CEO Of Jefferies: "These Are The Cancers That Will Cause The Next Crisis"

Tyler Durden's picture

In a moment of surprising lucidity, Rich Handler, the CEO of Jefferies one of the few remaining pure-play investment banks that was not converted into a bank holding company as part of the Paulson-Geithner bailout of the financial industry in 2008, has called about the kind of "cancerous" behavior that in his opinion will lead to the next financial crisis.

As Bloomberg summarized, "Bankers and investors need to ensure they don’t repeat “bad behaviors” that contributed to the credit crisis as the financial-services industry embraces greater risk, said Richard Handler, chief executive officer of Jefferies Group LLC."

People who take short cuts, are political, prioritize themselves above others, take excessive risks for personal gain, don’t value capital, or are unethical are outright cancers.... These types of people will not only flourish in the next crisis, but most probably they will cause it.”

And the punchline, one which the permabullish Fed cheerleader from the same firm, David Zervos, will surely blast in his next comic missive:

When the ten-year U.S. Treasury offers a "riskless" return of only  2.69%, it may take a lot of leverage to generate real returns in fixed income. What we are suggesting is that we all may want to have our eyes wide open regarding the risk that is clearly starting to make its way back into our system.

Sadly, he is right. Just as sadly, it is precisely the "cancers" that are now in charge of the insane asylum. Which is why any hopes that a new crisis will be avoided due to prudent "macroprudential" intervention by the Fed (which operates precisely on behalf of said cancers) or anyone else (the BIS' second warnings in two years came... and was roundly ignored by everyone once again), will most likely be left holding the bag.

And as usual, despite all the people who have repeatedly warned what is coming, the broad consensus will be that nobody could have possibly seen any of what is coming, coming.

* * *

Full letter by Handler "To Our Clients"

Let’s Not Dwell, But Let’s Not Forget

It is summer time again, an always personally enjoyable season, yet an often volatile time in the financial markets. We also think it is a good time for a bit of reflection. We continue to put some much appreciated distance from the epic financial crisis that first erupted in 2007, and then overwhelmed the markets and the world in 2008 and 2009. Miraculously, the world today is awash with liquidity, stock market indices are at all-time highs, bond yields remain at all-time lows, volatility is astoundingly subdued, unemployment is approaching pre-crisis levels, and productivity appears to be on the upswing.

However, let’s not completely forget the summer of 2007, which was truly the beginning of the great global de-leveraging and the financial contagion that left virtually nobody and no company unscathed. We do not think it is necessary to remind anyone of the specifics of what happened. We all either experienced losses ourselves or knew someone we cared for whose life was permanently changed. We are talking about the loss of companies, jobs, life savings, personal health and personal relationships. We also sadly lost a bit of innocence when we realized our unshakable belief in our economic system and fundamental way of life was in fact very shakable and far from guaranteed to exist forever.

The purpose of this note is not to sound the alarm that now that we are back to record levels, we should brace ourselves for an imminent crisis. In fact, there are many fundamentals in the world today that we find better underpin the valuations that are now prevalent, relative to the false sense of security many of us felt before the summer of 2007. That said, we do think it is a good time to reflect on three of the factors that we can control and thereby help ourselves avoid the slippery slope of the next real problem: Leverage, Style Drift and Culture.

Leverage can be an amazing tool. While it does an incredible job of amplifying the good, it does not know its master and is equally capable of magnifying the bad. In a world that is starved for yield, it is easy to get lulled into a false sense of purpose that your investors, whether they be shareholders or retirement accounts, can only be satisfied by returns comparable with those achieved in earlier periods, albeit very different times. When the ten-year U.S. Treasury offers a "riskless" return of only 2.69%, it may take a lot of leverage to generate real returns in fixed income. What we are suggesting is that we all may want to have our eyes wide open regarding the risk that is clearly starting to make its way back into our system.

After a few years of relative stability, it is also easier to begin to have “style drift,” whether one is managing a company or a pool of investments. We each tend to have our respective areas of expertise and most of those are highly competitive and not without endless challenge. Outside our respective specialties, the world is a very competitive place and nothing new is ever easy or safe. Clearly, diversification strategies and growing out of your comfort zone are important to create long term value.

That said, a lot of our collective problems occurred when some of us strayed too far from what we knew, relied on people we thought we knew, or just let our guard down and “went for it,” hoping for the best (and hope is not a strategy). We all know when our walls of common sense begin to erode. We each need smart partners around us who are not afraid to speak their mind and who are willing to help us restack the common sense walls on a continual basis.

