Dear Billy,

You can call me everyname in the book.  For the sake of this post I will agree I am an idiot, in fact I should be on the phone generating commissions, in fact I own an Infinity SUV (it is Gold)  , I might even make you sick to your stomach!  I agree with you on almost everypoint.

But the PROBLEM for you and all of the JOnesies is that no matter what you say, no matter what you believe, no matter what you wish, if there is a big judgement ($300 million or more) against Jones for whatever reason EDJ will be heading toward SIPC recievership.

Why?  Because the SEC requires firms to keep enough capital unincumbered to satisfy Fed Reserve Regulations and Customer Reserve requirements.  EDJ needs the capital to support its margin base.  

Why?  Becuase EDJ can not raise capital even from its goofy IRs through the LP practice ....No one wants to invest in the the uncertainity of a law suit.  No law firm will put out a legal opinion that there on no significant legal matters that need to be disclosed.    

If you don't like it call you congressman and get them to change the SEC NET Capital Requirements for the B/Ds and the Federal Reserve Requirements for margin capital. And THAT BE The FACT!

Remember Drexel Burnham and General American were "profitable" right up till the time the regulators closed them down! 

Its The Capital Base Stupid!

I hope you feel better Billy, but I got to tell you.  Turning toward that jug of Jones Juice ain't goin to help what y'all got!

Your Pal,

Lance

[quote=Bill Fakkland]No Lance, it's not the capital base. Its the fact that you're an idiot with an axe to grind. Oh my, THEY LIED TO THE SEC!!! Is that your next line? Jones is no more likely to go "under" than Morgan Stanley or any of the others. The churn rate at Jones is less than half the industry average. Most of their clients have recovered from 2001-02 and are pretty happy these days. Its only morons like you that perpetuate the myth that the sky is falling. Shouldn't you get on the phone to generate some commission to pay the lease on your ugly Infiniti SUV ? You really make me sick. [/quote]

Bill stop it your killing 'cuz I'm laughing so hard.  Who writes your material ?????  Why should you worry if your employer lied to the SEC?  (I nearly didn't make the loo 'cuz of the bladder pressure). 

I'm sure Bill Singer is getting a laugh out of that line too.... "so what if they lied to the SEC"  This from the firm that claims to do what is in the client's "best interest"   ...

SO WHAT IF THEY LIED TO THE SEC !!!!!!

So much of what is posted here is wishes and dreams with little to support it.

Legs, on what athority do you have it that Jones is having an issue with capital?  I know the statement about them not getting LP is just your wishing with not facts and want to know if the capital thing is in the same ball park or you have a link that you can point us all to.

Frank

Good question!  And thank you for not calling me gay, envious or jealous!

I wish there was one link, but first go to this one;  it is the EDJ Statement of Financial Condition from 6/30/04.  Please look at the Partnership Equity   http://www.edwardjones.com/cgi/getData.cgi?file=/pdf/stateme nt_financial_condition.pdf

It says $714 million.  Now subtract about $75 mil from that y'all gave to that prosecutor feller.  Note there is nothing in that statement that shows any reserves for fibbin to the SEC.  That leaves y'all with about $640 million of good capital.  Take about 10% off of that for non-allowable assets; things like real estate and fancy computers and satellites systems that do not work all of the time and you get down to about $580 million of net capital.  But I am just estimatin all of this.  

Now look at Recieveables from customers (margin loans) that is about $2.4 billion. Y'all need about $250 mil of good capital to support that.  Without nid-pickin through the FOCUS report we can sorta probably guess that the surplus good capital is about $580 mil(good) - $250 mil (need) = $330 mil (surplus).  This is the amount over and beyond what y'all need to support those customer margin balance.  There is some other fancy accounting but that is the basics.  

Now lets suppose that CA suit comes in at only $100 million, that brings the surplus down to $220 million.  Now lets say those hungry plaintif lawyers convince the good judge and those nice people on a jury that y'all owe another $250 mil...UH OH!  NET CAPITAL VIOLATION. (I don't think I need to post those links to the CA and Class action claims again...y'all know that they are there and I ain't makin 'em up!)

Quick y'all got to raise $30 million ASAP.  But ya can't do it.  The fancy examiners come streamin in from the NYSE and they got to call in SIPC to sort everything out. Oh, I forgot to mention, this is just the bad stuff that y'all know about.  What about the stuff that you don't know about.  As I keep sayin:

Its The Capital Stupid!

