Jamie Dimon Issues an Economic Warning

Jamie Dimon sees America at a ‘Pivotal Moment’

Jamie Dimon’s annual letter to JPMorgan Chase shareholders has simply been printed. The extensively learn observe affords a glimpse of his views on not simply enterprise, however the economic system at a “pivotal second for America and the free world,” with deep divisions at dwelling and international uncertainty.

Here are some highlights.

The economic system is resilient however the authorities underpinning it’s a purple flag. Consumers are spending and buyers count on a delicate touchdown. But Dimon warns that the economic system is being fueled by authorities spending and rising deficits. “The deficits at present are even bigger and occurring in growth occasions — not as the results of a recession — they usually have been supported by quantitative easing, which was by no means performed earlier than the nice monetary disaster,” he writes.

Inflation could also be sticky. “These markets appear to be pricing in at a 70% to 80% probability of a delicate touchdown — modest progress together with declining inflation and rates of interest,” Dimon writes, including that the percentages are literally loads decrease.

Global uncertainty is one other darkish cloud. The wars in Ukraine and the Middle East might additional “disrupt vitality and meals markets, migration, and army and financial relationships.” That shock coincides with a surge in public funding to energy a inexperienced transition, restructure provide chains and commerce relationships, and enhance well being care spending.

Industrial coverage is required however must be restricted and focused. Dimon says the U.S. have to be powerful with China, however interact with Beijing. That consists of establishing independence on provides of supplies essential to nationwide safety, like uncommon earth, semiconductors and 5G infrastructure. (According to Dimon, the Inflation Reduction Act and the CHIPs Act get it proper.)

Dimon warns concerning the deep political divisions at dwelling. Dimon doesn’t explicitly weigh in on the election (his public backing for a few of Donald Trump’s financial insurance policies induced a stir at Davos in January), however stated the U.S. is grappling with “extremely charged, emotional and political” points centering across the border safety disaster and the “fraying of the American dream.”

• On Basel 3 endgame: Dimon reiterated his considerations that lots of the proposed banking guidelines are “flawed and poorly calibrated.”

• On company governance: Dimon argues that proxy advisory corporations like ISS have change into too influential (he lately backed Disney in its struggle in opposition to Nelson Peltz). He is against latest efforts to separate chairman and C.E.O. roles and thinks the common proxy “makes it simpler to place poorly certified administrators on a board.”

HERE’S WHAT’S HAPPENING

Janet Yellen sees progress in China relations, however warns there’s “extra work to do.” The Treasury secretary concluded conferences in Beijing on Monday saying that ties between the nations had stabilized, however it was unclear how the connection would endure in an election yr. Her feedback got here because the Biden administration agreed to present Taiwanese chipmaker TSMC $6.6 billion in grants to start manufacturing in Arizona in 2028.

Brazil’s supreme courtroom opens an investigation into Elon Musk. Alexandre de Moraes, the chief justice, opened the instruction of justice inquiry after Musk stated he would reactivate some X accounts that the judge had ordered blocked. The accounts weren’t disclosed. Moraes has been investigating “digital militias” accused of spreading disinformation.

Gold hits a document excessive and an oil rally takes a breather. The safe-haven asset reached greater than $2,300 a troy ounce, buoyed by worries over a widening battle within the Middle East and better demand for the valuable metallic from central banks and Chinese customers. The worth of Brent crude fell on Monday to commerce close to $90 a barrel, down from a five-month excessive reached final week.

Is it present time for Warner Bros. Discovery?

Today marks the two-year anniversary of the Warner Bros. Discovery mega deal closing. Crossing that milestone signifies that the leisure large, which owns HBO, CNN and a profitable piece of the March Madness broadcasts, can now strike a deal with out dealing with an enormous tax hit.

The business is ripe for consolidation, given challenges in cable and streaming. An impediment is President Biden’s antitrust cops. “Regulatory constraints are limiting what offers can get performed, which is the case in most industries,” Rob Kindler, the worldwide chair of the M.&A. Group at Paul, Weiss, instructed DealBook.

Warner Bros. Discovery hasn’t gone as hoped. Its inventory is down 66 p.c for the reason that deal closed as its wager on streaming has languished (alongside rivals not named Netflix). The legacy cable enterprise has been a much bigger drag, damage by cord-cutting.

Its $44 billion debt mountain might additionally make an acquisition tougher. But John Malone, the media mogul and a board member, stated in November that money movement is bettering, which might set the corporate as much as scout for offers.

A merger with Paramount appears unlikely. Shares fell 5 p.c when talks between the 2 leaked in December, an indication that buyers might not look enthusiastically on the corporate rising its publicity to linear media. It’s in all probability a moot level anyhow with Paramount in unique talks with Skydance.

Even nonetheless, would an alliance with Paramount’s TV networks, like, CNN and CBS by means of a derivative or divestiture make sense, down the road?

Targeting Comcast might face challenges, too. Investors might just like the potential to mix their cable, studio and streaming companies. But regulators would seemingly have powerful questions.