Our final point is probably the one that is most important for not falling back into some of the bad behaviors that can lead one to be especially vulnerable during a crisis: Culture. A good culture keeps a company transparent, nonbureaucratic, focused on its clients and people, and honest. A good culture is devoid of arrogance that can easily seep in and do damage everywhere it touches. A good culture allows you to minimize (ideally zero tolerance) bad actors in your company. People who take short cuts, are political, prioritize themselves above others, take excessive risks for personal gain, don’t value capital, or are unethical are outright cancers. These types of people will not only flourish in the next crisis, but most probably they will cause it. A good culture enables you to surround yourself with the smartest of partners. The right culture will make sure even the most junior person in the organization is empowered to tell you there might be something you are missing, and that person will not fear retribution if they are wrong (or right!).

We do not want to dwell on the painful years of the worst crisis we have experienced in our business careers. We are pretty sure you do not want to either. We do want to keep first and foremost in our minds the things that we can do internally to make sure we are best positioned for the next (inevitable) market dislocation. There is a very simple rule we try our best to live by: In good times, operate aggressively, but do nothing too risky or arrogant. That way, in bad times, you can take advantage of the more plentiful opportunities. None of this is easy, but if we keep reminding ourselves of the challenges, realities, threats and opportunities, perhaps we can sustain the growth that is inherent in our system.

Enjoy your summer with your friends and family,

Rich and Brian

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Pee Wee's picture

Sorry Rich, you already lost the moral high ground.  Your ommission of criminal among the behaviors is also noted - particularly when it is entrenched and systemic.

Fascist fraud factories own you and everyone else, but most got paid a lot less than you did.  Cut the revisionist tripe.

MarkAntony's picture

I guess the genocide in Ukraine is old news... completely out of the news cycle...

For a second I thought ZH would keep on reporting it - guessed wrong :(


Well, just to keep you updated:



p.s.: sorry to go off topic.

Four chan's picture

ot the cancer started in 1913 on jekyll island.

maskone909's picture

And it metastasizes every election year

ZerOhead's picture

Names NOT to give your children if your last name is Handler...

Richard > Rich > Rick > DICK HANDLER

But Dick is on the money when he says:


People who take short cuts, are political, prioritize themselves above others, take excessive risks for personal gain, don’t value capital, or are unethical are outright cancers.... These types of people will not only flourish in the next crisis, but most probably they will cause it.”


Thats' shorthand for lawbreakers protected by the government, politicians, TPTB Oligarchs, banksters, the Federal Reserve and all the unethical riffraff that orbit the gravitational fields of the aforementioned.

Unfortunately if you say the same thing here on ZH you stand an excellent chance of being targeted by the NSA as a potential terrorist...

Abi Normal's picture

All Hail the Oligarchy!  Bow down to the Banksters and the Politicians, you must obey!  King Oblahlah and Company are doing their best transformation act too!  Long Live the Homeland!  What a bunch of crap we are in, under every rock, there is a probem, go tell it on the mountain.

May a special place be reserved for them all.



Colonel Klink's picture

Yep, special place in HELL.

RaceToTheBottom's picture

I think the cancer lives inside all humans.

Humans have the capability to be inherently evil.  

WS instills the organizations and motivations to focus that cancer.

Organizations that only exist to use that evil are as evil as the individuals themselves.


Abi Normal's picture

Kinda like..."Vee ver just folloving ordheirs!"

I think you misjudge humanity a bit, there is inherently good humanity out there, it is for you to find it.

RaceToTheBottom's picture

The cancer is always there, sometimes it metastasizes, sometimes not.


Dewey Cheatum Howe's picture

They should. Those pictures should serve as a reminder what a warzone with civilians caught in the middle looks like.

p00k1e's picture

Get those X-ians to do some preemptive praying!!! 

Butterflies and unicorns!
Butterflies and unicorns!
Butterflies and unicorns!

yogibear's picture

All the current Fed presidents should be in the hall of Shame. Including Greenspan and Bernanke. 

JRobby's picture

Euthanize all.

Put a 12 year old kid in charge and things will improve quickly.

crazybob369's picture

Welcome to the ADD society. Attention span of gnats. Politicians make careers and stupid decisions counting on this.

Dr. Engali's picture

Sorry what did you say? I was busy watching Survivor.....oh look ..squirrel. 

Squid Viscous's picture

let me guess, one of the chosen like "chelsea handler"? ...stfu, your analyst calls are fucking comical, you should be selling hot dogs in borough park.. but maybe you will be swinging from a tree there soon enough,

Colonel Klink's picture

Yep, he lost the moral high ground all right!  And what an appropriate name: RICH HANDLER

Before graduate school, he worked as an investment banker at First Boston, and after as a junk bond trader for Michael Milken at Drexel Burnham Lambert

Tapeworm's picture

AS a novice I got a cold call from a Drexel sales guy and I thought that I was getting high end advice from such a hot shot outfit. He got me into a fully levered position in GE just before the puke. I had to go to my bank to borrow the dough to close the account because I lost far more than the position that I thought that I had.

