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quick note this video is sponsored by weeble get yourself two free stocks with weeble by depositing a hundred dollars with weeble link down below go to met kevin dot com weeble it is that stock trading app that i show every day on my live streams again deposit 100 and you will morning jamie dimon the ceo of jpmorgan and chase put out a 66 page a letter about his opinions on what the heck is going on in the world and these presumably all are also the opinions of jp morgan and chase not just jamie diamond but i want to start with our favorite topic inflation market issues the fed so let's jump right into that section of the letter and then i want to talk about some specific stocks that are really benefiting and taking off today because of this letter and hint it's not jpmorgan chase so uh take a look at this so first of all he touches on quantitative easing here and basically says look we really haven't seen the quantitative easing like what we've had in the last 12 years ever before we haven't really done this before and he complains a bit about how there's a lot of regulation on banks that's potentially making more quantitative easing necessary because banks are now required to keep a portion of their money of cash deposits on hand rather than being able to lend that out and throughout the letter in multiple different areas whether that's individual banking or the discount window at the fed is essentially saying look because we have to keep more money around we can't lend when people need it stop requiring banks to keep so much money around he calls this a three trillion dollar amount of lost lending that helps us stagnate in our economy he's very very much slamming the regulations imposed on banks and when we here we this is a section here where he says qe was never effectively tried before prior to the great recession but here's an interesting argument he makes so he says quantitative easing reduces interest rates and increases asset prices and creates some spending so here he's essentially saying look when the fed is printing money all you're really doing is creating the effect of lowering interest rates making asset prices more expensive because when interest rates are lower on bonds more people invest in stocks and then and people can borrow more to invest in stocks or real estate and you increase asset prices some of that he says translates to people spending more money because they're richer they're wealthier but he says most of what qe does most of the money printing that happens with quantitative easing this is like bond rate is selling and buying that has mostly an inflationary effect on asset prices and so this is really important because when we're worried about inflation we really want to think about asset price inflation separately from consumer price inflation so uh just a quick little detail there on on how that would work fed prints one dollar or you know what let's say the fed prints 120 billion dollars let's go with that example fed prints 120 billion dollars they use that 120 billion dollars they created out of thin air to buy 120 billion dollars from let's say jp morgan and chase they they don't but let's just say it's from jp morgan jp morgan now has 120 billion in cash they have to keep some of that as reserves because of regulations and then jp morgan has this choice do we make more loans or just buy more bonds and lately it kind of seems like a lot of the money gets stuck in the system where jp morgan just goes and buys more bonds so really it's taking printed money and just increasing the demand for bonds increasing their price and lowering rates this is how rates stay low but little of this money actually finds its way into the economy through quantitative easing it just makes the rich richer basically now he's going to contrast to stimulus in just a moment but take a look at some of the downsides he talks about regarding quantitative easing and i've never considered some of these before some of these i have but some of these other ones were very unique take a listen to this on the other hand quantitative easing easing may have some deflationary effects this makes sense lower interest rates is deflationary and he says that's because businesses have lower input costs but you also with lower yields lower interest rates provide less income to savers we've heard that before but then he says this could actually reduce consumption so money printing and quantitative easing which we should separate that quantitative easing is one type quantitative easing could reduce people's spending because they're making less money on their savings you're not getting that two percent yield anymore in your savings account like you used to be able to get everywhere or that three or four percent yield that you got in previous days you know that doesn't exist anymore and this means people need to set aside or save more money to protect the required their retirement income as he says here and ultimately people potentially spend less money even though rates go down and we'd think quantitative easing would lead people to spend more money this is interesting uh something i haven't considered before is especially this retirement savings going up and people not spending in a low interest rate environment because they're just not making as much money as they used to on their savings then uh when he talks about spending uh for specifically like stimulus measures he mentions that look in recessionary environments with low inflation you basically should print money and spend it via stimulus and he says that you can do this without causing overheating or excessive inflation in fact he says one of the downsides or one of the reasons we had slower growth over the last 10 years is because we didn't do enough stimulus we just didn't do enough in those first two years of the obama era to do more stimulus congress was too gridlocked for too long and what he mentions as well is look when we spend money uh he talks this is where he gets into inflation which is a fascinating argument that he makes here then he touches some more on inflation and this is an interesting note he says that uh after or during world war ii he mentions that this period of high government debt did not create lasting and that's the key word here lasting inflation as the circumstances were different then were coming out of a deep depression and money was spent financing a war circumstances and starting points matter he says this is where he makes a difference between what happened during the recession and what's happening now during the recession he says the entire financial system was deemed over leveraged and that consumers individuals like you and me were over leveraged as well for years after the great recession there was a massive deleveraging in the united states by consumers and financial institutions he says today this is not the case instead the consumer's leverage is lower than it has been in 40 years on top of that before the stimulus package of 1.9 trillion dollars consumers had excess savings of two trillion dollars he says something that's different than the prior recession right before the global financial crisis corporations also have an extraordinary amount of cash he mentions and so this is where he comes to a very positive conclusion but it gets dark right after this so let's hit the positive conclusion first he says i have little doubt that with excess savings new stimulus savings huge deficit spending more qe a potential infrastructure bill a successful vaccine and euphoria around the end of the pandemic the u.s economy will likely boom this boom could easily run into 2023 because all the spending could extend well into 2023.
