Jamie Dimon Sees a Boom Coming
Dear shareholders, dear shareholders …
The annual letter to shareholders from JPMorgan Chase’s boss, Jamie Dimon, has just been released. The widely read letter not only gives an overview of the bank’s business, but also covers Mr. Dimon’s thoughts on everything from leadership lessons to public order regulations.
“The US economy will likely boom.” A combination of excessive savings, deficit spending, a possible infrastructure bill, vaccinations and “euphoria towards the end of the pandemic,” wrote Dimon, could spark a boom that “could easily last through 2023.” This might justify high stock valuations, but not the price of US debt, as the “huge supply” is about to hit the market. Chances are that inflation spikes are “more than temporary,” he wrote, forcing the Fed to aggressively hike interest rates. “A rapid rate hike to compensate for an overheated economy is a typical cause of a recession,” he wrote, but he hopes for the “goldilocks scenario” of rapid growth, slightly rising inflation and a measured rise in interest rates.
“Banks play an increasingly minor role in the financial system.” Mr. Dimon cited competition from an already large shadow banking system and fintech companies, as well as “Amazon, Apple, Facebook, Google and now Walmart”. He argued that these non-bank competitors should be more strictly regulated; Their growth was “partially made possible” by avoiding banking rules, he wrote. And when it comes to tighter regulation of big banks, he wrote, “The cost to the economy of having resilient banks may not be worth it.”
“China’s leaders believe America is in decline.” While the US previously faced difficult times, “the Chinese today see an America losing ground in technology, infrastructure and education – a nation torn and crippled by politics and racial and income inequality – and a country that is unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in a coherent way to achieve national goals, ”he wrote. “Unfortunately there has been a lot of truth behind this lately.”
“The solution is not as simple as moving away from fossil fuels.” Fighting climate change does not mean “giving up” fossil fuel production and use companies, Dimon wrote, but rather working with them to reduce their environmental footprint. He sees “great opportunities in sustainable and low-carbon technologies and businesses” and plans to measure customer progress in terms of reductions in carbon intensity – emissions per unit of production – that take into account factors such as size.
Other notable news (and views) from the letter:
With more widespread remote working, JPMorgan may only need 60 seats per 100 employees. “This will significantly reduce our real estate needs,” wrote Dimon.
JPMorgan spends more than $ 600 million on cybersecurity annually.
Mr. Dimon cited tax loopholes that he believed the US could do without: interest income, tax breaks for racing cars, private jets and horse racing, and a tax break for land protection for golf courses.
Some meta-analyzes: This was Mr. Dimon’s longest letter with 35,000 words on 66 pages. The ever-growing letters – apart from a shorter edition last year, weeks after Mr Dimon underwent heart surgery – could be seen as a reflection of the range of issues that top executives now face or face.
WHAT HAPPENS HERE
Toshiba is considering a $ 20 billion takeover bid. The Japanese tech company announced it had received a leveraged buyout offer from private equity firm CVC Capital that brought its shares to a four-year high. Toshiba has had a number of scandals and is being pressured by activist investors.
Amazon, a notable tax evader, supports higher corporate taxes. Jeff Bezos said he supported the corporate tariff hike to fund President Biden’s infrastructure plans – though he didn’t mention the 28 percent tariff proposed by the White House. Other company bosses criticize the possible tax hike privately.
The company behind the Johnson & Johnson vaccine mix-up has a history of errors. Emergent BioSolutions, which the US relied on to produce J. & J’s cans. and AstraZeneca had previously made manufacturing defects. Experts fear this could hold some Americans back from vaccinating, even if Mr Biden postponed the U.S. vaccination approval period.
An electric aircraft manufacturer is suing a rival for theft of intellectual property. Wisk, backed by Boeing and Google founder Larry Page, said former employees downloaded sensitive information before joining Archer, a competitor. Archer, who goes public through the merger with a SPAC operated by Moelis & Company and counts United Airlines as an investor, denied the wrongdoing and said he is cooperating with a government investigation.
A blistering start for venture capital in 2021. Startups set a quarterly record for fundraising in the first three months of the year, raising more than $ 62 billion, according to the MoneyTree report by PwC and CB Insights. That is more than twice as much as a year earlier and corresponds to almost half of the start-ups in all of 2020.
