Shares of Jefferies (JEF) have been on a wild ride in the last few days over concerns regarding the investment bank's exposure to European sovereign debt. As shown in the chart to the right, JEF has seen its share price cut by more than half after starting out the year at close to $27 per share.
Today the stock has already been halted due to circuit breakers twice, and the company has come out and said that most, if not all, of its sovereign debt exposure to troubled European countries has been hedged with similar short positions.
Needless to say, given the numerous similar assurances that other Wall Street CEOs made in 2007 and 2008, many investors remain skeptical. With that said, which way will JEF go? Will it follow the path of Lehman Brothers in 1998 during the Russian Debt Default and Long Term Capital blowup? Or will it follow the path of Lehman ten years after during the mortgage debt crisis? As shown in the charts below, the directions that Lehman took following each of those crises couldn't be more different, and for investors who make the right call on Jefferies path, there are huge profits to be made.