Litquidity Q&A Session with Rich Handler (CEO, Jefferies)
Happy Sunday, LitCap shareholders.
With COVID-19 continuing to dominate headlines and disrupt global economies, we wanted to invite a true Wall Street veteran and FinMeme comment section legend, Rich Handler, to give his personal take on the situation and provide insight/advice to the followers. As many of you may already know, Rich is the CEO of Jefferies and has seen it all in the world of business and Wall Street. The questions below were curated by Karl (the intern) and touch upon general workplace questions, industry outlook, and tips / recommendations to spend the time while working from home.
*this is where the perfect segue would go if I had one...*
Many workers in this industry typically try to go the extra mile to impress their seniors. What is your advice to juniors who are working alongside coworkers who are downplaying a cough or fever to meet the deadline set by partners / MDs? How can juniors feel empowered to speak up and overcome fear of retribution? This was particularly an issue a few weeks ago when coronavirus was still being downplayed in the US.
At some point in life, you realize that no matter how young or junior you may be, you have a voice and it is time to responsibly and maturely use it. If you have a dry throat or a very mild fever, do what you can at the pace you can from home and rest up and heal. If you are truly too sick to work, you have to express it calmly and rationally. Sometimes the fear of speaking up is worse than actually doing it. Have self-confidence that you are important and valued and anyone who inflicts retribution because of this is not someone who deserves respect anyway, so why drive yourself nuts. Better to take care of yourself, heal quicker and get back to adding value. Also, pick up the slack for your co-workers and ask the same of them if needed. They are not competition and life is not zero sum.
How are expectations around productivity changing given Work From Home constraints (limited resources and longer lead times)?
Every senior person, whether they admit it or not, understands that everything is harder and will take more time during this crisis. All you can do is your best and in times like this, take comfort in knowing if you are truly giving it your all, that is good enough.
Not to age you, but how would you compare our current situation to the 2008 financial crisis and other prior cycles?
If you wanted to age me, ask about the '87 crash. This is a huge event in your life, and it is also huge in mine even relative to all I have been through. The 2008 crisis was concentrated in the financial sector. In many ways this is far worse because the risk is to the entire economy because of the forced shutdown and on top of it, we are fighting an invisible ghost that causes sickness and death. Each time I have been though one of these, it seems like at the time it is the worst ever. This time I'm pretty sure it is. That doesn't mean we won't get through it.
Are market fundamentals stronger today than they were 12 years ago?
Yes. There is a lot less leverage in the system today. The financial sector is much stronger. Four weeks ago the economy was at record pace and unemployment was at an all time low. Interest rates were very low and Inflation was non-existent. Those are all the characteristics of a very strong environment. What a difference a month makes.
What do you think needs to happen for things to turn around again?
The world needs a 3-6 month time out. That means the government will need to deliver massive fiscal stimulus. Unlike the financial crisis, nobody today did anything wrong or reckless. Nobody should be punished. The government will have to foot the bill, which they will be able to do because rates are so low and the fundamentals of the economy are actually good. People need to get paid for the 3-6 months it will probably take so they can live.
Companies also need to be supported for this time period as we need them for their goods and services, and for the jobs they create once the virus has past. It's fine to give people cash for the short term, but they need their jobs when the virus is beaten. The details are complicated and there will be fits and starts by the politicians to figure this all out. They have no choice but to get this all eventually accomplished, and that’s a good thing.
Many are concerned about job offers possibly getting rescinded. Any word of advice to incoming summer / full-time hires in this market environment? What steps is Jefferies taking to try and ensure programs are not canceled? When should people really become worried?
Worry only about things you can affect. Learn additional skills, be open to every opportunity, don't limit yourself on anything, and if your job is still available, great. I'm not saying it won't be, but plan for the worst, give yourself maximum flexibility, and don't waste time worrying about nonsense.
We have every intention of having our summer program and will do everything possible to accomplish it. That said, nobody knows if any of us will be allowed in our offices this summer. This is the unknown and we all are living with it. If the worst thing that happened to people this summer was they had to do meaningful volunteer work for part or even all of the summer to help our country heal, it wouldn't be the end of the universe. You will each look back on this experience and for those of you with your eyes wide open and your minds free, it could be the best learning experience of your lives. Learning priorities, building true relationships, being pushed out of your comfort zone and true character building can be your summer experience, whether your summer intern job is intact or not.
Similar to the above, current professionals are also beginning to wonder if mass layoffs could be coming. Do you foresee this in the financial sector in the near term or is this a different situation than in prior downturns?
