Tags: Dimon | JPM | shareholders | investor

Arrogant Jamie Dimon Gets One Thing Right

By Wednesday, 03 June 2015 08:29 AM Current | Bio | Archive

Look up "arrogant" in the dictionary and you may well see Jamie Dimon's picture. The JPMorgan Chase (JPM) leader gave us yet more proof last week.

Speaking at a financial conference, Dimon criticized shareholders who object to his holding both the CEO and board chair positions. Proxy advisor firms call this a poor corporate governance practice.

Said Dimon: "God knows how any of you can place your vote based on [proxy advisors] ISS or Glass Lewis. If you do that, you are just irresponsible. I'm sorry. And you probably aren't a very good investor either. And you do, believe me, I know some of you in here do it because you're lazy."

Generally, calling the owners of your company irresponsible and lazy is the wrong way to climb the corporate ladder, even when it's true. Maybe Dimon feels free because he is already atop the ladder. He can deploy his "golden parachutes" if necessary.

Dimon was right about one thing, though: JPM shareholders are not very good investors. How do we know this? We know it because they are JPM shareholders!

Anyone who voluntarily owns JPM shares is tolerating management that spends more time cleaning up its own messes than finding ways to grow. Dimon's ill-advised acquisitions and internal chaos have cost shareholders billions. Good investors don't own such companies.

A few examples from Dimon's tenure:

The bank's Chief Investment Office lost $6 billion in supposedly safe cash reserves managed by "the London Whale." (That nickname should have been a clue something was amiss.) Dimon, who loves to talk about "risk management," had no idea how this could happen. The firm ate the $6 billion loss and paid another $920 million in fines for covering up the incident.

Dimon's 2008 decision to buy collapsed banks Bear Stearns and Washington Mutual looked like a bargain at the time. It was anything but a bargain. In his haste to snap them up, Dimon greatly underestimated the liabilities embedded in both. JPM has already paid more than $13 billion in fines for the two firms, with more cases still pending.

JPMorgan Chase was one of the six banks that plead guilty last month to criminal charges for manipulating foreign exchange rates. Their fines totaled nearly $6 billion. Only special intervention from the Securities and Exchange Commission kept JPM off corporate death row.

Some folks say Dimon and JPM are innocent victims of socialist Obama's Wall Street witch hunt. Even if that were true — and I think it isn't true — the conclusion stays the same.

When you realize a company is under regulatory attack, however unjustly, and will probably face billions more in penalties, then owning its stock is unwise at best. Anyone who does so is commendably loyal but a terrible investor.

The numbers prove it, too. For the five years ended May 29, JPM shares rose 74.9 percent, compared with a 97.9 percent gain in the S&P 500.

Dimon's performance lags even among his too-big-to-fail peers. Shares of a better-run bank like Wells Fargo (WFC) rose 113.6 percent in the same five years.

With no compelling reason to own JPM stock and many reasons NOT to own it, Dimon was right to question his shareholders' investment skills.

They can prove him wrong by selling right away.

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PatrickWatson
Look up "arrogant" in the dictionary and you may well see Jamie Dimon's picture. The JPMorgan Chase (JPM) leader gave us yet more proof last week.
Dimon, JPM, shareholders, investor
544
2015-29-03
Wednesday, 03 June 2015 08:29 AM
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