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JPMorgan is sitting on about $500M in cash, waiting to invest in higher rates

16 points by jchanimal 5y ago

upforgrabs 5y ago
Please fix headline to $500B.
- deleted 5y ago
  [deleted]
CameronNemo 5y ago
$500b is a lot of opportunity cost being lost. This type of behavior is what motivates the push toward negative deposit rates: This [...] monetary policy tool is used to strongly encourage lending, spending, and investment rather than hoarding cash https://www.investopedia.com/terms/n/negative-interest-rate.asp https://www.investopedia.com/terms/n/negative-interest-rate....
- andrewmcwatters 5y ago
  The problem is that you can't push policies that force investors of any size, individual or institutional to make bad investments because the alternative to investing in poor yield or overvaluation might be punitive. But that's precisely the duality of the US market right now. If we had policies in place that basically eroded people's capital and they just had to deal with it because the market was overvalued or yields were so low they're below inflation, you do nothing to uphold the confidence of investors. At that point, they'd literally be better off divesting from the US market and lifting up foreign markets than dealing with a reduction in effective capital from inflationary forces. You'd just be encouraging empowering other nations, and we already do plenty of that by offshoring labor and making it more difficult for us to to pay off debts by removing the flow of capital locally.
- incompatible 5y ago
  Isn't it just a bit of paper, or electronic equivalent, sitting around? It doesn't do anything. I JPMorgan "invested it", then it would just be sitting around somewhere else, since the total amount of cash in the system is controlled by the Federal Reserve or Treasury.
andrewmcwatters 5y ago
There’s a lot of bodies out there, institutions as well as individuals, who would rather take a hit from inflation than invest in the current environment. This isn’t surprising. Though perhaps the volume of capital is interesting.
8bitsrule 5y ago
Meanwhile, we need a lot more wind-turbines, solar panels, and a smart infrastructure which includes a lot of fiber... Is this a willful disconnect?
- prepend 5y ago
  How is that related to not investing this $500B in cash? I think people want different things and long term capital projects and short term cash aren’t really competing projects. It’s not like someone is going to decide to change their 3 month horizon that would be impacted from rates increasing to a 10-20 year horizon for solar panels and wind turbine projects.
- economusty 5y ago
  Are you suggesting they should give the cash away? That it should be confiscated from them and redistributed? What point, if any, are you making?
  - toomuchtodo 5y ago
    Monetary policy should be implemented to make those investment opportunities more attractive than holding half a trillion dollars on a commercial bank’s balance sheet. Negative interest rate policy comes to mind. Central banks don’t confiscate your fiat, they use policy to strongly encourage desired behavior.
gmm1990 5y ago
that seems like the opposite of inflation
- doggosphere 5y ago
  Feds raise the interest rate to reduce money in circulation, so it is.
  - deleted 5y ago
    [deleted]
inshadows 5y ago
I see inflation headlines a lot daily. What will it mean for broad ETFs like VT/VWRA? I am one of those who invested in current environment. So far, the it's good. Does JPMorgan anticipate crash in stock market as well?

16 points by jchanimal 5y ago

upforgrabs 5y ago

Please fix headline to $500B.

deleted 5y ago
[deleted]

CameronNemo 5y ago

$500b is a lot of opportunity cost being lost. This type of behavior is what motivates the push toward negative deposit rates: This [...] monetary policy tool is used to strongly encourage lending, spending, and investment rather than hoarding cash https://www.investopedia.com/terms/n/negative-interest-rate.asp https://www.investopedia.com/terms/n/negative-interest-rate....

andrewmcwatters 5y ago
The problem is that you can't push policies that force investors of any size, individual or institutional to make bad investments because the alternative to investing in poor yield or overvaluation might be punitive. But that's precisely the duality of the US market right now. If we had policies in place that basically eroded people's capital and they just had to deal with it because the market was overvalued or yields were so low they're below inflation, you do nothing to uphold the confidence of investors. At that point, they'd literally be better off divesting from the US market and lifting up foreign markets than dealing with a reduction in effective capital from inflationary forces. You'd just be encouraging empowering other nations, and we already do plenty of that by offshoring labor and making it more difficult for us to to pay off debts by removing the flow of capital locally.
incompatible 5y ago
Isn't it just a bit of paper, or electronic equivalent, sitting around? It doesn't do anything. I JPMorgan "invested it", then it would just be sitting around somewhere else, since the total amount of cash in the system is controlled by the Federal Reserve or Treasury.

andrewmcwatters 5y ago

There’s a lot of bodies out there, institutions as well as individuals, who would rather take a hit from inflation than invest in the current environment. This isn’t surprising. Though perhaps the volume of capital is interesting.

8bitsrule 5y ago

Meanwhile, we need a lot more wind-turbines, solar panels, and a smart infrastructure which includes a lot of fiber... Is this a willful disconnect?

prepend 5y ago
How is that related to not investing this $500B in cash? I think people want different things and long term capital projects and short term cash aren’t really competing projects. It’s not like someone is going to decide to change their 3 month horizon that would be impacted from rates increasing to a 10-20 year horizon for solar panels and wind turbine projects.
economusty 5y ago
Are you suggesting they should give the cash away? That it should be confiscated from them and redistributed? What point, if any, are you making?
- toomuchtodo 5y ago
  Monetary policy should be implemented to make those investment opportunities more attractive than holding half a trillion dollars on a commercial bank’s balance sheet. Negative interest rate policy comes to mind. Central banks don’t confiscate your fiat, they use policy to strongly encourage desired behavior.

gmm1990 5y ago

that seems like the opposite of inflation

doggosphere 5y ago
Feds raise the interest rate to reduce money in circulation, so it is.
- deleted 5y ago
  [deleted]

inshadows 5y ago

I see inflation headlines a lot daily. What will it mean for broad ETFs like VT/VWRA? I am one of those who invested in current environment. So far, the it's good. Does JPMorgan anticipate crash in stock market as well?