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So It Was An Issue After All: Jefferies Cuts Its Gross PIIGS Sovereign Debt Exposure In Half
And so the sovereign exposure that was perfectly innocent according to three previous press releases from Jefferies, has just been offloaded to some other bank, which has a bigger market cap and "won't be cause for major alarm."
Full release:
Jefferies announced today that its trading positions in the sovereign securities of the nations of Portugal, Italy, Ireland, Greece, and Spain have been reduced by an aggregate of approximately $1.1 billion long and $1.1 billion short. This represents a 49.5% reduction in Jefferies’ gross holdings of these securities since the close of business Friday and resulted in no meaningful profit or loss on today’s trading activity or our remaining positions, which continue to be substantially matched by country and maturity.
Jefferies’ current net exposure to these sovereign securities is currently $59 million, or 1.7% of shareholder equity, with negligible market or credit risk.
“We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book,” said Richard Handler, Chairman and CEO, and Brian Friedman, Chairman of the Executive Committee of Jefferies, in a joint statement. “We will now resume our normal market-making activities and serve our clients around the world.”
Thank you Jefferies for offloading shareholder risk onto someone dumber. And now, all this action has done is made any PIIGS exposure on any bank balance sheet, gross or net (and yes, Gross exposure apparently is a risk factor in an of itself, and the market is starting to ignore all lies about bilateral netting), an immediate excuse to sell off stocks right into the circuit breaker. Look for the vigilantes to comb through any and every 10-Q with a fine tooth comb and punish any bank that still has any exposure gross or net. Our only question remaining re: Jefferies is what was the P&L hit on this liquidation?
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Which 'bank' I wonder did they 'offload' their bad Euro debt to...'Bank of Fed taxpayer' I presume?
Financial Three Card Monte!
Make your bet as to where Wall St has hidden the crappy derivatives.
My guess is, where ever the US tax payer is exposed the most!
"We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book"
lol
They only did it to show that they could! No other reason.
The same reason that Charlie Sheen uses to bang seven gram rocks. That is just how they roll.
We could quit anytime we want!
Of course. Market Soars - it's a ponzi miracle!
PPT.
That's my line...
"reduced by an aggregate of approximately $1.1 billion long and $1.1 billion short"
WTF? They reduced their net exposure by ... $0.00 ?
For someone who tries to make you believe that gross exposure doesn't matter, what are they really trying to tell us here? That gross speaks louder than net?
This does confuse people who don't hedge. Let me try.
The initial position was roughly 2.2 billion long bonds, more or less matched by 2.2 billion short bonds. They are/were market makers in this stuff, so a large inventory is not unusual. The problem is, either side of that mountain of paper can blow up, due to the well known piigs problems, counter-party failure to perform, or plain illiquidity. Bonds are niche markets and have lousy liquidity even in good times and the profit margins are thin.
Think of it as picking up nickels ahead of a steam roller;)
I smell the mother of all lawsuits coming out of this.
Well according to the markets something bullish must have happened in the last 30 minutes. Just about everything from here to Dubai is now green... what universe am I living in...
A Dubai Gigapan viewer http://gigapan.org/gigapans/fullscreen/48492/
Incredible architecture..search hard for any sign of life...
You living in the Bizzaro Market Universe where everyting is the opposite of what it should be. So don't worry, all the off-loading of debt and risk onto the taxpayer will actually be good for us in the long run ;-)
Well according to the markets something bullish must have happened in the last 30 minutes. Just about everything from here to Dubai is now green... what universe am I living in...
Not sure. But there are two of you in this one.
clever. I like it.
Yea no kidding, which bank took that extreme toxic junk.
Get it while its liquid
Could be a case of too much liquidity.
Like from bad sushi and a lot of wasabi.
mercury is very liquid with a fickle temperament, but kills its host slowly
LOL- keeping the music going....
The directors bought some more shares themselves (500k a piece that is) to appease the market about JEF's conditions as well. These guys are literally throwing everything they have to show the firm is fine...
Them and another dozen or so...
And so the sovereign exposure that was perfectly innocent according to three previous press releases from Jefferies, has just been offloaded to some other bank, which has a bigger market cap and won't be cause for major alarm.
Unless it's floating on a chunk of Styrofoam anchored in some Caribbean island harbor....
Enron style off-balance sheet? Surely, the regulators wouldn't allow that;)
Actually, it was no problem.
I took the short side, and Madhedgefundtrader took the longs.
I 'm having trouble making the number add up.
"reduced by an aggregate of approximately $1.1 billion long and $1.1 billion short"
"This represents a 49.5% reduction in Jefferies’ gross holdings of these securities"
"Jefferies’ current net exposure to these sovereign securities is currently $59 million"
NET
Thanks Kaiserhoff. +1
One of Tyler's Tweets explained it too.
I'm guessing that $59 million is the difference between "approximately $1.1 billion long and $1.1 billion short"
Note the words here... gross and net.
They reduced gross holdings.. which looking at the simple numbers there would have changed net exposure by zero. They're saying what they have left is not net 0, but net 59 million
Like the big spot that keeps spreading in Dr. Suess' The Cat in the Hat Comes Back.
I want a pop-corn shitting unicorn, these skittles are rotting my teeth.
You can't spell "bullshit" without "bullish"
More like you can't spell "bullish" without "bullshit".
You can't spell Spain without Pain.
I find the acronyms weirder by the day. BRICS and PIIGS. All very subtle programming. The BRICS will build the new structures while the PIIGS will go to slaughter.
Except that the BRICS are a bunch of Hollowponzi's themselves.
