Perhaps one of the more comical things that takes place in the stock market is how financial companies that are on the brink of bankruptcy or at least going through their own troubles, like to downgrade or cut the estimates of other companies.
For instance, just today, the Jefferies Group (JEF), whose own stock was at one point halted after it dropped 20% in a flash, downgraded and or cut the estimates on EZchip, Smith Micro, and Molson Coors.
How can a company who is highly leveraged come out and say one company or another has their books in order? How can a company with hedged bets on European debt say another company is risky?
Just once I’d like to see a financial firm cut it’s own estimates. I’d like to hear Jefferies come out and say: “Jefferies cuts price target on Jefferies. Sites European debt exposure.”
Jefferies of course came out and made a statement said they have “no meaningful net exposure” to European sovereign debt. And went further as they spoke about MF Global, who just went bankrupt:
“We have always been cognizant of the fact that we’re not too big to fail and operate accordingly as we manage risk, diversification, liquidity and capital,” Handler, 50, said in an interview yesterday after MF Global Holdings Ltd. filed for bankruptcy. “We have always used our capital to facilitate clients rather than taking large proprietary bets.”
But it would be rather refreshing if firms who live in glasses houses would refrain from throwing so many stones, especially when there are cracks in their glass homes. And at the very least, perhaps financial firms could just hold off on making any stock recommendations until they get their own acts in order. That would be nice.