Inflation may continue to spread, JPMorgan Chase is hoarding cash, and billionaire Paul Tudor Jones hopes to allocate 5% of his portfolio to Bitcoin

JPMorgan Chase CEO Jamie Dimon said at a conference on Monday that JPMorgan Chase has been "effectively hoarding" cash rather than using it to buy U.S. Treasuries or other investments because rising inflation could force the Federal Reserve to raise interest rates, according to CNBC. Dimon believes there is a good chance that inflation will be more than just temporary.

He said the largest U.S. bank by assets has positioned itself to benefit from rising interest rates, which will allow it to buy higher-yielding assets.

“If you look at our balance sheet, we have $500 billion in cash and we’ve actually been hoarding more and more cash waiting for opportunities to invest at higher interest rates,” Dimon said. “We expect to see higher interest rates and more inflation in the future, and we’re prepared for that.”

Federal Reserve officials say the current surge in inflation is temporary, but a growing number of voices, including Deutsche Bank economists and hedge fund billionaires, are warning of dire consequences if the Fed ignores inflation.

Late Monday, Morgan Stanley CEO James Gorman told CNBC that he also believed higher inflation was likely to persist and that the Fed could be forced to raise rates sooner rather than later.

Billionaire hedge fund manager and Wall Street trader Paul Tudor Jones said in an interview with CNBC that he believes the Federal Reserve is too optimistic about inflation.

He also talked about the continuous rise in the consumer price index (CPI), which has pushed price pressures far above the Fed's 2% inflation target. However, Fed officials continue to insist that the current indicators are transitional and unlikely to last.

"That's a red flag because if they get it wrong on inflation, it risks further damaging their credibility in the market," Jones said.

The May CPI showed that overall inflation increased at an annual rate of 5%, the fastest since the financial crisis, while core inflation increased by the most since 1992. Jones said the Fed's message around inflation will be critical to the future path of investment.

Jones pointed out that Bitcoin is a good way to protect his wealth in the long term and is also a wealth storage. Before seeing what the Federal Reserve plans to do, he does not know what to do with 80% of his portfolio. As for the other 20%, he said: "I like Bitcoin very much. Everyone asks me what should I do with my Bitcoin? The only ideal portfolio I am sure of is 5% gold, 5% Bitcoin, 5% cash, and 5% commodities."

As recently as May 2020, Jones said that "close to 2%" of his assets were in Bitcoin, meaning he had doubled his investment in Bitcoin.