something he mentions throughout this report is he does talk about how hey look all of this spending that we're doing on stimulus is not going to be immediate we're going to keep benefiting from this for years after we spend the money and so that's an important takeaway from this as well now we get to some of the negative from jamie dimon so jamie dimon starts off by saying while equity valuation stocks are quite high by almost all measures historically a multi-year booming economy could justify the current price of stocks so he's being pretty clear here yo stocks aren't cheap right now but maybe if we have a multi-year bull run in the markets or just the economy then these prices are going to be justified now he does also say accept against interest rates this right here is a very cathy wood argument that look markets have not priced in the fact that we are going to have lower interest rates for the long term even after temporary inflation even after the fed increases the fed funds rate which is currently at zero percent even if that goes back to one and a half two percent we are still pricing in interest rates around five to six to seven percent on the s p 500 when in reality we should be pricing in interest rates closer to two to three percent which leaves a lot more room for growth stocks going forward it's a very cathy woody an argument uh many people obviously do not agree with kathy wood now clearly jamie dimon goes on to say clearly there is some froth and speculation in parts of the market he refers to a line from casablanca i'm shocked shocked to find that gambling is going on in here which is obviously sarcasm at least in this context then he goes on to say that the price of u.s bonds is actually very high right now like the 10-year the price of the 10-year bond is still too high is what he's saying he thinks it should fall more and that's because he thinks look we've got to be real there's going to be a lot more debt coming out so the price of bonds should be lower which would mean yields or rates go up and then he says there's also the not unreasonable possibility that an increase in inflation will not just be temporary and so he's basically saying here look we're going to have a huge supply of more bonds so prices for bonds should go down driving yields up we need to consider the fact that inflation could happen that should push push prices for bonds down more today because people don't want today's bonds which should price up yields so these are two very important things that he mentions here all right so uh then we're going to run over here we're going to see again he reiterates that the fed may be forced to raise rates sooner than people expect and this is also an interesting segment here which he we've talked about briefly before but he mentions here much of the stimulus may very well hit when the economy is doing quite well this is a way of saying look stimulus takes time to be spent so what happens if all the stimulus we just spent actually starts kicking into high gear in like 2022 or 23 when the economy is actually doing better because hopefully covets under control and gone then and then guess what happens inflation because now you're now it's literally like imagine this it's like oh the market's down now let's pump money into the market and stimulate the economy right but what if that takes two years to get fully realized that means a portion let's call it 25 doesn't hit until 2023 well let's now fast forward to 23.
