J P Morgan Chase CEO Jamie Dimon reportedly said Friday (May 30) that after excessive spending by the U.S. government and quantitative easing by the Federal Reserve, a crack in the bond market is “going to happen.”
I think that I beat him to it 
2 Likes
Name one prediction that Jamie Dimon was correct on? I can’t think of one.
3 Likes
I think that he’ll be right on this one, and its not just me and Jamie:
3 Likes
Jamie Dimon reportedly said Friday that after excessive spending by the U.S. government and quantitative easing by the Federal Reserve, a crack in the bond market is “going to happen.”
The Fed has been doing quantitative tightening for over three years now, so I don’t get his part about QE.
DB2
1 Like
I think that Mr. Dimon confused monetary stimulus (QE by the Fed which has actually been reversing slowly) with fiscal stimulus by Congress which is increasing the government debt and forcing the sale of massive quantities of Treasuries.
Wendy
2 Likes
What Mr Dimon was talking about is, the total QE done by Fed post GFC is $8 Trillion. That along with the fiscal deficit had created this situation. Whereas the current QT is only $2.4T.
He is not confused.
2 Likes
Yes, we all know about the enormous QE from the Fed. But, looking forward, what will cause a “crack” in the bond market? Not QE, since that horse is already out of the barn.
Wendy
1 Like
The article is clickbait. Dimon said,
“I just don’t know if it’s going to be a crisis in six months or six years…”
Hawkwin
Who thinks the bond mark is going to crack in the future, he just isn’t sure if it is in six months or six decades, but he is confident it will crack - just you wait! And you can quote me on that!
I think he will be correct on this one:
“I just got back from China last week,” Dimon said. “They’re not scared, folks. This notion that they’re going to come bow to America, I wouldn’t count on that.”
3 Likes
So what does he mean? What’s a crack in the bond market look like and what results will it have? Why should we worry?
I understand why you would think that way. QE on its own would not, but when combined with the sustained fiscal deficit… it creates a difficult situation. That situation is exacerbated with non-US treasury buying declining, creates a crisis.
Actually very few give credit to Powell for his QT. Hopefully Fed steadily eliminates MBS and agency debt.
1 Like
The role of a banker is to worry. Their primary responsibility is to identify and manage risks—regardless of whether those risks ultimately materialize. A good banker anticipates potential negative outcomes and prepares accordingly. When risk is managed effectively, returns tend to follow naturally. If you’re evaluating a Dimon’s CEO role, simply look at the performance of JPMorgan Chase’s stock as a benchmark.
Also, remember there are lots of people who work for him take risks…
6 months or six decades?
2 Likes
So you are saying you can’t think of one either.
1 Like
No, I am saying how you are viewing is incorrect and irrelevant. Have you looked at how JPM had managed interest rate risks, to various other risks? Then you will know how correct he is.
Sometimes when a banker talks in public about a potential risk, it is because they want to bring attention to the risk. Whether that risk materializes or not is irrelevant.
If you want to be dealing in absolute, and want to think Dimon doesn’t understand what he is talking, that is your prerogative. He manages an institution with $4.5 Trillion asset. And in the last 5 years that asset base has grown by $1 T.
1 Like
When people try to explain other people’s actions, it is usually because they have a vested interest in what the other person is saying. If you are going to make predictions you should stand on your own feet and realize the chances of you being correct are very small. I don’t need to argue about what Jamie said because we both speak english and he was very clear. I could care less about the opinion of others trying to tell me I didn’t undertand what he “Meant”.
He didn’t specify so I don’t have to!
2 Likes
Dimon for President! Hell, if billionaires are going to run this country, let it be guys that at least know what they’re doing with the economy.
2 Likes
The continuation of the tax cuts plus smaller cuts in the near future. Although Congress might punt until October.
The US economy going into a dive in other words shrinking.
Already bond holders are asking, “How are we going to get paid back”? That question looms over the market and all future events make that worse from here.
2 Likes
“A crack in the bond market” is jargon for a very real phenomenon: a sudden fear by lenders that they won’t be repaid and therefore they will only lend at very high interest rates, if at all.
The Federal Reserve tracks this as “Financial Stress.” The 2008 financial crisis and the Covid almost-financial crisis are easy to see.
The primary purpose of the Federal Reserve is to provide liquidity (lend when nobody will) and thus prevent the economy from freezing up.
The result of a “crack” in the bond market is a rise in interest rates. Depending on the Fed’s response the rise may be short or long lived. Even a short-lived rise may cause banks to fail (such as Silicon Valley Bank in 2023). A long-lived rise can affect many markets, such as mortgages, as well as increasing government deficits.
Wendy
If I was holding 30 year US Treasuries I’d be looking to get rid asap.
Assuming that there isn’t some kind of collapse then if I’d kept them I’d get back cents on the dollar (in today’s terms)