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JAMIE DIMON Jamie Dimon says ‘brace yourself’ for an economic hurricane caused by the Fed and Ukraine war 
Original article: https://www.cnbc.com/2022/06/01/jamie-dimon-says-brace-yourself-for-an-economic-hurricane-caused-by-the-fed-and-ukraine-war.html Peter Burgess COMMENTARY An economic hurricane ... for those at the top of the economic structure is long overdue ... like 30 years overdue. People at the top pf the banking and finance sector like Jamie Dimon have surfed along on top of a wave of financialization for about 40 years. This has been very good for the banking and finance sector, and not so much for every other sector of the economy and not very good for most of the broad general public. When the economic gross domestic product (GDP) is broken down to its constituent parts, the performance of the economy over the past 40 years looks quite different depending on the sector, the demography and the place. An older person working in a union job in a place like New York City may be quite comfortable with his/her economic situation, but this is not going to be the case for an older person in much of the industrial mid-west where union factories have been shuttered. Some tech jobs pay very well ... but a lot of young people are employed in low wage non-union service jobs with little prospect of economic progress. The cost of shelter is becoming out-of-reach for most young people. The rise in the price of housing (ownership) has been good for owners who purchased a long time ago, but is not so good for younger people who are only now getting into house ownership. The cost of building a new house now means that the idea of 'affordable housing' is more a dream than a reality. The metrics being used to understand the performance of the modern economy are substantially flawed, starting off with the GDP measure. Economic activity has both good (beneficial) results and bad (negative) results. In the GDP measure these are added together and the result is generally considered to reflect good performance when the number is large ... even if the activity is the clean up the damage caused by a hurricane which destroys everything in its path. Changes to the GDP metric have been discussed since I was an economics student in the 1950s, but the needed changes never get made. This is mainly because of corporate lobbying because most corporate decision makers know that a more meaningful GDP metric won't tolerate the data sloppiness that now prevails and will do a better job of assessing the impact of social and environmental changes. Peter Burgess | ||
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FINANCE
Jamie Dimon says ‘brace yourself’ for an economic hurricane caused by the Fed and Ukraine war
Written by Hugh Son @HUGH_SON PUBLISHED WED, JUN 1 2022 10:27 AM EDT UPDATED WED, JUN 1 20228:20 PM EDT KEY POINTS
JPMorgan Chase CEO Jamie Dimon says he is preparing the biggest U.S. bank for an economic hurricane on the horizon and advised investors to do the same. “You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” Dimon said Wednesday at a financial conference in New York. While conditions seem “fine” at the moment, nobody knows if the hurricane is “a minor one or Superstorm Sandy,” he added. “You’d better brace yourself,” Dimon told the roomful of analysts and investors. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.” Beginning late last year with high-flying tech names, stocks have been hammered as investors prepare for the end of the Federal Reserve’s cheap money era. Inflation at multidecade highs, exacerbated by supply chain disruptions and the coronavirus pandemic, has sown fear that the Fed will inadvertently tip the economy into recession as it combats price increases. While stocks bounced from a precipitous decline in recent weeks on optimism that inflation may be easing, Dimon seemed to dash hopes that the bottom is in. “Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” Dimon said. “That hurricane is right out there, down the road, coming our way.” There are two main factors that has Dimon worried: First, the Federal Reserve has signaled it will reverse its emergency bond-buying programs and shrink its balance sheet. The so-called quantitative tightening, or QT, is scheduled to begin this month and will ramp up to $95 billion a month in reduced bond holdings. “We’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years,” Dimon said. Several aspects of quantitative easing programs “backfired,” including negative rates, which he called a “huge mistake.” Central banks “don’t have a choice because there’s too much liquidity in the system,” Dimon said, referring to the tightening actions. “They have to remove some of the liquidity to stop the speculation, reduce home prices and stuff like that.” The other large factor worrying Dimon is the Ukraine war and its impact on commodities, including food and fuel. Oil “almost has to go up in price” because of disruptions caused by the worst European conflict since World War II, potentially hitting $150 or $175 a barrel, Dimon said. “Wars go bad, [they] go south in unintended consequences,” Dimon said. “We’re not taking the proper actions to protect Europe from what’s going to happen to oil in the short run.” ‘Huge volatility’ Last week, during an investor conference for his bank, Dimon referred to his economic concerns as “storm clouds” that could dissipate. Presentations from Dimon and his deputies at the all-day meeting have bolstered JPMorgan shares by giving greater detail on investments and updated figures on interest revenue. But his concerns seem to have deepened since then. During the response to the 2008 financial crisis, central banks, commercial banks and foreign exchange trading firms were the three major buyers of U.S. Treasurys, Dimon said Wednesday. The players won’t have the capacity or desire to soak up as many U.S. bonds this time, he warned. “That’s a huge change in the flow of funds around the world,” Dimon said. “I don’t know what the effect of that is, but I’m prepared for, at a minimum, huge volatility.” One step the bank could take to gird itself for a coming hurricane is to push clients to move a type of lower-quality deposit called “non-operating deposits” into other places, such as money market funds, for example. That would help the bank manage its capital requirements under international rules, potentially helping it absorb a surge in bad loans. “With all this capital uncertainty, we’re going to have to take actions,” Dimon said. “I kind of want to shed nonoperating deposits again, which we can do in size, to protect ourselves so we can serve clients in bad times. That’s the environment we’re dealing with.” Banks having a “fortress balance sheet” and conservative accounting are the best protections for a downturn, Dimon said. The bank has shied away from servicing a lot of federal FHA loans, he said, because delinquencies could hit 5% or 10% there, “which is guaranteed to happen in a downturn,” Dimon said. ‘Shame on you’ Dimon went on a tear during the hourlong session, barreling through topics like a “greatest hits” of his observations and gripes, often letting loose with profanity. He lambasted investors for voting along with proxy advisors like Glass Lewis, which has disagreed with JPMorgan’s board on recent matters including executive compensation and whether the bank should separate the chairman and CEO roles in the future. “Shame on you if that’s how you vote,” Dimon said. “Seriously, you should be embarrassed. Do your own homework.” Companies are being driven out of public markets “because of litigation, regulation, press, cookie-cutter governance,” he added. Meanwhile, other critics often conflate stakeholder capitalism for being “woke,” Dimon said. “I am a red-blooded, free market capitalist and I’m not woke,” he said. “All we’re saying is when we wake up in the morning, we give a s--- about serving customers, earning their respect, earning their repeat business.” Stock picks and investing trends from CNBC Pro:
| The text being discussed is available at | https://www.cnbc.com/2022/06/01/jamie-dimon-says-brace-yourself-for-an-economic-hurricane-caused-by-the-fed-and-ukraine-war.html and |