success fee oriented.

Brian Friedman's comments

-   We have a long term orientation not like private equity firms.

Q&A

-   Can you illuminate us on the Harbinger/ Phil Falcone deal?
Harbinger has a $ 14.82 NAV (slide 11) while we bought it at $ 9.
Spectrum Brand was created through debt.

-   Does political atmosphere favors exports of LNG?
We hope.

-   Would you consider share repurchases?
The Board authorized a $ 25 M share buyback. We will deploy capital depending on opportunities. We are all long term shareholders.

-   As Ian and Joe mentioned in the past, is Leucadia built for an inflation environment?
We have an hedge against inflation.
With current rates, fixed income is tuff.
There will be a period in time when we will get our cash back.

-   Leucadia’s Book Value has been flat for 4 years?
Richard Handler says that he is sorry for that but that they are trying their best through blood sweat and tears. Richard & Brian are also shareholders.

Although my truncated notes only give a superficial idea of the meeting. I feel that Richard & Brian make a talented duo mentored by Joe Steinberg. They seem frustrated with the current price of the stock but are patient value investor who will deploy cash at the right time and place. I might be wrong but Leucadia's best days lie ahead.
-----------
Thank you VersaillesinNY  for posting your meeting notes.

I share your view that significantly better days are ahead  for Leucadia over the longer term.

greenwave
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 02, 2014, 08:03:36 AM
VersaillesinNY,

Thank you for posting your notes!
Title: Re: JEF - Jefferies Group
Post by: ajc on June 02, 2014, 08:33:51 AM
VersaillesinNY,

Thank you for posting your notes!

+1

Title: Re: JEF - Jefferies Group
Post by: jay21 on June 02, 2014, 09:57:34 AM
Are we sure this down cycle of investment bank purely cyclical or somehow structural?

Pretty much everything LUK owns is pretty cyclical. I can't think of one business that isn't. Cyclical businesses are up and down. It's no Berkshire. National Beef is down. Jefferies is down too (most investment banks are down, returning hardly 10% on equity). It would be best to read up on how to value cyclical businesses because that is what we have here ...plus a few new projects. Now what I want to understand is compensation in cyclical companies. It seems LUK is paying as if it assumes an average over the cycle because one can't justify such high compensation during the low parts and I think this is evidenced by the large block of 'no' votes for a compensation-related vote at the latest AGM.

This is close to how I see LUK.  A lot of these businesses can earn significantly more than what they currently are.

There are quite a few reasons why I got comfortable with LUK after the merger:

1. JEF bought back stock and debt during the rating agency situation
2. Knight Capital
3. Harbinger
4. All 3 above were lead by JEF people
5. JEF was instrumental in fortescue
6. Berkadia and Garcadia - they don't move the needle but were incredibly smart and are doing well. 
7. >$2b to deploy

Could be either?

There was a story in the news surrounding a leveraged loan deal that the big banks couldn't participate in because of regulations.  These regulations did not apply to Jefferies and they ended up with the deal.  I expect them to have higher returns than other IBs because of things like this. I also think JEF's management is pretty good.  Combine good management and a competitive advantage and they should do better than the industry. In terms of the industry, I expect that companies will exit IB businesses if they can't earn decent RoEs, products will reprice, etc which will leave a sensible RoE for the industry.

That's why I am comfortable.  I understand if people have concerns and aren't comfortable.
Title: Re: JEF - Jefferies Group
Post by: no_free_lunch on June 02, 2014, 11:09:02 AM
Quote
In terms of the industry, I expect that companies will exit IB businesses if they can't earn decent RoEs, products will reprice, etc which will leave a sensible RoE for the industry.

I agree with this.  M&A activity is down (although picking up in 2014), companies are paying down debt and raising cash levels, it just isn't a great time for IB.  I'm voting with my money that this will change.

Some of these are a year old but they seem to prove your point that companies will be exiting.

Quote
THEY had no chance even to clear their desks. Scores of London traders who had gone into work for UBS, a Swiss universal bank, on Monday this week were abruptly barred entry to their offices on Tuesday. Others will soon follow them out of the door: the bank this week announced it would be cutting 10,000 jobs in its investment bank by 2015. The bank will concentrate on its core strengths: wealth management, Swiss retail customers, and still-appealing bits of investment banking like foreign exchange and equities trading. Other investment-banking activities—in its fixed-income businesses, in particular—will be housed in a non-core unit and gradually wound down.

http://www.economist.com/news/finance-and-economics/21565648-ubs-swings-axe-game-over

Quote
“You choose the businesses where you can get the most efficient return on your capital,” Gorman said, referring to Morgan Stanley taking full ownership last year of its then-joint venture with Citigroup, Smith Barney, one of the largest retail brokerages.
“[It’s a]phenomenal business, low capital usage, great returns,” Gorman said.
That rebalancing of the firm can be see in its first quarter results: $4.3 billion of its $8.9 billion in revenues came from wealth and asset management, while the rest came from all of investment banking, including sales and trading, underwriting, and advisory work. In 2006, at the height of the Wall Street trading bubble that almost brought down Morgan Stanley, only 18% of its revenue came from wealth management.

http://www.buzzfeed.com/matthewzeitlin/morgan-stanley-ceo-independent-true-investment-banks-are-dea

Quote
In the wake of a disastrous performance in fixed income & commodities (FICC) trading, Barclays has announced severe cuts to its investment bank. 7,000 jobs are to go over the next two years, and much of the troubled FICC division is to be thrown into a new internal “bad bank” for eventual sale or winding up. Investment banking is to be reduced to no more than 30% of the Group’s asset base, and rather than trading, its focus is to be on client advisory services, wealth and asset management. The Diamond days, when investment banking was Barclays’ largest and most profitable activity and its ambition was to be among the premier global investment banks, seem to be well and truly over.

http://www.forbes.com/sites/francescoppola/2014/05/09/is-investment-banking-dead/
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 03, 2014, 07:56:28 AM
No wonder investment banking is like meat packing these days! We are waiting for others to exit to boost future returns and we pick up the pieces and compensation teams. I don't think Goldman is exiting so we still have formidable competition. We are in an environment where long term isn't paying off, it can't last forever. As long as it lasts, I think talk of a bubble is overrated.
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 16, 2014, 12:59:22 PM
Additional detail on the Golden Queen JV:
http://www.goldenqueen.com/s/Proposed_Joint_Venture.asp (http://www.goldenqueen.com/s/Proposed_Joint_Venture.asp)
Title: Re: JEF - Jefferies Group
Post by: wbr on June 16, 2014, 01:50:55 PM
Im not too familiar with Leucadia, but it certainly looks interesting considering the management's reputation.

Is bookvalue per share a reasonable proxy for intrinsic value? If so, why has it not grown over the last 4 years? Is there a problem with the business (I understand that Jeffries is cyclical and takes time to play out, but it's not whole business...) or is management just being conservative and understating bookvalue?

Thank you in advance.
Title: Re: JEF - Jefferies Group
Post by: txlaw on June 18, 2014, 02:35:26 PM
Additional detail on the Golden Queen JV:
http://www.goldenqueen.com/s/Proposed_Joint_Venture.asp (http://www.goldenqueen.com/s/Proposed_Joint_Venture.asp)

Very interesting all-in sustaining cash cost profile.
Title: Re: JEF - Jefferies Group
Post by: txlaw on June 18, 2014, 02:35:50 PM
Jefferies results:
http://www.sec.gov/Archives/edgar/data/96223/000115752314002577/a50887846_ex99.htm
Title: Re: JEF - Jefferies Group
Post by: txlaw on June 18, 2014, 02:43:33 PM
Btw, with support of natural gas export growing in Congress, and continued M&A/re-orgs in the O&G sector, I expect Jefferies' energy focused biz to continue to fire on all cylinders (thanks to Ralph Eads). 

And hopefully there will be a halo effect around its other commodities-oriented practices.  Iron ore, gold, and other commodities sectors that LUK/JEF has expertise in are ripe for M&A.

It's nice to own the broker, ain't it?
Title: Re: JEF - Jefferies Group
Post by: OracleofCarolina on June 27, 2014, 06:24:50 PM
One of the most-senior executives of SAC Capital Advisors LP plans to start a new hedge-fund firm, potentially with a big chunk of funding from Leucadia National Corp., according to people familiar with deal discussions
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 27, 2014, 07:21:08 PM
You know it's kind of funny as I recall Ian Cumming & Joe Steinberg maybe 3-4 years ago after they had allocated funds to various "co-investment" vehicles - betting on other jockies, including Bill Ackman (in which LUK lost almost all their money) and David Winters' funds , that after that, selling it all at the AGM saying something along the lines of, we've learned our lessons. We're not going to diversify the capital allocation decisions anymore. Fast forward and it feels like deja-vu all over again with Top Water, and a slew of joint ventures in investment management firms. Perhaps this is part of the fundamental change that Jefferies brought to the new firm.
Title: Re: JEF - Jefferies Group
Post by: Grenville on June 27, 2014, 11:01:37 PM
Thanks for the heads up.

Here's the WSJ article title on it:
"Ex-SAC Capital COO Kumin to Start Hedge-Fund Firm"
Title: Re: JEF - Jefferies Group
Post by: jay21 on June 28, 2014, 06:28:42 AM
You know it's kind of funny as I recall Ian Cumming & Joe Steinberg maybe 3-4 years ago after they had allocated funds to various "co-investment" vehicles - betting on other jockies, including Bill Ackman (in which LUK lost almost all their money) and David Winters' funds , that after that, selling it all at the AGM saying something along the lines of, we've learned our lessons. We're not going to diversify the capital allocation decisions anymore. Fast forward and it feels like deja-vu all over again with Top Water, and a slew of joint ventures in investment management firms. Perhaps this is part of the fundamental change that Jefferies brought to the new firm.

Most of the current asset management activities are much more GP like than LP like (i.e. they are investing in the asset management company, not giving assets to an asset manager).

It doesn't seem clear if they will own any of the GP in the SAC firm.
Title: Re: JEF - Jefferies Group
Post by: benhacker on June 28, 2014, 07:37:51 AM
What Jay said.  Owning Topwater (the GP) vs. investing with Ackman (as an LP) isn't really even in the same ball park from an economics perspective.

Not sure how the deal with SAC will be structured, but I would assume (hope?) that it's another GP ownership deal... I share Scorpion's concern that they do much passive fund investing, I think it's generally a suckers bet due to the fees.
Title: Re: JEF - Jefferies Group
Post by: thepupil on June 28, 2014, 07:47:46 AM
Not a lot of detail, but I read the former SAC COO deal as a seed investment where they will be the anchor investor at launch ,probably with less favorable liquidity terms in order to provide stability to the fund, in exchange for a stake in the management company or a revenue share.

