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Egan-Jones President Sean Egan argues the genesis of issuing a report expressing concern over the amount of leverage and sovereign debt holdings on Je...
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-- also were very very keen to keep a very close watch of Jefferies is leading the financials -- to -- stock under pressure.
Over the European sovereign debt crisis are good questions about what US banking exposure is there's a big note -- from Fitch yesterday.
-- CEO Richard handler says he expects the stock's volatility though to calm down.
Egan Jones -- disagrees and downgraded the company back on November 3 let's get more on the future of Jefferies and what's going on with the US exposure.
Stemming from this note yesterday were talking Charlie and Fitch where do we stand with all this and what is the true risk.
Well I want to ask our next guess who I would say is probably the most hated man at Jefferies -- -- His name is Sean Egan of Egan Jones -- -- into -- how are you.
Very well thank you Charlie -- have been pretty good it was your report that I guess touched off what we see now is a run on the stock let me just tell you I've been -- spending the morning.
Speaking to the people at Jefferies I want to play devil's advocate with you this is what they're telling me.
-- they're saying the following your main customers -- short sellers.
You issued a report when the market was most -- to most skittish to help those customers the report was very negative.
And that some of the negative conclusions you came out your report.
Were wrong inaccurate and you were forced to write a clarification let's go through that one by one.
The short sellers.
Out and be happy -- As far as -- most hated man we have -- received data received death threats they did in connection with predicting GM's bankruptcy right.
I guess three years beforehand that hasn't risen to that -- all but then again you never now right regarding our client base.
We have a number of different clients I would say that that hedge funds who happened -- happen to short sell they are -- -- go along.
But a hedge funds are -- minority.
Portion of our client base so is unfair to say.
That we are at the forefront of shorts -- in fact.
In advance of our.
I mean anybody -- everybody can be short I guess the bigger question well.
Don't we don't let me let makes -- We don't know what our clients' positions are we don't want to know what are our clients' positions are they could be -- could be short we don't know.
If further bar in the case said Jefferies.
No I client's request reports all the time we also monitor right -- activities in the market -- -- says.
For our issuing the report and Jeffries.
Was -- -- global it wasn't a group of people all wanted to beat down.
Jefferies in fact we come to this with clean hands.
We just wanna protect our clients as much as -- saw and that's why we issue the report that we did its stand by that it was it was a completely accurate because there's.
Say in that they're saying that you relied on on old information from previous.
Fought financial filings and that at some point you actually -- in -- you actually wrote a clarification is that accurate.
Bob it's accurate in the sense that the most current financial woes that are out for Jefferies -- August we -- -- finance shows.
When I had a discussion along with my senior analyst.
With the CFO of Jefferies.
They took issue that we mentioned they are long positions.
On the Euro -- and didn't mention their short positions.
Our problem is that we had space constraints -- we had mentioned the sharp positions and a -- what -- that what we did mention another thing.
-- -- you know signal that that isn't that material to your analysis the short position which sort of ameliorate -- long position.
It I mean shouldn't that have been in the report because you issue -- at a very critical time.
Out what would've taken to put three lines in -- Jeffrey said is that you know they have short positions.
That sort of -- -- that balance out the long positions.
We.
Issued a follow up report addressing just that point that think war.
Reason for our taking -- negative action on Jeffries was not there.
Holdings or there -- offsets in the EU debt our core position was the it would be the core reason was that was the change in the environment as a result of MF clos both right accounts being frozen and people of not get possibly not giving back a hundred cents a dollar -- couple of what the fact.
That Jeffries head twelve point nine to one leverage in fact if you look at their market cap.
That leverage has even increased I was that we could have mentioned we're very well interest and -- they said -- asset -- could have mentioned the ABS expired and a lot of things because so let me just make it clear here used in the in hindsight of what you did in the past what you know now.
-- your prognosis.
This saying that Jefferies is a troubled company and investors should be beaten be wary.
Our report stands on its own we issued a one notch downgrade from triple -- triple B minus and we stand by that.
We're taking it highlighted the additional -- at Jefferies will be coming out with financial us sure -- presumably.
For there -- November our fiscal year and I think is an issue is there anything that you've learned since that report that would change your opinion.
About Jefferies right now.
Does the market yeah I was in front of yes that -- -- had continues to deteriorate UBS just announced I think -- 2000 job cuts in their investment banking division.
That the funding costs for Jefferies has increase is about 10% on their ten year.
That basically conditions are not very.
They haven't improved since we issued our our report hopefully they will turn around OK well we're gonna believe that they're -- I want to say thank you for being a stand -- guy.
I I do like your research and thanks for answering every question.
Appreciate -- not a problem.