I ain't wishin' any of this. I am just pointin out to y'all that this is a real possibility.  If you do not think so...then fine...then don't think so, but that would be just stupid wishfull thinkin on y'alls' part. And this has nothing to do whatsoever with my sexual orientation! It has everything to do with arithmatic and those fancy net capital laws that the G-Men enforce!

Of course I could be completely wrong, and EDJ could prevail over the CA and all Class Action Claims....but NO ONE can predict with any accuracy the outcome of this stuff.  I am just showin' how you can get to SIPC with what we all know and answer y'all question.

Hopes this helps!

Your Pal

Lance

OK, understand your logic but having been a partner at Jones (LP not GP) and still good friends with several GPs I can point out one flaw in your math.  The $75 mil came from the GPs and not the Partnership Capital.  And to add insult to injury, they still have to pay taxes on that money that they got.

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But even using your math on suits and settlements, Jones still has $220 million available (the report states $580 mil beyond what is needed).

I am not sure what will happen with the class actions.  Most states would include the actions into the settlement but liberal judges will be liberal judges.  This could be big but it will likely be years before anything comes of this.  So even if they loose these, they will have plenty of time to build a war chest.

Before we can make any judgments on <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />California, we need to wait and see what happens when Jones has to respond at the end of February.  The strength of the case will be clear when we see how many of the injunctions that Billy asked for are granted.  At least 6 of the 12 have already been agreed to by Jones in the Federal agreement.  If the findings by the US AG are not as bad as Bill would like (and remember, 60+% of the performance they will be looking at comes from American) then this one could go down the tubes.  And the US AG has no incentive to build this one up.  They already have a settlement and I am sure would love to embarrass Billy Boy.

Frank



At least you get the picture, if the CA AG and the plaintif guys are lucky they can grab a bunch of the capital. It basically comes down to math.



1. There is a finite amount of capital

2. It is unlikely they can raise any like they always have been.

3. The CA AG and the Class Action guys what all of the capital that is there.



Will the AG and Class Action guys be successful? AND this only what we know, what about what we do not know?



The other math that I did not include is, if and when the, LPs start leavin’ and their units need to be redeemed. I know of at least five of them over the next month that will do this.   That is a direct hit on capital AND until all this legal stuff is over it is real hard for those GPs to do another LP offering.



Oh Yeah! Don’t beleive the GPs because the settlement with the PROSECUTOR was between the company and the Feds. I guess we will see in April when the statement of financial condition as of 12/31/04 is printed (you know the one that none of the IRs know how to read)how much the audit firms will be requiring EDJ to book as contingent liabilities for all of this stuff. Remember contingent liabilities are a direct hit to capital.



Also I heard that Smith Barney has a $25,000 bounty out for any rep that can “capture” a Jones IR!



Best



Lance

average LP is far less than you would imagine… Not much of a “run on the bank” Lance SSB is also offering some of us 125% of trailing twelve… Still not a good deal…

$25k.



Those EJ reps are worth that much?



Wow.

Now look at Recieveables from customers (margin loans) that is about $2.4 billion. Y'all need about $250 mil of good capital to support that.  Without nid-pickin through the FOCUS report we can sorta probably guess that the surplus good capital is about $580 mil(good) - $250 mil (need) = $330 mil (surplus).  This is the amount over and beyond what y'all need to support those customer margin balance.  There is some other fancy accounting but that is the basics.

Lance,

I agree with you on many points, but after a lot of thought, I wish to offer a different outcome:

#1 The California AG settles for $100 Million.  This is less than what some expect, but the trail is blazed and EJ has all but admitted guilt in regards to the non-disclosure of Revenue-Sharing.

#2 The class action lawsuits combine, and settle for $100 Million.

#3 Through the course of the year, 2000 Jones reps leave (Net). Assuming this is a cross-section of Jones Reps, this would create a $350 Million reduction in Revenue (this assumes an even reduction through the year and not a sudden drop off after the first quarter which would bring this number to $550 Million). Most of this reduction falls straight to the bottom line.

#4 These same individuals request their LP (SLP or GP) payout of $180 Million throughout the course of the year.  This is proportionate to the total capital outstanding as it relates to the assumption in #3.

