One Week After Trolling Zero Hedge For Being Negative, Jefferies Posts Worst Quarter Since Financial Crisis

Tyler Durden's picture

One weekend ago, in an unexpected episode of Zero Hedge trolling by Jefferies economists, the junk-bond focused mid-tier investment bank sent out a note in which it defended the "recovery" as follows:

“Lightweights like Zero Hedge might point to a sub-50 ISM as another reason to hate equities, but there’s a reason why little ZH is a choker, a reason he’s got one of the worst records in predicting markets anywhere, just a harrable record, harrable, I mean, successful people have pointed out that he’s 0 for 2600. He’s succeeded at being wrong. Success is my son-in-law, I’m successful, my daughter is both beautiful and successful. I have many successful friends.” Made up quote, but the point is that it’s hard to be successful when just reacting to backward looking information. Our work suggests that by the time the ISM breaks 50 to the downside the market is already pricing in much of the concern--actually a break through 50 to the downside tends to be quite positive for the market over the next 12M even when you include recessionary periods. When that break of 50 hasn’t been associated with an immediate recession (i.e. perhaps now), median market performance is up 11% over the next 6M, and 21% over the next 12M. This week we got a better than expected ISM, and skeptics point to the fact that it’s still below 50, but that may be a positive.  See supporting chart, table and methodology below. (T.J. Thornton, US Product Management).

We responded not by retaliating with childish name calling, but by showing both the recent collapse in Jefferies revenues, the stock price of Jefferies Group owner Leucadia...

... as well as the massive restructuring in the company's investment bank group, as a result of which countless current Jefferies employees would become former:

Jefferies Group LLC will merge its junk-rated loans and bonds business with the junk debt unit of its joint venture with MassMutual Financial Group, according to people familiar with the matter, in the biggest reorganization by a U.S. investment bank since the leveraged finance markets seized up last year.


Jefferies' management presented the changes internally as a way to boost efficiency and focus on clients, rather than a response to troubled deals, the sources said. It was not immediately clear if the combination would offer Jefferies more financial resources to increase lending.

In retrospect it appears the changes were indeed in response to troubled deals, but more in that in a second.

We further said, that if instead of trolling "fringe blogs", the company's economists actually did their job and actually "predicted" what was coming instead of cherrypicking goalseeked economic datapoints to "justify" the bank's falsely bullish outlook and help their employer be better positioned for the proper trading environment, Jefferies wouldn't be forced to report quarter after quarter of abysmal results.

Well, make that after another quarter.

Moments ago Jefferies, which is still on the investment banking cycle of reporting where its earnings (and in this case, losses) arrive one month ahead of the other banks, and as such is a good bellwether into overall Wall Street revenue trends, reported an absolute disaster of a quarter, its worst since the financial crisis.

The appalling numbers: trading revenue plunged 82% in the fiscal first quarter, leading to the firm’s first non-GAAP loss for the period since 2008. Unlike previous quarters, this time the collapse in sales and trading was not led by massive losses in bond trading but by a massive remarking to market of its equity exposure, which is not to say bond trading was ok: revenue from fixed income plunged 55%, while equities imploded by an unprecedented 99%, down from $203 million to just $2 million!


The result: a ghastly net loss of $166.8 million, which not even non-GAAP adjustments could make stink any less.


Dick Handler's apologetic commentary for the third month in a row could make life for the firm's CEO difficult if its main shareholder, Leucadia decides it has had enough. This is what he said:

"Our overall first quarter results reflect an exceptionally volatile and turbulent market environment during our first fiscal quarter, although our core businesses performed reasonably, considering the environment. A quiet December was followed by an extremely challenging January and first few weeks of February. Almost every asset class, including equities and fixed income, suffered significantly amid concerns about the pace of global economic growth, outflows from the high yield market, forced selling from hedge funds, uncertainty over China, a potential Brexit, and an overall void in liquidity.

But wait, aren't your "economists" expected to anticipate events such as these and help your traders position accordingly? Perhaps they have "more important things" to do with their time.

