"Markets Have Always Been Wrong" - Jamie Dimon Warns QE's End Will Cause Volatility To Spike

JP Morgan Chase & Co. CEO Jamie Dimon’s declaration that he would fire any JPM traders whom he knew were trading bitcoin unexpectedly ranked among the most popular stories on several respected financial media websites – despite stiff competition from Apple Inc.’s 10th anniversary product launch.

Given what’s transpired in the bitcoin market over the past few days (See “Chinese Bitcoin Trading Soars As Local Exchanges Deny Crackdown Reports”), its unsurprising that Dimon, who spoke publicly at an industry conference hosted by Barclays before sitting for an interview with Andrew Ross Sorkin at Institutional Investor’s Delivering Alpha conference, managed to break through the noise with his comments. During the earlier appearance, he warned investors that J.P. Morgan Chase & Co. trading revenue was on track to fall 20% year-over-year during the third quarter – echoing a similarly downbeat outlook delivered by Citigroup CFO John Gerspach the day before. Dimon’s revelation sent JPM stock tumbling off its highs of the day.

Jamie Dimon: There's a huge vacuum if business isn't involved in policy from CNBC.

Perhaps it’s understandable, then, that reporters ignored some of the bank CEO’s more prosaic-sounding comments, writing them off as too boring to print. However, in both of his public remarks, Dimon reiterated his view that the coming unwind of the Federal Reserve’s $4.5 trillion balance sheet, and the subsequent “normalization” of interest rates, would revive volatility across markets. Investors, Dimon said, should “hold on to their hats.”

Why? Because, as Dimon explains, global central banks have purchased $12 trillion in assets since the crisis, supporting much of the global cross-asset rally. So logically, what would happen if the largest of those central banks were to stop buying?

“ANDREW ROSS SORKIN: Does the low volatility, by the way, make sense to you given all of the challenges and headlines in the world today?


JAMIE DIMON: Oh, listen, markets are markets. There's low volatility until they're highly volatile. The stock market is high until it goes low. Markets therefore have always been wrong. And I think people are making mistakes. I can give you reasons why it might be low. We've had this fairly consistent, coherent, consistent growth. But forget the geopolitical noise and stuff like that. We're chugging along, 2%. Europe is doing 2%. Russia - I mean, Japan is doing 1.5%, China's doing their 6%. You know, earnings are doing okay. We've had a fairly benign economic environment.

 

That's a reason. I can give you another reason is that the Central Banks of the world that bought $12 trillion of securities. 12 trillion. Since they started doing QE. And that's only just the U.S. That's an awful lot of security purchases that might - in all things be equal, and remember things are never all equal - can reduce volatility. And there may be other sides that are known. And once other sides happen, watch out. Then volatility goes way up. They'll say they're a genius, they figured out when it's going to happened. I don't guess on which kind of volatility. Like I said, we do a business. And we have to manage the volatility.”

But regardless of the market consequences (after all, banks’ trading desks benefit when volatility climbs), the Fed should continue to raise interest rates. And the two hurricanes that just devastated parts of the southern US shouldn’t lead the central bank to pull any punches.

“ANDREW ROSS SORKIN: Do you think interest rates should go up by the end of the year, with these hurricanes this fall?

 

JAMIE DIMON: The hurricanes are irrelevant. I wouldn't have any policy matter as a function of hurricanes. Going to reduce GDP in the short run, they'll probably increase it after that. I'll let the economists figure it out. But almost a $20 trillion economy, that isn't a reason to change monetary policy. It will create a lot of noise in the numbers, but I wouldn't overreact to that.

 

Advice, it's very sympathetic. We're doing - just so you know, we're going to do a lot for affordable housing, get these people in these states 20,000 people in Florida, 6,000 in Houston. Most of the banks are waiving fees, delaying loan payments, offering special services for your employees and stuff like that.”

The Fed should ultimately predicate its decision on the health of the US economy. And with growth steadily picking up, Dimon says, the economy should be able to absorb the borrowing costs without much of a disruption.

“The question about rates and QE is always important at the same time, say the why. Okay? So I think rates need to go up. And for as long as the why is because the economy is strong and may be strengthening, that's a good reason. It's not a bad reason.

