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JPMorgan Hoarding Cash As Its Sees Longer Inflation Period

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JPMorgan Chase CEO Jamie Morgan thinks that instead of transitory, a longer inflation period is in the works. This is why he says that cash will remain king for the time being. As a result, JPMorgan Chase is effectively stockpiling cash instead of using it to buy Treasuries and other investments. 

RELATED: Inflation Goes Wild: Consumer Prices Up 5% In May

Longer Inflation Period Means Fed Will Boost Interest Rates

Dimon believes that despite the reassurances of the Federal Reserve and the Treasury Department that higher prices will remain transitory, a longer inflation period is in the works.

With higher inflation, the Fed will need to raise interest rates. When that time comes, JPMorgan will have the money needed to buy higher-yielding assets.  

“We have a lot of cash and capability and we’re going to be very patient because I think you have a very good chance inflation will be more than transitory,” Dimon said. “If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates. I do expect to see higher rates and more inflation, and we’re prepared for that,” he added.

Fed Ignoring Inflation, Insists It’s Transitory

There is a healthy debate going on right now if the high prices the US currently experiences are temporary. The Fed insists that inflation is transitory, and is a result of the temporary effects of economic reopening. The surge in demand led to raw material shortages and supply chain disruptions.  

However, many industry voices are growing concerned. Apart from JPMorgan, Deutsche Bank and a number of hedge funds are warning of dire consequences if a longer inflation period remains ignored.

Fed Might Hike Rates Earlier Than Expected

Meanwhile, Morgan Stanley CEO James Gorman said that he also agrees that a longer inflation period is looming.

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Consequently, the Fed might hike rates earlier than planned. “The question is when does the Fed move? It has to move at some point, and I think the bias is more likely earlier than what the current dots suggest, rather than later,″ Gorman said. 

Dimon said their move to hoard cash will account for nearly half of their net interest income decrease this year. The other half will come from lower credit card balances of customers. JPMorgan now expects $52.5 billion in net interest income from the $55 billion it predicted in February. 

Banks Under Threat

Also, Dimon talked about other issues affecting the banking industry. He said that traditional banks are under threat from fintech and Big Tech players, which amassed larger capitalizations compared to US banks.

He said that JPMorgan’s automated investing service You Invest already collected $50 billion in assets. This is despite the fact that “we don’t even think it’s a very good product yet.”

Dimon also anticipates that JPMorgan’s second-quarter revenues will post lower numbers this year at around $6 billion. In contrast, last year was a bumper year for banks, including JPMorgan’s “exceptional” revenue last year.

Investment banking revenue is posting numbers that are 20% higher compared to a year ago. This means the bank is poised to report a strong quarter “based on strength in mergers advice and equity and debt issuance.”

Watch the Bloomberg Markets and Finance featuring JPMorgan AM’s Chow on Inflation Outlook:

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Do you agree that inflation will take longer than what the Fed expects? Also, do you see prices still going higher even as economic recovery goes into full gear?

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14 Comments

14 Comments

  • noel Portelli says:

    Yes and yes.

  • Craig A Torrey says:

    Money has long lost its purchase power. Prices won’t see appreciable stabilization till the national debt is paid down and Democrats stop spending us out of existence!

  • Alan Kopilec says:

    And prices won’t go back down unless we do as President Trump says and save America.

    The current administration is trying to toss America’s future to China and rely on NATO to protect us from them and Russia. All under the guise of a green new deal where nobody needs a plan of action, just a new world order club card and a promise to fulfill un-achievable ideals that are approved by our enemies.

    Shutting down our oil pipeline while giving Russia approval for their pipeline is an atrocity and it reflects the real intention of Biden is not to help the environment. This energy cost will not go down unless the Keystone is re-activated and the government protects our key energy assets.

    At a time when we need jobs, Biden lets China send mountains of junk they call made in China and god knows what else inside tens of thousands of containers every day on ships that belch pollution into the atmosphere. Let’s look at that.

    At a time when we need scrutiny and urgency in finding out how China created the virus, when and why, Biden gives elbow bumps and speaks like a bumbling freshmen on his first classroom presentation at the G-7.

    Inflation will take some time and Republican can-do to turn this around.

  • Lawrence Whitcomb says:

    I agree with Alan. The current Biden administration is bought and paid for by the CCP and we must get Trump back in charge with Republican support from the House and Senate to have any reasonable chance for improvement. None of this takes God by surprise but we must do our part to secure the future of America.

  • Anonymous says:

    As long Biden and democrats live America is in danger. They want to kill and destroy America and our citizens. WHY? THEY ARE SATAN’S CHILDREN.

  • TED BAILEY says:

    The fact that nobody wants to work is forcing wages to go up thanks to the extension of unemployment benefits. I believe this is a major factor in pushing inflation. I think Alan has hit the nail on the head.

  • yvonne says:

    Within 5 months $7 Trillion was printed and spent. America cant repay the loan to China, EU, Saudis, Japan, Russia and Brazil. American dollar is not supported by gold. China wants US to print a lot of paper dollars so their yuan will replace dollar on the international market. 36 countries already using Chinese yuan for the international transactions. -said European economist Berta Levin

  • Jimmy R Young says:

    President Biden is bought and paid for by China and the Socialist/Communist of America. There is no good way to put it. Everything he has done so far has hurt the United States and his use of the Education Department to push the 1716 project, etc. will destroy our society.

  • Boyce Trahan says:

    Biden administration is attempting and succeeding way too much to murder the USA, ignoring the constitution, pushing LGBTQ, lying about the beginning of the USA, spending is ultra ridiculous and economy-killing, foreign policy is anti-USA, pro-Islamic, anti-Jew and anti-Christian, advocating and supporting the killing unborn babies, not prosecuting ANTIFA and BLM when they break the law. Seems that what Obama, B. Sanders, and all the perverts want, Biden is doing.
    The public needs to wake up and fight against all this garbage. I agree with what ALAN KOPILEC had to say.

  • R. Curran says:

    I find it very ironic that only 3% see the economy as it is and has been and will be.
    This probably explains their idiotic responses about democrats. Did you not realize Trump was paid for by Japan. Everyone wants to complain about prices of this and that; but guess what? Money is flowing through the economy again. Unlike, during the Rump administration.

  • Terry Gill says:

    I’ve lived long enough to know that once prices of food and “durable goods goes up, they don’t come back down. Also if the “Fed” drops a bomb, “raising interest rates”, that will be the “straw that breaks the camels back”!! Total collapse of the dollar on the market. So the Fed must let things go for now, until everything hits a stable “zone”!!

  • Harry Gilliam says:

    Last time I looked his name is Jamie Dimon, not Jamie Morgan, which is what, if you had called JP that, would have gotten you kilt.

  • Terry Gill says:

    Another big thing to watch out for is the “sellout” of the dollar, I see this happening “soon”. The “Fed” will sell the dollar, for gold and “bitcoin” on the open market, making the dollar unstable and cause a “fixed” depression or recession!!

  • J says:

    R. Curran, you are obviously a lib idiot. You don’t have one of, if not the best economy this country has ever seen without money flowing thru it. That money was flowing from people who were willing and able to work for a living. The money that is flowing in the current economy is being provided to your ass by the government, not from a booming economy. Exactly how much of this money you speak of has come from printing a shit load of it, and borrowing from others. There will be a reckoning coming for all of this. See you in the bread lines.

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