What caused the collapse? First equity:

Although our Equities revenues declined to $2 million for the quarter from $203 million for the first quarter of 2015, this was primarily attributable to a $145 million difference in net revenues related to two listed equity block positions, including KCG, and our share of the results of our Jefferies Finance joint venture. The two equity block positions generated pre-tax, mark to market losses during the quarter that totaled $82 million, $67 million of which is unrealized, including KCG, which was written down by $37 million. This compares to the combined net revenues of the same positions of positive $30 million during the first quarter of 2015, a year-on-year decline of $112 million.

And then credit:

Leverage lending activity and related liquidity was very muted during the quarter, and two loans Jefferies Finance closed during the quarter and held for sale as of the end of the quarter were marked down by a total of $38 million. That is reflected in our share of Jefferies Finance's results. The two loans held for sale in Jefferies Finance as of the end of February 2016 were marked at prices believed to be required to clear their sale, with the potential for gains should markets improve prior to sell-down.

There was the odd defense of the balance sheet, which explained the firm's ongoing gross derisiking as well as its dramatic reduction in risk positions as confirmed by the 13% drop in VaR:

Our balance sheet at February 29, 2016 was $35.2 billion, down $3.4 billion from 2015 year-end and $8.6 billion from the year ago period. We estimate period-end tangible leverage to be 9.8 times. We continue to have ample excess liquidity. At the end of the first quarter our liquidity buffer was about $4.3 billion and represented 12.9% of gross tangible assets. We repaid our $350 million March debt maturity today from cash on hand and have retired a net $784 million of debt in the last six months. Our Level 3 assets decreased 10% to $489 million, from the year end level of $542 million and represents 3.6% of inventory. Average VaR for the quarter of $8.4 million was lower by 13%, compared to $9.7 million for the fourth quarter."


Jefferies Finance's equity is $949 million. Jefferies Finance is highly liquid and positioned well to serve our clients in this important business as the market recovers. We recently strengthened our Leveraged Finance origination team and expect to grow further our presence in this segment.

But first the team will be substantially trimmed, as reported last weekend. Handler went on:

New issue equity and leveraged finance capital markets were virtually closed throughout January and February, which resulted in many of our potential Investment Banking capital markets transactions being postponed until some stability returns to the markets. As we have done through many other turbulent periods in our history, we reduced our already smaller balance sheet to continue to reduce risk during this difficult period. We are humbled by Jefferies' quarterly loss and will strive to deliver the better results that our shareholders deserve and Jefferies is more than capable of achieving.

Humbled enough to actually read the economy correctly, or still unhumbled to where your novelty clown "economist" appears on Bloomberg TV wearing "I Heart QE" hats? Actually, we have a feeling said economist was instrumental in soothing investor nerves with the following Dick Handler line:

While we are early in the second quarter and one can never predict the future, it appears markets have not only stabilized, but aggressively snapped back. Bank holding company stocks in the U.S. and globally have halted their sell-off, high yield inflows have been at record levels, hedge funds appear to have stabilized, equity markets have rebounded, and energy/commodity prices have improved significantly. We are experiencing mark-ups in our block equity positions and believe there may be potential upside in the value of the loans held for sale in Jefferies Finance should the current market tone continue. Our core businesses are performing well, with total sales and trading net revenues for the first ten trading days of our second quarter averaging above our recent periods' mean results, and our investment banking backlog is stronger.

Yes, Jefferies just extrapolated a trend based on 10 trading days, which considering its novelty "market strategist" - who seems to be good at anything but actually 'strategizing markets' - appears on TV dressed as follows...


... is not really unexpected.

We wish Jefferies well, and that sooner or later the much "hearted" Fed QE will return and help the bank regain its central-bank infused mojo, in lieu of actual analysis by its highly overpaid cadre of forecasters.

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Father Thyme's picture
Father Thyme (not verified) Mar 15, 2016 7:04 AM

But it's been a whole week.

Nutsack's picture
Nutsack (not verified) Father Thyme Mar 15, 2016 7:07 AM

Fucking greedy lying socialist jew faggot

Latina Lover's picture

So tell us how you really feel....

VinceFostersGhost's picture



Jefferies Posts Worst Quarter Since Financial Crisis


And the Nobel Prize goes too....

Janice's picture

First they ignore you, then they laugh at you, then they fight you, then you win.

CheapBastard's picture

Jeffries needs a big distraction and FAST!


