Banc of America Securities analyst Scott Buck rates Jefferies as a SELL:

a. Concerned about near-term profitability and that shareholder interests are a distant third behind clients and management and employees.

b. Aggressive investments in areas like investment banking will continue to weigh on profitability

c.  many areas of Jefferies’ business will remain sluggish for some time including underwriting and high-yield (HY) sales and trading.

d. Net-net — shareholders’ interests suffer at the expense of employees and management. Case in point: Year-to-date revenue is down 33% and comp expense is up 12% ; they suspended the dividend this quarter

d. $13 target, which is fair for a company we expect to earn a sub-10% return on investment for the next two years.

Track Scott’s pick at:

http://trackthepros.com/categories.php?category_id=1499

The market is cheap on earnings.

The subprime issue is contained.

That’s been the mantra. I think the mantra is wrong. While the overall market is not expensive on earnings, certain parts are a lot more expensive than they look. Why? Well the earnings growth estimates are a hoax right now, specifically in the financial sector. Do they really know what’s on their books? Do they really know their exposure? How would they know? Can some of these mortgage companies look into the hearts and minds of their newfound (2005/2006) borrowers and tell who is going to default? I know they exported much of these risks in CDOs to hedge funds, but their is still exposure - but no one knows how much. So their earnings are at serious risk.