 

You know, remember Paul Volcker raised rates, people may have forgotten, 2%, 25 basis points, 2% Sunday night. Not in between meetings. On a Sunday. Okay? And he did it because inflation was going up, the stagflation at the time. That's a bad why. They show if the why is doing well and the jobs are coming back, and people are entering the labor force, the economy will dwarf rates, the importance of rates.

 

And so far that's what they've been doing. They've been watching the economy and lowering rates. I'm hopeful that will continue because I think rates do need to go up and the economy continues to be stable.


You know, people are joining the workforce, a lot of capital, markets are wide open, no major potholes in the American economy. I'm putting geopolitics - that would change if you might treat so many things, so they continue to raise rates, and they start QE. But it's going to help the economy, you'll all be fine.”

Dimon warned back in July that traders should brace for volatility to surge after the Fed begins unwinding its balance sheet, pouring cold water on the Fed’s complacency after Patrick Harker said the unwind would be as dull as watching paint dry.

Jamie Dimon on regulations: We're talking about calibration from CNBC.

“We act like we know exactly how it’s going to happen and we don’t,” he said at the time.
 

Comments

Manthong dark pools of soros Thu, 09/14/2017 - 04:47 Permalink

 
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Dimon and Barclays “industry conference”….is that anything like……….. DEBBIE DOES THE DALLAS COWBOYS    ????

In reply to by dark pools of soros

Escrava Isaura Manthong Thu, 09/14/2017 - 05:04 Permalink

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Well done Dimon. You told exactly what business and managers want, and need to hear.  

In reply to by Manthong

The Alarmist Thu, 09/14/2017 - 04:22 Permalink

He says that like it's a bad thing. JPM lives and dies by volatility. He's no doubt talking his book, so QE must die. Always fade what the Corruptocrats are telling you.

Manthong evokanivo Thu, 09/14/2017 - 04:58 Permalink

 
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All we can hope for now is that grahamesty gets terminal syph like Capone did.

In reply to by evokanivo

ebworthen Thu, 09/14/2017 - 04:48 Permalink

A living talking turd, or should I say...a lesser demon.Dimon is a small demon, a harbinger of Satan at the helm.If there is no debt, or rule-of-law for Wall Street, how can there be justice for the citizenry?Antipodes - the evil of Wall Street and their .gov toadies - against the real people of the United States of America."Hang 'em high" is the only answer.  Until the perfidious wastrals of the swamp hang from the neck until they are dead there will be no justice, nor "markets". Death to the banksters and their complicit lackeys in Washington D.C.!!!

USofAzzDownWeGo Thu, 09/14/2017 - 04:46 Permalink

I think I've finally caught on here. They put these "gurus" on TV to make bold statements/predictions to get people to keep shorting thinking there will be a crash coming because it is just ..... inevitable....... so the CB's can do less work when ramming the shit up. 

Rebelrebel7 (not verified) Thu, 09/14/2017 - 04:53 Permalink

What a conartist! 2 hurricanes don't matter- false!The economy can absorb interest rate increases -false!People are joining the workforce- falseMarkets are wide open- like wounds for disease!No major potholes in the economy- false+ D- infrastructure with potholes all over America! Lots of capital - for the banks that want to lend at higher rates!  This guy is worse than Hillary Clinton!Omg! Hillary Clinton has dissociative disorder and dresses in drag as Jamie Dimon! 

Money Mantra (not verified) Thu, 09/14/2017 - 05:00 Permalink

Keep this moron saying stupid again. The only market guru today is SHEPWAVE. Keep it up. 

