US futures stall as focus turns to big week ahead

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  Mon, April 8, 2024 at 5:32 AM MDT

  Jamie Dimon on why the number of public companies continues to shrink

  The golden nuggets for investors from Jamie Dimon’s latest annual letter today continues on page 35.

  The JP Morgan (JPM) boss points out the “diminishing role of public companies in the American financial system”, as seen in the number of US public companies sitting at 4,300. In 1996, that number stood at 7,300.

  Conversely, the number of US private companies backed by private equity firms has surged to 11,200 from 1,900 over the last two decades, notes Dimon.

  “This trend is serious and may very well increase with more regulation and litigation coming. Along with a frank assessment of the regulation landscape, we really need to consider: Is this the outcome we want?,” Dimon writes.

  Dimon calls out several factors for this disparity:

  • Intensified reporting requirements (see ESG).

  • Higher litigation expenses.

  • Costly regulations.

  • “Cookie-cutter” board governance.

  • Shareholder activism.

  • Less capital flexibility.

  • Heightened public scrutiny.

  • “Relentless pressure” of quarterly earnings.

  I do wonder, however, if less public companies has been the driver of higher stock prices since Dimon took over as CEO in the early 2000s. Less supply of assets, more competition for those assets — no?

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  Mon, April 8, 2024 at 5:05 AM MDT

  Dimon succession watchers may feast on this one

  Count me as very fascinated by what JP Morgan (JPM) is working on in the field of artificial intelligence.

  Dimon says in his annual letter today the company now has 2,000 AI/machine learning experts and data scientists. He adds the company has 400 use cases in production in areas such as marketing, fraud and risk — and they are “increasingly driving retail business value across our businesses and functions.”

  I am equally fascinated by Dimon dropping COO Daniel Pinto’s name (who has long been seen as a Dimon successor) into his important comments on AI. Dimon views AI as so mission critical to JPM’s future success, he has created a new role called the chief data and analytics officer. This role sits on the company’s operating committee and reports directly to Dimon and Pinto.

  Says Dimon:

  “Elevating this new role to the operating committee level — reporting directly to Daniel Pinto and me — reflects how critical this function will be going forward and how seriously we expect AI to influence our business. This will embed data and analytics into our decision making at every level of the company. The primary focus is not just on the technical aspects of AI but also on how all management can — and should — use it. Each of our lines of business has corresponding data and analytics roles so we can share best practices, develop reusable solutions that solve multiple business problems, and continuously learn and improve as the future of AI unfolds.”

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  Mon, April 8, 2024 at 4:50 AM MDT

  JP Morgan CEO Jamie Dimon’s masterclass in making money, in one chart

  Want to know why JP Morgan (JPM) investors hope Jamie Dimon stays CEO for 50 more years?

  Sure the guy is the face of banking with the best relationships in the game, but at the end of the day — he just knows how to make jobs of money for shareholders.

  That’s perfectly captured in Dimon’s annual letter out this morning. Check out this chart on page eight, showing how JP Morgan’s net income has grown by about six times since 2005.

  

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  Mon, April 8, 2024 at 4:28 AM MDT

  Here’s Jamie Dimon’s latest thinking on where interest rates may go

  JP Morgan (JPM) CEO Jamie Dimon just dropped his latest annual letter to shareholders. You can read it here in full. Yahoo Finance’s David Hollerith provides analysis of the letter here.

  Dimon doesn’t waste anytime weighing in on the outlook for interest rates, seemingly echoing what we have heard from some hawkish FOMC members (which has pressured stocks) in recent weeks:

  “In spite of the unsettling landscape, including last year’s regional bank turmoil, the U.S. economy continues to be resilient, with consumers still spending, and the markets currently expect a soft landing. It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus. There is also a growing need for increased spending as we continue transitioning to a greener economy, restructuring global supply chains, boosting military expenditure and battling rising healthcare costs. This may lead to stickier inflation and higher rates than markets expect. Furthermore, there are downside risks to watch. Quantitative tightening is draining more than $900 billion in liquidity from the system annually — and we have never truly experienced the full effect of quantitative tightening on this scale. Plus the ongoing wars in Ukraine and the Middle East continue to have the potential to disrupt energy and food markets, migration, and military and economic relationships, in addition to their dreadful human cost. These significant and somewhat unprecedented forces cause us to remain cautious.”

  Interestingly, JP Morgan strategists said this morning they see bond yields going lower:

  “With respect to bond yields’ direction, our call last October was to go long duration, that bond yields have likely peaked. After the year to date bounceback, we think that yields will resume moving lower. Our fixed income team forecasts that US and German 10-year yields will be below current on 3-, 6- and 9-month horizons. We fundamentally agree with this, especially given the elevated geopolitical risks at present, but note the risks of inflation staying too hot.”