 Drexel had me in positions that I never agreed to in levered stocks that I never heard of. My gains turned into 130% losses once that I figured out what had happened to me. I lost trust that day in 1987.

JRobby's picture

Not seeing much offered here in the way of prevention?

I think Bankster Concentration Camps would be a positive step.

sgt_doom's picture

repeat “bad behaviors”

Holy hell, they far improved (or devolved) upon those fraud behaviors, fer crissakes!

HFT internalization to the max!

Forex rigged to the max!

LIBOR rates rigged to the max!


Duc888's picture



Damage control.


LawsofPhysics's picture

So long as these "arsonists" don't go bankrupt or to prison, he is correct.  Gee, thanks captain fucking obvious.

orangegeek's picture

hmmm, no mention of yellen as one of the cancers, well that's queer

Clowns on Acid's picture

Rich - Good stuff , now give me your bid/ask in BitCoin in 10MM.

pragmatic hobo's picture

jefferies are part of that cancer ...

NotApplicable's picture

I thought he was describing Jefferies the whole time.

Dewey Cheatum Howe's picture

The crisis is already here and has been for awhile now just it is getting harder and harder to hide it from the great unwashed.


JustObserving's picture

If you look in the mirror, you will find the biggest cancer - the banksters. Nice job of misdirection for the gullible though.

crazybob369's picture

This is rich, coming from a guy whose firm, along with JPM and others, are up to their eyeballs in the manipulation of the precious metals markets.

NotApplicable's picture

Well, they're doing that for our own good, ya know.

crazybob369's picture

In a way you're right, cause it gives us a chance to buy more at depressed prices. Unfortunately, when it all comes crumbling down, most people are going to lose everything, while these assholes will be on their private islands sipping margaritas and banging their trophy wives/mistresses.

Meat Hammer's picture

Thank you, Captain Obvious.

Dr. Engali's picture

No shit private clueless. Who do you think caused  the crisis first place? Corrupt private bankers who control the 'federal' reserve, that's who.

vyeung's picture

Riskless treasury - hahahahaha. I beg to differ as well as the BRICS, especially Russia/China/Saudi/etc.

buzzsaw99's picture

fuck that maggot and anything he has to say

AccreditedEYE's picture

This story was the BTFD moment of the day

sgt_doom's picture

He's been acting pissy ever since they lost their primary dealer status.

Squid Viscous's picture

he looks like a typical zio-lizard

jmcadg's picture

This cocksucker is talking about himself. Fuck him

Stock Jobber's picture

Rich Handler, CEO of Jefferies, is full of crap.  I'm pretty sure he didn't get to be CEO of a major financial concern without "being political" or "prioritizing himself above others". What fun it must be for the people of Jefferies to work for such a scold.  

It's also an exasperating explanation of the financial crisis.  People have always been political, have always prioritized themselves above others, and there has always been ambition and greed.  It's why in 1776 our forfathers created a limited government with checks on power.  The reason we are in the soup now is that those limits have been destroyed.  Government manipulates the markets, spys on the people, debases the currency, steals our income, and aggrandizes itself.  All in the name of limiting the "greed" of individuals, businesses, and corporations, for the protection of the people.  People like Handler are the first to run to said government for protection from the nameless boogeymen he describes here.  It's the Handlers of this world that are the cancer.

Read some Ayn Rand.

NOTaREALmerican's picture

If only Ayn would have explaned two very important concepts, we'd have a perfect Libertarian utopia.


1)  How to make the losers disappear gracefully without bitching (and take their DNA bling with them when they disappear)

2)  How to keep the dumbasses from being manipulated by the bullshit created by the smarter-n-savvier people.


Stock Jobber's picture

Atlas Shrugged Part II:  America has devolved into a dark chaos.  The people of the valley return to kick ass and set up a new government.  

Ayn Rand was a tough lady, but that's no book for a woman to write...

GoatHerder's picture

I think your redemption can be found at the gallows Rich.

Davos's picture

Looks like the financial system needs some broccoli

Ness.'s picture

He says this shit as he tells his little monkeys at the shop to BTFD.  We have a nice little U shaped rebound happening in stawks right now.  A slow, very measured grind up.  I guess wars and sanctions are not considered risky these days.  

NOTaREALmerican's picture

Well,  if ONLY we had some sort of ISM that wasn't ruined by the normal sociopaths and assholes who feel naturally entitled to break the rules, we could have a utopia.

But, otherwise, it's:  Survival of the fittest,  bitchezzzz!!!!!

The Phallic Crusader's picture

David "Stocks are Not Overvalued" Zervos will be amongst those first up against the wall when the Revolution comes...