As many of you know, I get all excited about Jamie Dimon’s annual letter to shareholders. As a long-time JP Morgan shareholder and follower of Dimon, I find his letters to be terrific food for thought. He’s one of corporate America’s greatest leaders, and he’s both mightily experienced and uniquely thoughtful.
I’ll keep today’s column brief so that you have time to read his letter to shareholders that was released on Monday. While Dimon is a perma-bull on American economic excellence, his words were more than a little ominous. To be sure, he’s optimistic about American economic resilience and opportunities from artificial intelligence, but he’s clearly concerned about geopolitical events and U.S. political polarization, which he points out “may very well be creating risks that could eclipse anything since World War II.”
As far as financial assets, Dimon had this to say:
“Equity values, by most measures, are at the high end of the valuation range, and credit spreads are extremely tight. These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates. I believe the odds are a lot lower than that."
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One of the things about Dimon’s thinking that I find so endearing is that he avoids blind advocacy for any given ideology. I’ve never understood why so many people feel that they have to live in a world of absolutes; leadership does not require any absolute belief in one direction over another, one path over another or one person over another. Quite the contrary, in fact.
I voice my personal opinions here in Insights often enough, but nothing I write should indicate any sort of tightly held ideology. Frankly, the best investors I know intuitively understand that we live in a world filled with questions and that the only thing of which we can be 100% sure is that we don’t know everything.
My hope in writing Insights is that readers will assess the probabilities of one outcome over another. Ergo, I express opinions and attempt to provoke new ways of thinking rather than pound the table, engage in hyperbole and make statements with any sort of absolute certainty. For investors, it is perpetually humbling to know that success requires continually seeking to define a wide range of possible outcomes, yet that is the name of the game. It’s important for CEO’s, too, and Dimon’s letters often take us on meandering journeys, just as this year’s did, that reflect imagination and a recognition that world history is very much a story of chance.
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Warren Buffett once wrote, “Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
Approximately one third of RG’s clients are PhD’s or MD’s. Another third have masters degrees in engineering. Most of the rest of our clients are either attorneys, finance professionals or entrepreneurs. All of our clients are smart, and we’re grateful for that because I know many highly educated people who are terrible investors. They can’t control their emotions, but investing is and always has been more about EQ than IQ.
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