murphy metal monday

You’d better brace yourself
Jamie Dimon / JP Morgan CEO

Tesla CEO Elon Musk has a “super bad feeling” about the economy and wants to cut about 10% of jobs at the electric carmaker.

When the likes of Jamie Dimon and Elon Musk express similar concerns (and throw in Goldman Sachs President John Waldron), maybe it’s time to pay a little more attention. As per Dimon, there are two main factors that has him worried:

  • So-called quantitative tightening, or QT, is scheduled to begin this month and will ramp up to $95 billion a month in reduced bond holdings.
  • The other large factor worrying Dimon is the Ukraine war and its impact on commodities, including food and fuel. Oil could hit $150 or $175 a barrel, he said. “You’d better brace yourself,” Dimon told the roomful analysts and investors. “JP Morgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”

Upon hearing Dimon’s concerns, London analyst, Alasdair Macleod, elaborated with the following:

“The overall banking environment is changing rapidly and there has rarely been a clearer signal for financial markets. JPMorgan will contract its balance sheet, and where it goes, so will all the other global important banks. The banking cohort always acts as a crowd, alternatively driven by greed for profits and fear of losses. When fear takes over and banks protect themselves by withdrawing credit from the economy and markets, a financial and banking crisis always follows.

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Trading desks have cause for panic as the deteriorating bank credit conditions will lead to widespread selling of financial assets by hedge funds. And that must be put against investor concerns over holding liquidity in bank deposits as the systemic risks in the sector become foremost in their minds.”

Adding insult to injury, Mike Savage of Raymond Financial says the real state of the economy has been “masked by deliberate misinformation and slight of hand.” And when you can “print” unlimited amounts of cash from nowhere you can hide the rot in the system for a long time and keep most people clueless about the precarious position we are actually in.

So far, they got away with it because inflation was relegated to financial “markets” while consumer inflation was somewhat tame for a long time. This gave them the leeway to keep on “printing and buying”. Now, as former middle-class Americans are getting hammered from every angle with rising prices, the jig may be up.

Stop “printing” and an almost immediate collapse could be anticipated. Keep “printing” and prices will likely continue to spiral higher. Raising interest rates will just make it tougher for people, companies, municipalities, cities, states and our federal government to continue spending and servicing what appear to be unserviceable debts going forward- particularly with the economy showing signs of considerable weakness in almost all areas.