JPMorgan Chase & Co. /zigman2/quotes/205971034/composite JPM +0.40% Chairman and Chief Executive Jamie Dimon published his annual letter to shareholders on Wednesday, and, as is his wont, he offered a broad overview of the state of the world a year into a global pandemic, homing in on the hardship it has created for many and the widening wealth gap.
In a sign of the many issues Dimon sought to address, the letter runs to 66 pages. That makes it the longest such missive to shareholders that he has ever produced, according to the New York Times.
“Our nation is clearly under a lot of stress and strain from various events: the COVID-19 pandemic, of course, which has taken more American lives than the total lost in World War II, the Korean War and the Vietnam War combined, resulting in acute economic distress for millions more,” he said.
Dimon also acknowledged “the brutal murder of George Floyd and the racial unrest that followed; the divisive 2020 presidential election, culminating in the storming of the Capitol and the attempt to disrupt our democracy; and the seemingly inevitable, but nonetheless alarming and unnerving, rise of China, threatening America’s global preeminence.”
But America has “faced tough times before,” he said, adding that the problems the country faces are fixable. But first, in Dimon’s view, the institutions that have lost the trust of the people — government, schools, media and businesses — “must regain it and understand that the underlying problem is inequality. “
“The enormous wealth of our country is accruing to the very few,” he said.
Dimon’s U.S. economic outlook remains bullish, despite the many challenges facing the world’s biggest economy. He noted that the scope of the government response to the crisis situation brought on by the pandemic is far greater than the response to the financial crisis of 2008.
“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon said. “This boom could easily run into 2023 because all the spending could extend well into 2023.”
Dimon, a member of the Business Roundtable’s board of directors, said stock-market valuations are “quite high” even if a multiyear boom may justify those levels as markets are pricing in growth and excess savings. He conceded, though, that “some froth and speculation” exist in parts of the market, without offering details.
Dimon also weighed in on the threat posed to banks by fintech and Big Tech, a “large and powerful shadow banking system,” that is increasingly encroaching on traditional banking. He mentioned Amazon /zigman2/quotes/210331248/composite AMZN +1.47% , Apple /zigman2/quotes/202934861/composite AAPL -0.93% , Facebook /zigman2/quotes/205064656/composite FB -0.15% , Google /zigman2/quotes/205453964/composite GOOG +0.23% /zigman2/quotes/202490156/composite GOOGL +0.46% “and now Walmart /zigman2/quotes/207374728/composite WMT -0.45% ” as emerging competitors that should be more strictly regulated.
“As the importance of cloud, AI and digital platforms grows, this competition will become even more formidable. As a result, banks are playing an increasingly smaller role in the financial system,” he said.
But much of the Dimon letter discussed the need for the U.S. to acknowledge the problems that have led to the widening wealth gap, and address the challenges of educating Americans and improving, and making accessible, a healthcare system that is still out of the reach of many.
Nearly a decade after the passage of the Affordable Care Act, more than 30 million Americans still have no medical insurance, and life expectancy has declined in the poorest and minority communities.
“Our education and health issues come together in this alarming statistic: Seventy percent of today’s youth (ages 17-24) are not eligible for military service, essentially due to a lack of proper education (basic reading and writing skills) or health issues (commonly obesity or diabetes),” Dimon wrote.
The U.S. also needs to reform its immigration policies and improve social safety nets that are “poorly designed.” Nearly 30% of American workers earn less than $15 an hour, itself is barely a subsistence wage, the Dimon letter notes. Some 30% of Americans don’t have as little as $400 in savings to cope with an emergency.
“Governments, both federal and state, fight to keep military bases open that we don’t need and Veterans Affairs hospitals functioning that are broken — making the military more costly and less effective,” said the letter.
Dimon called on leaders to move away from the short-term thinking that is hampering progress in addressing important issues.
“When you step back and take a comprehensive multiyear view, considering the situation in its totality, it is the cumulative effect of many of our policies that has resulted in our present-day failures,” he wrote.
Dimon called for a national plan to improve training for jobs in the real world that will raise wages and improve labor-force participation. He called for higher wages for low-skill work to allow poorer people the ability to earn a middle-class income.
“We need proper, rigorous and multiyear budgeting, planning and reporting,” he said. “It is particularly important that most federal programs — think military, infrastructure and education — have good long-term plans and be held accountable to execute them.”