Jamie Dimon JPMorgan crisis warning
by Tim Official: United Kingdom
JPMorgan CEO Jamie Dimon has stated that a financial crisis is approaching. Bond yields have reached historic levels at the same time in the United States, the United Kingdom, Germany, and Japan. The last time this occurred was just before the 2008 financial crisis. Dimon confirmed that between 5 and 6 trillion dollars in leveraged loans are currently outstanding. The companies holding that debt will face significant challenges refinancing at current rates. Their equity values would be considerably less. Many of those borrowers did not protect themselves against higher rates. He added that he personally would not buy credit spreads at these levels. The chief executive of the largest bank in America has indicated that corporate debt appears mispriced and that he would not invest his own money in it. The interviewer then turned to artificial intelligence, and everyone seemed to overlook what he had just said. Jamie Dimon has warned about a recession every year, but this is the first time the data appears to support his concerns. Three days ago the 30-year Treasury yield reached 5.2 percent, the highest level since 2007. The 10-year yield stands at 4.62 percent. The United States government carries 31 trillion dollars in public debt with an average interest rate of 3.5 percent. Officials cannot refinance any portion of it at a lower rate than they currently pay. In addition, 9.7 trillion dollars in securities will mature this year and require rollover. The new Federal Reserve Chairman Kevin Warsh was sworn in on Friday. Traders now expect zero rate cuts for the remainder of 2026, and the chance of a rate hike is increasing. The conflict involving Iran has driven oil prices to four-year highs. Inflation accelerated in April to the highest annual rate in three years. Private credit defaults have reached a record high, with a 9.2 percent default rate in the United States private credit portfolio. Dimon described precisely how such a scenario unfolds. He noted that sentiment can reverse suddenly and pointed to the crashes of 1973, 1982, 1994, and 2000. Each of those episodes began with a similar setup. Everyone felt confident, everyone was buying, and liquidity seemed abundant. Then conditions change and people seek cash. They sell risky assets at the worst possible moment. Liquidity vanishes exactly when it is most needed. He also revealed where resources are shifting. JPMorgan employed 35,000 people in New York when he assumed leadership. That number has fallen to 26,000. In Texas the headcount grew from 12,000 to 33,000. During the 1970s New York was home to 120 Fortune 500 companies. Sixty of them departed in a single decade, driven by taxes and crime. When the interviewer raised the topic of the new New York City mayor increasing taxes on the wealthy, Dimon responded that the outflow has already begun. Capital is already departing. Putting it all together reveals multiple warning signs. Bond yields sit at 19-year highs. The government must refinance 9.7 trillion dollars in debt this year. Between 5 and 6 trillion dollars in leveraged corporate loans cannot be refinanced at prevailing rates. Private credit defaults have hit record levels. Inflation is accelerating again. No rate cuts are expected. A new Fed chairman has only just taken office. The leader of the country's largest bank has said he would avoid corporate debt at current prices. The same executive is steadily relocating operations away from New York. Every one of these indicators appeared before the crashes that Dimon cited.
Transcript (en)
Global deficits at all-time highs, and they are huge. So the governments, including ours, has to borrow huge sums of money more next year than this year. So people who own bonds, they tend to look at these things, and both inflation and demands for capital can push up rates. The thing is, it's not just an inflation story right now. It's also, I guess, a credibility story, right? I mean, we have an environment where everybody's trying to pay debt, and governments around the world have so much debt at a higher level. I mean, at some point, it's going to hit. Yeah, it is going to hit. Like, U.S. government debt is $30 trillion. The average rate is 3.5%. You know, so even today, they can't possibly refinance it at lower than that rate. They have another $2 trillion to do this year. So, yeah, but the thing is, we don't know when. We don't know when the world gets too scared about that, when inflation makes it where people don't want to own long-term duration securities, or when it's just a demand for capital. There have been examples in history where there's so much demand for capital, rates are going up, but it's for a good reason. People are making productive investments in the world. Government spending is often not that. Government spending is much more consumption-related, which doesn't help future productivity. And all that spending, too, drives corporate profits. So people shouldn be that surprised that corporate profits are doing quite well too which helps obviously the stock market The question I guess if I could get you to look at the crystal ball right And what yield would that be spillover to the economy to policy to markets Yeah, so I'm very cautious about crystal balls because I don't think anyone has a crystal ball. We look at all potential possible outcomes, and you'd be surprised, from recessions with inflation, from recession with no inflation, from your home prices down 40%, stock prices down 40%. It's a wide range of outcome. I think when people think this is our forecast that that's what's going to happen. I think that's a Intellectual error I think should be much more thinking about range of outcomes Possibilities probabilities and for us we want to handle all of them so we can serve our clients So I'm not that worried about you know profits going down in the stock That doesn't worry me at all I want to serve our clients and do a good job and I do worry about the geopolitics for the future of mankind kind as a far more important issue in my mind but but just looking forward I either pretty my own view and it's just different other people is that race can easily go up more and credit spreads go up more the people everything's gonna be okay even though it's right going no at one point you have a lot of people have to refi at higher rates so there's this general assumption that oh I can refi all this debt at roughly the similar rate will credit spreads go up people companies and governments will have to pay more and so that can put stress in the system and easily could cause a recession type thing. Again, I'm not terrified of recession other than, you know, it hurts people who get laid off. But I think as a scenario, that's a very possible scenario.