As you can see, Lance, this creates a demand of capital outflow of $630 Million, with the lawsuit portion being fairly light.

IT DOESN'T INCLUDE THE LOSS FROM ALL THOSE FIVE AND TEN YEAR LEASES JONES HAS BEEN SIGNING THAT MAY REMAIN EMPTY.

IT DOESN'T INCLUDE THE EXTRA ADVERTISING COSTS JONES HAS ALREADY EMARKED UPON, DEMONSTRATING TO THE PUBLIC THAT "ALL IS WELL".

IT DOENS'T INCLUDE THE NAV TRADE COSTS OF ALL FUNDS FOR 90 DAYS IMPOSED BY THE USDA.

IT DOESN'T INCLUDE THE HIRING AND TRAINING COSTS OF $75,000/HEAD THAT JONES WILL INCUR FRANTICALLY TRYING TO KEEP THE EMPTY OFFICES FILLED.

What are YOUR thoughts??

Lumi, WOW… You give way too much credit to yourself… And to the 2000 IRs who leave… Tell me, how much capital did you have when you left?? Less than 100k I promise you…

<SPAN =h2hed>Tsunami-aid auction brings caterer $2K

Jonestown,

Stop I'm getting verklempt     

[quote=illuminati]

Now look at Recieveables from customers (margin loans) that is about $2.4 billion. Y'all need about $250 mil of good capital to support that.  Without nid-pickin through the FOCUS report we can sorta probably guess that the surplus good capital is about $580 mil(good) - $250 mil (need) = $330 mil (surplus).  This is the amount over and beyond what y'all need to support those customer margin balance.  There is some other fancy accounting but that is the basics.

Lance,

I agree with you on many points, but after a lot of thought, I wish to offer a different outcome:

#1 The California AG settles for $100 Million.  This is less than what some expect, but the trail is blazed and EJ has all but admitted guilt in regards to the non-disclosure of Revenue-Sharing.

#2 The class action lawsuits combine, and settle for $100 Million.

#3 Through the course of the year, 2000 Jones reps leave (Net). Assuming this is a cross-section of Jones Reps, this would create a $350 Million reduction in Revenue (this assumes an even reduction through the year and not a sudden drop off after the first quarter which would bring this number to $550 Million). Most of this reduction falls straight to the bottom line.

#4 These same individuals request their LP (SLP or GP) payout of $180 Million throughout the course of the year.  This is proportionate to the total capital outstanding as it relates to the assumption in #3.

As you can see, Lance, this creates a demand of capital outflow of $630 Million, with the lawsuit portion being fairly light.

IT DOESN'T INCLUDE THE LOSS FROM ALL THOSE FIVE AND TEN YEAR LEASES JONES HAS BEEN SIGNING THAT MAY REMAIN EMPTY.

IT DOESN'T INCLUDE THE EXTRA ADVERTISING COSTS JONES HAS ALREADY EMARKED UPON, DEMONSTRATING TO THE PUBLIC THAT "ALL IS WELL".

IT DOENS'T INCLUDE THE NAV TRADE COSTS OF ALL FUNDS FOR 90 DAYS IMPOSED BY THE USDA.

IT DOESN'T INCLUDE THE HIRING AND TRAINING COSTS OF $75,000/HEAD THAT JONES WILL INCUR FRANTICALLY TRYING TO KEEP THE EMPTY OFFICES FILLED.

What are YOUR thoughts??

[/quote]

Again, here is the math facts:

1. EDJ has a Finite Amount of Capital base of $650 - $700 million

2. No way for EDJ to raise any Capital (except through earnings - if there are any)

3. We know the CA AG and the Class action boys are seeking at least $800 million, we do not know how much they will ultimately get

4. Today they need $250 minimun of capital to comply with Net Capital Rules.

5. If the net capital for ANY REASON drops below that number REGARDLESS OF SALES, ASSETS, or PROFITABILITY.  Then SIPC comes in and takes over.

As I said before this is what we know about, the fun stuff is what is coming that we do not know about

Hopes this answers y'all question!

Cheers,

Lance

The California AG settles for 100 million? You guys are completely nuts. If you had any credilbilty before that clunker, that’s all gone now. Hey, why not pick 5 BILLION dollars…no…100 BILLION DOLARS.thats it! The AG will settle for 100 Billion! woo hoo!

