Egan Jones Downgrades Jefferies On Concerns About Sovereign Exposure Amounting To 77% Of Equity

Tyler Durden's picture

Because like with insolvent sovereigns and the law of communicating vessels, there rarely is just one cockroach.

From the note:

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.


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Eireann go Brach's picture

Another domino, eventually all dominos will fall and this time Ben you will not be able to save the world!

GrinandBearit's picture

We are almost at the end.  It's only a matter of time.  I have my popcorn and recliner all ready.

rocker's picture

So the HFT's are going to do what kind of manipulation now.  Up 300 or Down 300. 

 Anybody with knowledge knows the rallies in U.S. Equities are not real are already gone.  100% Cash.

  This make believe EW Wave Shit and Robo garbage trades are done.  Now What.

Will anybody finally admit;  We are Worse than Japan Now

Or will make believe land still live on. The CNBC frauds or the Bloomberg circus. 

fattail's picture

By 100% cash do you mean stacks of $100 bills in the wall safe behind the family portrait, or do you mean 100% cash - safely secured in a segregated account held by your broker???  If its the latter the 100% cash position you have may be closer to a 72.5% cash position.

flacon's picture

I think he means this.... CASH CASTLE!







dasein211's picture

Corzine was SENT into MF Global with the objective of collapsing it and rolling the remains into Goldman (presumably). And he was paid eight figures to do it, AND promised SEC TREAS after Geithner. If you had said six months ago that the largest FCM in the U.S. would be taken down, everyone would have laughed in your face, but here we sit. The only question is, who is next? How long will an FCM like ADM last before looking at Dodd-Frank and saying, "Screw this. We're selling our clearing operations and we'll just go back to straight-up product merchandizing." Why shouldn't they? If the FCM profit center is made impossible by the government and the corrupt regulatory bodies, why would they continue to operate an FCM? Why not sell to Goldman or one of the other megabank entites and then do their exchange-traded hedge business through them as a customer? When will the old Chicago boutique firms be similarly forced out, either through regulation that makes their business impossible, or through outright sabotage as with Corzine and MF? None of you FCMs are safe. THEY WILL COME AFTER YOU AT SOME POINT. You have been targeted for extermination. Either you wake up to this fact and expose these regulatory bodies, megabanks and the Federal Government and fight them, or you are going to end up like MF, being bought by Goldman or one of the other fascist government-connected megabanks for pennies on the dollar. You have been warned.

Stormdancer's picture

Channeling Ann Barnhardt today are we?  Credit would be in order.  Integrity is really nice but absent that maybe a little shame?



Edit:  The "thumbs down" is definately very personally directed at the low-life messenger, not the message.  I happen to think Ann is wrong but I'd discuss that with her, not this poseur.

Yellowhoard's picture

Definative proof, or failure, of your hypothesis will come in the form of Corzine getting either a perp walk or the Sec. Treasury job.

natty light's picture

It is amazing how my silver has no volatility. Every time I weigh one of my JFK '64 halves, it always comes to .361 ozt.

rosex229's picture

this really pinpoints how critical it was for this latest eu summit to produce something large and competent enough to float market confidence for a few months. the few days of market relief that were achieved didn't amount to nearly enough time to stabilize balance sheets and offload assets to increase capital ratios. the continued degredation in bond and equity markets will corroce the viability of a number of financial institutions, one day at a time, until a tipping point where bank lending freezes due to fears of interacting with a soon to fail bank. sound familiar...

PulauHantu29's picture

Don't be so downbeat. I  bet luxury sales will have another blockbuster Q to match an even higher Wall Street Bonus Christmas season.

After all, 'tis the Season!


Nolsgrad's picture

time to start tip toeing into financials?

fizz's picture

Dick Bove, is that you?

beaker's picture

When all the counter-parties are insuring each other, is that what you call a circle jerk?

CrazyCooter's picture

I am probably one of the least math-iest folks here, but I could venture the following formula.


(some really complicated shit goes here)



But, on the other hand, I have a decent working understanding of arithmetic, algebra, geometry, and calculus.



Ident 7777 economy's picture



Division by Zero, Coot?


Undefined ...


