JP
Morgan Chase Chairman and CEO (Jamie Dimon) - Letter to Shareholders is a thought-provoking read:
https://reports.jpmorganchase.com/investor-relations/2020/ar-ceo-letters.htm
A
few noteworthy statements:
“The problem with the American public’s impression of “shareholder value” is that too many people interpret it to mean short-term, rapacious profit taking – which, ironically, is the last thing that leads to building real, long-term shareholder value. …
The QE and deficit-spending response to the COVID-19
pandemic is of a completely different magnitude and without some of the
offsetting drags that trailed the Great Recession. …
While equity valuations are quite high (by almost all
measures, except against interest rates), historically, a multi-year booming
economy could justify their current price. Equity markets look ahead, and they
may very well be pricing in not only a booming economy but also the technical
factor that lots of the excess liquidity will find its way into stocks.
Clearly, there is some froth and speculation in parts of the market, which no
one should find surprising. As Captain Louis Renault said in Casablanca, “I’m
shocked, shocked to find that gambling is going on in here!”
Conversely, in this boom scenario it’s hard to justify the price of U.S. debt (most people consider the 10-year bond as the key reference point for U.S. debt). This is because of two factors: first, the huge supply of debt that needs to be absorbed; and second, the not-unreasonable possibility that an increase in inflation will not be just temporary….
China’s leaders believe that America is in decline.
They believe this not only because their country’s sheer size will make them
the largest economy on the planet by 2030 but also because they believe their
long-term thinking and competent, consistent leadership have outshone America’s
in so many ways. The Chinese see an America that is losing ground in
technology, infrastructure and education – a nation torn and crippled by
politics, as well as racial and income inequality – and a country unable to
coordinate government policies (fiscal, monetary, industrial, regulatory) in
any coherent way to accomplish national goals. Unfortunately, recently, there
is a lot of truth to this.
Perhaps we were lulled into a false sense of security and complacency in the last two decades of the 20th century as we enjoyed relative peace in the world and a position of global dominance, validated by the fall of the Soviet Union. During those two decades, we experienced relatively uninterrupted and strong growth, resulting in broad improvement in income for almost all Americans. That stability was shattered by the September 11, 2001, terrorist attacks, which were followed by nearly 20 years of overseas combat for American soldiers. Economic growth over the last two decades (including the Great Recession of 2008) has been painfully slow, with increasing income inequality and virtually no growth in income at the lower rungs of the economic ladder. The COVID-19 pandemic, for which our nation was totally unprepared, capped by the horrific murder of George Floyd, shoved into the spotlight our country’s profound inequities and their devastating effects – inequities that had been there for a long time. Once more, our country suffered, and its least well-off individuals suffered the most. Unfortunately, the tragedies of this past year are only the tip of the iceberg – they merely expose enormous failures that have existed for decades and have been deeply damaging to America.
Today, the United States and other countries around the world are grappling with many other critical issues. To name just a few: capitalism versus other economic systems; access to healthcare; immigration policy; the role of business in our society; and how, or even whether, the United States intends to exercise global leadership. Many Americans have lost faith in their government’s ability to solve these and other problems – in fact, most people would describe government as ineffective, bureaucratic and often biased. Almost all institutions – governments, schools, media and businesses – have lost credibility in the eyes of the public. And perhaps for good reason: Many of our problems have been around for a long time and are not aging well. Politics is increasingly divisive, and government is increasingly dysfunctional, leading to a number of policies that simply don’t work.
Americans know that something has gone terribly wrong, and they blame this country’s leadership: the elite, the powerful, the decision makers – in government, in business and in civic society. This is completely appropriate, for who else should take the blame? And people are right to be angry and feel let down. Our failures fuel the populism on both the political left and right. But populism is not policy, and we cannot let it drive another round of poor planning and bad leadership that will simply make our country’s situation worse.
To explain how and why this all happened, we tend to look for convenient reasons – some blame greed and “short-termism,” some blame immigration and others blame the uncontrolled effects of new technologies, trade or China. Many of our citizens are unsettled, and the fault line for all this discord is a fraying American dream – the enormous wealth of our country is accruing to the very few. In other words, the fault line is inequality. And its cause is staring us in the face: our own failure to move beyond our differences and self-interest and act for the greater good. The good news is that this is fixable”.
https://reports.jpmorganchase.com/investor-relations/2020/ar-ceo-letters.htm
“The problem with the American public’s impression of “shareholder value” is that too many people interpret it to mean short-term, rapacious profit taking – which, ironically, is the last thing that leads to building real, long-term shareholder value. …
Conversely, in this boom scenario it’s hard to justify the price of U.S. debt (most people consider the 10-year bond as the key reference point for U.S. debt). This is because of two factors: first, the huge supply of debt that needs to be absorbed; and second, the not-unreasonable possibility that an increase in inflation will not be just temporary….
Perhaps we were lulled into a false sense of security and complacency in the last two decades of the 20th century as we enjoyed relative peace in the world and a position of global dominance, validated by the fall of the Soviet Union. During those two decades, we experienced relatively uninterrupted and strong growth, resulting in broad improvement in income for almost all Americans. That stability was shattered by the September 11, 2001, terrorist attacks, which were followed by nearly 20 years of overseas combat for American soldiers. Economic growth over the last two decades (including the Great Recession of 2008) has been painfully slow, with increasing income inequality and virtually no growth in income at the lower rungs of the economic ladder. The COVID-19 pandemic, for which our nation was totally unprepared, capped by the horrific murder of George Floyd, shoved into the spotlight our country’s profound inequities and their devastating effects – inequities that had been there for a long time. Once more, our country suffered, and its least well-off individuals suffered the most. Unfortunately, the tragedies of this past year are only the tip of the iceberg – they merely expose enormous failures that have existed for decades and have been deeply damaging to America.
Today, the United States and other countries around the world are grappling with many other critical issues. To name just a few: capitalism versus other economic systems; access to healthcare; immigration policy; the role of business in our society; and how, or even whether, the United States intends to exercise global leadership. Many Americans have lost faith in their government’s ability to solve these and other problems – in fact, most people would describe government as ineffective, bureaucratic and often biased. Almost all institutions – governments, schools, media and businesses – have lost credibility in the eyes of the public. And perhaps for good reason: Many of our problems have been around for a long time and are not aging well. Politics is increasingly divisive, and government is increasingly dysfunctional, leading to a number of policies that simply don’t work.
Americans know that something has gone terribly wrong, and they blame this country’s leadership: the elite, the powerful, the decision makers – in government, in business and in civic society. This is completely appropriate, for who else should take the blame? And people are right to be angry and feel let down. Our failures fuel the populism on both the political left and right. But populism is not policy, and we cannot let it drive another round of poor planning and bad leadership that will simply make our country’s situation worse.
To explain how and why this all happened, we tend to look for convenient reasons – some blame greed and “short-termism,” some blame immigration and others blame the uncontrolled effects of new technologies, trade or China. Many of our citizens are unsettled, and the fault line for all this discord is a fraying American dream – the enormous wealth of our country is accruing to the very few. In other words, the fault line is inequality. And its cause is staring us in the face: our own failure to move beyond our differences and self-interest and act for the greater good. The good news is that this is fixable”.