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At this point, you’ve probably heard about JP Morgan’s shocking and embarrassing $2 billion trading loss, which was announced last Thursday.Fans of CEO Jamie Dimon, who is (or was) was widely recognised as Wall Street’s golden boy, have been left confused and disappointed.
One of Dimon’s biggest cheerleaders has been Warren Buffett.
In fact, Buffett gave Dimon a shout out in his latest annual letter to Berkshire Hathaway shareholders, which was released in February. On the matter of share buybacks:
One CEO who always stresses the price/value factor in repurchase decisions is Jamie Dimon at J.P. Morgan; I recommend that you read his annual letter.
Days after Buffett’s letter came out, the Oracle of Omaha was on CNBC to give Dimon even more praise. “I think Jamie Dimon writes the best annual letter in corporate America,” said Buffett. “Every viewer will learn a lot by reading his annual report. He thinks well and he writes extremely well and he works a lot on his report. He told me that.”
During the program, Andrew Ross Sorkin asked why Buffett hasn’t purchased any shares of JP Morgan for Berkshire. In response, Buffett unleashed this bombshell.
“I’ll let you in on a little secret,” said Buffett. “I own some shares of JP Morgan. Personally. You got some news from me Andrew.”
If JP Morgan was good enough for Buffett, then shouldn’t it be good enough for Berkshire Hathaway?
CNBC’s Becky Quick posed this question to Buffett, who responded with this ambiguous answer: “Because it’s one I can buy without any possible problems with my conflict,”
The Really Good News For Berkshire Hathaway Shareholders
During Berkshire Hathaway’s recent annual shareholder meeting, Buffett was asked about this again. And he gave the best answer any Berkshire shareholder could hope for. From The Telegraph:
“My best ideas are all in Berkshire,” he said according . “That I can promise you.”
…Comparing Wells Fargo and JP Morgan, Mr Buffett said: “I know Wells better and it’s easier to understand.”
In hindsight, this answer is absolutely amazing. When investing, Buffett is willing to take risks. However, when there are any doubts about a prospective investment, it won’t go into the Berkshire portfolio.
Ultimately, Buffett’s investment philosophy is much more rigid for Berkshire Hathaway than it is for himself. Shareholders should take great comfort in this.