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CEO Jamie Dimon Warns JPM Shareholders To Beware of Costly New Risks and Dangers

Apr 12 2014, 9:47am CDT | by

The latest must-read in financial circles is  JPM boss Jamie Dimon’s 32 page letter to  JP Morgan Chase shareholders made public last week. It is is a mixture of gritty optimism going forward...

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15 weeks ago

CEO Jamie Dimon Warns JPM Shareholders To Beware of Costly New Risks and Dangers

Apr 12 2014, 9:47am CDT | by

The latest must-read in financial circles is  JPM boss Jamie Dimon’s 32 page letter to  JP Morgan Chase shareholders made public last week. It is is a mixture of gritty optimism going forward with rueful  musings on the costly nature of regulation in the wake of the 2008 economic and financial meltdown. Informed Wall Street followers will want to muse over  the warning that “we need to be prepared for even the unlikely and unpredictable bad outcomes” from “risk to the system.”

1.  You will be happy to know “The banking system is almost fully recovered and banks are better capitalized than they have been in 60 years.” Dimon claims  the average equity to assets  ratio is 11.1%, the highest it’s been since 1950, thanks to the absolute need to raise capital resources dramatically since 2008.

2.  Corporations are in extremely good financial shape with cash balances equal to  11.4% of assets, more than double what they were in 2000 when the tech bubble burst. This could be termed preparing for the next  financial- economic crisis.

3. These conservative  financial postures are crucial in light of the “most discussed area of uncertainty”… what effect the reversal of the Fed’s QE policy will have on the economy, markets and the level of interest rates.

4. Dimon bemoans the way ” almost everyone has become a risk expert and sees risk behind every rock. They don’t want t o miss it-like they did in 2008.” Therefore, warns Dimon, these Cassandras “ identify everything as risky.” I can’t say I blame them. It’s better to run scared than be overlain with superficial arrogance.

5. Yes, Obamacare does create uncertainties for many businesses. Yes, entitlement spending on Social Security and Medicare is now 60% of the federal budget and crowding out much-needed infrastructure spending. Yes, U.S. corporate tax policy is “hugely inefficient.” Yes; capital formation as a % of GDP has been at the lowest levels in 40 years. The wall of worry mounts.

6. Making the financial system safe from derivatives, those notorious weapons of mass destruction,  will cost JPM  larger amounts charged on capital, liquidity and margin requirements. Good for the world’s safety  say I.  Dimon worry warts on “how all this  will sort out.” Less dangerously I certainly hope, because derivatives are here to stay as a huge portion of JPM’s balance sheet.

7. Another unpleasant result of 2008 is to make mortgages more costly for lower and middle income consumers, warns Dimon,  concluding it will be harder for the less wealthy Americans to obtain mortgages in the future. This is the price to pay for having given out too many mortgages to unworthy borrowers in the run-up to 2008.

8.  Dimon properly lends weight to increased competition from the so-called “shadow banking system,”  which is made up of money market mutual funbds, huge assset managers like PIMCO and BlackRock, from the growing hedge fund industry, even  innovations like the burgeoning Pay Pal, and the comeback of asset backed financial products. Banks vs. Nonbanks, he seems to say, is changing  financial landscape more than ever before.

All these items add up to the “new financial architecture” which makes navigating a fast changing landscape the Number One challenge for the future to JPM management and its shareholders. It’s very much too early to see what JPM must do to maintain its strategic importance in the finance industry and  the Wall Street pecking order.

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was t ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by robbers. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rej ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern st ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri M ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 million. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar S ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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