Finance

Microsoft Corporation headquarters at Issy-les-Moulineaux, near Paris, France, April 18, 2016.
Charles Platiau | Reuters

Check out the companies making headlines in midday trading Thursday.
Microsoft — Shares of Microsoft closed up 0.8% after slipping earlier in session as the company cut its earnings and revenue guidance for the fiscal fourth quarter. Microsoft cited unfavorable foreign exchange rates as the reason for the move.

Meta Platforms — Facebook’s parent company rose 5.4% after Sheryl Sandberg announced she is leaving her role as chief operating officer. Chief growth officer Javier Olivan will take over the position this fall.
GameStop — Shares of the video game retailer rallied 10.4% after the company posted its quarterly results. GameStop reported $1.38 billion in revenue in its fiscal first quarter, up slightly from the $1.27 billion it reported in the year-ago quarter. But it also reported a $157.9 million net loss, which is worse than the $66 million net loss in the year-ago quarter. 
Chewy — The pet e-commerce company soared 24.2% after reporting an unexpected profit in the previous quarter. Chewy shared earnings of 4 cents per share on $2.43 billion in revenue. Analysts expected a loss of 14 cents per share on $2.42 billion in revenue, according to Refinitiv.
MongoDB — The database platform provider’s stock surged 18.6% after the company’s results for the previous quarter topped analyst expectations. MongoDB reported an unexpected profit of 20 cents per share on $285 million in revenue. Analysts had anticipated a loss of 9 cents per share on revenues of $267 million.
Generac — The generator company’s stock jumped 10.3% after UBS named it a top pick. The investment firm said the downside for Generac’s core business was already priced into the market, and the company’s push into clean energy gave the stock significant upside.

Hewlett Packard Enterprise — Hewlett Packard Enterprise dropped 5.2% after missing analysts’ forecasts on the revenues and earnings for the previous quarter. The company reported a profit of 44 cents per share on revenues of $6.71 billion, compared with a Refinitiv consensus estimates of 45 cents per share on $6.78 billion in revenue.
PVH — The apparel company added 1.9% after beating Wall Street’s forecast on the top and bottom lines for the previous quarter. The Tommy Hilfiger and Calvin Klein owner reported a profit of $1.94 per share on $2.12 billion in revenue, compared to estimates of $1.61 cents a share on $2.09 billion in revenue.
Hormel Foods — Shares of Hormel Foods fell 5.2% after the company trimmed its fiscal 2022 earnings guidance. The food company expects earnings per share to range between $1.87 and $1.97 after previously guiding for a profit between $1.87 per share and $2.03 per share.
— CNBC’s Jesse Pound and Yun Li contributed reporting.
Correction: An earlier version of this story misstated PVH’s estimated revenue.

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Check out the companies making headlines before the bell:
Hormel (HRL) – Hormel added 1.7% in premarket trading after beating top and bottom-line estimates for its latest quarter. The company behind the Spam, Dinty Moore and Jennie-O food brands backed its earlier full-year sales guidance and also said its moves to mitigate inflation and supply chain issues were proving effective.

Designer Brands (DBI) – The footwear and accessories retailer reported better-than-expected profit and revenue for its latest quarter and raised its full-year profit outlook, although it cut its comparable-sales growth outlook. Designer Brands shares jumped 3.7% in the premarket.
Lands’ End (LE) – The apparel retailer’s shares slid 10.2% in the premarket after the company reported a quarterly loss of 7 cents per share, 3 cents smaller than anticipated, but revenue fell short of Wall Street forecasts. It also issued a full-year earnings forecast of 60 cents to 88 cents per share, mostly short of the 87-cent consensus estimate.
Ciena (CIEN) – The networking equipment maker earned an adjusted 50 cents per share for its latest quarter, 4 cents short of consensus, while revenue came in below estimates. Ciena said demand remains strong but supply chain challenges are resulting in increased uncertainty. Ciena fell 2.3% in premarket action.
GameStop (GME) – GameStop rose 1% in premarket trading after posting a sales increase for its latest quarter as more people shopped in its stores, although it also saw its losses widen.
Hewlett Packard Enterprise (HPE) – Hewlett Packard Enterprise fell a penny shy of estimates with adjusted quarterly earnings of 44 cents per share, while the enterprise computing company’s revenue was slightly short of Wall Street forecasts. The company said its profit margins are holding up well in the face of inflation and supply chain disruptions. The stock fell 4.9% in the premarket.

