0/ In the $JPM annual letter Jamie Dimon says "Banks have enormous competitive threats -- from virtually every angle. Fintech and Big Tech are here… big time!”

"Acquisitions are in our future & FinTech is an area where some of that cash could be put to work."
1/ "From loans to payment systems to investing, they have done a great job in developing easy-to-use, intuitive, fast & smart products. We have spoken about this for years, but this competition now is everywhere. Fintech’s ability to merge social media, use data smartly &
2/ integrate with other platforms rapidly (often without the disadvantages of being an actual bank) will help these companies win significant market share."

On Big Tech- "Importantly, Big Tech ( $AMZN, $AAPL,
$FB, $GOOGL – &, as I said, now I’d include
$WMT) is here, too.
3/ Their strengths are extraordinary, w/ ubiquitous platforms & endless data. At a minimum, they will
all embed payments systems within their ecosystems & create a marketplace of bank products & services. Some may create exclusive white label banking relationships, & it is
4/ possible some will use various banking licenses to do it directly."

On how $JPM intends to compete- "As tough as the competition will be, $JPM is well-positioned for the
challenge. But our eyes are wide open as the landscape changes rapidly & dramatically."
5/ We have an extraordinary # of products & services, a large, existing client base, huge economies of scale, a fortress balance sheet & a great, trusted brand. We
also have an extraordinary amount of data, & we need to adopt AI & cloud as fast as possible so we can make better
6/ use of it to better serve our customers...Sometimes new markets look too small (e.g., $BTC) or appear not to be critical to our customer base– until they are. We intend to be a little more aggressive here."
7/ On his macro outlook- "I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill,
a successful vaccine & euphoria around the end of the pandemic, the U.S. economy will likely boom. This boom could
8/ easily run into 2023 because all the spending could extend well into 2023. The permanent effect of this boom will be fully known only when we see the quality, effectiveness & sustainability of the infrastructure & other government investments. I hope there is extraordinary
9/ discipline on how all of this money is spent.
Spent wisely, it will create more economic
opportunity for everyone."
10/ On equity valuations "While equity valuations are quite high (by almost all measures, except against interest rates), historically, a multi-year booming economy could justify their current price. Equity markets look ahead, & they may very well be pricing in not only a booming
11/ economy but also the technical factor that lots of the excess liquidity will find its way into stocks. Clearly, there is some froth & speculation in parts of the market, which no one should find surprising."
12/ Comparing this market backdrop to post GFC- "The US QE actual in '20 & QE projected for '21 total $4.6T or ~25% of GDP. Deficit spending for the 2 years
combined is projected to total $6.8T, or ~35% of GDP.
The RoW is showing similar actions, compounding the global effect
13/ On partisan gridlock globally- "As Washington, D.C., & central governments around the world struggle w/ partisan gridlock & an inability to get big things done, local communities are coming up with some of the best ideas to make civic society work for more people. Mayors,
14/ governors, educators, major employers, entrepreneurs, community leaders & nonprofits are making serious progress developing innovative approaches that address our greatest challenges."
15/ On $JPM acting on behalf of all stakeholders "JPM takes an active role in large-scale public policy issues. We are fully engaged in trying to solve some of the world’s biggest issues – climate change, poverty, economic development & racial inequality."
16/ Comparing Banks vs. FinTech firms over the past 10 / 20 years, U.S. banks have become much smaller relative to U.S. financial markets & to the size of most of the shadow banks. You can also see the rapid growth of payment & fintech companies & the size of Big Tech companies.
17/ "It is completely clear that, increasingly, many banking products, such as payments & forms of deposits among others, are moving out of the banking system. In addition, lending including mortgage, student leveraged, consumer & non-credit card consumer – is moving out"
18/ The whole letter is well worth the read (its his longest yet) covering bank competitive pressures, COVID-19 & the economy, American exceptionalism, Competitiveness and Leadership: Challenged by
China, COVID-19 and Our Own Competence

• • •

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More from @JohnStCapital

6 Apr
0/ The @coinbase team announced 1Q21 data including revenue of ~$1.8B, adj EBITDA of $1.1B, NI of $730-$800M, trading volume of $335B & assets on the platform of $223B (11.3% of cryptoasset market) with 56M users