Still, don’t rely out a deal. As Barry Diller instructed The Times final yr: There appears to at all times be curiosity within the Warner media properties. “Whether that can occur is determined by whether or not somebody needs to take it,” stated Diller, a longtime pal of the Warner Bros. Discovery chief, David Zaslav.

Rethinking the deals-are-bad trope

For a long time, the widespread knowledge in company America — as encapsulated within the 2004 e-book “Mastering the Merger,” by two Bain & Company consultants — was that for all of the billions spent on mergers, roughly 70 p.c failed.

But a brand new white paper by one of many e-book’s authors and two different colleagues finds that the inverse is now true: 70 p.c of takeovers succeed. DealBook bought the primary take a look at the analysis to study what had modified.

Companies have gotten smarter about M.&A. In 2004, the defining offers of the period — together with that of AOL-Time Warner — have been meant to be transformative and ship large financial savings. Today the targets are extra modest, reminiscent of increasing into new geographies or adjoining companies, or including new expertise.

Acquirers are additionally getting extra follow. Having more-conservative goals for mergers means firms can do extra of them, justifying having in-house groups of M.&A. specialists who can higher determine promising acquisitions and make them work. One development: extra refined evaluation of potential takeovers, in contrast with earlier offers that always relied on much less exacting monetary issues like synergies.

“Frequent acquirers have the expertise and functionality to do the diligence that’s required,” Suzanne Kumar, a Bain vp and one of many white paper’s authors, instructed DealBook, pointing to Thermo Fisher Scientific, Constellation Brands and tech giants.

Serial acquirers are inclined to have higher returns. Between 2000 and 2010, firms that did at the least one deal a yr had 10-year complete shareholder returns that have been 57 p.c larger than companies that did no offers, Bain discovered. Between 2012 and 2022, that unfold rose to 130 p.c — a discovering that stunned the researchers.

Unionization efforts come to Harvard Yard

With automobile firms on excessive alert over the United Auto Workers’ efforts to ramp up labor organizing, the union has racked up a collection of wins removed from the manufacturing facility flooring — on school campuses.

The most up-to-date victory was at Harvard University. The faculty’s nontenure monitor staff — a bunch of roughly 6,000 that features college, postdoctorate fellows and preceptors — overwhelmingly voted to unionize final week. That opens the door to negotiations for larger wages, improved job safety and bolstering office safety.

The divide brings one other supply of stress to campus. Harvard has been embroiled in a struggle over free speech and security ever since Hamas attacked Israel on Oct. 7, spurring a debate that led to a wave of high-level resignations.

Harvard is way from alone. Staff at Wellesley College and New York University additionally voted to unionize this yr, becoming a member of efforts by adjunct professors and postdocs at Boston University, Columbia, Rutgers and the University of Connecticut.

The U.A.W. is on the heart of the push. The union has been branching into larger training for years. And its hard-knuckled ways in securing new contracts from Detroit’s Big Three automakers final yr have given it momentum.

After N.Y.U.’s profitable unionization vote, Shawn Fain, the U.A.W.’s president, hailed the second as a historic one for labor organizing efforts on America’s college campuses. “We’ve bought their again,” he stated.

The week forward

Congress returns at present from its two-week recess to search out Ukraine, the TikTok invoice and repairing the Baltimore bridge within the highlight — and a doable House management problem looming. Elsewhere, inflation, central banks and the brand new earnings season can even be in focus.

Here’s what to observe:

Tuesday: Google’s Cloud Next builders convention opens amid expectations that the tech large will make a raft of bulletins to do with synthetic intelligence.

Wednesday: The March Consumer Price Index is ready for launch. Economists forecast that general inflation rose by 3.5 p.c on an annualized foundation, a slight improve from February. Core C.P.I., which removes meals and gas, is predicted to have cooled.

Minutes from the final Fed assembly are additionally resulting from be printed.

Elsewhere, President Biden will maintain talks on the White House with Prime Minister Fumio Kishida of Japan. On the agenda: commerce, A.I. and China. Also looming over the summit is Nippon Steel’s $14 billion bid for U.S. Steel.

Thursday: It’s determination day on charges for the European Central Bank. Inflation has fallen comparatively rapidly throughout a lot of Europe, prompting the query: Will the E.C.B. minimize rates of interest earlier than the Fed?

Friday: Wall Street giants start reporting first-quarter outcomes, together with JPMorgan Chase, Wells Fargo, Citigroup and BlackRock.

THE SPEED READ

Deals

• The luxurious group Puig, proprietor of the manufacturers Paco Rabanne and Charlotte Tilbury, plans to listing in Spain and goals to lift greater than 2.5 billion euros ($2.7 billion) in what can be the sector’s largest I.P.O. in years. (FT)

• Could buyers’ relative apathy for European shares push the continent’s largest oil firms to think about larger listings within the U.S.? (Bloomberg Opinion)

Policy

• Josh Shapiro, the Democratic governor of Pennsylvania, has warned that the Biden administration’s determination to pause liquefied pure fuel initiatives might damage the party’s possibilities in November. (FT)

• “Maryland Passes 2 Major Privacy Bills, Despite Tech Industry Pushback” (NYT)

Best of the remainder

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