MongoDB (MDB) – MongoDB surged 8.6% in the premarket after reporting an unexpected quarterly profit and revenue that topped analyst forecasts. The database platform provider’s sales surged 57% compared with a year earlier.
Chewy (CHWY) – Chewy reported a quarterly profit of 4 cents per share, compared with consensus forecasts of a 14 cents per share loss. The pet products retailer also reported better-than-expected revenue and stood by its prior outlook. Its stock soared 19.6% in premarket trading.
PVH (PVH) – PVH rallied 4.1% in the premarket after the apparel company reported better-than-expected quarterly sales and profit. The company behind brands like Tommy Hilfiger and Calvin Klein said it was negatively impacted by supply chain and logistics disruptions as well as Covid-related lockdowns in China.

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China’s local-government financiers have a complex identity. Tasked with developing land and doing public works, they act on behalf of, and with approval from, city and provincial authorities. Yet at the same time they represent large companies, known as local-government financing vehicles (lgfvs), which have the ability to raise billions of dollars from global investors. The thousands of lgfvs around the country owed an estimated 53trn yuan ($8.3trn, equivalent to 52% of annual gdp) in debts last year. Conflicts of interest have naturally arisen for the bosses of these hybrid firms. In some cases they have been caught giving chummy private companies lucrative stakes in government projects. Others have used their official status to guarantee bank loans for friends. In Sichuan province a government financier was recently found to have lent out state funds to private firms at rates as high as 20% a year. In Hunan province a boss was caught charging companies that work with the government consulting and paperwork fees. Such practices might fly in the private sector—but not with anti-corruption investigators.The central government is taking new interest in such dodgy dealings. More than 40 high-ranking officials at lgfvs have been put under investigation or detained since the start of the year. The Ministry of Finance has warned provincial authorities about the risks associated with corruption in the quasi-state sector. The renewed attention on graft at lgfvs betrays growing concerns about the role the companies play in generating economic growth, along with the piles of debt they have amassed in the process.lgfvs are a uniquely Chinese problem. Invented in the 1990s to get round rules that banned local governments from raising debt, the companies became one of the most important sources of economic growth over the past two decades, as they carried out vast numbers of public projects. Their status as non-government entities allowed them to borrow heavily from investors in China and abroad. One of the oddities of lgfvs is that it is city and provincial authorities that are on the hook for those debts. But lgfvs’ borrowings are not included in official government budgets, making it hard to gauge risk.The latest scrutiny brings with it two complications. For a start, it comes at an awkward moment. The economy has been hit hard by recent lockdowns to contain covid-19. In response, China’s leaders have announced plans for infrastructure spending this year to help achieve a lofty gdp-growth target of 5.5%. lgfvs would typically play a key role in funding and contracting much of the building activity across the country. But the crackdown on corruption and other restrictions means that managers will be less likely to take risks. Normally this would be considered a good thing. This time, however, an unwillingness to take on new projects could come at the cost of precious gdp growth at a time when the Communist Party can ill afford it.Moreover, tighter oversight has had the unintended effect of exposing lgfvs to currency risk. The firms must gain regulatory approval to issue bonds within China. Greater scrutiny over their use of funds has led to onshore-debt issuance by lgfvs falling by 22% in the first four months of 2022, compared with the same period last year. This has pushed the companies into the riskier offshore market: dollar-bond issuance by lgfvs soared by about 150% during the same period, according to Pengyuan, a rating agency. But few of these companies earn dollar revenues, making it harder to repay the bonds. A default would send a shock wave through the bond market. Such dangers explain why Beijing’s technocrats want to reduce the importance of lgfvs, especially as local governments can now issue bonds directly, reducing the need for fiddly workarounds. For as long as the growth target is in peril, though, lgfvs will be going nowhere. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

China’s local-government financiers have a complex identity. Tasked with developing land and doing public works, they act on behalf of, and with approval from, city and provincial authorities. Yet at the same time they represent large companies, known as local-government financing vehicles (lgfvs), which have the ability to raise billions of dollars from global investors. The thousands of lgfvs around the country owed an estimated 53trn yuan ($8.3trn, equivalent to 52% of annual gdp) in debts last year. Listen to this story. Enjoy more audio and podcasts on More