They can join the other distractors [and detractors] and bash The Trumpster to take readers' minds off their miserable results.

Laowei Gweilo's picture that really a I <3 QE baseball cap?


it's like those videos from 2007 of "experts" laughing at that guy predicting a housing crash... or the jock meathead 'realtors' in the new Big Short film...


and I'm kinda a bull even haha but these retards are just..... never go full kool-aid! =p

lehmen_sisters's picture

I'm really surprised i had to scroll all the way down to your comment to see a remark about the i <3 QE hat, first thing i noticed. What a toolbox that guy is 

Theosebes Goodfellow's picture

Somebody cue up the donkey horse-laugh, I'm braying my ass off.

new game's picture

so jan and half of feb needed fed support and it wasn't there or the market down turn will take them to the woodshed or the cancer is terminal. hey, take your pick...

StychoKiller's picture

Rather than call out Zerohedge, the phrase "Stick to your own knitting" springs to mind!

Blackfox's picture

Soooo just about everywhere I look & read I see people waking up to the Jewish problem. The internet has really ruined it for them, you would have thought they might behave themselves after WW2 - but nope!

BarkingCat's picture

There were changes. Some have changed their names so they are not instantly recognisable. They now interact with general population.

Most of their business is done via corporate entities and not private business.


So, basically they are trying to blend in.

holgerdanske's picture

We have psycopaths in our midst. These are the eternal optimists with no sense of fear of failure, because they literally don't give a fuck about other people, and I mean the don't care whatsoever.

They are likely to take chances no other person will contemplate, because the consequences of a positive outcome overshadows everything else!

And, many times these odds pay off. When they don't they loose other peoples money and brush it off.

A large portion of these people find their way into the financial sectors and they play games with other peoples money.


If they don't fuck up the markets, they are often politicians and then they fuck everything up!


BlueStreet's picture

He looks like Chumlee from Pawnstars. 

Dadburnitpa's picture

I read that Chumlee got busted for meth the other day.  This douche bag who loves QE should be his cell mate.  "Hey, over here. Free ass pounding for all my home boys!"

Racer's picture

A guy in a suit with a QE cap - what a plonker

shovelhead's picture

He looks like the guy who works at the car wash coming back from a funeral.

Government needs you to pay taxes's picture

Gucci loafer windchime potential?!?

Panafrican Funktron Robot's picture

Yeah, still, at least his name isn't Dick Handler.  I can't believe that's a real name!

E.F. Mutton's picture

The hat doesn't just signify "douchebag", it flaunts it.

tarsubil's picture

I thought that was photoshopped. What a complete pile of shit that guy is to wear that hat. That is pretty much "let them eat cake." How fucking tone deaf can you be?

Chupacabra-322's picture

The guy is a total Scum Fuck Dick

pods's picture

A whore might get mad that you call her a whore, but it won't change the fact that she is a whore.

VinceFostersGhost's picture



It won't even faze a professional whore.


Which is the difference between professional and amateur.

it aint paranoia if they really are out too harm you's picture

The difference between Senators and whores is that whores don't run around acting like senators...

Sisyphus's picture

OT, but since we are talking about whore and trolling. It seems, Portia De Rossi went whoring with a man and trolled her marriage with Ellen.
The couple is reportedly calling it quits after Portia cheated on her wife of seven years with a man.

LMAO. So, after tribbing for seven years, you woke up one day and started craving for a khram? JFC on a pogo stick.

Smerf's picture

Tribbing: when lesbians rub their vaginas together in a humping motion.

I did not know that.

BarkingCat's picture

neither dyke was a wife and their relationship was not marriage.


EddieLomax's picture

Looking at Jeff this quote seems apt, "Not all whores wear a skirt" - General Alexander Lebed

TheSheepWolf's picture

Zero Hedge IS negative, no doubt about that.

Father Thyme's picture
Father Thyme (not verified) TheSheepWolf Mar 15, 2016 7:17 AM

So always look on the bright side of death.

Just before you draw your terminal breath.


On a long enough timeline...

VinceFostersGhost's picture



Yeah...being in debt 20 trillion dollars is extremely positive.