An $800mm launch is huge, particularly for an equity fund.

 I don't mind LUK building out a seeding business as part if it's asset management platform; you can argue it has synergies with Jefferies Prime Brokerage and trading business and maybe there's some advantage to having permanent capital ( although the other big players like Blackstone, GS, some endowments and family offices getting in the seeding business, probably have pretty stable capital also.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 28, 2014, 01:33:02 PM
Do you mean that LUK would have veto power over the investment manager? Cause otherwise, losing money - or making it, is the same in any language :)
Title: Re: JEF - Jefferies Group
Post by: Haasje on June 28, 2014, 04:45:41 PM
Fwiw I don't think seeding capital pays fees or at least not the same fees.
Title: Re: JEF - Jefferies Group
Post by: jay21 on June 28, 2014, 05:04:37 PM
Fwiw I don't think seeding capital pays fees or at least not the same fees.

No one knows the proposed structure of the transaction.  The bolded may mean it's more than just investing in the fund:

Solomon "Sol" Kumin, who was SAC's chief operating officer, is in advanced talks over a deal with Leucadia that would make the company Mr. Kumin's biggest investor and owner of a substantial portion of his firm, the people said.

The talks with Leucadia, which aren't finalized, picked up in the past week with discussions of detailed terms including investment size and profit-sharing arrangements, one person with knowledge of the talks said. Leucadia could invest around half of the starting assets, or an estimated $400 million, although any terms aren't yet ironed out, people familiar with the discussions said.

For Leucadia, which in 2013 acquired investment bank Jefferies Group Inc., backing Mr. Kumin would represent another push into the asset-management business. It also owns Topwater Capital, which gives money to traders relatively new to the business in exchange for a split of any profits, a person with knowledge of the firm said.
Title: Re: JEF - Jefferies Group
Post by: thepupil on June 29, 2014, 08:09:52 AM
Do you mean that LUK would have veto power over the investment manager? Cause otherwise, losing money - or making it, is the same in any language :)

https://www.caia.org/sites/default/files/5aiar-hedgefund-2012-q3.pdf

Scorpion, here is a good intro to seeding hedge funds. An SAC type of fund is a very lucrative potential seed because of the scalability of the multi-manager/ multi strat model. These funds can grow to having over 100+ PM's and $10B+ AUM so there is a lot of optionality in seeding that type of operation.

I doubt that this new operation will get to charge SAC's 3% and 50% though!
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on June 29, 2014, 08:18:53 AM
Come to think of it, Brookfield Asset Management has done just that - in infrastructure and resource investments. They manage some giant assets under management and take some % stake alongside the funds. That company has done very well over the years with this strategy, but of course it all hinged on investing in solid, quality assets.
Title: Re: JEF - Jefferies Group
Post by: peter1234 on June 29, 2014, 08:36:32 AM
Oaktree's Howard Marks seeded Gundlach's Doubleline after he left Pimco. If you score a home run, this model is very lucrative.

 ;)
Title: Re: JEF - Jefferies Group
Post by: stahleyp on June 29, 2014, 09:18:33 AM
At least from a mutual fund perspective, Markel funded Goodhaven.
Title: Re: JEF - Jefferies Group
Post by: fareastwarriors on June 29, 2014, 09:52:41 AM
Oaktree's Howard Marks seeded Gundlach's Doubleline after he left Pimco. If you score a home run, this model is very lucrative.

 ;)

You mean TCW. =)
Title: Re: JEF - Jefferies Group
Post by: Spekulatius on June 29, 2014, 10:20:24 AM
Jefferies results:
http://www.sec.gov/Archives/edgar/data/96223/000115752314002577/a50887846_ex99.htm

Great - 174M$ in 6month earning or ~350M$ annualized with 5.5B$ in equity. This engine needs a good tuneup.
Title: Re: JEF - Jefferies Group
Post by: peter1234 on June 29, 2014, 11:31:26 AM
Oaktree's Howard Marks seeded Gundlach's Doubleline after he left Pimco. If you score a home run, this model is very lucrative.
 ;)

You mean TCW. =)

Thanks for correcting.
 :)
Title: Re: JEF - Jefferies Group
Post by: topofeaturellc on June 30, 2014, 06:24:13 AM
Seeding is basically a venture biz.  The seeders get an big piece of the economics (usually something like 20% of total revenue).  Historically even the "top-tier" seeders are pretty crap at selecting managers, but just having one big hit in your book is enough to make the IRRs for the entire fund look good.  That's also why they tend to have a strong preference for strategies that can scale - winners need to then be able to gather a lot of AUM.  If you know you can't really underwrite future investment performance you underwrite what you can. 

Usually the seed capital is locked for a period of time. Again, negotiable - but three years is pretty common.  $400 mil is an unusually large seed, especially for what sounds like an equity strategy, and especially when it sounds like the guy already has $400 mil soft committed (although that ending up a lot smaller wouldn't exactly be unheard of).  You don't need $800 mil to run that biz from a P&L perspective unless you are launching with an absurd number of teams, and while the cut off for institutions to look at you seems to be growing every day I've not heard anything that big.  The guys who want you to be that big also want 3-5 years of numbers as well.

Like anything else, its all negotiable. I'd imagine someone like this guy would be in demand so the terms might end up being a bit in his favor.  Often larger FoF who are in the biz might also negotiate future access for their non-seeding funds on what may or may not be preferential terms.

I'd be surprised if JEFs desire to drive PB biz or whatever would play much into this.

If you are a LUK shareholder I'd view this just like entering any other Venture biz. Especially given the strategy itself doesn't sound directional at all.

 The flip side of it is I'd be surprised if they wanted to do this as a one off.  I personally think the seed biz only makes sense as a portfolio.
Title: Re: JEF - Jefferies Group
Post by: txlaw on June 30, 2014, 07:47:14 AM
Perhaps this is just another idea of how to shift excess capital to non-traditional fixed income strategies.  In this case an equity trading strategy.  I know that Jefferies has been hit hard by low interest rates (see, e.g., http://dealbook.nytimes.com/2013/09/18/jefferies-results-reflect-the-hazards-of-fixed-income ), and we all tend to think that fixed income is probably the least attractive asset class for the long term.

Last year, Alleghany bought a stake in Ares Management and agreed to seed (or at least invest in) some of the Ares funds, up to the tune of $1 billion.  The ideas was to get a better return on capital than with traditional fixed income investments and to gain additional return from the asset management biz by increasing Ares' insurance company AUM. 

New trend?
Title: Re: JEF - Jefferies Group
Post by: plato1976 on June 30, 2014, 08:50:55 PM
Will higher interest rate be good for their fixed income business?

Perhaps this is just another idea of how to shift excess capital to non-traditional fixed income strategies.  In this case an equity trading strategy.  I know that Jefferies has been hit hard by low interest rates (see, e.g., http://dealbook.nytimes.com/2013/09/18/jefferies-results-reflect-the-hazards-of-fixed-income ), and we all tend to think that fixed income is probably the least attractive asset class for the long term.

Last year, Alleghany bought a stake in Ares Management and agreed to seed (or at least invest in) some of the Ares funds, up to the tune of $1 billion.  The ideas was to get a better return on capital than with traditional fixed income investments and to gain additional return from the asset management biz by increasing Ares' insurance company AUM. 

New trend?
Title: Re: JEF - Jefferies Group
Post by: txlaw on June 30, 2014, 09:38:36 PM
Will higher interest rate be good for their fixed income business?

Perhaps this is just another idea of how to shift excess capital to non-traditional fixed income strategies.  In this case an equity trading strategy.  I know that Jefferies has been hit hard by low interest rates (see, e.g., http://dealbook.nytimes.com/2013/09/18/jefferies-results-reflect-the-hazards-of-fixed-income ), and we all tend to think that fixed income is probably the least attractive asset class for the long term.

Last year, Alleghany bought a stake in Ares Management and agreed to seed (or at least invest in) some of the Ares funds, up to the tune of $1 billion.  The ideas was to get a better return on capital than with traditional fixed income investments and to gain additional return from the asset management biz by increasing Ares' insurance company AUM. 

New trend?

I'd actually be interested in hearing other people's opinions on this question.  Below is my guess on how this works.

We all know that if interest rates remain low for an extended period of time, FI trading returns are not going to be great.  If interest rates move up and then stay higher but stable, then FI trading might be better than the current environment, but could still be terrible versus other asset classes.  At the same time, rising interest rates seems to mean being forced into shorter duration bonds to avoid principal loss.

Doesn't seem like fixed income is that great going forward, which is why there are moves to equity funds and alternative investment strategy funds.

But, again, I'd like to hear others' thoughts on this.  I'm not really a bond guy.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on July 02, 2014, 05:11:57 PM
I always thought the argument for FI was that the governments of the world are highly indebted and require the sale of debt by agents such as investment banks. Presumably, the higher the rate paid on this debt, the higher the commission cut of the broker?
Title: Re: JEF - Jefferies Group
Post by: txlaw on July 02, 2014, 05:53:20 PM
I always thought the argument for FI was that the governments of the world are highly indebted and require the sale of debt by agents such as investment banks. Presumably, the higher the rate paid on this debt, the higher the commission cut of the broker?

I think you're referring to the investment banking side at Jefferies.  But I was referring to the issues with performance at the FI trading desks.  (Also, I don't think commissions for debt underwriting are taken off the interest rate -- I believe it's a percentage of the principal amount.)

I'm thinking that JEF/LUK will be reallocating capital away from the bond desks to the equity trading venture being discussed.
Title: Re: JEF - Jefferies Group
Post by: HJ on July 02, 2014, 07:15:36 PM
In general I think people recognize that fixed income trading is a very challenged business.  As far as influence of rate level on fixed income trading revenue, it's not just the absolute level, but also the shape of the curve.  Most fixed income books are funded short term (inventory is considered "aged" if held for longer than 30 days), even though 2's-10's spread is still actually fairly steep in historical context, the funding spread for anything other than plain vanilla treasuries and agencies has blown out since the crisis, and hasn't really come back in (partly driven by money market funds continuing to shrink).  Last couple of years, everybody benefitted from the recovery trade, whatever inventory you carried moved up.  At this point, however, that trade has pretty much run its course.  In addition, the buy side has gained a lot of leverage against the intermediaries.  Inventories for most fixed income desks has come way down.  Quite a few buy side entities (GSO, ARES, Carlyle, Babson, etc.) run larger balance sheet than the intermediaries.  And in fixed income, ability to throw around balance sheet still wins business.  Often times these days when a corporate client look for financing, they can completely bypass the street, and go directly to these funds.  For an entity like Jefferies, there is no doubt that they are shrinking the capital deployed in this business.  In many ways them not being subject to same amount of regulatory oversight (the most recent leveraged lending guideline for example), could give them advantage over the big banks.  But these days their high yield desk is not just competing against desks of other banks, but also all the new credit funds, often times affiliated with private equity shops who control the borrowers to start with. 