Remember the Great Moderation? This refers to the period before the global financial crisis of 2007-09 during which there was a marked fall in the volatility of gdp growth in rich countries. Explanations for it ranged from wiser monetary policy (yes, really) to globalisation. In fact, much of it was down to something more mundane: smaller inventories. One authoritative study found that more than half the improvement in the stability of rich-world growth was explained by diminished inventory cycles.The classic stockbuilding cycle, in which inventory changes add to the momentum of gdp on the way up (through over-ordering) and on the way down (through stock clearances), is showing signs of a revival. Some big American retailers, notably Walmart, have reported large increases in stocks. In part this is the result of errors in forecasting demand. But it also reflects an increase in the desired level of inventories. As just-in-time production gives way to just-in-case stockpiling, the scope for greater volatility in gdp, and in corporate earnings, is increasing.To understand why inventories are rising again, it helps first to understand why they fell. Improvements in computing mean that firms have more detailed and timelier information about demand from consumers. Such changes made large precautionary stockholdings redundant. A related factor is carrying cost. Interest rates were high in the 1980s, when businesses first began to favour leaner inventories. And a dollar in stock is a dollar that cannot be used profitably elsewhere. Accompanying this was the widespread adoption of just-in-time manufacturing, with its emphasis on flexible supply.For the leanest companies, inventory consists of whatever FedEx or ups is carrying for them. Or it did until recently. The tech-and-trade wars between America and China challenged assumptions about the security of supply. The pandemic (and now the war in Ukraine) upset them completely. The pattern of demand suddenly shifted as locked-down consumers could not spend on dining out or live entertainment; instead they spent more on goods that could be ordered online and delivered to their door. Meanwhile shortages of workers and of key inputs, notably semiconductors, meant that some orders could not be fulfilled. Businesses lost sales for want of inventory. Logistical snafus became a board-level discussion.The result, inevitably, has been an overcorrection. Having lagged behind spending, inventories got ahead of it. The share prices of Walmart and Target fell sharply in mid-May when the two retailers revealed they had been left with large stocks of unsold goods, after misjudging the strength of demand. Even the mighty Amazon has been blindsided, as the e-commerce share of retail sales, which exploded in the pandemic, has fallen back towards its pre-covid trend. The cyclical effects of all this will have to be reckoned with. Some retailers may be holding the wrong stock for the time of year. They will either have to store it, mark down prices to clear it quickly, or move it on to discount retailers that specialise in selling out-of-season stock. Inflation will be lower than it would otherwise have been. Some companies that have over-ordered will cut back on purchases to allow stock levels to adjust to the trend in spending. Albert Edwards of Société Générale, a French bank, reckons that the pain will be felt more in China, as “demand for Chinese imports gets hit hard just when the Chinese authorities are struggling to revive their moribund economy”.Yet there is something more profound at play. Just-in-time production assumes a largely frictionless world—of open borders, predictable demand and low transport costs. This can no longer be relied upon. Inventory is a form of insurance against unexpected delays. And though insurance is costly, company bosses seem willing to pay for more of it. The trade-off between efficiency and self-insurance, between just-in-time and just-in-case, has shifted markedly towards the latter. And larger inventories imply greater scope for inventory cycles in the future.There is a paradox here. The more companies seek to self-insure by holding more stocks, the more volatile gdp (and thus corporate earnings) is likely to become over time. American retailing might thus be offering a preview of a particular future—of jumpier revenues and more frequent profit warnings. The Great Moderation is going into reverse. Read more from Buttonwood, our columnist on financial markets:Is China “uninvestible”? (May 21st)Why Italy’s borrowing costs are surging once again (May 14th)Who wins from carnage in the credit markets? (May 7th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Rarely can so much have been used by so few. During Shanghai’s long lockdown, which mercifully eased this week, the city’s impressive infrastructure stood in splendid isolation from most of the citizens it is meant to serve. The metro (all 831km of it) was eerily quiet. The two airports, which handled 120m passengers in 2019, operated at 99% below their normal level. The famous mag-lev train neither magnetised nor levitated. Six-lane highways provided an ocean of road space for handfuls of scooters. China is renowned for creating “ghost cities”: new, sparsely populated districts that gradually come to life as people move into them. Shanghai’s lockdown reversed this process, turning a lively metropolis into something undead. This surreal underuse of existing infrastructure