Run-rate of $7.2B in revenue / $4.4B in EBITDA / $3.0B of NI.
1/ The 56M user # is bigger than @CashApp & @Venmo and significantly larger than @RobinhoodApp & @eToro. That's greater than every bank not named $JPM.
2/ Incumbents can no longer ignore this. The BoD's of $SCHW $IBKR $MS (as a result of the $ETFC acquisition) and Fidelity (even though they are private) have to add crypto trading at this point it's almost a violation of their fiduciary duty to s/h not to.
Read 9 tweets
6 Apr
0/ China's digital yuan is starting to gain a lot of attention as they lap 1 year since they first launched trials and have ~100K users piloting it as they look to be the first to bring a Central Bank Digital Currency (CBDC) to market.
1/ Today the USD is used for ~88% of international foreign-exchange trades while the yuan is used in just ~4%.

The fact that China is launching a CBDC doesn't change this from an institutional perspective you're still exposed to the monetary policy decisions of the PBOC / CCP
2/ There are concerns that on the margin this would allow those seeking to avoid US Sanctions to move money without using SWIFT (and therefore avoiding the monitoring systems set in place).
Read 5 tweets
1 Apr
0/ $BTC "closed" March +29.6% its 6th consecutive positive month (for the first time since Nov '12-April '13. March had historically been the most challenging month for $BTC with April / May being the strongest.

Its only had 7 consecutive (+) months once; March-Sept '12 Image
1/ If we look at $BTC's "theoretical cost basis" it ended the month at $17,400 +15.5% its 12th consecutive positive month.

The current premium to theoretical cost basis is 237.5% which is in the top 4% of all observed periods. ImageImage
2/ If we look at $BTC inflation its now at over $50M/day on avg which is nearly 2x the '17 peak; but the fiat on ramps / types of institutional buyers have changed considerably since that time period.

In 1Q we've had $3.8B of $BTC mining inflation this compares to $4.7B in '20. Image
Read 13 tweets
29 Mar
0/ Bill Hwang / Archegos + RH $GME saga may be more intricately linked than we thought but but show problems w/ existing market infrastructure

How does a $10-$12B family office cause $2B of losses at Nomura $3-$4B at CS & unknown across the street w/ tech names -40% in 5 days?
1/ Archegos allegedly had $10-$12B of equity value & created $40-$60B of notional exposure via swap positions with an offsetting index hedge against it.

Common theme for all the stocks high short interest (10-30%) held on swap with multiple P/Bs.
2/ If you look at the holder lists of his names MS / GS were the bulk of it but Nomura, CS, DB, and UBS all had exposure as well.

Each bank has different margin requirements for their swap counterparts (typically 25%-35%).
Read 15 tweets
29 Mar
0/ In a recent $SQ report they discussed payment trends one-year into the pandemic; estimating the shift away from cash usage would have taken 3 years w.o COVID-19 serving as an accelerant.
1/ Looking at businesses that have been with $SQ since 2015 they see a steady decline in the % of cash transactions (this is a global phenomenon).
2/ From Feb '20-Feb '21 there was a 15.1% increase in $SQ sellers accepting online payments (vs. 3.3% in the prior year).

45% of all SQ sellers accept online payments now up from 30% a year ago
Read 4 tweets
10 Mar
0/ The $RBLX & @coinbase DL's will be interesting to compare vs. SPAC's + IPO's.

$RBLX raised $520M at a $29.5B valuation led by @altcap in Jan w/ the intent to DL. It had a ref price of $45/sh & opened at $60.50/sh ($40B) & closed at $69.50 ($46B)
1/ While optically this still looks like a 56%+ "pop" from the @altcap round all employees etc... who were able to sell could never actually execute at the ref price & even if they somehow all bottomed ticked it at the open enjoyed that 36% premium
2/ @coinbase is rumored to be going out at the end of the month & given their reported metrics & profitability will be completely different. There aren't a ton of sizable s/h who just invested to be that initial liquidity & you could see this gap up day one vs its ref price.
Read 4 tweets

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