Is JPMorgan at Risk?

Not the most likable guy, Jamie Dimon has been vilified and hated by many ever since 2008. Born to a family of Greek descent in New York some 67 years ago, he went to Harvard Business School and followed his father into banking and investments.

In 2005, he became CEO of Chase and is one of the only billionaire CEOs in the banking sector, thanks to a massive stock position in the bank.

Dimon is very controversial, especially in the precious metals community, due to JPM’s involvement with silver price manipulation, which resulted in a $920M settlement against it.

Dimon next made headlines, bashing Bitcoin, later acknowledging that the bank is actually trading it.

In 2023, Dimon is taking to the airways to sound the alarm about the banking sector’s fragility, because of the interest rate policy of the FED.

Banks operate with a straightforward business model: they borrow short-term debt and originate long-term loans.

Normally, the shorter the duration of the loan, the less risk to the lender, because there is less uncertainty in the immediate future than in the long-run, reasons conventional wisdom.

Therefore, the yield curve (spread between long-term debt and short-term) is usually positive and the banking sector can borrow at X% and lend out at a premium to the X%, generating a spread.

If the FED changes their policy rapidly and without much regard to reality, it risks the degree of momentum in the short-term debt rising faster than banks’ ability to pivot their models.

The short-term rate is so high today that the public is withdrawing funds from banks and transitioning it to Money-Market Accounts, all the while banks are borrowing short-term debt at a higher yield than they can lend it out.

The banks are strapped.

Is Jamie Dimon in trouble?

The answer is NO.

He realized how high yields could go and JPMorgan is actually in a really solid financial position, but the regional banks aren’t.

Some of them are not only losing money, but to add insult to injury, they also have extremely concentrated exposure to commercial real estate.

So, what you have in today’s America is an unusual situation, which has never been this confusing: the president’s approval rating is low, while unemployment is really low.

Courtesy: Zerohedge.com, Bloomberg

Never in the history of this country have we had such an unpopular administration, coupled with an environment where anybody looking for work can find it, but at the expense of higher-than-normal inflation and very tight lending standards, with the cherry on top of the default risks at their most elevated EVER.

I mean, this is totally unprecedented.

Clearly, at one point or another, be it after a major panic or just at the first signs of distress, the FED will have to cut interest rates.

Markets are desperate to make sense of when. At first they assumed July, then they pushed it out to September, and now, it looks more likely that the FED will wait until November.

What you have to know is that once the FED pivots to rate cuts, you’ll have one of the best chances to generate outsized market returns in your lifetime.

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Best Regards,

Lior Gantz
President, WealthResearchGroup.com