notwithstanding, the government’s best hope for reviving the economy is to add more of it. Much more. Spending on transport, water conservation and renovating old neighbourhoods will be a “strong driving force” for the economy, helping to employ China’s 290m migrant workers, said Li Keqiang, the prime minister, in an emergency teleconference with thousands of local officials on May 25th. The government will also “vigorously” promote 102 “major projects”, listed in the country’s five-year plan, such as flood prevention, ultra-high-voltage power lines and four-lane expressways—including one to a city in Yunnan renamed Shangri-La.If Omicron resurges, recurring lockdowns may prevent China spending its way out of trouble this year. But even if everything goes to plan, a successful stimulus will raise a deeper question. Does China need all that additional infrastructure? Or will the extra spending leave behind superfluous “white elephants”, as undisturbed by human traffic as the airports, roads and railways of locked-down Shanghai?The question is tricky to answer, because infrastructure in China is hard to measure or even define. The definition used by the National Bureau of Statistics (nbs) often leaves out areas such as gas and electricity, as well as social sectors like education and health care. Worse, the official investment figures, designed with central planners in mind, are not consistent with modern national accounting. Nor, owing to shifts in classification and reporting thresholds, are they consistent with themselves over time. As Carsten Holz of the Hong Kong University of Science and Technology once noted, if one intended to make this data “as unusable as possible, one could probably not do a better job than the nbs does”.In a paper published by the World Bank in 2020, Richard Herd nonetheless estimates that China’s stock of infrastructure and government capital rose from 64% of gdp on the eve of the global financial crisis in 2007 to 107% in 2016 (the most recent figure in his paper). This new prominence of infrastructure (and housing) in Chinese investment may help explain the country’s productivity slowdown over the past decade. Another measure by the imf adds up all the investment undertaken by China’s central and local governments. According to this method, the stock of public capital was even larger: 151% of gdp in 2019, among the highest shares in the world. Both of these measures compare the scale of China’s infrastructure with the size of its gdp. This convention makes some sense: a bigger economy needs a larger backbone to support it. Conversely, a small economy, where people are few in number or limited in their means, can fit into a smaller infrastructural frame. If few people can afford cars, flights or smartphones, a country will have less need of roads, airports and 5g towers. According to this logic, infrastructure is a kind of “input” that should be sized according to the scale of production. But gdp is not the only relevant comparison. Indeed, saying that a country’s infrastructure should be kept in proportion to its gdp is tantamount to saying that poor countries should have poor infrastructure. Some common components of infrastructure are more like amenities than inputs to production. A cleaner environment, a faster bus trip or a more comfortable train journey are things people of all income levels can appreciate. On this view, what matters is the amount of infrastructure per person, regardless of their income.Sadly, China’s infrastructure is less impressive when compared with the size of its vast population. For example, it has 120km of motorways per 1m people, compared with 179km in France and 326km in America. And it has 106km of railway per 1m people, compared with 236km in Britain and over 400km in Germany. China’s metro lines are more than 20 times as long as those in France. But China’s population living in cities (of over 500,000 people) is also more than 20 times as large. China also has only 4.4 intensive-care beds for every 100,000 people, according to some estimates, compared with 14 in America—a catastrophic shortage of medical infrastructure that helps explain its lack of tolerance for covid outbreaks. Indeed, there are 37 economies in the imf’s database that have a higher stock of public capital per person than China. Presumably those economies do not think that their extra infrastructure is entirely superfluous. The longer road to Shangri-LaCritics of China’s proposed infrastructure stimulus worry that it will crowd out other, more productive forms of spending. But in China’s covid-wracked economy, other spending is unusually weak. Without government help, the level of demand might not be enough to fully employ the country’s labour and capital, including its existing infrastructure. A recession can impose the same kind of compulsory idleness on an economy as a lockdown. The time and energy that China’s workers will devote to extending power networks, waterways and roads to Shangri-La might otherwise be lost to the economy for ever. Wasteful spending is a curse in China. But underspending can be the most elephantine waste of all. ■Read more from Free Exchange, our column on economics:How economic interdependence fosters alliances and democracy (May 28th)How to unleash more investment in intangible assets (May 21st)The world needs a new economic motor. Could India fit the bill? (May 14th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