no covid everything's booming here's another 25 stimulus it's not a new package it's just the delay in how long it took for that money to actually go through the system and then all of a sudden hits and it's like wait a minute this is a lot of extra uh uh you know stimulus kind of interesting so uh then we go on let's see the government did the right thing by moving extraordinarily quickly to stop copyright blah blah blah okay so let's get to some other conclusions here so i highlighted the best parts let's get over here so uh how do we okay over here he spends a lot of time in his piece complaining about regulation he says look banks should be allowed to fail there should be no such thing as too big to fail he also says the problem is there's too much regulation right now banks are capitalized markets are good if there's a collapse of a bank markets will be okay he says he's actually very confident in the market but he's very upset but by what he deems as unfair regulation he compares fintechs to having lower capital requirements less operational risk no liquidity requirements no fdic insurance less costly regulation no social requirements higher debt debit card income and so on so forth whereas banks have basically lower or more stringent issues on all these fronts and basically he spends a few pages in here talking about how non-banks neo banks and non-banks are gaining shares in consumer accounts that are creating these effective savings account kind of like or if things that are like effectively like savings account like robinhood savings account and he makes this analogy here or actually gives us a stat here and says look you take a banking customer with twenty thousand dollars or who spends twenty thousand dollars on a debit card annually jp morgan might only make 120 off that customer whereas other banks like the non-banks are making 240 because of the differences in regulation uh and he really complains quite a bit about regulation i mean look at this onerous reporting requirements higher litigation expenses for public companies annual shareholder meetings that focus on matters that most shareholders view as frivolous really jaded tone and he has a lot of this jaded tone throughout a lot of this and he talks about how well-positioned fintech is with social media or big tech is with data to basically white label banking relationships and create huge competition for jp morgan now jp morgan basically to this says look the game's rigged uh we're at the losing end of that but we won't die yet so don't worry uh yeah okay that might be a little bit of a harsh conclusion but i think it's a fair conclusion uh talks a little bit more about how look at this he says this system is broken talks about how heavy these requirements are for banks to keep all this extra liquidity around but wait a minute if there's so much more like there's so much more cash requirements on banks what happens well the fed has to step in more frequently when there are issues or stresses in the repo market or the treasury market if you got rid of all of these extra requirements banks would be able to provide more lending and essentially goes on this tangent about complaining over regulations uh which in fairness thanks to dodd-frank and some other regulation banks are way more regulated than like the fintechs any we see that time and time again like i cannot get more than four mortgages at jpmorgan but i can get uh up to 10 in some cases up to 19 at brokers or fintechs but jp morgan can't because dodd-frank says the big four banks nope you can't do more than four mortgages for kevin it's not jp morgan's fault sucks for them they're just too big maybe they should create their own fintech uh you know a division of or maybe not a division of just a totally separate company led by jamie dimon i don't know go compete you know can't beat him join them kind of thing anyway then he talks about how he believes that china believes that america is in decline and that america is going to get basically dominated by china and this is something that biden is deathly afraid of and biden is really trying to fight this jaime diamond here says that china sees 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 in a country unable to coordinate government policies in other words our government is very slow also says uh unfortunately recently there has been a lot of truth to these arguments so he's reiterating uh what china's beliefs are about america he also goes out of his way to mention the horrific murder of george floyd this is taking a a position on that you all know that i'm always 100 neutral on this channel but there are some people on one side that say george floyd wasn't murdered he you know was following department policies and then there are a lot of folks on the other side who say no way neon way too long uh total murder abuse of power right again everybody's got their own conclusions here i'm not even mentioning a side uh that that i would remotely be on the point is to say that jamie diamond is the only thing i'm conveying here jamie dimon took his stand okay good so moving on uh politics is increasingly divisive the government is increasingly dysfunctional these are harsh words the enormous wealth our country is a clear accruing to the very few that k-shaped recovery he blames these problems on wealth inequality he suggests that 30 percent of americans earn less than 15 dollars an hour says 85 percent of high schoolers in inner cities do not graduate says uh wait hold on hold on let's see well i'm sorry i misread that while the amer average american high school graduates approximately 85 percent of its students many of our inner city schools don't graduate half that's the correct statistic half of their students our health care system is increasingly costly now over 11 000 per person more than twice our global competitors now i'm not sure if he means per year per person 11 000 i think that's what he means but the bottom line there is really twice as expensive of a healthcare system than our global competitors uh he complains that uh 70 of today's youth are not eligible for military service due to a lack of proper education or health issues complains about difficult litigation system and regulatory system that is costly and crippling to small business with red tape and bureaucracy he does not have a lot of good things to say like jamie dimon it just sounds like he is so frustrated kept up by so many things at night and feels almost powerless to change some of these things this is i think one of the reasons he has this letter is to potentially try to provide some solutions but he also goes on to say that look if we keep having this anemic growth kind of like what we