Layoffs in every industry come over cycles and through technological change and innovation. Again, I've never worried about being laid off. I've always focused on constantly learning, evolving, expanding my scope and relationships and everything else always seems to take care of itself. You can't live your life scared or make decisions to avoid the downside. Be the best you can be and the cycles will take care of themselves.
What are the opportunities that exist at the moment to keep clients engaged from an investment banking perspective? Are there financing opportunities, restructurings? Appears that equity issuances and M&A have slowed down significantly due to uncertainty and market volatility.
There is always something to do for your clients and their companies. Today it is about helping them maintain and increase their liquidity. Debt extensions, rescue financings, rights offerings, and strategic M & A will be in vogue once there is an once of visibility on the future. Every industry banker should be involved in a restructuring or two sometime in their career. Makes you a better banker, better person, and more humble.
What are your thoughts on Bill Ackman’s “Hell is coming” interview on CNBC? Do you agree with his sentiment or do you think that it was an overreaction?
I know Bill and like him a lot. His heart is good and I know he is well intentioned. However, I did tell him that if I'm in a crowded theater that is on fire and my leg has flames all over it, I don't need him to yell FIRE at the top of his lungs. That's not helpful. I prefer smart strategic ideas to help put the fire out. We tried to do that with one of our letters showing ways stimulus could be most effective. I also don't believe hell is coming. We will figure this out.
What is your outlook on highly-levered PE-backed companies. Do you think this could lead to bigger problems if liquidity (*pls fix*) dries up and borrowers default on loans?
Leverage merely exaggerates everything. In good times, it exaggerates how much money you make. In bad times the losses are also magnified. Leverage doesn't know if times are good or bad. That’s for the people who apply it to decide.
Do you think the government will (or should) step in and bailout the airline industry? Any other industries?
Yes. The airlines, just like all other businesses did nothing wrong. This is a pandemic and it is not the fault of anyone running a company. The airlines are also strategic to our way of life. They also employ a lot of excellent people.
What long-term impacts do you think COVID-19 will have on the financial services industry (good and bad)?
This will forever change every industry going forward and human behavior as well. Since we now know this is a risk that can happen, we will have to assume it can occur again and we will have to take it into account in how we execute our deals, capital structure, assess the risks of various industries, run our companies, and live our lives. A crisis like this will also serve to remind us all of what is most important in life: health, friends, family and purpose.
Switching gears away from the nitty gritty market questions...
What are you doing during your downtime while at home? Reading books, yoga, launching your own meme page, picking up a hobby?
On Friday after the market closed I went outside and threw around a bunch of sharp objects. Unbeknownst to me, two of my kids @skylarhandler and @mrhandler videoed it and I'm sure you will see it on their Instagram at some point.
Aside from that, I have literally been working constantly helping clients who are friends deal with the liquidity needs of their companies, trying to influence the government fiscal programs, and enjoying every other minute with my family.
What are you most positive about right now?
My family and the world will go on.
Anything that is under-meme’d in the FinMeme sector? I’m open to a challenge.
Why would I tell you? Now that I have 14k followers on @handlerrich I may compete.
Touché. Any book or movie recommendations to pass the time?
The Richest Man in Babylon. Short parable but tells you all you need to know about finance (and a lot about life).
What is your favorite movie about Wall Street?
The one I'm living. I would produce it but nobody would believe it.
Any parting words for the audience?
Older people have told you that you don't know squat because you haven't lived through a cycle or a meltdown. Now you are living through one. Don't be paralyzed or let fear overtake you. Do your job to the best of your ability and distinguish yourself as someone that can add value when all the chips appear down. Keep a level head, pay attention to everything you see and hear, and process it all. If you do all this you will emerge smarter, more experienced, more mature and more valuable.
If while accomplishing all of this you can be there for everyone else who may not be able to keep it together and help them through this period, you gain something even more important......true character. Then you earn the right to tell someone younger that they don't know squat, until they lived through one of these things.
Amazing. Great way to close it out. Once again, thank you Rich for your involvement in the FinMeme community and willingness to provide commentary / give advice, especially in what will be many of this generations first downturn. We've had the benefit of the longest bull market in history and now seeing that what goes up also comes down (although this wasn't how the permabears drew it up). Hope this addresses the concerns that have been raised over the past few weeks and gives hope to those who are just starting their careers in such a bizarre time. And with that... operator please close the line.
OPERATOR: "That concludes the LitCap Shareholder Exclusive Q&A. At this time, there are no further questions. The conference line will now be disconnected."
*classical music plays gradually fades away*
Chairman & CEO of Litquidity Capital