When it comes to revenue, robotaxi apps show companies are still heavily subsidizing rides. For now, the money for self-driving tech is in software sales.
Investment analysts from Goldman Sachs and Nomura point to opportunities in auto software itself, from in-car entertainment to self-driving systems.
Last week, Chinese self-driving tech start-up WeRide said it received a strategic investment from German engineering company Bosch to produce an assisted driving software system.

A WeRide robotaxi with health supplies heads to Liwan district on June 4, 2021, in the southern Chinese city of Guangzhou.
Southern Metropolis Daily | Visual China Group | Getty Images

BEIJING — While governments may be wary of driverless cars, people want to buy the technology, and companies want to cash in.
It’s a market for a limited version of self-driving tech that assists drivers with tasks like parking and switching lanes on a highway. And McKinsey predicts the market for a basic form of self-driving tech — known as “Level 2” in a classification system for autonomous driving — is worth 40 billion yuan ($6 billion) in China alone.

“L2, improving the safety value for users, its commercial value is very clear,” Bill Peng, Hong Kong-based partner at McKinsey, said Monday in Mandarin translated by CNBC. “Robotaxis certainly is a direction, but it doesn’t [yet] have a commercialization result.”
Robotaxi businesses have made strides in the last several months in China, with Baidu and Pony.ai the first to get approval to charge fares in a suburban district of Beijing and other parts of the country. Locals are enthusiastic — Baidu’s robotaxi service Apollo Go claims to clock roughly more than 2,000 rides a day.
But when it comes to revenue, robotaxi apps show the companies are still heavily subsidizing rides. For now, the money for self-driving tech is in software sales.

Lucrative tech

Investment analysts from Goldman Sachs and Nomura point to opportunities in auto software itself, from in-car entertainment to self-driving systems.
Last week, Chinese self-driving tech start-up WeRide said it received a strategic investment from German engineering company Bosch to produce an assisted driving software system.

The goal is to jointly develop an L2/L3 system for mass production and delivery next year, Tony Han, WeRide founder and CEO, told CNBC. L4 designates fully self-driving capability under specific circumstances.
“As a collaborator, we of course want this sold [in] as many car OEMs in China so we can maximize our [revenue and] profit,” he said, referring to auto manufacturers. “We truly believe L2 and L3 systems can make people drive cars [more] safely.”
In a separate release, Bosch called the deal a “strategic partnership” and said its China business would provide sensors, computing platforms, algorithm applications and cloud services, while WeRide provides the software. Neither company shared how much capital was invested.
The deal “is very significant,” said Tu Le, founder of Beijing-based advisory firm Sino Auto Insights. “This isn’t just a VC that sees potential in the overall market and invests in the sector.”
He expects the next step for commercialization would involve getting more of WeRide’s technology “bolted on the partner OEM’s products in order to get more pilots launched in China and experimenting with paid services so that they can tweak business models and understand the pricing dynamics and customer needs better.”

WeRide has a valuation of $4.4 billion, according to CB Insights, with backers such as Nissan and Qiming Venture Partners. WeRide operates robotaxis and robobuses in parts of the southern city of Guangzhou, where it’s also testing self-driving street sweepers.
CEO Han declined to speak about specific valuation figures. He said that rather than needing more funds, his main concern was how to reorganize the start-up’s engineers.
“Because Bosch is in charge of integration, we have to really spend 120% of our time to help Bosch with the integration and adaptation work,” Han said. WeRide has yet to go public.

The China stock play

For publicly listed Chinese auto software companies, Goldman’s thematic picks for autonomous driving include ArcSoft and Desay SV.
An outsourcing business model in China gives independent software vendors more opportunities than in the United States, where software is developed in-house at companies like Tesla, the analysts said. Beijing also plans to have L3 vehicles in mass production by 2025.
“Auto OEMs are investing significantly in car software/digitalization to 2025, targeting US$20bn+ of obtainable software revenue by decade-end,” the Goldman analysts wrote in mid-March.

Read more about electric vehicles from CNBC Pro

They estimate that for every car, the value of software within will rise from $202 each for L0 cars to $4,957 for L4 cars in 2030. For comparison, the battery component costs at least $5,000 today. By that calculation, the market for advanced driver assistance systems and autonomous driving software is set to surge from $2.4 billion in 2021 to $70 billion in 2030 — with China accounting for about a third, the analysts predict.
In September, General Motors announced it would invest $300 million in Chinese self-driving tech start-up Momenta to develop autonomous driving for GM vehicles in the country.
“Customers in China are embracing electrification and advanced self-driving technology faster than anywhere else in the world,” Julian Blissett, executive vice president of General Motors and president of GM China, said in a release.
Correction: This story has been updated to correct the currency conversion figure for the estimated size of the self-driving tech market.