Debugas Thu, 09/14/2017 - 05:01 Permalink

can you see how these money-junkies always talk about how to make more money and never never talk about how to advance civilization, improve quality of lifedespicable junkie he is

BritBob Thu, 09/14/2017 - 05:03 Permalink

Bitcoin or real commodities. Rather like the .com boom in the '90s.Real commodities will always win.Falklands Oil By a ruling of the UN, Argentina will extend its maritime platform (Politica Argentina) ; New map of the maritime platform reaffirms the sovereignty of Malvinas with UN endorsement (ElCronista); Argentina enlarges its territory 35%, with a UN endorsement ...(La Capital).To add to this euphoric atmosphere the Argentine Foreign Minister stated, ''This is a historic opportunity for Argentina. We have taken a great step in the demarcation of the outer limit of our continental shelf; the most extensive boundary of Argentina and our border with humanity,'' Foreign Minister Susana Malcorra told La Nacion, which tomorrow will publicly announce the details of this resolution. (Susana Malcorra, quoted by Dinatale M, La Nacion, Argentina, 27 March 2016). But what is the truth...Argentina's Continental Shelf Claims and The UN CLCA Commission (1 page):-https://www.academia.edu/33898951/Argentinas_Continental_Shelf_Claims_-The_UN_CLCS_Commission 

JailBanksters Thu, 09/14/2017 - 05:08 Permalink

Because of QE there is NO risk, well for Banks.They can get their money back, then head back into the Casino and 'ave another go.The only risk is, if your NOT a Bank and they decide to play a round of Pump & Dump.If you lose, the Bank Wins, if the Bank loses the Bank gets a QE Refund so they still Win.So all the banks are just Pumping because there is nobody to Dump playing.

Batman11 Thu, 09/14/2017 - 05:38 Permalink

“Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929. That’s not real wealth you half-wit.1600s Holland "Those tulip bulbs look like a good investment"Jesus! If only Holland had a Central Bank in the 1600s, it would have propped up the price of tulip bulbs.Tulip bulb prices are falling, more QE. 

onthedeschutes Thu, 09/14/2017 - 06:39 Permalink

The FED must be getting very nervous when they start having fuksticks like Jamie Dimon and Lloyd Blankfein prancing around trying to talk this market down.  This is a huge  indicator that the FED (and the global central bank cabal) have created a runaway train.

OldPost Thu, 09/14/2017 - 07:49 Permalink

The more he pops up  out of of his hole...the better I feel..........keep stackin..supoposedly JPM has a few physical oz. stored somewhere...

taketheredpill Thu, 09/14/2017 - 08:15 Permalink

 I can give you another reason is that the Central Banks of the world that bought $12 trillion of securities. 12 trillion. Since they started doing QE. And that's only just the U.S.  I thought the Fed Balance Sheet was around $4 Trillion.

falak pema Thu, 09/14/2017 - 11:44 Permalink

Haha!King Bankster of USA says : the Invisible Hand is a fiction and self regulation is baloney; aka if we don't have a strong, honest government to regulate in the interest of the 99% its gonna be Great Gatsby day every day the markets are open! How do you get a strong honest government in a land of Hubris "where racism is like baseball" : a national institution and Robber Barons built its world of "the sky is the limit for us Oligarchs and not for those with cotton pickin fingers" ?Scott Fitzgerald, who was despised by Hollywood as weak script writer, 'cos who wouldn't sell his soul to the soul-less machine, must be laughing in his grave..."I hate the place [Hollywood] like poison with a sincere hatred.""ZELDA can you see the madness in the air. There are a lot of madder people on earth than you my Zelda! You were just a love sick child of puritanical flapper land who wanted all night sex and cocaine on the rocks."Looks like we are back there today : puritans and flappers, surrounded by the WS sharks ! Will the King of Mar a Lago be able to handle the sharks and the flappers of his own Lord of the pussy grabbers and Fire and Fury family ?"What Happened" said the mad queen now gone sad ! "We came, we saw and He died ! Comes back to bite us in the ass! "

Not if_ But When Thu, 09/14/2017 - 12:02 Permalink

F_CK YOU DIMON!!!!!!!  JP Morgan should have been allowed to fail like Lehman.  This cocksucker patted himself on the back saying they didn't need Fed/Treasury assistance when he knew full well that financial institutions are so interconnected that just about every one of the TBTFs would have failed without the bailout - including fraudulent JPM.  All of them reneged on the terms associated with the TARP contracts they all signed on 10/13/08.  This (person) is a billionaire solely due to undeserved largesse forced on taxpayers.    CPL593H