The fixed income business on the street is going through structural changes, and it's still not quite clear what the new market structure, business models and return on capital will look like.  The only thing people are certain of is that the future looks quite a bit worse than the past.
Title: Re: JEF - Jefferies Group
Post by: txlaw on July 03, 2014, 08:23:03 AM
In general I think people recognize that fixed income trading is a very challenged business.  As far as influence of rate level on fixed income trading revenue, it's not just the absolute level, but also the shape of the curve.  Most fixed income books are funded short term (inventory is considered "aged" if held for longer than 30 days), even though 2's-10's spread is still actually fairly steep in historical context, the funding spread for anything other than plain vanilla treasuries and agencies has blown out since the crisis, and hasn't really come back in (partly driven by money market funds continuing to shrink).  Last couple of years, everybody benefitted from the recovery trade, whatever inventory you carried moved up.  At this point, however, that trade has pretty much run its course.  In addition, the buy side has gained a lot of leverage against the intermediaries.  Inventories for most fixed income desks has come way down.  Quite a few buy side entities (GSO, ARES, Carlyle, Babson, etc.) run larger balance sheet than the intermediaries.  And in fixed income, ability to throw around balance sheet still wins business.  Often times these days when a corporate client look for financing, they can completely bypass the street, and go directly to these funds.  For an entity like Jefferies, there is no doubt that they are shrinking the capital deployed in this business.  In many ways them not being subject to same amount of regulatory oversight (the most recent leveraged lending guideline for example), could give them advantage over the big banks.  But these days their high yield desk is not just competing against desks of other banks, but also all the new credit funds, often times affiliated with private equity shops who control the borrowers to start with. 

The fixed income business on the street is going through structural changes, and it's still not quite clear what the new market structure, business models and return on capital will look like.  The only thing people are certain of is that the future looks quite a bit worse than the past.

Excellent post -- thanks for sharing your insight.
Title: Re: JEF - Jefferies Group
Post by: Grenville on July 03, 2014, 08:54:11 AM
For whatever it's worth, I've decided to part ways with LUK. A couple of things in combination have driven my decision:
+ Ian Cumming leaving the board
+ CFO planning on stepping down (health reasons)
+ Potential business relationship with former SAC Capital upper management (FFH shorting/lawsuit)

I wanted to wait to see the results of the energy projects, but the above in combination pushed me to move on.
Title: Re: JEF - Jefferies Group
Post by: LongTerm on July 04, 2014, 02:15:39 AM
For whatever it's worth, I've decided to part ways with LUK. A couple of things in combination have driven my decision:
+ Ian Cumming leaving the board
+ CFO planning on stepping down (health reasons)
+ Potential business relationship with former SAC Capital upper management (FFH shorting/lawsuit)

I wanted to wait to see the results of the energy projects, but the above in combination pushed me to move on.

I think I have to agree with you on this, although what pushed me over the edge was the amount of leverage Jefferies has brought to the combined entity; the inherent risks of a financial institution which, in a liquidity event like 2008, can bring the whole company crashing down to zero is not what I originally signed up for when purchasing Leucadia. And of course I don't like Handler's whole NYC penthouse kind of thing. I'm slowly reducing my stake and will probably just leave a token position in case I can get more comfortable with the balance sheet in the future.
Title: Re: JEF - Jefferies Group
Post by: valueyoda on July 04, 2014, 02:59:19 AM
I personally think that the liquidity and solvency risk of Jefferies within the Leucadia structure is largely overblown given the holding company's financial resources. Furthermore, I think that Jefferies is a necessary - and of the more stable - profit and book value generators within the company right now. Leucadia was always a good investment because they had the balls to take large levered calculated bets on individual investments. This caused highly volatile return numbers, but very strong results over longer periods of times. The reverse is true at the moment. The company is currently drowning in liquidity and has too few meaningful investments that will cause large profits going forward. One of the more interesting long term bets they've made recently, was the Harbinger position. 

Given the large period of inaction and flat book value growth, I think that investors might be pleasantly suprised by new investments that will be added. I think that the right course of action should be a gradual accumulation rather than disposition of Leucadia shares at these valuations (maybe even some Leucadia LEAPS). The relative inaction shown by Leucadia is also noticeable at Loews (a company I always had a lot of respect for), as they have been hesitant to deploy their cash balances in new large investments.
Title: Re: JEF - Jefferies Group
Post by: valueyoda on July 04, 2014, 03:09:06 AM
My cheapskate nature has always appealed to Buffett's frugality. However, simply because Handler is more willing to spend a portion of his substantial net worth on a more luxurious lifestyle, does not make me worry about his capital allocation abilities. Bill Ackman, Dan Loeb and hundreds of other famous investors like to live a bit better without compromising their attention for their investors.
Title: Re: JEF - Jefferies Group
Post by: jay21 on July 04, 2014, 06:36:12 AM
I personally think that the liquidity and solvency risk of Jefferies within the Leucadia structure is largely overblown given the holding company's financial resources. Furthermore, I think that Jefferies is a necessary - and of the more stable - profit and book value generators within the company right now. Leucadia was always a good investment because they had the balls to take large levered calculated bets on individual investments. This caused highly volatile return numbers, but very strong results over longer periods of times. The reverse is true at the moment. The company is currently drowning in liquidity and has too few meaningful investments that will cause large profits going forward. One of the more interesting long term bets they've made recently, was the Harbinger position. 

Given the large period of inaction and flat book value growth, I think that investors might be pleasantly suprised by new investments that will be added. I think that the right course of action should be a gradual accumulation rather than disposition of Leucadia shares at these valuations (maybe even some Leucadia LEAPS). The relative inaction shown by Leucadia is also noticeable at Loews (a company I always had a lot of respect for), as they have been hesitant to deploy their cash balances in new large investments.

I largely agree with this.  I do not think JEF has too much risk in it.  There are a few minor things to not like here, but it's at less than BV so I think I am being more than compensated for my few minor quibbles.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on July 04, 2014, 07:32:26 AM
Jefferies has the most conservative balance sheet of the larger investment banks. Something like 9-10x leverage.
I am reducing my stake in LUK over the next 6 months by 10%, it's a giant ship and it seems that value gains are to come in the years ahead. One thing we might say is it was quite overvalued a few years ago (in hindsight) and I think that with the changes in management and entering the investment banking business we are going to tread water until some catalyst or investments season. However, as Philip Fisher wrote, sometimes perceptions of valuation change very quickly and suddenly, we just don't know when. What we have to distinguish is if there are some "headwinds of mediocrity and complexity" which are a downward pull on this business. Are they ahead of the curve, are they making good investments and managing existing businesses for growth? Can they earn a decent return? These are fundamental questions.
Title: Re: JEF - Jefferies Group
Post by: Spekulatius on July 04, 2014, 10:06:04 AM
If you want to own an investment banking business right now, just buy GS. It's cheaper based on P/tangible book than LUK and outearns JEF in terms or ROA.

The problem with the current structure is that the rest of LUK will serve as a piggy bank, in case JEF has a need for capital (like in 2008). do, I think they will always have excessive liquidity in the holding company going forward.
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on July 08, 2014, 09:28:59 AM
A Jefferies quarterly letter by "Rich and Brian".  This is exactly the type of tone an investment bank should keep.

http://www.jefferies.com/cmsfiles/jefferies.com/files/insights/tickr/jefferiesinsights_july2014.pdf
Title: Re: JEF - Jefferies Group
Post by: Grenville on July 08, 2014, 10:11:37 AM
A Jefferies quarterly letter by "Rich and Brian".  This is exactly the type of tone an investment bank should keep.

http://www.jefferies.com/cmsfiles/jefferies.com/files/insights/tickr/jefferiesinsights_july2014.pdf

Thanks for posting. Good read.
Title: Re: JEF - Jefferies Group
Post by: james22 on July 30, 2014, 11:10:05 PM
I think the misunderstandings surrounding LUK can give us a rare opportunity to invest in a quality company with proven history at this attractive price point.

http://seekingalpha.com/article/2351905-leucadia-national-corp-where-value-investors-can-still-find-good-opportunity-in-this-inflated-market
Title: Re: JEF - Jefferies Group
Post by: ajc on August 01, 2014, 07:34:01 AM

Oregon LNG wins natural gas export license


- The Department of Energy approves Oregon LNG, controlled by Leucadia National Corp. (LUK -1.2%), to export up to 1.25B cf/day of liquefied natural gas for 20 years.

- The project still must clear a lengthy and expensive review process at the FERC, which can span at least 18 months.

- The DOE's review of the Warrenton, Ore., project was initiated before the Obama administration shook up its LNG review process in May; under the revamp, the DOE will no longer issue conditional approvals of LNG projects.


http://seekingalpha.com/news/1889345-oregon-lng-wins-natural-gas-export-license (http://seekingalpha.com/news/1889345-oregon-lng-wins-natural-gas-export-license)


Title: Re: JEF - Jefferies Group
Post by: rranjan on August 01, 2014, 08:04:59 AM

Oregon LNG wins natural gas export license


- The Department of Energy approves Oregon LNG, controlled by Leucadia National Corp. (LUK -1.2%), to export up to 1.25B cf/day of liquefied natural gas for 20 years.

- The project still must clear a lengthy and expensive review process at the FERC, which can span at least 18 months.

- The DOE's review of the Warrenton, Ore., project was initiated before the Obama administration shook up its LNG review process in May; under the revamp, the DOE will no longer issue conditional approvals of LNG projects.


How much flowing to the bottom line we are talking here? Any reasonable estimates?
Title: Re: JEF - Jefferies Group
Post by: ajc on August 01, 2014, 10:13:04 AM


Oregon LNG wins natural gas export license


- The Department of Energy approves Oregon LNG, controlled by Leucadia National Corp. (LUK -1.2%), to export up to 1.25B cf/day of liquefied natural gas for 20 years.

- The project still must clear a lengthy and expensive review process at the FERC, which can span at least 18 months.

- The DOE's review of the Warrenton, Ore., project was initiated before the Obama administration shook up its LNG review process in May; under the revamp, the DOE will no longer issue conditional approvals of LNG projects.


How much flowing to the bottom line we are talking here? Any reasonable estimates?


