You might call it the earthquake that rocked Wall Street; a financial crisis of unimaginable proportions that sparked billions in losses, sullied reputations and slew one of Wall Street’s most storied firms.
But a select few saw the early warning signs of the current mortgage mess and used the crisis to cash in. Here at Fast Money we call these investors subprime savants! And few compare with JP Morgan’s CEO, Jamie Dimon.
While competitors Bank of America and Citigroup wrote down a combined $26 billion last year, JP Morgan emerged relatively unscathed, recording a loss of just $1.3 billion amid record profits.
How did Dimon do it? By never believing the mortgage myth in the first place.
Dick Bove, an analyst at Punk, Ziegel & Co. follows Dimon closely. "What Jamie Dimon understands that perhaps others don’t is that if a business is going really well and it’s in a cyclical area, that ultimately you’ve got to back away, and that’s what he did,” says Bove.
JP Morgan sold off its riskier Structured Investment Vehicle, or SIV business in 2005, and while rival Merrill underwrote $31 billion in CDOs (collateralized debt obligations) last year, JP Morgan 's total accounted for just $4 billion.
“He’s extraordinarily cost-conscience,” Bove says. “That conservative approach paid off when Bear Stearns – an 85-year old institution - was on the brink of collapse.”
Traders, what do you think of JP Morgan stock?
I like JPM long term, says Guy Adami. In addition, when the storm clears look at Morgan Stanley . At some point it could have a 50-handle, he says.
If you’re looking out months and years both JPM and MS are probably trading at a discount, adds Pete Najarian. If you buy now, at some point I think you will probably find yourself in a great position.
I agree, says Jeff Macke.
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Trader disclosure: On Apr.1, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (DIS), (YHOO), (MSFT), (INTC); Najarian Owns (AAPL), (CSCO), (MSFT), (YHOO), (ORCL); Najarian Owns (AA) Calls, (BSC) Calls, (CCU) Calls; Najarian Owns (LEH) Puts, (MER) Puts; Najarian Is Long (XLF) And (XLF) Puts: Finerman Owns (GS); Finerman's Firm Owns (JCP), (MO), (MSFT), (VLO), (YHOO), (PM), (TIP):Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (GLD)