JPMorgan chief executive Jamie Dimon said on Monday the investment bank is sitting on $500 billion in cash in anticipation of higher inflation.
It has been “effectively stockpiling more and more cash” in anticipation of investing at higher rates rather than putting money into Treasuries and other investments now, he said at Morgan Stanley’s US Financials, Payments & Commercial Real Estate Conference.
“We have a lot of cash and capability and we’re going to be very patient, because I think you have a very good chance inflation will be more than transitory,” Dimon, the longest-serving CEO among the big US banks, said.
He suggested the risk of higher, more persistent inflation is growing. US inflation, or the rise in prices of goods and services, has picked up dramatically compared with last year, when the economy was in lockdown. Disruptions to the global supply chain and a burst of consumer spending have added to the increase. Higher interest rates would help ward off a more damaging pickup in inflation.
“If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates,” he said. “I do expect to see higher rates and more inflation, and we’re prepared for that.”
While several Fed officials have been resolute in their view that the rise in inflation will ultimately prove transitory, other influential leaders have warned of the consequences of rising prices.
In a 1980 shareholder letter, Warren Buffett described high inflation as a “tax on capital” that dissuades corporate investment. The billionaire investor said the rise in general price levels can hurt more than income tax, and rising costs force companies to spend cash just to maintain their business – regardless of whether they’re generating profits.
JPMorgan, the largest US bank by assets, expects $52.5 billion in net-interest income in 2021, down from its previous expectation of $55 billion, partly due to a decline in credit card balances.
Separately, at Monday’s conference, Dimon said he planned to hold his position at JPMorgan for at least the next two to three years. Without giving an exact time frame, he said: “I intend to stay, which is sanctioned by the board, for a significant amount of time.”
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