From the article that james22 posted above, the author writes that "the potential revenue for this project could be billions, but there are still many obstacles to overcome."
Obviously though, that's vague.
Arnold Van Den Berg (go to about 2 minutes in - https://www.youtube.com/watch?v=fc_5-iqalQ8 (https://www.youtube.com/watch?v=fc_5-iqalQ8)) talks about current US capacity allowing for production at $4.00 to $4.50 per 1000 cubic feet with shipping costs being roughly the same price.
He goes on to say that Japan pays as high as $16.00 per 1000 cf.

Say production and shipping cost $9.50 and Japan and others pay $13.50 (I'm not sure if that's conservative enough), then the entire drilling to delivery process yields $4.00 profit per 1000 cf.
How much does Oregon LNG get from that $4.00? I don't know.
At a guess, they're a key component in the delivery process so they get more. Producers, pipelines (less so) and ships are somewhat abundant, LNG export terminals are complex and there aren't many of them.
Say they get 30% or 35% of that $4.00, so $1.25 or so.

If the terminal operates at full capacity (1.25B cf/day), 6 days per week then Oregon LNG gets $488 million a year for the service they provide. If that $9.50 can turn into $8.50 for production and sellers get $14.50 from Asia then that number goes up to $788 million per year for Oregon LNG.
Minus the annual cost of running a LNG terminal and you have your answer. What that cost is though, I really have no idea.
Maybe there are some operational Middle Eastern LNG terminals that would make useful comparisons.

There are some economic studies (http://www.oregonlng.com/learn-about-lng/economic-studies/ (http://www.oregonlng.com/learn-about-lng/economic-studies/)) on their website, by the way.
A few of the market analyses look like they'll also shed more light on the issue of production costs and what prices Asia might pay over the next few decades.

PS. I might be double-counting, but I'm assuming that export terminals weren't included in Van Den Berg calculations.

PPS. Some other things I don't know the answer to:

 - Could that 1.25B cf per day number be increased after Oregon LNG operates smoothly for a number of years?

 - And, would it be legal for Leucadia to buy from producers themselves, hire shippers and then use some of Oregon's capacity to capture a greater share of that $4.00 per 1000 cf?

Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on August 01, 2014, 11:58:01 AM
They do plan to buy the natGas from Canada. Perhaps there is a speculation on foreign exchange implicit here as well.
Title: Re: JEF - Jefferies Group
Post by: ajc on August 01, 2014, 02:16:51 PM

They do plan to buy the natGas from Canada. Perhaps there is a speculation on foreign exchange implicit here as well.

Maybe that's a possibility.

Having thought about it now though, I think the key will be expanding the 1.25B cf per day limit.
My view is that this is just a starting point and that after X years of safe operation, they will get permission to increase Oregon's capacity. From the website, there looks like plenty of open space available for that.
Perhaps sooner rather than later too, because the Canadian supply is huge and the demand in Asia is big and growing rapidly.
I think there is a risk of these terminals becoming major bottlenecks if capacities aren't regularly being increased.

For example, Qatar exported around 3800 billion (est.) cubic feet of LNG in 2011 and that number was doubling every 2 years (http://persiangulffund.com/qatar-the-biggest-exporter-of-liquid-gas-in-the-world/ (http://persiangulffund.com/qatar-the-biggest-exporter-of-liquid-gas-in-the-world/)).
In order for the west coast of North America to match Qatar's 2011 output, they would need 10 terminals like Oregon sending out 1.25 billion cubic feet per day for 6 days a week, all year round.
Given those numbers, I think it makes a lot of sense to expand existing capacity instead of building whole new terminals each year.

Just to pluck a number out of the sky, if after a few years that number got increased to 5 or 10 billion cubic feet per day for Oregon LNG then you can see for yourself that things would start to look quite different from Leucadia's point of view.


Title: Re: JEF - Jefferies Group
Post by: ajc on August 02, 2014, 10:51:15 AM

@scorpioncapital

Just some thoughts to follow-on from what you wrote.

Most of the US export plants looking to be built are on the Eastern seaboard.
Oregon LNG is the only one out west. Canada has 3 proposed western projects which together total 2.0B cf per day (http://www.sourcewatch.org/index.php?title=LNG_Terminals (http://www.sourcewatch.org/index.php?title=LNG_Terminals)).
I'm having a hard time thinking that anywhere will be cheaper to ship to Asia from, but maybe I'm missing something obvious there.

As well as that, there's the US/Canada arbitrage opportunities.
In currency as you noted and also I think related to where there's been over-production and a consequential over-supply. Sometimes that will happen in the US and sometimes it'll be Canada.
Either way, Oregon users get the best access to the lowest prices.
So, from that perspective it seems to make sense for the smart money to take their business to Oregon because you'd think it'd be the most profitable terminal for them to do work through.

Does that then also mean that Oregon expands capacity more quickly than other places? I don't know, but I don't think that's a totally crazy notion.
The more companies that want to do business through your terminal, the more pressure there will likely be to increase capacity there. I mean, that'd be the sensible direction for things to take.
For the sake of some comparison, Ras Laffan Industrial City (the world's largest LNG export terminal, if I'm not mistaken) was exporting 31 million tons of LNG per year back in 2007 (http://www.cedaconferences.org/documents/dredgingconference/downloads/2/qatar2008_2008-18-05_42_saad.pdf (http://www.cedaconferences.org/documents/dredgingconference/downloads/2/qatar2008_2008-18-05_42_saad.pdf)).
Oregon will be designed to export 9 million metric tons per year, so there is still a fair amount of room for growth there.

Finally, I was wondering... since Jefferies is a full-service investment bank and Leucadia would own Oregon LNG, would Oregon LNG become a kind of full-service export terminal?
Could they offer currency hedging to all of their various clients?
The relationships would already be there, they'd trust each other and Jefferies could do that kind of thing.
How about if a producer wanted to IPO after some time. If business with Oregon LNG had been going well, would they be inclined to use Jefferies for that rather than someone else?
After all, the trust and previous business history would already be there.
Again, what if a shipping company needed to raise some capital?
The list might go on and on.

What I'm wondering is how active Oregon LNG could eventually become in financial activities that relate to the LNG business?
Or whether they could at least offer these services and then put in a call to Jefferies so that everyone involved trusts the other person they're doing business with.
I don't want to put a number on that stuff (even if I don't think it'll be zero), but right now I think most people are looking at this as if Leucadia invests and then that thing produces cash flows over time.
Clearly that's not wrong, but another side-effect might be that all of these other added business opportunities are then created for another Leucadia subsidiary and if it's handled well there could potentially be a substantial amount of business to be done there for Jefferies too.

Anyway, that's as far as I've got for now.
I guess we'll just have to wait and see how things turn out if FERC does end up giving Oregon LNG the approval they need to build this thing.


Title: Re: JEF - Jefferies Group
Post by: BG2008 on August 08, 2014, 08:00:43 AM
Has anyone here dealt with Leucadia in a professional capacity?  Given that they are savvy investors, does that make them tough negotiators.  Any reputation on whether they are pleasant people to work with?  I find it interesting that the CEO of the Bank of Ireland said that he never wanted to go through another DD process with Fairfax again.  I get the sense that these firms are shareholder friendly, but not necessarily friendly with counterparties.  Thoughts?
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 08, 2014, 08:29:18 AM
Has anyone here dealt with Leucadia in a professional capacity?  Given that they are savvy investors, does that make them tough negotiators.  Any reputation on whether they are pleasant people to work with?  I find it interesting that the CEO of the Bank of Ireland said that he never wanted to go through another DD process with Fairfax again.  I get the sense that these firms are shareholder friendly, but not necessarily friendly with counterparties.  Thoughts?

Thanks for the post. Do you have a link to those comments by the CEO of BOI? I'd be curious to hear more.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on August 08, 2014, 09:06:35 AM
I've never dealt with them (meaning Cummings and Steinberg) but they have generally been good at distressed investing (look at the total return from the Fortescue loan).  What's hurt them is offloading some of their investing portfolio to Ackman, Wintergreen, and some other hedgies.  They had a terrible return from the Ackman side car for transforming Target.  One would assume they did DD on Ackman but sheesh.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on August 08, 2014, 09:42:30 AM
They're at it again - offloading investments to other managers. Even in the latest press release handler says they have given the money to funds and managers they have great confidence in their investing abilities.
Title: Re: JEF - Jefferies Group
Post by: racemize on August 08, 2014, 09:45:27 AM
They're at it again - offloading investments to other managers. Even in the latest press release handler says they have given the money to funds and managers they have great confidence in their investing abilities.

Aren't they buying in at the manager level, rather than as clients though?
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on August 08, 2014, 10:16:43 AM
they said they invested 461m in liquid securities managed by focused investment managers so it sounds more like their previous activity but not entirely sure what they are buying.
Title: Re: JEF - Jefferies Group
Post by: jay21 on August 08, 2014, 10:27:07 AM
they said they invested 461m in liquid securities managed by focused investment managers so it sounds more like their previous activity but not entirely sure what they are buying.

Can you post the link?  I missed this.  Thanks
Title: Re: JEF - Jefferies Group
Post by: thepupil on August 08, 2014, 10:36:58 AM
We invested a further $332.5 million in our Leucadia Asset Management platform, including a follow-on investment in Topwater Capital, a new investment with Mazama Capital Management and an initial investment in the Global Equity Events Opportunity Fund, which historically was part of Jefferies. At June 30, 2014, total capital invested in our asset management affiliates and associates was $461.5 million. Almost all of this represents seed capital invested in liquid securities managed by focused investment teams in which we have significant confidence. We expect a reasonable return on our invested capital and to earn an incremental return from our participation in the results of the related management companies.

http://seekingalpha.com/pr/10706945-leucadia-national-corporation-announces-second-quarter-2014-results
Title: Re: JEF - Jefferies Group
Post by: BG2008 on August 08, 2014, 11:17:36 AM
This was during the fairfax shareholder meeting.   There's likely no link to it.   You just have to be there.  Richie is a riot and hilarious.  He insinuates that Fairfax in essence gave him a rectal probe with the DD they did.

Has anyone here dealt with Leucadia in a professional capacity?  Given that they are savvy investors, does that make them tough negotiators.  Any reputation on whether they are pleasant people to work with?  I find it interesting that the CEO of the Bank of Ireland said that he never wanted to go through another DD process with Fairfax again.  I get the sense that these firms are shareholder friendly, but not necessarily friendly with counterparties.  Thoughts?

