Ej money losing international operations

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Aug 28, 2009 1:19 am



see the outlook from Jones' 2008 10-k report below
I don't get it...Canada 1995= 14 years.  U.K. 1997= 12 years
Q1: How does this help my clients in my small town?
Q2: How does it help me help my clients?
Q3: Any guesses as to WHY they'd keep pissing money away around the globe?
I can only speculate there MUST be some "pie in the sky" gigantic payoff somehow "some day" expected by the GEEPs. 
Jones Financial Companies LP LLP · 10-K · For 12/31/08  Filed On 3/30/09 5:32pm ET   ·SEC File 0-16633   ·   Accession Number 1068800-9-75
Item 1A. Risk Factors, continued

International Expansion — The Partnership's foreign operations are not yet profitable; they will require significant infusions of capital and may never become profitable.
 
The Partnership's branch system has expanded into Canada and the United Kingdom.  Operations are at substantial deficits in these two countries, and it is anticipated that it will be a substantial number of years before the Partnership's expansion in these countries will reach a sufficient scale of operations to achieve profitability.  Additional investments will be incurred in the interim, which will be substantial.  Despite the substantial past and prospective investment in the foreign branch system, the Partnership's Canadian and U.K. operations are not yet profitable, nor is there any assurance at this time that either operation will ultimately attain profitability.
Aug 28, 2009 9:10 am

Get a life bro - If your wife won't sleep with you, get a hooker.  

Aug 28, 2009 9:21 am

Seriously. This is ridiculous. In order to grow, you have to incur losses sometimes. Every company has to. Eventually those business units will be profitable, but how knows how long it could take.

Aug 28, 2009 9:25 am

Here's my take - they give it the good college try (which can take years or decades).  When they decide to cut their losses, they will sell the offices to a firm up there, and across the pond.  It's business.  If you think Jones is the only major firm that has ever had a losing business unit, try reading the paper.  But my guess is that they want to gain more mass before they try to sell off the offices.

Aug 28, 2009 10:22 am

I don't believe they'll sell off the offices.  My guess is that they're committed to both of those countries no matter what.  The issue is that they're trying to grow Canada and the UK in a similar fashion to the US.  But instead of doing it over 50 years like Ed, Ted, and John did, they're doing it in a decade.  There just aren't enough people in those countries hitting big numbers yet to make a bunch of profit. 


As to the OP's three questions:


1) It doesn't matter to you. 


2) It doesn't matter to your clients.


3) You have to spend money to make money.  Jones lost money on you for years before they ever saw a profit.  Why would they keep throwing good money after bad? 


Just as an example, let's say your client, at your recommendation, purchased $10,000 of CAIBX in Oct of 2007 and had him add $100 a month.  In almost 2 years of investing with you, he's still down.  Is it a bad fund?  Was it a bad advice?  No on both.  Is there some big pie in the sky gigantic payoff somehow someday that you expect that the client just doesn't see?  What do you tell your client?   
Aug 28, 2009 10:51 am

To xfer to somebody who won't just slam them in A shares and forget about them.. just kidding spiff..



I had to room with a guy who was going to start an office in Canada(forgot if it was PDP, Eval Grad or what) but he mention all the differences between securities regulations and portfolio holdings(more int'l because there domestic stock market shouldn't account for 60% of the portfolio). It was actually kind of interesting.

Aug 28, 2009 11:45 am
 
 
voltmoie:

Get a life bro - If your wife won't sleep with you, get a hooker.  


 
 
 
currently leader :
 
"RR quote of the year"
Aug 28, 2009 2:54 pm
Spaceman Spiff:

I don't believe they'll sell off the offices.  My guess is that they're committed to both of those countries no matter what.  The issue is that they're trying to grow Canada and the UK in a similar fashion to the US.  But instead of doing it over 50 years like Ed, Ted, and John did, they're doing it in a decade.  There just aren't enough people in those countries hitting big numbers yet to make a bunch of profit. 


As to the OP's three questions:


1) It doesn't matter to you. 


2) It doesn't matter to your clients.


3) You have to spend money to make money.  Jones lost money on you for years before they ever saw a profit.  Why would they keep throwing good money after bad? 


