Smartest Man in the Room Looks Dumb
"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."
-- Warren Buffett
I took a small long position in JPMorgan Chase (JPM) at $38.20 after the close of trading yesterday and after JPMorgan made its surprising announcement.
I weighed the impact of the hit to earnings and to perception and concluded that it is fairly unusual to be able to buy JPMorgan Chase's shares at only $4 over book value ($34 a share), especially in the face of an active $15 billion buyback.
I am not foolish enough to believe that I will be immediately rewarded in this trade, however, and I am putting the shares away as an investment.
Also, my position has been sized modestly for, as described below, the opportunities probably lie elsewhere in the financial sector. (And I did more aggressively buy Berkshire Hathaway (BRK.A) /(BRK.B) and American International Group (AIG) last night.)
While I have not yet read bank analysts' reactions to the news, here are my brief observations on JPMorgan Chase's blunder.
- Jamie Dimon screwed up. His eye was clearly off the ball. JPMorgan Chase has been a champion against reform, seeing it as a detriment to banking profitability and credit availability. Dimon looks very stupid now. He is mortal, like us all.