Jamie Dimon Warns of Economic Hurricane
Yesterday, I was musing about the increasing number of storms on the horizon. I really didn’t feel comfortable being invested right now. A lot of things (war, covid) could get worse and there’s no clear path for those things to get resolved.
And while I was writing those words, Jamie Dimon, CEO of JPMorgan Chase, was saying “I said there’s storm clouds but I’m going to change it … it’s a hurricane.”
It was just a week ago that Dimon talked about storm clouds, so his view of the future got more depressing in only a week.
Dimon is worried about Quantitative Tightening (QT) and the Ukraine War. A couple of the things I mentioned yesterday.
Dimon is also worried about bank things, like loans going bad. He thinks bad loans could hit 5%-10%, and if you remember the movie The Big Short, 8% was when the disaster happened back in 2008. So there could be a cascade effect here. The economy goes into a recession (“a little gully”), inflation is running hot, prices go up, people can’t afford to service their loans and put food on the table, loans start to fail… banks start to fail…
Yesterday, the Bank of Canada raised interest rates by 0.50% to 1.25%. Now today, Bank of America says that perhaps Bank of Canada will raise rates by 0.75% in July!
They probably won’t, but the fact that the debate is between 0.50 and 0.75, means that people are starting to panic. I’d hate to see The Fed or Bank of Canada appear to panic.
I’m still struggling to get into the market.
I need to learn about portfolio beta and hedging. Imagine if I could purchase a little 6-month insurance against my portfolio dropping. Would I pay a few thousand dollars to protect myself on the downside while staying invested? Could I go ahead and be fully invested with this downside protection in place?
I need to look into that.