Just as an example, let's say your client, at your recommendation, purchased $10,000 of CAIBX in Oct of 2007 and had him add $100 a month.  In almost 2 years of investing with you, he's still down.  Is it a bad fund?  Was it a bad advice?  No on both.  Is there some big pie in the sky gigantic payoff somehow someday that you expect that the client just doesn't see?  What do you tell your client?   
 
Maybe it's just me, do you have American Funds on the brain?  How does this analogy apply to business operations in Canada and England? By the way, to explain further, let's say your client went to New York City on a train that left Philly and was travelling at 60 mile per hour north and another train left NYC and was travelling south at 75 miles per hour. When would they collide if they were on the same longitude? Does that help explain?? Your office must be next to a nail salon because I just don't get where you are coming from....
Aug 28, 2009 3:44 pm

Bottom line. At some point Jones will have to decide if it makes economic sense to continue the bleeding. Bleeding is defined for those that feel like challenging...not making a profit.

The problem gets amplified when markets (i.e., profits) are down. I don't disagree that companies make investments that take time to provide profits, but they do need to see a light at the end of the tunnel. I would think 12-14 years ought to be enough time to figure out whether or not they have made a good business decision.
 
My statement stands...when the average GP's income drops to their base, everything is up for discussion. I wouldn't be suprised to see Jones management make major changes in many areas to shore up their cushy little kingdom...or sell out to the highest bidder (before Spiff jumps too high, I think that's very unlikely).
Aug 28, 2009 4:29 pm

OK Ice, Volt, Moraen, and B24, and others, go ahead and ignore my opinionated or inflamatory question #3 but DO addres the first two questions, seriously...


HOW DOES THIS HELP MY CLIENTS?


HOW DOES THIS HELP ME HELP MY CLIENTS?


Lay it on me dudes (and dudettes). Lets hear it.
Aug 28, 2009 4:40 pm
It doesn't help your clients.
 
2. It probably hurts you in helping your clients because resources aren't available for US reps (really hard to quantify). Less bonus and partnership payout if you were elgible would be the logical answer.
 
What's your take? You obviously have an opinion or you wouldn't have asked.
Aug 28, 2009 4:52 pm
noggin:
Spaceman Spiff:

I don't believe they'll sell off the offices.  My guess is that they're committed to both of those countries no matter what.  The issue is that they're trying to grow Canada and the UK in a similar fashion to the US.  But instead of doing it over 50 years like Ed, Ted, and John did, they're doing it in a decade.  There just aren't enough people in those countries hitting big numbers yet to make a bunch of profit. 


As to the OP's three questions:


1) It doesn't matter to you. 


2) It doesn't matter to your clients.


3) You have to spend money to make money.  Jones lost money on you for years before they ever saw a profit.  Why would they keep throwing good money after bad? 


Just as an example, let's say your client, at your recommendation, purchased $10,000 of CAIBX in Oct of 2007 and had him add $100 a month.  In almost 2 years of investing with you, he's still down.  Is it a bad fund?  Was it a bad advice?  No on both.  Is there some big pie in the sky gigantic payoff somehow someday that you expect that the client just doesn't see?  What do you tell your client?   
 
Maybe it's just me, do you have American Funds on the brain?  How does this analogy apply to business operations in Canada and England? By the way, to explain further, let's say your client went to New York City on a train that left Philly and was travelling at 60 mile per hour north and another train left NYC and was travelling south at 75 miles per hour. When would they collide if they were on the same longitude? Does that help explain?? Your office must be next to a nail salon because I just don't get where you are coming from....
 
Would it have made more sense if I had used Neuberger Berman Mid Cap Growth?  The mutual fund name is irrelevant.  The point is that when you make an investment, sometimes it initially loses money before you see any gains.  In this case, Jones is making and investment of capital to go international.  They're initially losing money.  Just like every business in this country that has ever been started, you lose money before you breakeven and then eventually make a profit.  You have to choose, whether as an investor in CAIBX or in a new business venture, how you want to move forward.  You can either cut and run or you can keep putting money in if you believe that what you are doing will be very profitable in the long run.  I would guess that Jones is going to stick it out. 
 
