Even Jamie Dimon Failed To Pick Up On Early Warning Signs

Although JPMorgan Chase CEO Jamie Dimon is generally credited with pulling his firm out of the mortgage-related securities business before the storm hit, and thus avoiding the huge writedowns sustained by rivals, he apparently wasn't always quick to pick up on the fact that the US housing market was heading for a crash.

And he seemed unaware that it was possible to effectively hedge mortgage positions.

As detailed in Gregory Zuckerman's The Greatest Trade Ever (How John Paulson Bet Against the Markets and Made $20bn), Jeffrey Green, a JPMorgan client who was shorting mortgage debt by purchasing CDS insurance, found himself in the JPMorgan box at The 2006 US Open tennis tournament.

Excited at the prospect of meeting with Dimon, Green bounded over, hoping to go to school at the feet of the master:

'Hey, Jamie. My biggest position is shorting subprime credit through credit default swaps. I've done $400m with you guys'.

Dimon had a blank look on his face. 'What's that ?', he asked.........

Greene thought maybe he just needed to explain it better. He outlined his trades to Dimon as best he could.....Dimon had little reaction, though. He's either bored or doesn't understand the trades, Greene realized'

Source - The Greatest Trade Ever by Gregory Zuckerman

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