ORI
Wikidribbles
We hereby guarentee that our previous guarentee was warranted under the said guarentee...
Did I say "guaranteed"?
No, no ,no. I said 9% would be "rare, indeed".
Well, at least they are saying "substantially matched" instead of fully hedged. That has to be closer to the truth.
"substantially matched"... somehow safety matches comes to mind.
...bullish for equities...glad I BTFD in the overnight. Square and outta here!. Sell again at 1305
I wonder what kind of discount they sold it for. If they even sold it.
Hey, at least they put their money where their mouth is.....huge insider buying Friday afternoon....
The liars cup runneth over.
Gross, meet Net.
Euro/US equity peg suddenly snapped as Euro is down 1%, equities reverse and up 1%.
when are people going to start going to jail for all this b.s. lying.
hey - it's great that JEF was able to offload this shit, but i got long LEH b/c dicky fuld publicly said 'nothing was wrong' a hundred times and now JEF got away with it - but what if they hadn't and shareholders listened to these assholes!
just because every prime minister in europe and 'unofficial source' quoted by FT can get away saying whatever the fk they feel like at the moment, regardless of its correlation to the truth, does that mean that officers of public companies can now say whatever they want and get away with it?
So let me get this straight: Dick Handler offloaded into someone else's face?
Thank you Jefferies for offloading shareholder risk onto someone dumber.
Did they offload it to a SPV or a SIV?
Be first, be smarter or cheat.
that expression is so 1990 -- today it goes like this:
i am slow
i am dumb
therefore i cheat
people are sheep, either way...that's evidence by the 20% drop and multiple halts the other day. What would you do if you were Jef? sit back and watch your clients pull money one after another to prove a point? or slash your exposure and go into crisis(whether real or percieved) management? I fail to see how this move proves it "was an issue". It certainly became an issue for the firm's PR which has real business effects....but was it an actual inherent risk issue to Jefferies, a la MF Global? I'm not Jefferies mgmt, so I don't know, but if they were able to unload half their exposure in a few days it seems unlikely.
i agree, everybody may be overreacting in this case, until you know what bonds are held long and short and at what price nobody knows shit, jeff handled it the right way because perception is everything with these companies, and they have no credibility, they unwound half of their position to get everyone to STFU, most on this board is acting like the sky was falling, and jeff just proved it wasn't, unless they are lying of course.
OT - I realize we're not supposed to discuss US news on ZH anymore (jus kiddin', viva la Euro) but...
60 Minutes last night was pretty good: "Jack Abramoff: The lobbyist's playbook"
http://www.cbsnews.com/video/watch/?id=7387331n
Not that we all don't know the US Govt is rotten and corrupt to its core. But it is seldom that anyone who is Inside on the Con admits it and depicts exactly how it all works.
In MSM no less. I was impressed by candid nature of the story.
The cat continues to claw its way out of the bag...
why is the ecb pouring money down he drain supporting btp yields bullish for the euro?
if they don't, then it's game over...or atleast pushes things to sudden death OT.
OT: Germany's IFO Institute and Greece:
http://www.spiegel.de/international/europe/0,1518,796251,00.html
offtopic but this is going really fast, first Iran, now North Korea..: http://www.offgridminds.com/blog/2011/11/7/north-korea-we-were-waiting-f...
Euro stars in girl interrupted.
http://www.youtube.com/watch?v=zeTDL1G9wG0
So, let's ask a fun question. If any and all Euro sov. debt is now toxic on any balance sheet, just who is going to be buying all the new issuance and roll-overs? Let alone taking existing holdings off their hands
Option.....print baby print
Bernank has a penchant for bad debt, he would love to have it
I'd really like to know what is going on with oil. Oil seems to trade down everynight then spike back up every morning. There has already been a $3 swing from late last night.
The auto news out of China is horrible. Falling auto sales in China should be the kind of news that would send crude down 10% but in this bullshit rigged market all news is bullish.
I remember how all news was bullish in 1999 and how all news was bullish in 2007. Now in 2011 all news is once again bullish, didn't work out so well the last few times.
Possibility of pew pew in Iran may have something to do with that.
The ECB's interns must be hard at work today.
First time ever that I heard a CNBC talking head saying that maybe the Euro strength is based on repatriation of funds from European banks.
I read it here two weeks ago.
TD those bonds were never a problem, we have zero liquidity issues, all is well, really it is... Jef CEO. (they were sold at a loss of 70%) ..
Contagion "To infinity and Beyond"!
: ? Which Country in Europe does not hold anothers debt?
This is the ONLY reason for the lifelines. The reality is all the "lifelines" are anvils and millstones!
Every monetary transaction is by the nature of this system inherently tied to the dollar, and most importantly, is DEBT at it's most basic level.
Sink or swim baby.
Thank you Egan Davis! The market FINALLY worked!!!! The downgrade of Jefferies by Egan Davis created Market concerns which forced Jefferies to liquidate their risk!!! Someone send this to CNBC's Steve Liesman - This is how it works! Well done!
This mkt reminds me of the post Bear St default when the Mkt rallied for a while then nosed dived..we are due for some big moves. Stay vigilent, it's a coming.
It's the All IS Well Market!
I smell an error account with a hedged position in sovereign debt.
Winning....!!!!!!
They sold it to demonstrate they are not trolls........
Those PIIGS are the new Jews, Aborigenes or Indians. Kill them all!
FuckinA, KILL Whitey!
Latest NASDAQ chart porn suggests fun times ahead:
http://stockmarket618.files.wordpress.com/2011/11/2011-11-05_nas-8_x.png