American Express to Exit the Financial Advisory Business

By David A. Geracioti
Feb 1, 2005 6:32 PM

American Express announced today that it is spinning off its Financial Advisors unit (AEFA) from its credit card and travel operations. American Express shareholders rejoiced, sending shares up 6.4 percent. AEFA will be spun off to shareholders and not sold, Amex executives said, because of adverse tax consequences that shareholders would have faced in a sale.

.......In September 2004, Registered Rep. published a story called “The Great Experiment”, which detailed the problems plaguing AEFA. “With a tradition of grooming brokers from scratch, American Express Management hoped the franchise option would attract more seasoned planners who would bring sophisticated skills—and rich clients—under the corporate umbrella. The strategy hasn’t quite panned out.” For more, see registeredrep.com/mag/finance_great_experiment.

This article knocks the legs out from under the value of a far flung network of captive advisors for a number of reasons, couldn't happen at a worse time for you know who.....oh no, not a Merger of the Clones!!!!!

http://registeredrep.com/news/amex-spinsoff-aefa/

Why Howday Potna!...

"I'm all tapped out Marv" ?

Putnam May Owe $100 Million

By JOHN HECHINGER
Staff Reporter of THE WALL STREET JOURNAL
February 2, 2005

BOSTON -- An independent consultant has found that improper share trading at Putnam Investments shortchanged investors by as much as $100 million, about 10 times a previous estimate of damages, according to people familiar with the matter.

www.wsj.com

[quote=Bill Fakkland]The California AG settles for 100 million? You guys are completely nuts. If you had any credilbilty before that clunker, that's all gone now. Hey, why not pick 5 BILLION dollars..no...100 BILLION DOLARS.thats it! The AG will settle for 100 Billion! woo hoo![/quote]

ROTFLMAO 

I'll eat my hat if all of the lawsuits total more than 10 million combined.  Jones will make more than the total gross settlements in the next two weeks.  Lance has apparently been drinking not koolaid but heavy alcohol if he really and truly believes that the CA AG will get anything more than a couple mill tops.

Lance, please detail your numbers for the 800 million… Please post any relevent articles that helped you come to that conclusion. You seem to think you are anumbers guy, let’s see that work product… CA AG could care les anymore about the settlement. he will never see it. He got what he wanted. EVERYONE KNOWS HIS NAME…

Guest 1,

Gee fella I didn't think y'all thought I was a "numbers guy".  Lets see if I reckon out this arithmatic for y'all...

I reckon EDJ Net Capital is ruffly $650-$700 million

Those G-Men tell us all that EDJ needs about $250 million to support all of that cash that those nice customer borrowed from EDJ....somethin called margin loans.

So with a little bit of figurin I come to about $400 million that EDJ has to play with before those G-Men cum in and take over...something called recievership SIPC or somethin like that.

But when the Californi Attorney man says that he wants $300 million of that $400.  Now I do not know about those fancy claims, alls I know is what the paper says. And the papers says $300 million... the Californi Attorney man wants $300 million.

Now all of those things called  "Class Action Claims"  lets see now ...here if some of  'em.

Spahn v. EDJ

Enriquez v. EDJ

Pasik v. EDJ

And then those smart men from some place called The Stanford Law School put together this here report

http://securities.stanford.edu/1029/EDJCL04-01/

Looks like those class actions laywers want to take all that money... nearly $100 million per year that those fancy talkin GeePees took from those mutual funds and give it back to the good folks that bought that stuff.  Lets see $100 million times 5 years....I get $500 million.  What do y'all come up with?

Lets see the paper say the Californi Attorney man wants $300..And then those fun lovin plaintif boys with those class actions claims want $500 million.  mmmmmmmm...thats $800 million what did y'all come up with?

Now lets see EDJ boys got an extra $400 million but the gussied up lawyers might get $800...maybe I am not a numbers man...there ain't enough money for everybody.

Gee this math is fun.  Maybe I am a Numbers Man!

Hopes this helps y'all.

Love

Lance

NO where did the CA AG say HE wants the 300 million. He felt that 300 million was earned by rev sharing. No one has decleared the proposed value of the class actions. Again, show me where you get the numbers?