Build ’em up and tear ’em down. It’s one of the oldest games in any competition for status, and now Jamie Dimon might be the latest victim.
The problem is that Dimon’s reputation has just become too good. JP Morgan Chase, which Dimon runs, has outmaneuvered many of its rivals throughout the credit crisis. And Dimon has been on the cover of Fortune, New York Magazine and regularly gets called the current King of Wall Street. All this, of course, has many on Wall Street looking forward to his fall.
Charlie Gasparino says the fall is coming:
People close to Dimon tell me he’s well aware of the fact that his image is about to take a major hit along with the financial performance of the bank—and he’s preparing for the worst. He’s now turning down just about every interview request (including one with The Daily Beast; he declined to comment for this story). Company executives in background interviews are quick to point out that they weren’t as smart as the glowing press account indicate and they made unwise investments as well, though they have yet to full materialise. The firm, for instance, has problems in the credit card debt areas and that tough times are ahead. It’s also why Dimon has privately told JP Morgan’s board that despite all the good he’s done for the company this year, he won’t take a 2008 bonus. (The official announcement could be made this week.). It’s also the reason he made a strategic decision to speak on television in pretty harsh terms— “November itself has been a terrible trading month …December so far is still pretty terrible…It will be a tough quarter.” —about the challenges facing JP Morgan and its pending fourth quarter results, these people tell me.
The plan, as I understand it, was to use the CNBC platform to correct the public record about JP Morgan’s financial health and to suggest to the world, that Morgan could very well post a sizable loss for the fourth quarter. A few weeks earlier, at a conference sponsored by Merrill Lynch, Dimon was a bit more positive about the future; but since then, things had gotten worse, largely the result of the firm’s exposure to souring credit card business and other toxic stuff on the bank’s balance sheet. Dimon wanted to give Wall Street guidance in a perfectly legal way so investors didn’t have to wait until later in January when the firm is scheduled to announce earnings that will show it is now, like everyone else, losing money—or pretty close to it.
Most analysts I speak to say if JP Morgan does record a loss, it probably won’t be at the levels of Goldman Sachs and Morgan Stanley, which recently announced gargantuan losses of more than $2 billion for the fourth quarter. People close to the firm tell me that’s why some analysts, investors, and his own board members believe that Dimon’s comments to CNBC were over-the-top. “He could have said the same thing without being so aggressive,” said one person close to the firm who is a Dimon fan. “Jamie is great, the best on the street, but he got way ahead of himself. All that he had to say was that the fourth quarter will be difficult and move on.”
So did Dimon go too far in warning the markets about the horrible fourth quarter? Or does he know that things will be even worse than many expect?