Wednesday, January 13, 2016

J.P. Morgan CEO Jamie Dimon On What the Falling Oil Price Means for the Economy

From an interview with FOX Business News anchor, Maria Bartiromo:

BARTIROMO: What's the impact of the drop in oil that we've seen? How confident are you that the major banks, J.P. Morgan included, have their energy exposure in check?

DIMON: There's an industry where, obviously prices have changed. Remember, commodity prices change like this all the time, and all different commodities, so you should somewhat be prepared for it. And, obviously, debtor countries will be hurt. We'll be fine. We're going to lose some more money on it. I want to be FD [full disclosure] compliant here, we told the world that if oil goes to $30 dollars and stays there for 18 months it would cause us to increase reserves by something like $500 million dollars. Which is fine, we're still going to help these companies get through it, our clients. It's important that we're there in good times and bad. You can't be a bank, and the second something goes wrong you go running. There is a beneficiary of lower oil prices, right? it's bad for Brazil, it's good for India. It causes different flows in the countries around the world, but it's good for consumers, and businesses. So, all those who consume energy are paying lower prices.  We have the J.P. Morgan Chase Institute which uses real data that consumers are spending 80 percent of the gas decrease. And they're spending it in T&E, maybe bigger SUV's and houses. It's a benefit a little bit  as opposed to being, badly hurt.  It's good for the American consumer. Gas is at $2 dollars, and if you adjust for inflation it's kind of the same price is was at 1960.

BARTIROMO: So, you see the data of what everybody's spending their money and you say that they're saving money at the gas pump and going out to hotels and entertainment.

DIMON: And, that's true across the country, by all income levels, about 80 percent, I think, is the number that we think they're spending.


  1. Could it be the onset of a deflationary recession?

  2. Deflation is bad though !

    Are "speculators" involved in this price drop ?

    We need multiple investigations.

    Let's get that price up were it needs to be !

  3. Oh boy, let's go out there and SPEND!!!

  4. "You can't be a bank, and the second something goes wrong you go running."

    It must be nice to know you always have the lender of last resort backing you up.

    What a business model. I wish I could make mistakes and get bailed out for "the good of the nation"- then pocket bonuses in my good years.

    It's easy to understand why people like working for big banks, it's basically a better paying government job.

  5. "Gas is at $2 dollars, and if you adjust for inflation it's kind of the same price is was at 1960."

    Hmm... CPI makes gasoline look expensive. A quick web search tells me the 1960 gasoline price was 31 cents a gallon. In 90% silver US coin it's 19.0 cents a gallon including tax today. (using the 1.949/gal for gasoline and $2.5626 for the melt value of a 1960 quarter)

    1. What are you implying, that greater technology and additional capital makes things cheaper over time? The horror!

  6. It's not good for the ones who are dependent on high oil prices. The banks are there for the good and the bad? Yeah, when things are good with oil they do loan for those industries, but when oil is bad, they shut the spicket off. Full shut. Then they move to the current good. Low oil prices are a conundrum, it's cheaper to buy a gallon of gas, but there is no work to spend the fuel on.
    I remember when oil hit $50 a barrel, fuel hit $1.59 a gallon. Now it's $31 a barrel, fuel here is still $3.00. Hmm.

    1. Gasoline today is more complex to manufacture and is regionally customized. This can result in regional supply issues or simply not enough sales volume to offset costs. Thank the EPA and the corn lobby.