JPMorgan

When you are looking for hard hitting journalism four years too late, there is only one place to turn: Vanity Fair. In 2013, JPMorgan paid (at the time) a record fine of $13 billion for its role in the financial crisis. Specifically, for securitizing and reselling bad mortgage debt. Later, CEO Jamie Dimon and JPMorgan were hailed as “white knights” for their selfless acts of buying Bear Stearns and Washington Mutual. This left many people asking, “If Chase is so great, why did they pay that fine?”

Except, no one asked that, and everyone knew Chase was involved. Apparently the $13 billion settlement included a clause to hide a “smoking gun” of a report by Benjamin Wagner.

“The contents of the draft complaint have long been a financial-crisis mystery, a Great White Whale of a document. At least until now.”

Really, not so much. Also, nice reference to the London Whale, subtle.

I guess there were other fines paid and other clauses to keep the report secret, however the freedom of information act allowed attorney Daniel Novack to get his hands on a copy of a redacted version of the document, another example of how transparency often lags behind automation in the world of compliance and documentation

Chase probably put it best when it was reached for comment:

“These allegations have been addressed, resolved, or refuted years ago.”

Don’t get me wrong, people still hate banks, but the people that bought Chase’s narrative following the mortgage crisis were Chase employees. At least, the employees that didn’t work in the mortgage securitization department. They probably knew better.

Robots!

Don’t fear the Robot Apocalypse!

I often enjoy writing about the unfounded fears of people worried that automation will take jobs in America. Most of what I write about centers on the concept that automation will accentuate the work that many people do. Admittedly, some jobs will be lost. However, I think they will sort of make way for better jobs.

This article took a decidedly different approach, arguing, not that robots won’t take over but rather that when they do, they will make gentle masters.

Take Belinda Duperre, for instance. She was laid off in 2016 when Sam’s Club closed. She is not a victim!

“But Ms. Duperre, a lifelong resident of the once-thriving factory town an hour south of Boston, went from victim of the digital revolution to beneficiary. Amazon.com Inc. announced plans to hire 500 full-

time workers for a new 1.2-million square foot fulfillment center on the outskirts of town. ‘I was just dying, waiting for Amazon to open,’ she recalls. She was among the center’s first hires last fall; full-time employment has since soared to about 2,000.”

Thanks Amazon! What is Belinda doing now?

“At Amazon, she packs 75 to 120 boxes an hour that are then whisked via high-speed automated conveyor belts to fleets of trucks that fan out across the region.”

I guess she was hired to do work that is somehow beneath the machines. Or maybe people are just cheaper than machines that pack boxes. But there’s more.

“The work is more physically demanding, but Ms. Duperre, 54, sees a bright side. ‘I lost 25 pounds working here,’ she says. ‘This is a free gym membership.’”

Stockholm syndrome occurs when victims start to feel affection towards their captor.

Of course, I’m mostly poking fun at the article. In truth, automation and efficiencies generally create new, often better, jobs for displaced workers.

More Automation!

In fact, Joe Davis, Vanguard’s chief global economist says that “we’re at an inflection point where today we’re seeing a structural change in the nature of work that will greatly impact the labor market not just for the United States but for the global economy. How work changes for all of us in the years ahead will be the trend that defines our lifetime.”

Davis believes that we are in a period of disruption. A period that will ultimately change the way we work, generally for the better.

While the entire article is a very interesting read, Joe presents four paradoxes for the modern economy:

1) More automation, yet labor shortages

The number of robots in the workforce will double in the next three to five years, Davis posited, yet the combination of the aging population and the strong demand for uniquely human work will mean there will be labor shortages in the U.S.

2) Labor shortages, yet low inflation

Offsets to wage inflation due to technology is lowering the cost of producing just about everything, Davis said, and the more we use technology the harder it is to generate 2 percent inflation.

3) Low inflation, yet high real interest rates.

Even though Davis said he had the least confidence in this prediction, he foresees we’ll see the same level of global economic growth and the same inflation rate in the next three years, and we’ll see higher real interest rates not because the Fed will raise rates in December and probably will be on hold for at least a year, but because productivity will slowly rise and that’s often associated with higher interest rates.

4) High real rates, yet lower short-term market returns.

“High real rates is good news for all long-term investors because near-zero rates have depressed expected returns in the efficient frontier across all asset classes,” Davis said. “But there is a catch: we’d be in for some rocky weather as we adjust to that period during the next two or three years, and I think there’s more risk in the equity market than the bond market.”

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