saw between 2018 and 2019 we could end up in secular stagnation this is a way of what i've been talking about on this channel really throughout this entire pandemic about possibly entering a frugal decade where people are saving much more than they previously have before and that's bad because when people save more you don't get some of the benefits of faster growth which here he says faster growth would not only have spurred higher incomes more jobs and increased opportunities but would have also created far more consumption and increased demand for investment eliminating any potential savings glut or secular stagnation but he says my view is if you add it all up this dysfunction of our government could easily have been a one percent drag on our growth rate and this is something that he's projecting not just from or looking at from the past 10 years but also going forward he complains about society a bit too and says look when we debate things we often see things as binary it's either you're with me or you're against me and not looking into the nuance of detail or blaming scapegoats or unfairly assigning jaded moment motives to people like oh you know that person's in it for this or whatever uh and he also complains that media hype and people's willingness to uh be weaponized derail thoughtful strategy so in other words he's saying media folks oftentimes come to quick conclusions because it makes for good click bait look at this most media and individuals barely have time to focus on the issues and often default to overly simplistic binary on or off and incorrect conclusions that neatly fit into false political narratives this is a massive slam on on america i mean he even goes on here to say that we're stemming by self-interest selfishness and the buildup of bureaucratic plaque and institutional sclerosis geez man this is harsh from jamie dimon i mean he is going off on many different parts of of our country but he does provide some examples or of ways to solve this more acknowledgement by democrats that spending money you know is is potentially an issue you can't just spend money like crazy but republicans need to realize that look it's okay to have a proper safety net for the elderly are sick and our poor and he points to germany and switzerland switzerland who have impr impressive excuse me work apprentice programs singapore with great healthcare programs hong kong with great infrastructure but just copy those and don't copy what argentina cuba and venezuela have done he does also give suggestions for having this multi-year national marshall plan where where you solve these things like having better training better education systems uh goes into talking about creating more opportunities for jobs and improving wages and he does give a lot of suggestions to his problems so he doesn't only suggest uh issues he doesn't only rag on america uh and in fairness he has very good suggestions and he gives suggestions into exactly how we can change things uh but folks this shareholder letter the loudest arguments that come through this because we know jamie dimon's not about to change congress the loudest arguments that are coming through this are that we've got massive problems uh not only and these are the sort of the big bottom lines i take away from this not only do we have big societal problems where we're way too divisive of a country which is leading to slowness in congress he gives this example of how more soldiers died because it took years for congress to improve on personnel carriers in iraq and afghanistan that weren't armored enough to withstand ieds and now you've got many many more people who are dead or injured or maimed because of ieds and he really complains about how dysfunctional our government is and then look as a market sure maybe if things keep booming over the next few years we're good like fine maybe these higher valuations in the stock market are fine but we've got to be real here inflation could come we've got a lot of government debt we've got an extremely dysfunctional government we have in some sense i'm going a little further here uh what what he appears to be from allowed to summarize in this way say calling our society almost dysfunctional and maybe if he thinks society is dysfunctional maybe he just thinks that society or congress is just a representation of society he's really bagging on a lot of different things here and certainly complaining about fintech i mean he gave fintech a big old boost today we've got square square as a stock is one of the few that's up it's up 5.14 percent at 248 today jp morgan is up one percent uh in fairness but definitely gave a big boost to uh a square when this letter came out and i imagine other fintechs as well but pretty scathing letter here very interesting perspective on inflation as well something uh something to definitely pay attention to and consider that uh hey you know what we've got to consider the fact that inflation could actually come uh we'll see i i uh personally what's my takeaway well look my bottom line takeaway on this is jamie dimon's not going to change society he's not going to change congress he's not going to change the government there could be a lot of bureaucrats that read this or congressmen and women who read this or even watch this video maybe who knows yeah and and say yeah jamie dimon's got a point those are all problems back to normal back to work like this there's little uh you know these these changes take decades the systems that have been established take decades to create and they'll take decades to dismantle and to improve on so yeah there are lots of problems and the biggest takeaway i had from here is look yeah we might see stagnation through higher savings rates we might see that frugal decade this year maybe we won't see that crazy growth that we're expecting and maybe inflation will go up and i think it would be very prudent for us that even if we think the economy is going to boom over this next decade to at least limit our debt limit our leverage and in the event that we get more of these rk goes is these hedge funds blowing up and potentially leading to failures in excuse me the financial system that uh we're we're prepared to withstand that volatility that our portfolios you know we're not going to go bankrupt in our portfolios and we're not gonna hand and paper hand by uh by selling out just because stocks went down a bit uh and so we might have to get used to this roller coaster much more than what we got used to in 2020 which was basically stunks only go up anyway hopefully you found this summary helpful from the ceo of jpmorgan chase i certainly found it very insightful
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