Markets are closed tomorrow for Good Friday so enjoy the long weekend! Short Weekend Reading but definitely check out the Zeihan video. I thought it was very interesting..

By Charles Ruff, CFA

Peter Zeihan presentation at Fort Benning

Peter Zeihan | The Changing Character of War | Maneuver Center of Excellence

His perspectives are pretty unique. I don’t agree with all his takes but he does a great job framing and verbalizing complicated issues and relationships. NB this presentation is to a military audience. The video is an hour long but you have a 3 day weekend! Get to it!

  • Demographics
    • As you all know, I love these sort of discussions. Demographics aren’t something that change with elections or market cycles. I am a strong believer that demographics are destiny.
    • We previously discussed how the US is ‘winning’ the demographic race with China but Zeihan’s claims about China fiddling with the census numbers are news to me.
      • This claim isn’t surprising. China has a long history of data manipulation
      • This claim is also supported by the fact that China has been very slow releasing its census data. I need to do more digging to verify his exact claims.
    • China’s reliance on safe trade routes, particularly for oil.
      • Terrific perspective here showing just how vulnerable China is to oil imports.
      • This certainly explains China’s interest in building a Navy
    • Taiwan
      • This is one key question that isn’t adequately addressed and doesn’t align with his other points
      • Taiwan would not help China achieve any of its geopolitical ambitions. In fact, it would directly hinder China’s geopolitical ambitions.
      • Perhaps China’s obsession with Taiwan is more jingoistic posturing to try to unite Chinese people during slowing economic growth and draconian COVID policies?

JP Morgan (JPM)

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JP Morgan (JPM) kicked off earnings season and reported on Wednesday. As the largest bank, JPM is a bellwether for financial companies and the economy at large. A few highlights.

  • Core operations are pretty good and generally came in above the consensus of Wall Street estimates. Net Interest Income & fee income grew and were broadly in-line with expectations.
    • From an economic standpoint, this is bullish.
  • Credit costs were higher with management citing inflation and the War in Ukraine. Specifically, while Net Charge Offs were down, and Non-performing assets were down, JPM still took a larger than expected provision for credit losses.
    • Low Net Charge Offs and Non-Performing Assets suggest credit is very clean today.
    • Provisions are forward-looking charges banks take to help offset credit problems that might arise in the future. On the call, JPM management mentioned that they took this provision to be proactive and they are not (yet) seeing signs of stress on consumer balance sheets even with higher inflation etc.
    • Consumer banking dipped with mortgages and auto loan volumes both of these are driven by supply limitations. Consumer deposits at JPM rose at a healthy clip. The US consumer seems to be doing fine.
  • In total, JPM’s quarter and the messaging provided by management echoed the points made in Jamie Dimon’s annual letter (which we included last week). Today, the US economy is strong. But Inflation, constrictive monetary policy, and uncertainty from the Ukraine War are major concerns.
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