NEW YORK–The widely read annual letter to shareholders from JPMorgan Chase CEO Jamie Dimon has just been published, and it covers Dimon’s thoughts on everything from leadership lessons to public policy prescriptions.
Among the points made in the 66-page letter, Dimon’s longest to date:
- The U.S. economy will likely “boom.” A combination of excess savings, deficit spending, a potential infrastructure bill, vaccinations and “euphoria around the end of the pandemic,” suggested Dimon, may create a boom that “could easily run into 2023.” He said that could justify high equity valuations, but not the price of U.S. debt, given the “huge supply” soon to hit the market.
- Inflation. There is a chance that a rise in inflation would be “more than temporary.” Dimon said that would force the Fed to raise interest rates aggressively. “Rapidly raising rates to offset an overheating economy is a typical cause of a recession,” he wrote, adding he hopes for “the Goldilocks scenario” of fast growth, gently increasing inflation and a measured rise in interest rates.
- Banks are playing an increasingly smaller role in the financial system. 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 those nonbank competitors should be more strictly regulated; their growth has “partially been made possible” by avoiding banking rules. And when it comes to tougher regulation of big banks, he wrote, “the cost to the economy of having fail-safe banks may not be worth the cost, he said.
- China’s leaders believe America is in decline. While the U.S. has faced tough times before, today “the Chinese see an America that is losing ground in technology, infrastructure and education — a nation torn and crippled by politics, as well as racial and income inequality — and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals,” he wrote. “Unfortunately, recently, there is a lot of truth in this.”
- Reduced Space Needed. With more widespread remote working, JPMorgan may need only 60 seats for every 100 employees. “This will significantly reduce our need for real estate,” Dimon wrote.
- Costly Security. JPMorgan spends more than $600 million a year on cybersecurity
The full letter can be found here.