Becker Private Equity & Business Podcast
JPMorgan, the IRS and Smoke & Mirrors 2-21-25
Fri, 21 Feb 2025
In this episode, Scott Becker discusses three key stories: JP Morgan taking a hit despite strong leadership, the IRS facing job cuts amid concerns over government inefficiency, and the increasing trend of companies using “smoke and mirrors” to explain weak earnings.
Chapter 1: What are the key stories discussed in this episode?
This is Scott Becker with the Becker Private Equity and Business Podcast. Today's discussion is JP Morgan, the IRS, and smoke and mirrors. And these three aren't necessarily related, so bear with me. So here are the three stories that we're talking about here, and that'll be the title, JP Morgan, the IRS, and smoke and mirrors. So the first concept is JP Morgan.
Chapter 2: Why did JP Morgan's stock drop despite strong leadership?
JP Morgan, with the other big banks, dropped several percent yesterday. It was down about 4.43%. It's literally about as good a well-run bank. Jamie Dimon is as good a leader as they come. We're a huge Jamie Dimon fan. We're not shy about that. Huge fan of the person, about the most center principal leader that I know out there. Just fantastic. But J.P.
Morgan took it on the chin yesterday with the other big banks. The IRS is number two, and this is complicated. The IRS, you know, the Trump administration, DOJ, is going to lay off several thousand employees at the IRS today. This is going to cut into the auditing of small businesses, self-employed people and so forth, the auditing of that.
Chapter 3: What are the implications of IRS job cuts?
But the concept here is really challenging because at the end of the day, I think most of us know that the government's probably way bloated and also probably doesn't rely enough on technology and relies too much on probably human labor. And often we don't know what that human labor is doing.
Chapter 4: How does government inefficiency affect small businesses?
So the challenge is, of course, that we probably have an over bloated federal government and state government at many, many levels in many, many states. At the same time, when you do do job cuts, it does have even though on a statute, it might look good on a P&L sheet. It might look good in the reality.
Chapter 5: What does a bloated government mean for the economy?
It impacts real, real lives and people that are paying bills for their families to take care of their families and so forth. So we often joke and it's not so much a joke. The recession is when the economy is going in the wrong direction. A depression is when you yourself lose your job. So that's sort of the second story today, the IRS.
Chapter 6: How do job cuts impact real lives during a recession?
I'm conflicted about all this stuff because at the end of the day, I do believe the government is probably way overboard. We've grown payrolls that we don't need to have. And at the same time, it's very real people that will be laid off and have to find work if they're laid off.
and so forth, and the government still has to function, but I think there probably is a ton of inefficiency and waste in government. So those are our first two stories, JPMorgan Chase and the IRS. The third story is, and this is, I think, fascinating. This is the smoke and mirrors.
What you see going on right now, for the first time in a couple years, a lot of companies are reporting earnings and trying to use different kinds of excuses for why their earnings are a little bit more challenging than they expect.
and we're seeing a lot of that we call that the smoke and mirrors defense you know a company's got their car sales going down for the next quarter and they say that's not really their car sales it's something else no no no it really is your car sales another company says you know we're making great progress we're still losing a ton of money but our gross profit is up but our ebitda still sucks and and that's the same concept we're trying to get our cost of good sold down
But the only way to do that is explode our number of vehicles sold. And this happens to be Rivian I'm talking about here, whether it's Rivian, Carvana, whatever. You're seeing more and more of the dodge, the smoke and mirrors and earnings releases. And we'll see how that goes. But, again, those are our three stories this morning. J.P. Morgan, Chase, takes it on the chin a little bit, down 4.43%.
The IRS, look at the job cuts, probably down. needed, probably need to do a lot more to technologically improve our government as the rest of the world starts to improve their governments. And third is the smoke and mirrors earnings and just seeing a lot and lot more of that. Thank you for listening to the Becker Private Equity and Business Podcast this morning. Just a great pleasure every day.
If you listen to this all the way through, you send me a text, 773-766-5322, and you talk about, give me your opinion on either the IRS cuts or on the smoke and mirrors earnings releases, and love to send you $100 gift certificate if you're the first person to send that in. Thank you for listening to the Becker Private Equity and Business Podcast.
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