Sunday, February 14, 2010

Book about Jammie Dimon

I recently read a book titled 'The last man standing'. It's a good read to gain insight into Jammie Dimon's (CEO and chairman of JP Morgan chase) work. Few items of interest are listed below from the book.

1. Jammie Dimon likes fortress like balance sheet. Considering banks are leveraged businesses, it is surprising why more such bankers are not around.

2. Likes to be counter cyclical in terms of acquisition. No doubt Wa Mu acquisition is a good example. In contrast, Wachovia bought Golden West at the height of housing bubble. This essentially provides a margin of safety.

3. Jammie's crtierion to buy is as follows. Buy when it makes business sense, price is right and the acquiring company is operationally ready to integrate new business.

3. Cut costs and have lean operations. It somehow always seems that penny pinchers are better stewards of shareholder money. More on this in a later article.

4. Straight forward and no nonsense reporting to share holder. Buffett has appreciated Jammie on his share holder letters. Thats as good as it gets!

5. Jammie is the chief risk officer and has an intutive sense of identifying and acting on risk.

In short, banking is commodity business. In a commodity business, management makes all the difference. Further, the leverage in banking business adds inherant risk. So it is important to have a CEO who understands risk. If you find a small bank with an excellant CEO, it is worth considering for further research. Typically, it is difficult to identify a good manager in banking unless an entire cycle passes.

On the whole, this book helps understand why JP Morgan chase stands tall in this crisis. Simple answer is Jammie Dimon.

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