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Jamie Dimon said, JPMorgan is hoarding cash because 'perfect chance' inflation is here to stay

Jamie Dimon said, JPMorgan is hoarding cash because perfect chance

June 16, 2021: JPMorgan Chase has been “effectively stockpiling” cash. Instead of using it to buy Treasuries or other investments because of the possible higher inflation, it will force the Federal Reserve to boost interest rates, Dimon said on Monday in a conference. The vast U.S. bank by assets has positioned itself to benefit from increasing the interest rates, making purchase the higher-yielding assets, he added.

“We have a lot of cash and capability, and we’re going to be very patient because I think you have a perfect chance inflation will be more than transitory,” said Dimon, JPMorgan CEO of longtime.

“If you look at our balance sheet, we have got $500 billion in cash; we’ve been effectively stockpiling more cash waiting for opportunities to invest at higher rates,” Dimon says. “I do expect to see higher rates and more inflation, and we’re prepared for that,” Dimon added.

Dimon waded into the ongoing debate on if the higher inflation results from temporary aspects of the reopening, such as raw material shortages or supply chain issues, or if it could be more lasting. Fed officials have called the present spike in inflation transitory, which meant temporary and short-lived. But there are increasing voices, that include Deutsche Bank economists and hedge fund billionaires, who warn the consequences should the Fed ignore inflation.

Later Monday, Morgan Stanley CEO James Gorman told CNBC’s Wilfred Frost on Closing Bell that he, too, thinks that higher inflation may be lasting and the Fed may be forced to hike rates earlier than expected.

“The question is, when does the Fed move?” Gorman said. “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.″

JPMorgan’s move to accumulate cash accounts for about half of the decrease in anticipated net interest income this year, Dimon said. The other half comes from lower credit card balances, he said. The bank is now expecting $52.5 billion in net interest income in 2021, down from the $55 billion it disclosed in February.

In the wide-ranging discussion, Dimon struck on several familiar themes. He warned that banks were under threat from fintech and Big Tech players, which include PayPal, which has a larger market capitalization than nearly all U.S. banks.

Dimon disclosed that the bank’s automated investing service You Invest had garnered about $50 billion in assets, even though “we don’t even think it’s an excellent product yet.”

Dimon said the bank’s second-quarter revenue from trading would be “a little north of $6 billion,” which is lower from the “exceptional” period a year ago. Investment banking revenue is headed about 20% higher than a year ago and could be one of the bank’s best quarters on strength in mergers advice and equity and debt issuance, he said.

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