OK.....back to watching dancing with the stars.


venturen's picture

Negative interest so crooked bankers can collect bonuses....what is not to like about that!

Tall Tom's picture

Global Financial Collapse is extremely positive.


What can be more positive than the total eradication of a fraudulent and corrupted financial system that plunders future generations unborn so that we live beyond our means today?


I celebrate the realization of the destruction of lies and deceit.


I am enthralled by watching evil destroyed.


I will be dancing in the streets, just like the Mossad agents that later detonated an explosives filled van in Manhattan on 9/11.


(Yes Hedgeless_Horseman's 9/11 article proved extremely enlightening.)


I yearn for the destruction and pray to God Almighty to bring His wrath and righteous judgment to fruition.


Zerohedge is one of the most positive websites in the World.


Thank you Tyler Durden.

Father Thyme's picture
Father Thyme (not verified) Tall Tom Mar 15, 2016 8:07 AM

<-- "I yearn for you tragically. R. O. Shipman, Chaplain, U.S. Army." --Catch 22 (Joseph Heller, 1961)

<-- Yearning for Zion Ranch.


pray to God Almighty

Same one that the Jews plagiarized from Ugaritic clay tablets?

The Origins of Biblical Monotheism: Israel's Polytheistic Background and the Ugaritic Texts
Mark S. Smith
Oxford University Press

If you "yearn for destruction," you're nothing more than a damned Boshevist, according to this famous Austrian economist:

"[Jesus] rejects everything that exists without offering anything to replace it. He arrives at dissolving all existing social ties…. The motive force behind the purity and power of this complete negation is ecstatic inspiration and enthusiastic hope of a new world. Hence his passionate attack upon everything that exists. Everything may be destroyed because God in His omnipotence will rebuild the future order…. The clearest modern parallel to the attitude of complete negation of primitive Christianity is Bolshevism. The Bolshevists, too, wish to destroy everything that exists because they regard it as hopelessly bad."

Ludwig von Mises
Socialism (p. 413)


Fuck off, Bolshevist.


Father Thyme's picture
Father Thyme (not verified) Father Thyme Mar 15, 2016 8:40 AM

"...Christianity is Bolshevism." -Mises

Austrian economist Ludwig von Mises'  insight on Christianity is confirmed by Eric Hoffer, in his 1951 book on fanatical mass movements--which Communism and Christianity both are--called "The True Believer."  These fanatical mass movements are "interchangeable."

Hoffer argues that even when their stated goals or values differ mass movements are interchangeable, that adherents will often flip from one movement to another, and that the motivations for mass movements are interchangeable. Thus, religious, nationalist and social movements, whether radical or reactionary, tend to attract the same type of followers, behave in the same way and use the same tactics and rhetorical tools. As examples, the book often refers to Communism, Fascism, National Socialism, Christianity, Protestantism, and Islam.

The True Believer: Thoughts On The Nature Of Mass Movements (Hoffer, 1951)

Hohum's picture


That's only the federal goverment.  You're forgetting most of the economy's debt.

g&#039;kar's picture

"Zero Hedge IS negative"


negative based on reality. if it weren't for qe, ppt and esf the s&p500 would be 500

Tall Tom's picture

Zerohedge is positive.


The total destruction of the current paradigm is what is needed.


Zerohedge provides some hope for that.

Father Thyme's picture
Father Thyme (not verified) g'kar Mar 15, 2016 8:03 AM

TALL TOM: The total destruction of the current paradigm is what is needed.

Disagreed -- if you've read Mises.


But thanks for admitting you're nothing more than a Boshevist, according to this famous Austrian economist:


"[Jesus] rejects everything that exists without offering anything to replace it. He arrives at dissolving all existing social ties…. The motive force behind the purity and power of this complete negation is ecstatic inspiration and enthusiastic hope of a new world. Hence his passionate attack upon everything that exists. Everything may be destroyed because God in His omnipotence will rebuild the future order…. The clearest modern parallel to the attitude of complete negation of primitive Christianity is Bolshevism. The Bolshevists, too, wish to destroy everything that exists because they regard it as hopelessly bad."

Ludwig von Mises
Socialism (p. 413)


Fuck off, Bolshevists.


Iconoclast421's picture

Heart QE. Yep that about sums up wall street.