Thanks for the post. Do you have a link to those comments by the CEO of BOI? I'd be curious to hear more.
Title: Re: JEF - Jefferies Group
Post by: txlaw on August 08, 2014, 11:20:57 AM
We invested a further $332.5 million in our Leucadia Asset Management platform, including a follow-on investment in Topwater Capital, a new investment with Mazama Capital Management and an initial investment in the Global Equity Events Opportunity Fund, which historically was part of Jefferies. At June 30, 2014, total capital invested in our asset management affiliates and associates was $461.5 million. Almost all of this represents seed capital invested in liquid securities managed by focused investment teams in which we have significant confidence. We expect a reasonable return on our invested capital and to earn an incremental return from our participation in the results of the related management companies.

http://seekingalpha.com/pr/10706945-leucadia-national-corporation-announces-second-quarter-2014-results

I've been thinking about this a bit, and I have to say I'm getting more and more uncomfortable with all these seed capital deals.  Obviously, distributing capital to different managers didn't work out too well last time, and I'm not so sure investing in the management firms mitigates the potential downside risks.

I'm also not too crazy about this "reasonable return" + "incremental return" business.  What exactly are their target returns here?
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 08, 2014, 11:54:56 AM
This was during the fairfax shareholder meeting.   There's likely no link to it.   You just have to be there.  Richie is a riot and hilarious.  He insinuates that Fairfax in essence gave him a rectal probe with the DD they did.

Has anyone here dealt with Leucadia in a professional capacity?  Given that they are savvy investors, does that make them tough negotiators.  Any reputation on whether they are pleasant people to work with?  I find it interesting that the CEO of the Bank of Ireland said that he never wanted to go through another DD process with Fairfax again.  I get the sense that these firms are shareholder friendly, but not necessarily friendly with counterparties.  Thoughts?

Thanks for the post. Do you have a link to those comments by the CEO of BOI? I'd be curious to hear more.

Thanks for the color!
Title: Re: JEF - Jefferies Group
Post by: stevevri on August 08, 2014, 12:06:11 PM

I've been thinking about this a bit, and I have to say I'm getting more and more uncomfortable with all these seed capital deals.  Obviously, distributing capital to different managers didn't work out too well last time, and I'm not so sure investing in the management firms mitigates the potential downside risks.

I'm also not too crazy about this "reasonable return" + "incremental return" business.  What exactly are their target returns here?

If you looked at Leucadia as a concentrated bet on Jefferies and investment banking and then saw this as a continuation of those activities as opposed to with a lens towards the past how would you view this?

Title: Re: JEF - Jefferies Group
Post by: jay21 on August 08, 2014, 12:06:26 PM
We invested a further $332.5 million in our Leucadia Asset Management platform, including a follow-on investment in Topwater Capital, a new investment with Mazama Capital Management and an initial investment in the Global Equity Events Opportunity Fund, which historically was part of Jefferies. At June 30, 2014, total capital invested in our asset management affiliates and associates was $461.5 million. Almost all of this represents seed capital invested in liquid securities managed by focused investment teams in which we have significant confidence. We expect a reasonable return on our invested capital and to earn an incremental return from our participation in the results of the related management companies.

http://seekingalpha.com/pr/10706945-leucadia-national-corporation-announces-second-quarter-2014-results

I've been thinking about this a bit, and I have to say I'm getting more and more uncomfortable with all these seed capital deals.  Obviously, distributing capital to different managers didn't work out too well last time, and I'm not so sure investing in the management firms mitigates the potential downside risks.

I'm also not too crazy about this "reasonable return" + "incremental return" business.  What exactly are their target returns here?

I don't know the specifics, but these are the type of deals I think make a ton of sense for LUK.  There is so much room to scale up the management cos of the funds.  I don't think they would invest in a company that they didn't think they could net 8+% on their investment after fees and a total of a 15% RoE.  It's also right in their core competency as a financial service company (which may result in synergies from trading etc.?). 

I don't think these asset management companies are BRK-type quality deals and there are risks, but the potential returns should more than compensate for additional risk.  And their sizing is small relative to BV.  These are also less risky than the Pershing Square deal if i recall the details correctly.
Title: Re: JEF - Jefferies Group
Post by: dwy000 on August 08, 2014, 12:33:55 PM
Got to say I'm with TXLAW on this one.  I manage my assets.  I pick to put some in Leucadia - who is essentially a manager of assets.  They then put it into another manager of assets.  Who finally puts it in investments that earn a return (hopefully).  There are a lot of layers in there of fees and people who need to be paid.  I far prefer when they make direct investments - if I wanted to invest in a managed fund I don't need Leucadia to do it for me.  Where is the value add for LUK here? 
Title: Re: JEF - Jefferies Group
Post by: txlaw on August 08, 2014, 12:49:36 PM

I've been thinking about this a bit, and I have to say I'm getting more and more uncomfortable with all these seed capital deals.  Obviously, distributing capital to different managers didn't work out too well last time, and I'm not so sure investing in the management firms mitigates the potential downside risks.

I'm also not too crazy about this "reasonable return" + "incremental return" business.  What exactly are their target returns here?

If you looked at Leucadia as a concentrated bet on Jefferies and investment banking and then saw this as a continuation of those activities as opposed to with a lens towards the past how would you view this?

Actually, that's exactly how I'm increasingly viewing LUK. 

And that gives me pause because it means there is no longer any reason for me to own LUK.  I admired the LUK of old, but perhaps that is gone for good now that C&S are no longer together and Handler is running the show.

Nothing against Handler or Jefferies (I like much of what they're doing).  It's just that I already have plenty of exposure to the investment banking/merchant banking biz.     
Title: Re: JEF - Jefferies Group
Post by: BG2008 on August 08, 2014, 03:04:08 PM
I think that the seeding model is very different than being a plain generic LP in a fund.  As long as Leucadia picks managers who generates a reasonable rate of return, i.e. 10%, the upside comes from the ability to gather assets and achieve an institutional investor base.  After X number of years, the ownership in the GP can generate revenue that is larger than the initial seed investment.  The seed investment also does not have to stay at the managers forever.  It can be pulled after a few years leaving behind an attractive annuity stream that can be held for the cashflow or monetized. 

Picking managers is a whole different conversation.
Title: Re: JEF - Jefferies Group
Post by: topofeaturellc on August 08, 2014, 03:11:17 PM
yeah - except picking managers to seed is insanely hard. Much much harder than picking managers to be an investor in which it self is very hard - especially at startup.

 Even the best returning seeding funds have like one home run, one or two OK investments, and lots of strike outs.

Now granted - you only need one fund to hit. But its a VC biz, and like other VC funds, returns over time for the asset class are unlikely to be great.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on August 08, 2014, 04:43:54 PM
I thought the idea of Leucadia merging with Jeffries was so that LUK could cherry pick the best real world investments discovered by Jeffries engagement with investment banking clients. It seems like a totally opposite angle for Jeffries or LUK to be going out and seeding capital to managers to find investments.
Title: Re: JEF - Jefferies Group
Post by: topofeaturellc on August 08, 2014, 04:57:07 PM
I'd be pretty bummed if I owned LUK to see my capital being used to seed a JEF prop desk.  Almost none of those spins have worked.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on August 08, 2014, 05:11:06 PM
Perhaps their angle is we are not a bank holding company so we can do prop trading for advantage. Their argument was we did not take government money and can take more risk. The funny thing though is
 a)  they have the lowest leverage ratios in the industry despite the un-regulated advantage and
b) is it an advantage to pile on the leverage more than your competitors  even if you can?
The fact that they don't makes it meaningless that they are not regulated for leverage and prop trading.
Title: Re: JEF - Jefferies Group
Post by: topofeaturellc on August 08, 2014, 05:13:38 PM
I think they are actually spinning the prop desk off balance sheet - that's how I parsed it.  So even that doesn't apply.

Title: Re: JEF - Jefferies Group
Post by: BG2008 on August 08, 2014, 06:21:01 PM
Does anyone have a list of the deals that they've done in the last few years and how they have panned out?  It would be interesting to compile the list and try to calculate an all-in return for their seed capital.  If they have 2010, 2011, and 2010 seed vintages, we can probably figure out how the funds have performed and how AUM have ramped during that time.  Maybe, we will be surprised to learn that they're hitting 0.400 and it's actually really great ROI.  The upside could be in the future when the annuity stream grows larger as the funds go from $50mm to $1.0bn. 
Title: Re: JEF - Jefferies Group
Post by: peter1234 on August 08, 2014, 11:43:26 PM
Does anyone have a list of the deals that they've done in the last few years and how they have panned out?  It would be interesting to compile the list and try to calculate an all-in return for their seed capital.  If they have 2010, 2011, and 2010 seed vintages, we can probably figure out how the funds have performed and how AUM have ramped during that time.  Maybe, we will be surprised to learn that they're hitting 0.400 and it's actually really great ROI.  The upside could be in the future when the annuity stream grows larger as the funds go from $50mm to $1.0bn.

This would be great data.

This seeding biz/asset gathering biz seems to be very cyclical, meaning you do very well in a rising market of your asset class.

Not sure what to make of it. This was a period of rising markets, so the more risk you took, the better your funds performed.

Going forward the environment might be different.

 ;)
Title: Re: JEF - Jefferies Group
Post by: topofeaturellc on August 09, 2014, 05:32:15 AM
of course the better the markets the worse your adverse selection issue.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on August 09, 2014, 08:46:04 AM
http://www.marketwatch.com/story/more-hedge-funds-lured-to-new-source-of-capital-2011-05-23

Interesting how Topwater funds HFs putting the managers in first loss position.
Title: Re: JEF - Jefferies Group
Post by: BG2008 on August 09, 2014, 09:32:27 AM
There's a fairly robust discussion on VIC regarding first loss funding.  I personally would put it in the category of "won't touch with a 10 foot pole"
Title: Re: JEF - Jefferies Group
Post by: topofeaturellc on August 09, 2014, 09:52:59 AM
I struggle with how a value investing style would work with first loss.

It would seem like something for someone who wants to run a millennium type book, but can't get a gig at one of those places for some reason.

But from the LUK perspective, assuming Topwater has robust risk controls its pretty much a heads I win, tails I break even situation.
Title: Re: JEF - Jefferies Group
Post by: rogermunibond on August 09, 2014, 10:01:10 AM
Agreed in a really bad downturn that first loss position is easily wiped out. 
Title: Re: JEF - Jefferies Group
Post by: ajc on August 12, 2014, 10:31:57 AM

Valuation of a LNG terminal play. Not Oregon, but still worth reading for the sake of comparison.

http://insuranceinvestor.wordpress.com/2014/08/12/riding-seth-klarmans-coat-tails-on-this-aussie-listed-lng-export-play/ (http://insuranceinvestor.wordpress.com/2014/08/12/riding-seth-klarmans-coat-tails-on-this-aussie-listed-lng-export-play/)


Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on August 18, 2014, 10:06:51 AM
I notice a pattern in LUKs recent investments in other jockeys. They invest in people who have been fined, sued, gone bankrupt, or have criminal controversy surrounding them. The market doesn't seem to like this strategy so far...