Why is the Amazon union vote taking so long?
Voting in the union election at an Amazon warehouse in Bessemer, Ala., Ended on March 29 and counting began the next day, but the outcome is still unknown. What’s happening? It’s less about the number of ballots than how they’re counted.
There is a lot at stake, for both Amazon and the labor movement. Progressive leaders like Bernie Sanders have argued a victory for the union, the first at an Amazon plant in the US that could inspire workers elsewhere to unionize. And Amazon is facing increased scrutiny of its market power and labor practices.
Only a tiny fraction of Amazon’s workforce was actually eligible to vote. About 5,800 workers sent their ballots to the National Labor Relations Board office in Birmingham. Counting each vote includes two envelopes: one with the employee’s name and another sealed envelope with an anonymous voting slip. Dealing with them was a tedious process:
Once Amazon and the union have gone back and forth over controversial voters, the NLRB counts the undisputed ballots anonymously and by hand on a video conference open to reporters. This could start today.
“Economic fate within and between countries is dangerously different.”
– Kristalina Georgieva, Executive Director of the IMF, on how the uneven adoption of vaccines poses a threat to the global economic recovery.
Credit Suisse’s expensive mistakes
After the 2008 financial crisis, Credit Suisse was beaten by risky bets and promised to do better. A number of recent scandals suggest that this is not the case, writes The Times’ Jack Ewing.
A look back at the problems facing the Swiss bank over the past year or so:
A Espionage scandal this led to the overthrow of Tidjane Thiam as CEO
Ties too Greensill Capital, the SoftBank-backed lender who has filed for bankruptcy and will result in losses at the Swiss bank.
His involvement in Archegoswhose hugely leveraged stock bets went south and saddled the bank to a great success.
It could be worse. Rules requiring banks to hold more capital have helped keep the Archegos meltdown from being a systemic threat. Nevertheless, Credit Suisse is paying dearly for it, replacing half a dozen top executives, foregoing bonuses for executives and stopping share buybacks. His current boss, Thomas Gottstein, is also facing closer scrutiny.
Credit Suisse’s problems show that regulators need to remain vigilantCritics say lenders pursue profits in increasingly risky ways. The Swiss bank is “a straw in the wind suggesting that risk management within banks is being relaxed because it is so difficult to make money on interest margins,” said Nicolas Véron of the Peterson Institute for International Economics.
Who is behind this corporate veil?
The finance department is introducing new rules for corporate transparency and would like to contribute. A 30-day comment period began this week on draft regulations that would make it more difficult to disguise who controls a company. The details to be worked out include which companies should report when; how to collect, protect, and update information for a database; and the criteria for sharing with law enforcement agencies.
“We couldn’t be more excited” Kenneth Blanco, the director of the Treasury Department’s Financial Criminal Enforcement Network (FinCEN), recently told bankers. The US has been under pressure to eliminate its money laundering and financial crime vulnerabilities:
In 2016, the international Financial Action Task Force gave the country a failed mark for corporate responsibility transparency.
In 2018, banks and financial institutions had to collect this information from customers to help law enforcement identify individuals.
In January, Congress passed the Corporate Transparency Act, which requires companies to report property to the government.
New rules could make the formation of small businesses, special purpose vehicles and other related companies “significantly” more burdensomesaid Steve Ganis of Mintz, an expert on anti-money laundering. “FinCEN’s new regime will make things a lot more complicated for startups where control and ownership are very fluid,” he said. Public companies and many larger companies would be exempt as they are already under scrutiny.
READ THE SPEED
Flipkart, Walmart’s Indian e-commerce company, is reportedly planning to go public this year. (Bloomberg)
Grab, the Singaporean tech giant, is about to merge with an Altimeter Capital-backed SPAC valued at $ 35 billion. It would be the biggest blank check business ever. (FT)
Fox sued the owner of FanDuel over the price of its option to buy a stake in the sports betting service. (CNBC)
Politics and politics
Coinbase, whose direct listing is set for next week, announced it had more revenue in the first quarter of this year than in all of 2020. (CNBC)
The audio chat start-up Clubhouse is set to raise $ 4 billion in donations. (Bloomberg)
The SEC accused an actor of running a $ 690 million Ponzi program based on false claims made about deals with Netflix and HBO. (Bloomberg)
The best of the rest
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