JP Morgan & Chase's CEO Jamie Dimon recently sent out his annual letter to his shareholders in which he states that another crisis is inevitable. In his letter he states "Some things never change - there will be another crisis, and it's impact will be felt by financial markets". According to this letter, Dimon predicts that investors will exhibit the following behaviors once the crisis breaks out:
1. Sell assets they believe are the problem
2. Invest their money in safe havens, such as bonds and deposits in strong banks
3. Can only sell less risky assets if they need cash, because there will be no market for the riskier assets
The most eye opening part of his letter, was the notation that no investor is safe in a crisis. Whether that be an individual, corporation, hedge-fund, etc no one in the financial market can escape unaffected. It will be interesting to see if investors react as Dimon predicted during the next crisis.
9 comments:
This is really interesting. This story will hopefully keep the media updated in whether their investors are slowly pulling out or selling their assets like his prediction.
It is a scary thought to think that no investor is safe especially what occurred in '08. It will be interesting to see how this pans out and how consumers will react to this prediction.
Keeping in mind that the economy just came out of a recent recession, the negative prediction by the CEO of a major bank comes as rather shocking. Maybe, it is to increase deposits as stated in the second point.
Jamie Dimon is always incredibly blunt and candid in public documents. While he makes good points, nothing he is saying is revolutionary. With a cyclical economy and some potential headwinds, Dimon is just making some rudimentary investment analysis. I do not view this is an attempt to increase deposits.
I believe he was trying to be honest and making the statement sort of as a disclaimer, but I think comments like these can hurt the economy. If prominent figures are warning everyone about another crisis, rumors are going to swirl and the current growth of consumer and investor confidence will come to a halt. I think the statement may have been a little premature.
If history repeats itself (which it usually does) the U.S. will have another recession. Business cycles tend to make this happen and it capitalist economies this happens roughly every 20 years. I think Jamie Dimon is far from revolutionary in predicting another crisis but rather just stating the obvious. The severity of the crisis is what will be in question.
(http://www.businessinsider.com/jamie-dimon-letter-to-jpmorgan-shareholders-2015-4 has a link to the letter in the first sentence; didn't see this posted above but I could've just glazed over it.)
All in all, I would have to say that I agree with Austin; predicting that people will make safer investments during a recession isn't new. And also, no investor is really safe ever, and we are definitely going to enter another recession at some point.
This is a scary topic to think about because currently we are still feeling some aftershocks from the recession in 08'. History does tend to repeat itself and a recession probably will come along in the future but the big question is when will that recession hit?
This is not only scary and knowing that most likely their will be another crisis, will the letter change spending or saving habits? Will it scare people into safety or prevent people from saving?
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