Kcg -  lost 400m on a trading glitch, almost went bankrupt. Jeffries invests.

Hrg - run by falcone, fined by sec and barred from hedge fund operations for using the fund as his piggy bank for paying personal taxes -  LUK invests as fund unwinds Hrg holding.

That coal guy in Australia - almost goes bankrupt, has to sell his horses to start a new mining venture. LUK involved.

Kumin - just gave him 400m. He worked for Cohen' sac advisors which had quite a few problems with the sec.

Trend - invest in beat up money men?
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 18, 2014, 10:13:29 AM
Kumin - just gave him 400m. He worked for Cohen' sac advisors which had quite a few problems with the sec.

I didn't realized they finalized the deal with Kumin. Thanks for the heads up. Here's an article from the WSJ:

Ex-SAC Executive Kumin's Hedge-Fund Firm Gets Leucadia Investment
http://online.wsj.com/articles/ex-sac-executive-kumins-hedge-fund-firm-gets-leucadia-investment-1408309096 (http://online.wsj.com/articles/ex-sac-executive-kumins-hedge-fund-firm-gets-leucadia-investment-1408309096)
Title: Re: JEF - Jefferies Group
Post by: Picasso on August 18, 2014, 10:15:10 AM
I notice a pattern in LUKs recent investments in other jockeys. They invest in people who have been fined, sued, gone bankrupt, or have criminal controversy surrounding them. The market doesn't seem to like this strategy so far...

Kcg -  lost 400m on a trading glitch, almost went bankrupt. Jeffries invests.

Hrg - run by falcone, fined by sec and barred from hedge fund operations for using the fund as his piggy bank for paying personal taxes -  LUK invests as fund unwinds Hrg holding.

That coal guy in Australia - almost goes bankrupt, has to sell his horses to start a new mining venture. LUK involved.

Kumin - just gave him 400m. He worked for Cohen' sac advisors which had quite a few problems with the sec.

Trend - invest in beat up money men?

Probably been a trend for a while given the shoutout Ackman gave to Leucadia in his last shareholder letter.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on August 18, 2014, 10:26:25 AM
Yeah, it's like value investing for people, sort of reminds me of moneyball by Michael Lewis. Let's just hope this strategy is based on the idea that you had good investors who were unlucky and down and out but with talent instead of investors who were good for a while cause they skirted with the law.

Hopefully someone can ask about this at the shareholder day coming up, as well as the weak stock performance in the last few years like in berkshire's operating manual about the 5 year rolling test.
Title: Re: JEF - Jefferies Group
Post by: topofeaturellc on August 18, 2014, 11:36:27 AM
I'm a huge believer in good process, good long-term numbers, bad short-term numbers - but that doesn't really seem like what they are doing. Most of these guys either didn't have numbers through more than one cycle and went out of business because they did something skeevy.
Title: Re: JEF - Jefferies Group
Post by: jay21 on August 19, 2014, 05:31:47 AM
I notice a pattern in LUKs recent investments in other jockeys. They invest in people who have been fined, sued, gone bankrupt, or have criminal controversy surrounding them. The market doesn't seem to like this strategy so far...

Kcg -  lost 400m on a trading glitch, almost went bankrupt. Jeffries invests.

Hrg - run by falcone, fined by sec and barred from hedge fund operations for using the fund as his piggy bank for paying personal taxes -  LUK invests as fund unwinds Hrg holding.

That coal guy in Australia - almost goes bankrupt, has to sell his horses to start a new mining venture. LUK involved.

Kumin - just gave him 400m. He worked for Cohen' sac advisors which had quite a few problems with the sec.

Trend - invest in beat up money men?

I trust JEF's judgement more than my own on this one; same with Kumin.  They are in the financial services industry.  They should know the reputation and problems associated with KCG and Kumin extremely well.  I have no opinion on KCG and like what they did with Kumin.

HRG - I think they bought at a discount and created some value right away.  Seems like a good move and what I would expect out of the JEF/LUK combo.

No idea about the mining guy.

It seems like to me, since JEF took over they have gotten rid of some of the assets they do not like as much and started to deploy capital in opportunities they like better.  Now that the drag of legacy businesses is getting close to clear, I think we start seeing a decrease in their liquidity relative to BV, which hopefully will drive BV higher.
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 22, 2014, 08:54:33 AM
It's official.

http://www.sec.gov/Archives/edgar/data/96223/000090951814000267/mm08-2114_8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000090951814000267/mm08-2114_8k.htm)

Quote
On August 15, 2014, we and Solomon Kumin established Folger Hill Asset Management LLC (“Folger Hill”), which is expected to register as an investment adviser with the SEC and launch a multi-manager investment partnership.  Mr. Kumin will serve as Chief Executive Officer and a manager of Folger Hill, and Richard Handler and Brian Friedman, the Chief Executive Officer and President of Leucadia National Corporation, respectively, will serve as the other two members of the Board of Managers of Folger Hill.
 
We have committed to invest $400 million in Folger Hill's investment partnership conditioned upon, among other things, Folger Hill’s raising an additional at least $400 million in commitments from other investors.  The Folger Hill investment partnership is expected to begin investing in the first quarter of 2015.  We also committed to provide Folger Hill with a 3-year, $20 million revolving credit facility to fund its start-up and initial operating expenses.
 
Mr. Kumin is the former Chief Operating Officer of S.A.C. Capital Advisors, L.P. and has over 15 years' experience in the financial services industry.
Title: Re: JEF - Jefferies Group
Post by: Grenville on August 26, 2014, 08:30:51 AM
More details regarding the new venture with Folger Hill. Michael Handler, Richard Handler's brother, worked at SAC before running an internal hedge fund at Jefferies.

"Leucadia backs SAC alum fund despite previous internal scandal"
http://www.cnbc.com/id/101945416 (http://www.cnbc.com/id/101945416)

Quote
The Jefferies Paragon Fund was co-managed with Contorinis by then-CEO Handler's brother Michael, who was never accused of wrongdoing. Michael Handler had been an SAC portfolio manager before joining Jefferies.
Title: Re: JEF - Jefferies Group
Post by: ajc on August 26, 2014, 09:24:07 AM

Comp for Oregon LNG


Sabine Pass has 6 trains and a 2.2B cf/day export license. Leucadia has a license for 1.25B cf/day.

From Cheniere's investor presentation, the first 4 trains at Sabine (1.47B cf/day) will result in...
(http://desmogblog.com/sites/beta.desmogblog.com/files/June%202013%20Corporate%20Presentation.pdf (http://desmogblog.com/sites/beta.desmogblog.com/files/June%202013%20Corporate%20Presentation.pdf))

Total annual revenues of $2.55 billion
Total annual expenses of $765 million
Annual EBITDA of $1.79 billion
Annual debt service of $505 million

Distributable annual cash flows to parent company of $1.285 billion

If you add a bit for the pipeline (50% of which is likely worth $20 million per year - see Cheniere's CTPL in the presentation) and knock off 15% percent because Oregon is that much smaller, then you're left with:


Annual cash flows distributable to Leucadia of around $1.1 billion.


Title: Re: JEF - Jefferies Group
Post by: Grenville on August 27, 2014, 12:30:46 PM
Richard Handler takes ice bucket ALS challenge. There is a video of him taking the challenge.

http://thetally.efinancialnews.com/2014/08/hold-bankers-ice-bucket-challenge/ (http://thetally.efinancialnews.com/2014/08/hold-bankers-ice-bucket-challenge/)
Title: Re: JEF - Jefferies Group
Post by: Parsad on August 27, 2014, 12:40:23 PM
Richard Handler takes ice bucket ALS challenge. There is a video of him taking the challenge.

http://thetally.efinancialnews.com/2014/08/hold-bankers-ice-bucket-challenge/ (http://thetally.efinancialnews.com/2014/08/hold-bankers-ice-bucket-challenge/)

Wow, he got out of the tub pretty quick!  Nice city views from his washroom.  Cheers!
Title: Re: JEF - Jefferies Group
Post by: Liberty on August 27, 2014, 12:49:52 PM
Quote
Wow, he got out of the tub pretty quick!

DONE  :D
Title: Re: JEF - Jefferies Group
Post by: thepupil on September 03, 2014, 10:46:14 AM
https://www.bamsec.com/filing/119312514329715?cik=96223

New LUK presentation

I'm too young to have invested in the old LUK that some people here are nostalgic for but I I really like what they are doing now and think the stock is a nice risk/reward w/ lots of optionality

Title: Re: JEF - Jefferies Group
Post by: rogermunibond on September 03, 2014, 10:52:41 AM
Interesting how they've labeled all those operating companies that LUK holds as merchant banking.

I don't like that characterization of it, despite maybe it's accuracy.

Cummings & Steinberg had always just had a mish-mash of companies they bought cheap and then sold dear or liquidated.  To put it under the merchant banking moniker sounds like LUK will now be measured as a financial services company kind of like Lazard.

Title: Re: JEF - Jefferies Group
Post by: ajc on September 03, 2014, 12:57:19 PM

https://www.bamsec.com/filing/119312514329715?cik=96223

New LUK presentation


Thanks.


Title: Re: JEF - Jefferies Group
Post by: BG2008 on September 03, 2014, 04:33:50 PM
Anyone else notice that Homefed trades at a $494mm valuation for its 64% stake but is only carried on the books at $227mm? Are there other examples such as this?
Title: Re: JEF - Jefferies Group
Post by: Wabash02 on September 03, 2014, 07:14:06 PM
Anyone else notice that Homefed trades at a $494mm valuation for its 64% stake but is only carried on the books at $227mm? Are there other examples such as this?

Berkadia has roughly a 150mm pretax income run rate, yet is carried for 203mm. 

Vitesse Energy is very interesting.  Bob Gerrity souded very legit and mentioned that payback periods for the wells are under one year!  He also said of the most recent deal, they were not the high bid but with LUK backing they won it because they could close the deal in a month.  They own the wells and let other operators run it, the business model seems amazing.  Would not be surprised to see the value of that much higher in 1-3 yrs.

Linkem is in a unique position and if what the CEO said is anywhere close to correct they are worth quite a bit more than book value. (Basically Italy has a large legacy copper infrastructure wholly owned by Telecom Italia, and Linkem is both faster and cheaper--gets great customer reviews and good subscriber growth.)

Obviously the big horse in the stable is Jefferies and they have an investor day Oct 9th, but I came away from the call quite bullish and happy with my position.

Title: Re: JEF - Jefferies Group
Post by: thepupil on September 03, 2014, 07:15:51 PM
 thoughts on book value in relation to IV for various parts of LUK


Berkadia is undervalued on the balance sheet, marked at 2.6X annualized 1H2014 Pretax earnings, a mortgage banker's earnings are incredibly lumpy, but Walker Dunlop is a good comp and trades at much higher multiples.
 
