(Photo by Mark Wilson/Getty Images)
Key Takeaways
- JPMorgan CEO Jamie Dimon has given an interview at the World Economic Forum in Davos, Switzerland, and he wasn’t mincing words.
- He believes that inflation might not yet be under control, and that we could see interest rates hit 6% in 2023.
- Dimon also had strong words to say on Bitcoin and cryptocurrency in general, calling it a “hyped-up fraud” and a “pet rock.”
JPMorgan Chase CEO Jamie Dimon is in the World Economic Forum in Davos, Switzerland this week, and he gave a wide ranging interview today. Appearing on CNBC’s Squawk Box, he discussed his thoughts on interest rates and Bitcoin, among other topics.
The interview comes a week after JPMorgan announced a sizable earnings beat, with revenue of $35.7 billion against expectations of $34.3 billion.
Analysts have been eager to hear forecasts from Wall Street on what is expected to be a generally mixed year from an economic standpoint. JPMorgan addressed their outlook on the recent earnings call, starting that there had been a “modest deterioration in the Firm’s macroeconomic outlook, now reflecting a mild recession in the central case.”
Download Q.ai today for access to AI-powered investment strategies.
Jamie Dimon on interest rates and inflation
Jamie Dimon has expressed concerns over the current inflation trends and stated that he believes interest rates may need to go higher than what the Federal Reserve currently projects.
In the CNBC interview, Dimon stated, “I actually think rates are probably going to go higher than 5%…because I think there’s a lot of underlying inflation, which won’t go away so quick.”
Despite the Federal Reserve’s efforts to curb inflation by raising interest rates to a range of 4.25% to 4.5%, the highest level in 15 years, Dimon believes the recent pause in inflation isn’t due to systemic changes.
He stated that he believes that the recent decrease in inflation, as indicated by the Consumer Price Index (CPI), which measures the cost of a broad basket of goods and services, is due to temporary factors such as a decrease in oil prices and a slowdown in China due to the Covid pandemic.
The Federal Reserve’s December meeting saw the anticipated “terminal rate,” or the point where officials expect to end the rate hikes, at 5.1%. CPI rose 6.5% in December from a year ago, marking the smallest annual increase since October 2021.
Dimon’s comments suggest that it may require more action from the Fed in order to truly address the issue. This highlights the ongoing challenges the Fed and other central banks may face in trying to manage inflation in the coming months.
He believes that if the US does go into a recession, even a mild one, that rates will rise to 6%.
“I know there are going to be recessions, ups and downs. I really don’t spend that much time worrying about it. I do worry that poor public policy damages American growth,” Dimon said.
Dimon’s views on Bitcoin
Jamie Dimon has been a vocal opponent of Bitcoin for a long time. Last year he compared Bitcoin to a Ponzi scheme, like the infamous, decades-long scam run by Wall Street titan Bernie Madoff.
When asked about Bitcoin specifically during the interview, Dimon shot back, asking why they “waste any breath” discussing the cryptocurrency. He went on to say that he believes that “Bitcoin itself is a hyped-up fraud, a pet rock.”
He also weighed in on the ongoing saga with FTX.
Dimon said that he wasn’t surprised at all to see FTX fail and declare bankruptcy, and also called it a Ponzi scheme.
Pushed on whether he believed the entire cryptocurrency sector is a Ponzi scheme, he said, “You guys have all seen the analysis of Tether and all these things, the lack of disclosures, its outrageous. Regulators should have stopped this a long time ago. People have lost billions of dollars if you look at its lower-income people, in some cases retirees.”
JPMorgan’s crypto and blockchain projects
While their CEO may be pretty clearly against Bitcoin and crypto in general, it’s clear that as one of Wall Street’s largest banks, they understand the need to hedge their bets.
The company is actively involved with development of blockchain implementations into their services, and they’ve even created their own proprietary token – JPM Coin. This token has a specific use case within their system, being used for intraday repurchase agreements.
Also known as repos or RP, intraday repurchase agreements are short term loans involving financial institutions. They’re used by big banks to help manage their short term cash flow or to meet regulatory capital adequacy requirements.
Not only that, but late last year they company also registered a trademark for a new cryptocurrency wallet.
What should investors take from Dimon’s comments?
That it’s not going to be smooth sailing on the horizon. JPMorgan is now forecasting a mild recession as their central case for 2023. That could end being correct, in which case we are likely to see continued challenges facing investment markets.
If Dimon’s comments about inflation turn out to be correct, we could see the Fed tighten their interest rate policy even further.
In recent meetings we’ve seen the rate of increases come down from 0.75 percentage points for multiple meetings in a row, down to a 0.50 percentage point increase and now a 0.25 percentage point increase being forecast at the February meeting.
According to Dimon, the slowdown in inflation might just be a temporary respite, rather than a long term change. If this is true, the Fed might need to look at ramping up their rate hikes again.
That’s not going to be well received by businesses, and could increase the risk of a recession that is more than just mild.
So, what do investors do?
Well, you could follow in the words of Jeff Bezos and “batten down the hatches”. But how do you do that while also staying invested to catch the gains when markets eventually bounce back?
One way is to implement hedging strategies to protect you on the downside, while helping you keep some or all of the upside. Doing this yourself is…difficult. To say the least.
Luckily, we’ve harnessed the power of AI to do this for you. We created Portfolio Protection, which is available on all of our Foundation Kits. It works by analyzing your portfolio’s sensitivity to a range of different risks such as market risk, oil risk and interest rate risk, and then automatically implements sophisticated hedging strategies to protect against them.
It runs the analysis every week, and then updates the hedge accordingly.
It’s the type of strategy that’s usually reserved for high flying private banking clients, but we’ve made it available for everyone.
Download Q.ai today for access to AI-powered investment strategies.