As to your algebra problem:  Approx 32 miles north of Philly on the New Jersey Turnpike.  I had to use some very general locations to get the answer, but I'm close.  Now, I've only driven into NY one time from the Poconos, so I'm not too familiar with that part of the country.  But, I'd guess you'd be pretty lucky to average 60 mph with the toll roads and all.  So, technically, I may be off a little bit.
Aug 28, 2009 4:53 pm

I can't speak for the UK, but in Canada I think that part of the problem was a lack of veterans. I joined EJ as new/new in '02, was Seg 5 by '05, and left in '06. When I first joined, I was struck by how many enthusiastic fresh faces there were. I asked myself - where are the successful veterans? Oh, there were some veterans, but they had only been there 5 years or so, and were Seg 3 (and the occasional 4). EJ was having enough trouble keeping the pipeline full (at least in my region), so they weren't going to lean on those guys to produce more. I was grateful to EJ for the training and the salary and the office (and even a few assets they threw my way), but the first time I had an $80K month, with $28K for me and $52K for them, it was time to call the recruiters.




 
As I say, I left in '06, so maybe it's different now, as the guys would have picked up LP and grown their books (I didn't keep in touch, so I don't know). But at that time, EJ was practically the farm team for RayJay (so much so that EJ sued RJ, and RJ couldn't solicit EJ employees for 6 months in Canada), and anyone who's producing well knows that more freedom and more $$ are just a phone call away.
 
...and that's how I learned where the successful veterans went! Pretty hard to win the World Series when your best players go to the Yankees.
 
One other thing: Canadians don't like to admit it, but we sort of are America Jr., with minor cultural differences (like: gay marriage is legal here). I went on a div. trip to Hawaii, and when the hosting GP had to introduce the gay IR and his companion - well, let's just say there is no word in the language to describe the look on that GP's face. My wife and I killed ourselves laughing about that one.
Aug 28, 2009 5:08 pm
BigCheese:
It doesn't help your clients.  
Nor does is hurt them.  Since they aren't invested in, but rather with, EDJ what happens to the UK and Canadian divisions doesn't materially affect our clients. 
 
2. It probably hurts you in helping your clients because resources aren't available for US reps (really hard to quantify). Less bonus and partnership payout if you were elgible would be the logical answer.  Really?  Seems to me that those entities have never been profitable, but yet the firm has spent millions of dollars on things that make our jobs easier, allowing us to better advise and service our clients.  To list the things that have been done at EDJ while we've been in Canada and the UK would take too much time, but you can't seriously make the arguement that because of the way things are going in the UK and Canada that we are suffering as US advisors. 
 
Partnership and bonus payouts have ZERO impact on our ability to advise and service our clients.  That's proven every day by the number of Seg 1, 2, and 3 FAs who do a bang up job with clients. 
 
The only way you MIGHT be able to stretch it into a negative is if you assume that because we're not getting bonuses and our LP payouts aren't at 20% this year, it is having a negative impact on morale and that somehow translates to a below normal client experience. 
 
What's your take? You obviously have an opinion or you wouldn't have asked.
 
I'm also curious about your opinion.  Is this the first time you've read the 10-K?  As long as I've been reading them those statements have been there.  Do you really think that Jones is short changing you on something because they're spending money in the UK and Canada?
 
Aug 28, 2009 5:15 pm

How do we get to gay marriage on this thread?????????

 
Spiff- I have a math problem for you.....
 
Let's assume for a moment you own a company and you have grown exponentially for years. You have expanded into two countries and for more than a decade you have lost money with dim prospects of making any money in the future. If your net profits are lagging in your only profitable country, and you are continuing to drain resources, the question I continue to scratch my head is....
 
HOW LONG WOULD YOU CONTINUE THE BLEEDING?
 
Remember for a moment you are the owner...
Aug 28, 2009 5:24 pm
Spaceman Spiff:

  As to the OP's three questions:

1) It doesn't matter to you. 


2) It doesn't matter to your clients.

 
Hmmm, let me see, it doesn't metter to me or my clients?  I wonder it it ONLY matters, then, to the GPs?  Since that is speculative of me to wonder (any GPs on these boards, I'd love to hear from you) let me tell you just a couple quick reasons off the top of my head as to why IT DOES MATTER TO ME.  
 
1) Because at Jones, my muni bond inventory purely SUCKS.  Sorry guys that's not bashing, theat's merly fact.  Gee guys, whaddayasay you put some capital into intermediates?  My buddy at LPL has an incredible inventory of intermediate or whatever ne needs in munis.  I dont have d*** to offer my clients under 25 year maturities.  I get the periodic wires lamenting that "Inventories are lean everywhere."  That's B.S. cause my buddy's LPL inventory isn't lean!
 
