Author Topic: JEF - Jefferies Group  (Read 594818 times)

giofranchi

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Re: JEF - Jefferies Group
« Reply #630 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
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WhoIsWarren

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Re: JEF - Jefferies Group
« Reply #631 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.

Packer16

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Re: JEF - Jefferies Group
« Reply #632 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

Sportgamma

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Re: JEF - Jefferies Group
« Reply #633 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.

Shane

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Re: JEF - Jefferies Group
« Reply #634 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.

Kraven

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Re: JEF - Jefferies Group
« Reply #635 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.
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jay21

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Re: JEF - Jefferies Group
« Reply #636 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.
@jay_21_

jay21

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Re: JEF - Jefferies Group
« Reply #637 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.
@jay_21_

rjstc

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Re: JEF - Jefferies Group
« Reply #638 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.  :) :)
   

rjstc

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Re: JEF - Jefferies Group
« Reply #639 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