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There are two main factors that has Dimon worried: So-called quantitative tightening, or QT, is scheduled to begin this month and will ramp up to $95 billion a month in reduced bond holdings.
The other large factor worrying Dimon is the Ukraine war and its impact on commodities, including food and fuel. Oil could hit $150 or $175 a barrel, he said.
“You’d better brace yourself,” Dimon told the roomful of analysts and investors. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”

JPMorgan Chase CEO Jamie Dimon says he is preparing the biggest U.S. bank for an economic hurricane on the horizon and advised investors to do the same.
“You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” Dimon said Wednesday at a financial conference in New York. While conditions seem “fine” at the moment, nobody knows if the hurricane is “a minor one or Superstorm Sandy,” he added.

“You’d better brace yourself,” Dimon told the roomful of analysts and investors. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”
Beginning late last year with high-flying tech names, stocks have been hammered as investors prepare for the end of the Federal Reserve’s cheap money era. Inflation at multidecade highs, exacerbated by supply chain disruptions and the coronavirus pandemic, has sown fear that the Fed will inadvertently tip the economy into recession as it combats price increases.  
While stocks bounced from a precipitous decline in recent weeks on optimism that inflation may be easing, Dimon seemed to dash hopes that the bottom is in.
“Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” Dimon said. “That hurricane is right out there, down the road, coming our way.”
There are two main factors that has Dimon worried: First, the Federal Reserve has signaled it will reverse its emergency bond-buying programs and shrink its balance sheet. The so-called quantitative tightening, or QT, is scheduled to begin this month and will ramp up to $95 billion a month in reduced bond holdings.

“We’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years,” Dimon said. Several aspects of quantitative easing programs “backfired,” including negative rates, which he called a “huge mistake.”
Central banks “don’t have a choice because there’s too much liquidity in the system,” Dimon said, referring to the tightening actions. “They have to remove some of the liquidity to stop the speculation, reduce home prices and stuff like that.”
The other large factor worrying Dimon is the Ukraine war and its impact on commodities, including food and fuel. Oil “almost has to go up in price” because of disruptions caused by the worst European conflict since World War II, potentially hitting $150 or $175 a barrel, Dimon said.
“Wars go bad, [they] go south in unintended consequences,” Dimon said. “We’re not taking the proper actions to protect Europe from what’s going to happen to oil in the short run.”

‘Huge volatility’

Last week, during an investor conference for his bank, Dimon referred to his economic concerns as “storm clouds” that could dissipate. Presentations from Dimon and his deputies at the all-day meeting have bolstered JPMorgan shares by giving greater detail on investments and updated figures on interest revenue.
But his concerns seem to have deepened since then.
During the response to the 2008 financial crisis, central banks, commercial banks and foreign exchange trading firms were the three major buyers of U.S. Treasurys, Dimon said Wednesday. The players won’t have the capacity or desire to soak up as many U.S. bonds this time, he warned.

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“That’s a huge change in the flow of funds around the world,” Dimon said. “I don’t know what the effect of that is, but I’m prepared for, at a minimum, huge volatility.”
One step the bank could take to gird itself for a coming hurricane is to push clients to move a type of lower-quality deposit called “non-operating deposits” into other places, such as money market funds, for example. That would help the bank manage its capital requirements under international rules, potentially helping it absorb a surge in bad loans.
“With all this capital uncertainty, we’re going to have to take actions,” Dimon said. “I kind of want to shed nonoperating deposits again, which we can do in size, to protect ourselves so we can serve clients in bad times. That’s the environment we’re dealing with.”
Banks having a “fortress balance sheet” and conservative accounting are the best protections for a downturn, Dimon said.
The bank has shied away from servicing a lot of federal FHA loans, he said, because delinquencies could hit 5% or 10% there, “which is guaranteed to happen in a downturn,” Dimon said.

‘Shame on you’

Dimon went on a tear during the hourlong session, barreling through topics like a “greatest hits” of his observations and gripes, often letting loose with profanity.
He lambasted investors for voting along with proxy advisors like Glass Lewis, which has disagreed with JPMorgan’s board on recent matters including executive compensation and whether the bank should separate the chairman and CEO roles in the future.
“Shame on you if that’s how you vote,” Dimon said. “Seriously, you should be embarrassed. Do your own homework.”
Companies are being driven out of public markets “because of litigation, regulation, press, cookie-cutter governance,” he added.  Meanwhile, other critics often conflate stakeholder capitalism for being “woke,” Dimon said.  “I am a red-blooded, free market capitalist and I’m not woke,” he said.
“All we’re saying is when we wake up in the morning, we give a s— about serving customers, earning their respect, earning their repeat business.”

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