What Is JPMorgan Trying to Tell Us?

Focus: MARKETS

Mark Hulbert Image Mark Hulbert Senior Columnist, MarketWatch

If you are an investor in the big banks like JPMorgan Chase, Mark Hulbert of the Hulbert Financial Digest thinks that you need to pay attention to one important lesson from this fiasco.

Learning from JP Morgan. Mark Hulbert joins us now. Mark, were some lessons learned with this one?

Well, that’s right. A lot of people are trying to draw lots of lessons from the fiasco.

I’ll leave a lot of that to others, I mean, looking at what it means about Jamie Dimon’s personality in particular, but what I think it suggests from a broader investment point of view is rather profoundâ€"and fewer people are drawing that lesson, which is that it means that few of us really know or can know what’s going on at these banks.

I think that suggests that the banks are far riskier than anyone has imagined. Look at it: everyone would admit, whatever else people say about him, that Jamie Dimon is a very, very smart guy, and yet he didn’t know how bad it was. And if Jaime Diamond doesn’t know how bad it is at one of the best-run banks in the planet, then you can bet that you or I have no clue.

We have always assumed that outside rating agencies like S&P or Moody’s or investment advisors who look at it on a full-time basis as a lot of Wall Street analysts do, that they are able to come up with some sort of insight into what’s going on. I think the answer or the lesson to draw is know that we are fooling ourselves if we think that we can really assure ourselves that they are not incurring huge risks because some of the smartest people looking at it still didn’t know a month prior to this loss that there was that risk.

Was his management style too hands-off, perhaps?

Well, I don’t know.