For the 1st quarter LUK will get to start with JEF's losses as reported today and then what? FCXM closed today @ $10.09 which is down about 40% from where it closed at the end of the previous quarter ($16.73). At 12.31.15 LUK valued its investment in FCXM @ $625.7 million. A 40% write down of this investment would result in a loss of about $250 million. Add that to JEF's loss and you get a pretax loss of over $400 million. Could that type of loss affect the value of the Deferred Tax Asset? Maybe that is why they are renegotiating the FCXM deal. Only time will tell, but we do know that National Beef and/or Berkadia, HRG, HOFD or any other combination of other investments will not come close to offsetting this expected huge loss in the 1st quarter for LUK. At his time the sale of National Beef would not do much good for LUK. As for trading at 50% of book value, could a write down of the JEF related Goodwill also be in the cards? At this point the JEF related Goodwill has to be suspect in a real sense if not in an accounting sense. So, LOL!
"Revenue tumbled by almost half from year ago to $299 million
Trading results down 82% on stock, fixed-income decline
Jefferies Group reported a fiscal first-quarter loss as revenue from trading stocks and bonds tumbled 82 percent, leaving Chief Executive Officer Richard Handler vowing to do better.
The net loss, the firm’s first for a December-to-February period since 2008, was $166.8 million, the New York-based company said Tuesday in a statement. Revenue plunged by almost half from a year earlier to $299 million.
“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,” Handler, 54, said in the statement."
Besides sitting on their cash, as you put it, they are also sitting on their mark to market holdings of KCG. So how did KCG do in the most recent quarter that ended 2.29.16? Down almost 20% ($10.57 down from $12.91 ). That alone should translate into a loss for JEF for this quarter of about $37 million. Maybe the overpaid wizards will overcome this loss with great operating earnings or maybe you will have to keep "...waiting for things to improve"...LOL!
And how about Jefferies, how's that doing? And the investments that get marked to market, how have they been doing since the end of last year? Apparently nobody is responsible for the destruction of value since Ian left. Just keep the high salaries and bonuses going and do not hold any of the bonus babies responsible for anything bad.
1st quarter could be worse. From LUK's press release regarding JEF: "New issue capital markets are barely open and Investment Banking deal flow is sparse, as many transactions are being delayed due to market conditions. Similar to most market participants, we are experiencing some meaningful markdowns in equity positions held in inventory." And what about LUK's major investments? "We anticipate continued volatility in the fair value adjustments for our investments in KCG (held at Jefferies), FXCM and HRG, which are all currently down from year-end. " Down from year end with a capital DOWN: KCG down 14.3%, FXCM down 29.53%, HRG down 17.4% and let's not forget HOFD down "only" 6%. That translates to starting the 1st quarter with an approximately $350 million pre tax deficit. And that does not include JEF"s "...meaningful markdowns in equity positions held in inventory." It seems as though the press release is preparing us for worse than terrible, to say nothing about Vitesse, Juneau or National Beef which are admittedly working through challenging conditions for their respective businesses. LOL!!!