Berkadia 50% interest book value: $203MM
Berkadia Pre-tax earnings(2011-2013): $35MM $105MM $135MM, $79MM YTD
"Our share of pre-tax earnings for the first half of the year was $38.4 million and we received $19.4 million in distributions"

Garcadia is undervalued on the balance sheet

Garcadia book value: $140MM , approximately 65% interest in company + land and real estate rented to dealerships, the ownership structure isn't as clean here since LUK owns a varying % of dealerships but I don't think it's worth $140MM given they've received $80MM of distributions over the past 3 years and their ROE is in 20's and 30's

Consolidated (not just LUK's share) revenue           2011-2013: $790MM, $1.1B, $1.5B
Consolidated (not just LUK's share) pretax income  2011-2013: $22MM, $37MM, $47MM
Distributions to LUK: $16MM, $30MM, $40MM
Pre-tax ROE on LUK's interest: 26%, 33%, 32%

National Beef may be overvalued at $775MM, tough to tell if the challenges there are just cyclical, they had a good yer or two where they generated like 15% of LUK's basis in cash and then the business just went to shit.

The energy projects have no book value, so that's big source of potential growth and optionality

The way I look at LUK is

I pay $9.3B

I get $2.2B of liquid assets;  (net cash, asset management business<--am i the only one that loves the Folger Hill seed??? big scalable multi-manager HF's are fee machines , harbinger + homefed stock at market)

I get the next $3.5B or so of pre tax earnings tax free

So the remaining $7.1B grows with JEF pre-tax income of 5 or 6 hundo (7-8.5% of the ex-liquid assets book) and with earnings from all the other crap, plus the optionality from stuff like Energy marked at 0)

It's definitely not a 50 cent dollar, but perhaps a growing 75 or 80 cent one, with ample liquidity, a bigass tax asset and lots of connections for possibly lucrative investments.

Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on September 03, 2014, 08:40:35 PM
"National Beef may be overvalued at $775MM,"

The CEO was asked the normal net profit margin over the cycle and he said 2.5-4%. That implies around $120mm at 3% on 4 billion in revenues or 15% return on investment.
Title: Re: JEF - Jefferies Group
Post by: Kiltacular on September 03, 2014, 08:41:25 PM
thoughts on book value in relation to IV for various parts of LUK


Berkadia is undervalued on the balance sheet, marked at 2.6X annualized 1H2014 Pretax earnings, a mortgage banker's earnings are incredibly lumpy, but Walker Dunlop is a good comp and trades at much higher multiples.
 
Berkadia 50% interest book value: $203MM
Berkadia Pre-tax earnings(2011-2013): $35MM $105MM $135MM, $79MM YTD
"Our share of pre-tax earnings for the first half of the year was $38.4 million and we received $19.4 million in distributions"

Garcadia is undervalued on the balance sheet

Garcadia book value: $140MM , approximately 65% interest in company + land and real estate rented to dealerships, the ownership structure isn't as clean here since LUK owns a varying % of dealerships but I don't think it's worth $140MM given they've received $80MM of distributions over the past 3 years and their ROE is in 20's and 30's

Consolidated (not just LUK's share) revenue           2011-2013: $790MM, $1.1B, $1.5B
Consolidated (not just LUK's share) pretax income  2011-2013: $22MM, $37MM, $47MM
Distributions to LUK: $16MM, $30MM, $40MM
Pre-tax ROE on LUK's interest: 26%, 33%, 32%

National Beef may be overvalued at $775MM, tough to tell if the challenges there are just cyclical, they had a good yer or two where they generated like 15% of LUK's basis in cash and then the business just went to shit.

The energy projects have no book value, so that's big source of potential growth and optionality

The way I look at LUK is

I pay $9.3B

I get $2.2B of liquid assets;  (net cash, asset management business<--am i the only one that loves the Folger Hill seed??? big scalable multi-manager HF's are fee machines , harbinger + homefed stock at market)

I get the next $3.5B or so of pre tax earnings tax free

So the remaining $7.1B grows with JEF pre-tax income of 5 or 6 hundo (7-8.5% of the ex-liquid assets book) and with earnings from all the other crap, plus the optionality from stuff like Energy marked at 0)

It's definitely not a 50 cent dollar, but perhaps a growing 75 or 80 cent one, with ample liquidity, a bigass tax asset and lots of connections for possibly lucrative investments.

I think this is a good analysis, though I do share some of rogermunibond's concerns (though perhaps that's what the market thinks too and why this might be cheapish).  If it was a 50% dollar, I'd be back to a very large position.

I did like that the new team immediately shut Sangart.

This company is priced just wrong...not quite cheap enough given the unproven team (aside from their Jefferies experience) but just cheap enough to possibly turn out to be a superb investment from these prices.

If they can execute on the energy deal in Louisiana that Cummings and Steinberg referenced in their final letter, that would be nice.

Excerpt from their last letter, 2012:

A Major Future Opportunity

After a 10-year effort led by the indomitable and indefatigable Tom Mara, our Louisiana
gasification project is now poised to move into the construction phase. The gasification facility
located in Lake Charles, Louisiana has major off-take agreements in place as well as all
necessary permits. It recently entered into a Memorandum of Understanding with SKE&C USA,
Inc., SK Engineering & Construction Co. Ltd. and Technip USA Inc. pursuant to which they
will provide an industry standard lump sum turnkey construction contract.
Funding for this project will be covered in part by $1.561 billion of tax exempt bonds, a $230
million federal grant for carbon capture and sequestration, and a $128 million federal investment
tax credit. The project will require equity of $400 to $600 million.
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on September 04, 2014, 03:01:04 AM
I came away from the call quite bullish and happy with my position.

Darn it -- I missed the call.  Anyone know where I can get a transcript?  Bloomberg doesn't have it.....and as for the LUK website, sheesh! ::)
Title: Re: JEF - Jefferies Group
Post by: maxthetrade on September 04, 2014, 08:51:52 AM
I came away from the call quite bullish and happy with my position.

Darn it -- I missed the call.  Anyone know where I can get a transcript?  Bloomberg doesn't have it.....and as for the LUK website, sheesh! ::)

Unfortunately there is no replay or transcript available.
Title: Re: JEF - Jefferies Group
Post by: jay21 on September 07, 2014, 08:29:26 AM
Someone post a few notes on Yahoo. Nothing too helpful imo.  Thought this was interesting:

"Very interesting -- either Handler or Friedman (or someone) mentioned that they expect to convert the $1.3 billion DTA into cash within the next 3-5 years. If so, that would be astonishing income generation during that period."

And I liked his note on asset managers:

"They are expanding the asset management business by investing in managers (and management companies), rather than doing M&A deals that would create goodwill -- they believe everything is highly or fairly valued. "

I.E. - if they were to get out and buy a GP/asset manager business they would have to pay more than the way they are currently structuring their deals.

http://finance.yahoo.com/mbview/threadview/?&bn=19ae4497-92fa-3786-aa7d-551fc38c08ed&tid=1409783681041-ab10dd5f-d556-41c6-af9f-496945789870&tls=la%2Cd%2C0%2C3
Title: Re: JEF - Jefferies Group
Post by: WhoIsWarren on September 08, 2014, 03:43:28 AM
Someone post a few notes on Yahoo. Nothing too helpful imo.  Thought this was interesting:

"Very interesting -- either Handler or Friedman (or someone) mentioned that they expect to convert the $1.3 billion DTA into cash within the next 3-5 years. If so, that would be astonishing income generation during that period."

Jay, thanks for highlighting the Yahoo notes.  The DTA angle is interesting.  However, the poster's conclusion about income generation in the next 3-5 years isn't necessarily true, as DTA's can be used up through capital gains too....

But let's work through the numbers:
JEF did $500m in the last 12 months.  From the recent investor presentation, Berkadia, National Beef, Garcadia, Conwed and Idaho Timber are currently doing around $200m pre-tax.  (A quick calculation, hope I haven't added up the numbers incorrectly).  But that's with National Beef doing c.$60m a year (was $27m in H1:14), versus the $324m it did in 2011. 

So if NB can get back to 2011 levels and everything else stays where it is, then yes, you can think about c.$1bn of pre-tax for LUK group.  That would use up c.$350m a year in DTAs (assuming 35% tax rate), within the 3-5 year range given by management.

Title: Re: JEF - Jefferies Group
Post by: rogermunibond on September 12, 2014, 11:06:40 AM
http://www.washingtonpost.com/sf/business/2014/09/12/reimagining-union-station-2/

Akridge/LUK Union Station stake doesn't even get mentioned by Handler.
Title: Re: JEF - Jefferies Group
Post by: dwy000 on September 24, 2014, 11:11:18 AM
Stopped development on Lake Charles project.  That's a ton of money down the drain.
Title: Re: JEF - Jefferies Group
Post by: thepupil on September 24, 2014, 12:14:05 PM
Stopped development on Lake Charles project.  That's a ton of money down the drain.

thankfully marked at or close to 0, but disappointing.
Title: Re: JEF - Jefferies Group
Post by: Grenville on September 24, 2014, 01:39:43 PM
Thanks for the update.

I expected something to come about of this project especially with all the energy activity in the US. Hopefully they can still monetize their regulatory work down the road.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on September 24, 2014, 02:33:06 PM
Some quotes from Mr. G. (Sep 2014)

"One example is in how corporations evaluate the probable rate of return on a specific facility and then wonder what the variance on that return might be. That variance is really what the executive committees of corporation are really interested in, Greenspan said, and if a project is supposed to have a 30% yield, but there is a 10% chance of it returning a -10% yield, then the project will be dead in the water."

In this kind of environment, corporate tax rates become impossible to estimate, and that results in a serious curtailment of expenditures. When people don’t have a clue what the tax rate will be 20 or 30 years from now, and they have projected income from those years, then it drives up the effective cost of current projects.

"“What we see is that construction is dead in the water,” Greenspan said today at an insurance conference hosted by KPMG in New York. That contrasts with other recoveries since World War II, as “every single one of them was led by construction or longer-lived assets,” he said."

"“What they are saying is ‘we are so uncertain about the distant future that we are not going to invest,’” Greenspan said.

"“The reason inflation is dead in the water now and will be for the immediate foreseeable future is that we are operating at less than full capacity in the world,” Greenspan said today."

I think LUK is dead in the water vis-a-vis large construction projects for a while.

PS. An excellent write-up on Leucadia and Leucadia Investor Day: http://boards.fool.com/annotated-investor-day-notes-31427733.aspx?sort=postdate

Title: Re: JEF - Jefferies Group
Post by: Junto on October 02, 2014, 06:46:10 AM
LUK has certainly been taken to the cleaners as of late. Lower 52 week lows each of the past three days.
Title: Re: JEF - Jefferies Group
Post by: bargainman on October 07, 2014, 12:11:01 PM
LUK has certainly been taken to the cleaners as of late. Lower 52 week lows each of the past three days.

