JPMorgan Chase CEO Jamie Dimon
My retirement portfolio is down 2.85% from its recent high. The allocation of 55% domestic stocks (10% Fidelity Contrafund, 7% T Rowe Price Equity Income, 7% Fidelity Extended Market Index and a handful of Fidelity Select Funds), 7% foreign stocks, 6% bonds and 30% Fidelity Cash Reserves is down less than the 4.65% decline in the S&P 500 index since its high on April 2.
Good job, right? Not by the standards by which many people seem to be judging Jamie Dimon and his risk management crew over at JPMorgan Chase & Co.'s Chief Investment Office, including risk guru Ina Drew and the London Whale trader who is fingered for losing the firm a cool $2 billion in bum CDS trades.
The investment unit will lose $800 million this quarter after netting out the losses against winning trades. While the sheer dollar volume of the boneheaded trade is prone to elicit a dyspeptic response in anybody who hears it, the proportion of the loss to the total assets managed by Ms. Drew and a network of guys on trading desks like Monsieur Bruno à Londres is not terribly large. A $2 billion loss on $370 billion is a scant 0.54%. Of course, the performance of the whale measured by what he lost to what he risked is much worse, but for the overall bank, they're doing better than both me and the U.S. stock market.
Check out the Market Blaster video for a look at the stain on Jamie Dimon's sterling reputation as a suave CEO who could walk on water when everyone else was drowning. With a dividend yield near 3% and coming off of a one-day drop of 9.2%, is JPM a falling knife worth catching? It would seem that the punishment inflicted on Friday--the loss of about $15 billion in market capitalization--is a bit disproportionate to the $800 million net investment loss by the poorly executed, monitored and conceived derivatives trades. Citigroup and Morgan Stanley shares both lost 4.2%.
We also check out some of the social media stocks like Groupon, Zynga, Pandora and LinkedIn that have come public before Facebook, which is expected to unload about $11 billion worth of stock to eager investors next Friday. Is there a cautionary tale to be told from the likes of GRPN, ZNGA and P, or an ode to joy to be sung if Facebook shares follow a trajectory like those of LinkedIn? From the level of mania around Facebook, investors may hold their noses at the rich valuations for FB and drive it higher out of the gate, but growing from a base of 900 million users does get harder. Plus it needs to learn how to start making more money from smartphone usage.