But then that is where we are (undefined land).



rubearish10's picture

I thought Mr B said today that the MF thing had no impact and was isolated? Ummm.

WestVillageIdiot's picture

"Subprime is contained."
-  Golem Bernanke 2007

Mactheknife's picture

Busted. 3rd rule of fight club: You do not watch CNBC.

Ronaldo's picture

There is a certain artistic and comedic value you can glean from it.

Yellowhoard's picture

CNBC is must viewing.

As a contrary indicator, you cannot find a more accurate barometer.

They exist solely to herd the masses to the other side of Goldman's positions.


ArkansasAngie's picture

Collateral damage.  TBTF is offering up sacrificial shatheads.  Gotta keep them Central Banksters scared.

My money is in my pocket.  Do you know where your money is?

fnord88's picture

It was all in Gold. Then I spent it all on coke and hookers. I swear. All of it.

DoChenRollingBearing's picture



I am very sorry to hear that.


Victim of a boating accident

ReallySparky's picture

You must have been with Gorden. Happened to someone else I know.

HoofHearted's picture

And fnord must have been with Charlie Sheen.

Unfortunately, I traded all mine for Pokemon and Beanie Babies. I mean you can't just print a...oh shit, I see my problem now.

HUGE_Gamma's picture

I find that hard to believe when every employee is a top 5 MBA with the FRM, CFA, CPA, CAIA and every Finra license 01-99. I rate them AAAA+^3

Flakmeister's picture

I remember the FP division of a monoline going down in flames.... The hubris and self-delusion was palpable....

Mactheknife's picture

>On the pos. side, JEF is a respectable competitor.

Pretty sure I heard that said about MF.

TheGoodDoctor's picture

I'm glad I bought some popcorn. Now whether it will last through the weekend is another thing entirely. :p

Schmuck Raker's picture

I recommend popping a small bowlful now, and making it last through next week. Can as much as the stores will sell you. These are desperate times friend.

nmewn's picture

More popcorn!!!

DoChenRollingBearing's picture

+ 1

At this rate I am going to need a new machine to pop it, and will have to buy popcorn in BULK!

fuu's picture

Store it a 5 gal bucket with a gamma lid, mylar bag, and oxygen absorbers.

CrazyCooter's picture

Screw popcorn, I am loading up on rice ... my first 24 pounds of Japonica and Wehani are in the mail!



Raging Debate's picture

Cooter, don't forget import commodities like coffee and sugar. Cooking oil substitutes like Crisco. I like to rotate powdered milk and eggs. I lean toward whatever will be least available in my region for luxury commodities. Have some stuff you enjoy eating and drinking. Lots of water filters. If you can generate your own power your really ahead of the game.

The idea is to maintain a quality of life and trade the rest. Oh yeah have Forex like Yuan. I view that as once in a lifetime trade. But I wouldnt hang onto it like Gold much past 2014.

Read up on criminals and how they behave at the ground level, particularly Russia 1998. Good luck and God bless all people of all nations. None of this has been easy and good things to come never are.

CrazyCooter's picture

Fuck living like a king amongst paupers in the most armed state in the union.

I plan to share/donate excess through local churches.

No lamp post for me ... I am in the fox hole with the people ...



caerus's picture

just short gmcr through the's an easy it

WonderDawg's picture

Care to elaborate, Caerus? I'm all ears, sitting with a little dry powder.

caerus's picture

i figure a quick dip to 40 at best...they delayed earnings till the ninth...thought i would be out of the position by now...

WonderDawg's picture

Interesting. I'll check the puts, see how they look. You're expecting a miss on earnings, eh?

caerus's picture

they already missed...i didn't trust them before the delay...i don't trust them now

WonderDawg's picture

Thanks for the heads up. Might place a bet tomorrow. If it pays off, I'll send you of bottle of single malt.

caerus's picture

good man...hope im not an idiot

WonderDawg's picture

No sweat, I wouldn't blame you, I make my own decisions. I'm always open to some insight, and if it looks good to me, I pull the trigger. No guts, no glory, and no blame.

WonderDawg's picture

Besides, how could I not trust a guy who goes by Caerus? I'm always seeking kairos myself.