Another one today!  buying opportunity/put options selling...
Title: Re: JEF - Jefferies Group
Post by: Picasso on October 07, 2014, 12:14:53 PM
Stock seemshave taken it in the chin when 30-year Treasury bonds started rallying in September.  Any particular reason for this so I don't have to spend the time digging up the reason for the correlation?
Title: Re: JEF - Jefferies Group
Post by: thepupil on October 07, 2014, 01:00:54 PM
https://www.bamsec.com/filing/119312514329715?cik=96223

New LUK presentation


you can find the components of LUK's value here...not much to do with ze long bond; i'd say any relationship is nearly meaningless
Title: Re: JEF - Jefferies Group
Post by: VersaillesinNY on November 02, 2014, 02:58:09 PM
An explosive story...

‘Wolf of Wall St.’-like banker on leave after clients flee amid sleazy scandal

http://www.dailymail.co.uk/news/article-2816875/Wall-Street-firm-tests-entire-department-drugs-7m-year-investment-banker-stands-accused-forcing-wife-binge-cocaine-sex-potential-client-foursome-Ritz.html

Warning: The affidavit is nasty...

http://nypost.com/2014/10/30/wolf-of-wall-st-banker-on-leave-after-clients-flee-sleazy-drug-sex-claims/

Jefferies' memo related to the scandal

http://www.jefferies.com/culture-and-character/Special/Pages/844

Quote
Lose money for the firm and I will be understanding. Lose a shred of reputation and I will be ruthless.
Warren Buffett
Title: Re: JEF - Jefferies Group
Post by: thepupil on November 02, 2014, 05:16:45 PM
the affidavit is a must read, pure gold (although sad for the guy's kids)
Title: Re: JEF - Jefferies Group
Post by: peter1234 on November 03, 2014, 12:05:50 AM
Regardless of the outcome, this is bad PR.
Title: Re: JEF - Jefferies Group
Post by: Grenville on November 03, 2014, 08:20:24 AM
Thomas Mara is retiring at the end of the year.

http://www.sec.gov/Archives/edgar/data/96223/000119312514392091/d814006d8k.htm (http://www.sec.gov/Archives/edgar/data/96223/000119312514392091/d814006d8k.htm)
Title: Re: JEF - Jefferies Group
Post by: thepupil on November 03, 2014, 08:28:53 AM
Regardless of the outcome, this is bad PR.

the only potentially bad thing is the Aegerion CEO wife swap, right? that is the only thing related to Jefferies' actual business.

Is it really fundamental changing (or surprising) news that a banker does too much blow and has terrible family life?
Title: Re: JEF - Jefferies Group
Post by: bookie71 on November 03, 2014, 08:30:42 AM
Is it really fundamental changing (or surprising) news that a banker does too much blow and has terrible family life?
.
.
No, but it indicates the culture that might be in place.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 03, 2014, 09:42:22 AM
Is a 'wife swap' similar to a 'credit default swap'?
Title: Re: JEF - Jefferies Group
Post by: compoundinglife on November 03, 2014, 09:49:32 AM
Is a 'wife swap' similar to a 'credit default swap'?

Coffee just shot out my nose.
Title: Re: JEF - Jefferies Group
Post by: wellmont on November 03, 2014, 12:25:23 PM
turning luk over to the JEF guys just proves nobody is safe from losing their marbles.
Title: Re: JEF - Jefferies Group
Post by: benhacker on November 03, 2014, 03:17:53 PM
Handler has definitely pissed off some competitors over the years by stealing their bankers I think.  The continued small little anti-JEF stories in the news is clearly a PR campaign of some kind.

Most of this stuff *if* it were true, wouldn't even be newsworthy, but somehow a bank most folks have never heard of gets media stores covering it's bankers???  Yeah, call me skeptical.

Chance to buy cheaper.
Title: Re: JEF - Jefferies Group
Post by: Fat Pitch on November 03, 2014, 04:49:51 PM
Handler has definitely pissed off some competitors over the years by stealing their bankers I think.  The continued small little anti-JEF stories in the news is clearly a PR campaign of some kind.

Most of this stuff *if* it were true, wouldn't even be newsworthy, but somehow a bank most folks have never heard of gets media stores covering it's bankers???  Yeah, call me skeptical.

Chance to buy cheaper.

Or are they just getting the bottom of the barrel type deals/people? This is an industry where if you aren't 1st then don’t bother.
Title: Re: JEF - Jefferies Group
Post by: merkhet on November 03, 2014, 04:52:32 PM
Why do you think that it's an industry where being first matters?
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 03, 2014, 05:16:20 PM
I've always suspected the argument advanced about paying a large comp ratio upfront and even ongoing to retain high talent should be viewed with skepticism - especially on Wall Street, in an overcrowded industry where everyone is doing the same thing. Great people don't "need" the highest amount of money to work with you, they just need a decent amount. If Goldman can get by with 40% comp ratio why does Jefferies need 60%, is there something 20% more brilliant about their people?





Title: Re: JEF - Jefferies Group
Post by: mcliu on November 03, 2014, 06:30:06 PM
I've always suspected the argument advanced about paying a large comp ratio upfront and even ongoing to retain high talent should be viewed with skepticism - especially on Wall Street, in an overcrowded industry where everyone is doing the same thing. Great people don't "need" the highest amount of money to work with you, they just need a decent amount. If Goldman can get by with 40% comp ratio why does Jefferies need 60%, is there something 20% more brilliant about their people?


There's a big ego factor on the street so the best needs to be paid more. Bankers seem to care a lot about their relative comps.
Title: Re: JEF - Jefferies Group
Post by: Fat Pitch on November 03, 2014, 07:40:23 PM
Why do you think that it's an industry where being first matters?

Read up on Solomon Brothers and their clientele such as the "Bouncing Czech". If you are a Fortune 500 company and you need an ibanker you go to Goldman. These guys get first dibs on all the best deals and pass on anything that looks suspect. Guess who gets the sloppy seconds?
Title: Re: JEF - Jefferies Group
Post by: benhacker on November 03, 2014, 08:21:22 PM
For those of you who think their comp & ben expense is out of line, I think you may just be not comparing them properly.  GS is not a good comp (it's 15x the size with different business composition).

LAZ, GHL, EVR are all better comps, will similar (slightly higher) comp ratios (in the 55-65% ranges).

Also, to those who think JEF has 2nd rate MDs / teams, I'd love to see any serious data / insight you have on that.  It hasn't been my findings from research I've done.  Also, just qualitatively, JEF did a lot of poaching of their teams (and yes, paid top dollar) from '07-'11 from other big IB's as they were hampered with lawsuits, bad press, additional regulation, etc, and I really don't think they were in the weaker position in those transactions (and I do believe a lot of the bad press and bear raiding is a direct result of Handler sticking it to the likes of UBS et al by taking their best employees).

In the end, I agree that comp is too high in IB land, but I focus on end ROE.  I feel quite similarly about exec comp overall in corporate America / World.  But unless there is a culture of corruption, I don't see the absolute level of comp at any company as being the most important metric, and it certainly doesn't stand on it's own.  I've studied a lot of JEF's history, and I really don't see them being at the bottom of the barrel for talent or ethics, it's quite the opposite actually (again, IMO).  I think aside from GS, no IB firm has better ROE for the last 15-20 years.  *if* you adjust for risk / leverage and perhaps some "luck" GS got during the crisis (AIG contracts), perhaps JEF is better both absolute and risk adjusted.

Just my 2 cents.

This is a really hated industry (for a lot of good reasons), so I understand why many aren't interested.

Title: Re: JEF - Jefferies Group
Post by: thepupil on November 03, 2014, 08:22:53 PM
Why do you think that it's an industry where being first matters?

Read up on Solomon Brothers and their clientele such as the "Bouncing Czech". If you are a Fortune 500 company and you need an ibanker you go to Goldman. These guys get first dibs on all the best deals and pass on anything that looks suspect. Guess who gets the sloppy seconds?

Interesting, I didn't realize the Goldman Sachs was number 1 in all league tables and had 100% market share amongst large issuers...I guess my salary, bonus and dividends were funded with something else when I worked for another bank.

Sloppy seconds seemed to work pretty well for JEF from 1990 to its acquisition by LUK over which time the stock returned 28X and 16% CAGR.

Sloppy seconds is sending a more modest, but still decent relative to its $3.6B tangible common equity, $500-$600MM pretax to mother Leucadia.

JEF pays high cash bonuses and is not as regulated/scrutinized as the big boys. It should continue to grow and take share.

Wife swaps and blow for everyone!
Title: Re: JEF - Jefferies Group
Post by: jay21 on November 04, 2014, 04:33:27 AM
Why do you think that it's an industry where being first matters?

Read up on Solomon Brothers and their clientele such as the "Bouncing Czech". If you are a Fortune 500 company and you need an ibanker you go to Goldman. These guys get first dibs on all the best deals and pass on anything that looks suspect. Guess who gets the sloppy seconds?

Imo, one thing you should focus on is what can JEF do that GS and the other i-banks can't? That list has grown since the financial crisis due to regulations. 

Tbh, I should spend more time on it because I think that's going to be a measurable competitive advantage.
Title: Re: JEF - Jefferies Group
Post by: scorpioncapital on November 04, 2014, 06:06:12 AM
"In the end, I agree that comp is too high in IB land, but I focus on end ROE"

There is some truth to this - no I-bank has had >10% ROE since the crisis. It's been a long time getting back to normal but I feel the tide is turning slowly and over the next 2-3 years will improve. Obviously compensation is a lever you can control to fiddle with your ROE, trying to balance growth vs profitability. But if the mandate in the latest Jefferies memo about being better not bigger is to be the case, I would imagine profitability plays a key role there. (I would also add FBRC as another example of a small ibank with 50%+ comp ratio).

Title: Re: JEF - Jefferies Group
Post by: ajc on November 05, 2014, 09:00:22 AM

Don’t Blame The Messenger, Jefferies

http://blogs.reuters.com/breakingviews/2014/11/03/dont-blame-the-messenger-jefferies/ (http://blogs.reuters.com/breakingviews/2014/11/03/dont-blame-the-messenger-jefferies/)


Title: Re: JEF - Jefferies Group
Post by: benhacker on November 05, 2014, 10:04:25 AM
Quote
Don’t Blame The Messenger, Jefferies

http://blogs.reuters.com/breakingviews/2014/11/03/dont-blame-the-messenger-jefferies/</