How to find financial opportunities in what Jamie Dimon calls 'the most dangerous time the world has seen in decades'

By Philip van Doorn

Also, hope for housing, close looks at choices for bond investors, a busted IPO and sound advice from the Moneyist

JPMorgan Chase & Co. (JPM) CEO Jamie Dimon didn't mince words when the bank reported its third-quarter results on Friday.

It was a very good quarter for the largest U.S. bank, but Dimon said: "This may be the most dangerous time the world has seen in decades."

In JPM's earnings press release, Dimon referred to the war between Russia and Ukraine and Israel's war against and Hamas, and the potential for various disruptions to international trade and commodity markets. But he also said "the largest peacetime fiscal deficits ever are increasing the risks that inflation remains elevated and that interest rates rise further from here."

Vivien Lou Chen works through a complicated set of circumstances affecting the bond market, including traders' expectations for Federal Reserve Policy and oil prices under various scenarios.

West Texas Intermediate crude oil for November delivery (CL.1) settled at $82.91 on Thursday, only 1% higher than a week earlier. But on Friday oil prices jumped early after Israel ordered more than a million residents of Gaza to evacuate to the south.

More coverage of markets:

Will Israel-Gaza war sink stocks and shake the global economy? Watch oil prices.Stock-market moves show bond traders are still in charge as yields renew riseStocks hit a bear-market low one year ago. Time to celebrate?1970s-style stagflation may be at risk of repeating itself, Deutsche Bank warnsOPEC leaves forecasts for oil-demand growth unchangedRally in U.S. stocks sparked by unusual option-market trading activity, strategist saysJoseph Adinolfi: Emerging-market stocks are looking cheap, especially relative to the U.S. Does that mean it is time to buy?

Housing, high mortgage interest rates and hope

This week the national average interest rate on a 30-year mortgage loan rose to 7.57%, according to Freddie Mac. Prospective home buyers already know that potential sellers are reluctant to move because so many of them have low-rate loans locked-in.

But the market has been perking up. There is hope in two important aspects of residential real estate, according Redfin.

And this may fascinate you. Aarthi Swaminathan explains how it is possible to find a home for sale with an assumable mortgage loan, featuring a low interest rate.

Related: Three reasons investors have fallen in love with home builders' stocks

Is it finally time to shift into bonds?

The dramatic rise in long-term interest rates is making life difficult for prospective home buyers, or people looking to move, but it is also setting up opportunities for investors.

When you see headlines about plunging bond prices, there can be opportunities because bonds' yields have risen. Following four decades of declining bond interest rates, and a slower rise for long-term yields after the Federal Reserve began its cycle of increases for short-term rates, this may be the right time for investors to shift their portfolios more toward fixed income.

Pimco makes the case that bonds can provide downside protection for investors, in addition to income, in the event of a recession, as Joy Wiltermuth reports.

More bond market coverage:

Fix my portfolio: I bought Series I bonds, then forgot about them. Are they still worth anything, or should I sell them?Treasury yields are likely to fall. That doesn't mean stocks and corporate bonds are guaranteed to increase.ETF Wrap: Investors shun high-yield debt ETFs despite gains as broader bond market stumblesTime for big shift from stocks to credit as 'easy money' ends, says billionaire investor Howard MarksBruising Treasury bond selloff is looking long in the tooth, says Deutsche Bank strategistRay Dalio thinks the U.S. is courting a debt crisis. Are regulators moving fast enough to avert it?

Should you try to avoid taxes with municipal bonds?

There are times when municipal bonds -- most of which pay interest that is exempt from federal income taxes and from state taxes if issued within your state -- have such low interest rates that they are only worth considering if you are in one of the highest tax brackets. This isn't one of those times, especially if you live in a state with a high income-tax rate.

Here's a detailed explanation of how to calculate fully taxable equivalent yields for municipal bonds and U.S. Treasury bonds, which are exempt from state and local taxes.

A different angle for investors: Dividend stocks are dirt cheap. It may be time to back up the truck.

Another twist on high bond rates -- credit problems

High interest rates bring new opportunities for income-seeking savers and investors. The flip side is that borrowers face much higher interest rates:

The risk of defaults is increasing as companies' debt matures and renewal rates soar. And the pace of corporate bankruptcies has been increasing.

Meanwhile, interest rates on auto loans, for people with less-than-stellar credit, have climbed to 17%-22%, which investors are shrugging off, for now.

Related: Americans are less confident they can make the minimum payments on their credit cards, New York Fed says

Exxon's shale move and a happy exit for Pioneer's shareholders

On Wednesday, Exxon Mobil Corp. (XOM) finally announced an agreement to acquire Pioneer Natural Resources Co. (PXD) in an all-stock deal valued at $59.5 billion.

Exxon's expansion of its shale drilling business in the Permian Basin in Texas and New Mexico is the largest deal in a tempered M&A market this year.

More reaction:

Exxon, Pioneer deal is 'home run' for ExxonPioneer's CEO cheers Exxon's 'great dividend.' Here's how much he could make

Some problems are good ones to have

Quentin Fottrell -- the Moneyist -- helps a reader who is 59 years old and wants to enter semiretirement within a few years and move to Hawaii. Here's the wonderful problem: Should he sell investments to buy a beautiful house in Hawaii, or take a mortgage loan?

Another of the Moneyist's readers is 67 years old and still works full time. He needs help working through tax and other implications as he decides whether or not to wait until he is 70 to begin receiving Social Security payments.

One more retirement question: We have two houses and 45 acres of farmland, but we don't know what to do about retirement. Where do we start?

More: Should I put my fiancé's name on the deed to my $560,000 California home after we marry?

A busted IPO

Shares of Birkenstock Holding PLC (BIRK) fell 13% on Wednesday, their first day of trading. Ciara Linnane explains the sour reaction to this initial public offering and how it fits into the subdued scene for IPOs in 2023.

This trend will grow as it shrinks

Take a look at a year-to-date performance chart for shares of Eli Lilly & Co. (LLY), the maker of Ozempic, and American depositary receipts of Novo Nordisk (NVO), relative to the SPDR S&P 500 ETF trust SPY:

Walmart Inc. (WMT) has said that the two weight-loss drugs, being used as treatments for people with Type 2 diabetes and obesity, have already led to a decline in sales for high-calorie food products.

PepsiCo Inc. (PEP) owns Frito-Lay, which makes Doritos, Cheetos, Ruffles and other popular snacks. During the company's earnings call on Tuesday, PepsiCo CEO Ozempic and Wegovy said the two diet drugs hadn't yet had much of an affect on its snack business, but that this trend was leading to smaller package sizes.

Related: DaVita plays down Ozempic's potential in treating kidney disease

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-Philip van Doorn

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10-13-23 1230ET

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