Both Tiffany & CO (NYSE:TIF) and Jefferies Group (NYSE:JEF) announced results and when read together give investors pause for concern. Tiffany the long-established purveyor of expensive but useless baubles reported increased revenues of 18%. Thats good considering the economy is supposedly shaky and high paying Wall Street jobs are shrinking. Somehow wealthy men continue to spend large on both wife and mistress. The blue box has turned many a women’s anger into well something else for now.
The Jefferies Group which is touted as a mid level investment bank dealing with interesting middle market clients is not doing as well as they would like. The markets continue to rise as measured by Nasdaq and S&P indices. So how come the returns are worsening. If Jeffries is beating expectations but not making more money than the last comparable quarter than you have to wonder how much money the Jefferies Group producers can afford to drop at Tiffany.
Here is the kicker. Everyone agrees that unemployment will drop and stay low when small and mid size businesses start to hire. If Jefferies is losing ground; they are either not finding the mid market opportunities or they are not able to convince their clients to invest in the mid market narrative. In any event Jefferies is not feeding Tiffany. But Tiffany is thriving without Jefferies.
The macro-economic question for Tiffany becomes is Jefferies the canary in the coal mine. What is the real health of the financial sector. As you stand at the jewelry counter and ask to see that just perfect necklace how much anxiety are you experiencing. No not about will she like it. She has been signalling you long enough on the necklace. No the anxiety question becomes will you have the bonus to cover the American Express bill.
This has been an open book exam. Please correct your own test papers and continue forward into the unknown future.
George Gutowski writes from a caveat emptor perspective.