2) Because Jones' bond trading area SUCKS.  OK, ignore the inflammatory opinion and let me restate it factually.  FACT: The bond trading department is understaffed and they'll tell you so.  How about allocating some UK and Canada capital to staff up your trading areas to remotely pursue matching your mantra of GROWTH GROWTH GROWTH?  FACT: EJ continues to grow the hell out of the rookie sales force but refuses or declines to staff up critical area like bond trading.
 
FACT: Jones now WILL NOT provide firm quotes when my client needs to liquidate a bond. In the past, when they used to provide form quotes, it was sometimes truly DAYS before they responded to your wire but in all honesty, it was usually a few hours.  Now they have eliminated that pesky delay by refusing to provide firm quotes at all.   I call my buddy at LPL and he tells me "No, man they WANT us to use firm quotes and the traders  provide them after a short hold on the phone."  Similar resposes come from buddies at Steifel and Wells Fargo.  They're shaking their head like "C'mon man, you're not serious are you.. Jones won'tgive you firm quotes?"
 
Jones preaches to the lemmings about having the best bond inventory best pricing yada yada and lemmings believe that crap because that's all they know.  Well they don't know what they don't know.  What they don't know is the inventory sucks and it is not competitive when measured by 1) availability/quantity 2) pricing or yield the client receives, 3) yield to broker.  I've been documenting this for a year or so. 
 
Again, here's a couple problems that someone in St Louis should be throwing some capital at.  Anybody understand why I don't care to conquer the globe.  I only care to focus on that area around my small town office.  So Spiffy, it does matter to me and yes, I do really think that Jones is short changing me on bond inventory and undrestaffed trading areas at least indirectly because they're spending money in the UK and Canada.
 
Cuck Fanada
Euck Fengland
Juck Phones   
Aug 28, 2009 5:35 pm

BigCheese (or foot, or whatever),

 
I meant no offense. I included the "gay marraige" anecdote because I thought (and still do think) it's funny.
 
The original thread title was EJ MONEY LOSING INTERNATIONAL OPERATIONS. I thought I'd offer a little perspective that you folks might not have - that's all.
Aug 28, 2009 5:38 pm
BigCheese:
It doesn't help your clients.
 
2. It probably hurts you in helping your clients because resources aren't available for US reps (really hard to quantify). Less bonus and partnership payout if you were elgible would be the logical answer.
 
What's your take? You obviously have an opinion or you wouldn't have asked.
 
Yes, Big Cheese you are spot on.  Doesn't do ANYTHING at all for my client and doesn't do ANYTHING to help me help my client, yet regardless of my LP and bonus, I have encountered specific situations that actually makes it harder for me to help my clients. 
so
Juck Phones
Aug 28, 2009 6:09 pm
BigCheese:

How do we get to gay marriage on this thread?????????



Spiff- I have a math problem for you.....



Let's assume for a moment you own a company and you have grown exponentially for years. You have expanded into two countries and for more than a decade you have lost money with dim prospects of making any money in the future. If your net profits are lagging in your only profitable country, and you are continuing to drain resources, the question I continue to scratch my head is....



HOW LONG WOULD YOU CONTINUE THE BLEEDING?



Remember for a moment you are the owner...





That wasn't a math problem.

Aug 28, 2009 7:45 pm
Juck Phones:

OK Ice, Volt, Moraen, and B24, and others, go ahead and ignore my opinionated or inflamatory question #3 but DO addres the first two questions, seriously...



HOW DOES THIS HELP MY CLIENTS?

It doesn't.

HOW DOES THIS HELP ME HELP MY CLIENTS?

   It doesn't.

Lay it on me dudes (and dudettes). Lets hear it.





Juck - it's not about you. Why would it be? The purpose of any for profit company is to generate profits for the owners. Not so that you can help your clients. Helping your clients is supposed to generate profits for the company, not using profits to help you help your clients.



They will continue to fund those operations because they believe it will eventually be profitable, and they have the capital to continue to fund those operations.



Whether they are correct or not is a subject for debate. I personally wouldn't do it, or at least change the business model in both countries (3 person offices anyone?).