If catching knifes is not profitable then there are excess returns to be earned by shorting knifes. Its contradictory to not be short JPM then I already know the reply 'but its too uncertain, I have no confidence either way' exactly, its in this type of situations that stocks are sold bellow their fair value, its a human value to want to step way from this situation Furthermore if there is one asset where buying declines is likely to be profitable it is in stocks as they are historically mean reverting
I think you need to think a bit harder about the differences between Greece and Lehman. The former has been in serious trouble for a number of years and already defaulted once just a few months ago (causing barely a ripple). Their debt has been trading at distressed levels for over a year and continues to do so. Up until the last moment nobody really thought Lehman would be allowed to fail whereas a Greek exit now appears quite likely, and not just on the fringes of Elitetrader. European leaders are now beginning to openly discuss the possibility. There's no way they would dare bring it up if the perceived consequences were as disastrous as you say. I'm not trying to argue it won't have an effect - merely that the world won't end overnight, and in particular I think you're very mistaken to think the Germans et al will continue to throw good money after bad if Greece's government snubs the bailout conditions.
...which goes 100% against the Grahamian ethos of finding clear cut situations and avoiding muddled ones (also Buffett, re, "seven footers," and Munger, re, "too hard bucket"). Apart from citing value guys, though, that's daffy logic. Just because one side of a proposition is unattractive, doesn't mean you want to take the other side automatically. And the problem with the fair value assertion, of course, is the challenge of making a credible estimate as to what fair value consists of. If nobody fuckin' knows, then how do you know it's below fair value? How do you know it wasn't above fair value in the first place? Meat? Eww. WB saw JP Morgan as a well managed holding when he bought for his personal account, and presumably also assumed Dimon had a very tight rein on things -- a little different than buying into a derivatives debacle that is still playing out after the CEO just displayed cluelessness to his own trading book. Also, there's no rule that says the Oracle of Omaha can't be a hypocrite. He does plenty of stuff Graham would have had no truck with.
But do they really know? Or have they just dithered and dallied to the end of the line? Given the track record so far, it seems more logical to take the William Goldman stance: "Nobody knows nothin," i.e. downside risks are still egregiously unquantified at this point. When it comes to macro crises, the market has a notorious habit of ignoring the obvious and the flatly stated for indeterminate periods of time, occasionally quite long periods of time, then suddenly waking up to "reality" all at once. I would be hesitant to say with firmness what is or isn't priced in.
Let's also not forget Hank Paulson thought it'd be a great idea to let Lehman fail in a disorderly manner on a Sunday evening and thought the market was 'well prepared' and the impact would be muted. 48 hours later he started wetting his pants. There's no telling if there's a large discrepancy between what European leaders assume will be the market reaction and what may actually follow.
Buy panic sell histeria, you don't have to know the exact fair value to know that the odds are in your favor due human flaws leading to mispricings I'd be shocked if Buffett doesn't come out saying the same thing he said about WMT. Plus he has been more accomplished than Graham ever was, tons of Graham tricks are outdated anyhow
Better than 50% chance Dimon doesn't survive this. W/O the prince, JPM is just another POS bank sitting on plenty of capital, but no good way to make a lot money. MSFT and WMT would be better bets.
So "panic" in this case = a one day gap and < 10% drop in stock price that isn't even a new six month low. Re, human flaw connoisseurship, I humbly suggest a review of "anchoring" and "recency bias"