So It Was An Issue After All: Jefferies Cuts Its Gross PIIGS Sovereign Debt Exposure In Half

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Mon, 11/07/2011 - 10:35 | 1852858 SheepDog-One
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Which 'bank' I wonder did they 'offload' their bad Euro debt to...'Bank of Fed taxpayer' I presume?

Mon, 11/07/2011 - 10:47 | 1852879 Pladizow
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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!

Mon, 11/07/2011 - 10:47 | 1852905 gojam
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"We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book"


They only did it to show that they could! No other reason.

Mon, 11/07/2011 - 11:11 | 1853006 Quinvarius
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The same reason that Charlie Sheen uses to bang seven gram rocks.  That is just how they roll.

Mon, 11/07/2011 - 11:26 | 1853063 gmrpeabody
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We could quit anytime we want!

Mon, 11/07/2011 - 10:40 | 1852881 HelluvaEngineer
HelluvaEngineer's picture

Of course.  Market Soars - it's a ponzi miracle!

Mon, 11/07/2011 - 10:55 | 1852928 JohnG
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Mon, 11/07/2011 - 11:07 | 1852984 GeneMarchbanks
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That's my line...

Mon, 11/07/2011 - 10:43 | 1852890 Unprepared
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"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?

Mon, 11/07/2011 - 12:37 | 1853438 kaiserhoff
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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;)


Mon, 11/07/2011 - 10:47 | 1852904 CPL
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I smell the mother of all lawsuits coming out of this.

Mon, 11/07/2011 - 10:48 | 1852906 rosex229
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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...

Mon, 11/07/2011 - 11:09 | 1852992 Theta_Burn
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A Dubai Gigapan viewer

Incredible hard for any sign of life...

Mon, 11/07/2011 - 11:22 | 1853051 Odin
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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 ;-)

Mon, 11/07/2011 - 10:48 | 1852907 rosex229
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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...

Mon, 11/07/2011 - 11:07 | 1852985 Quinvarius
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Not sure.  But there are two of you in this one.

Mon, 11/07/2011 - 11:12 | 1853009 Vergeltung
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clever. I like it.


Mon, 11/07/2011 - 21:10 | 1855237 Buck Johnson
Buck Johnson's picture

Yea no kidding, which bank took that extreme toxic junk.

Mon, 11/07/2011 - 10:35 | 1852859 junkyardjack
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Get it while its liquid

Mon, 11/07/2011 - 10:48 | 1852908 Manthong
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Could be a case of too much liquidity.

Like from bad sushi and a lot of wasabi.

Mon, 11/07/2011 - 11:24 | 1853054 earleflorida
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mercury is very liquid with a fickle temperament, but kills its host slowly

Mon, 11/07/2011 - 10:36 | 1852862 jcaz
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LOL-  keeping the music going....

Mon, 11/07/2011 - 10:36 | 1852864 ZeroPower
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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...

Mon, 11/07/2011 - 10:45 | 1852902 GeneMarchbanks
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Them and another dozen or so...

Mon, 11/07/2011 - 10:39 | 1852866 Mercury
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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....

Mon, 11/07/2011 - 10:48 | 1852910 kaiserhoff
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Enron style off-balance sheet?  Surely, the regulators wouldn't allow that;)

Mon, 11/07/2011 - 11:03 | 1852967 kaiserhoff
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Actually, it was no problem.

I took the short side, and Madhedgefundtrader took the longs.

Mon, 11/07/2011 - 10:45 | 1852870 gojam
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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"

Mon, 11/07/2011 - 10:49 | 1852915 kaiserhoff
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Mon, 11/07/2011 - 11:12 | 1852921 gojam
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Thanks Kaiserhoff. +1

One of Tyler's Tweets explained it too.


Mon, 11/07/2011 - 10:50 | 1852917 Ethics Gradient
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I'm guessing that $59 million is the difference between "approximately $1.1 billion long and $1.1 billion short"

Mon, 11/07/2011 - 10:52 | 1852923 MonsterZero
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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

Mon, 11/07/2011 - 10:39 | 1852874 defn8Dog
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Like the big spot that keeps spreading in Dr. Suess' The Cat in the Hat Comes Back.

Mon, 11/07/2011 - 10:39 | 1852875 fuu
fuu's picture

I want a pop-corn shitting unicorn, these skittles are rotting my teeth.

Mon, 11/07/2011 - 10:39 | 1852876 Zgangsta
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You can't spell "bullshit" without "bullish"

Mon, 11/07/2011 - 10:53 | 1852924 Raynja
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More like you can't spell "bullish" without "bullshit".

Mon, 11/07/2011 - 11:05 | 1852978 Oh regional Indian
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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.



Mon, 11/07/2011 - 10:39 | 1852878 tuco13
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We hereby guarentee that our previous guarentee was warranted under the said guarentee...

Mon, 11/07/2011 - 10:41 | 1852885 Turd Ferguson
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Did I say "guaranteed"?

No, no ,no. I said 9% would be "rare, indeed".

Mon, 11/07/2011 - 10:40 | 1852882 kaiserhoff
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Well, at least they are saying "substantially matched" instead of fully hedged.  That has to be closer to the truth.

Mon, 11/07/2011 - 10:45 | 1852898 nonclaim
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"substantially matched"... somehow safety matches comes to mind.

Mon, 11/07/2011 - 10:41 | 1852884 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

...bullish for equities...glad I BTFD in the overnight. Square and outta here!. Sell again at 1305

Mon, 11/07/2011 - 11:03 | 1852892 Dr. Engali
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I wonder what kind of discount they sold it for. If they even sold it.

Mon, 11/07/2011 - 10:44 | 1852894 The Axe
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Hey, at least they put their money where their mouth is.....huge insider buying Friday afternoon....

Mon, 11/07/2011 - 10:44 | 1852895 BlueStreet
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The liars cup runneth over. 

Mon, 11/07/2011 - 10:44 | 1852896 firstdivision
firstdivision's picture

Gross, meet Net.

Mon, 11/07/2011 - 10:44 | 1852897 SheepDog-One
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Euro/US equity peg suddenly snapped as Euro is down 1%, equities reverse and up 1%. 

Mon, 11/07/2011 - 10:45 | 1852899 eBuddha
eBuddha's picture

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?

Mon, 11/07/2011 - 10:45 | 1852900 Bartanist
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So let me get this straight: Dick Handler offloaded into someone else's face?

Mon, 11/07/2011 - 10:48 | 1852909 Cursive
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Thank you Jefferies for offloading shareholder risk onto someone dumber.

Did they offload it to a SPV or a SIV?

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