Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: All Right, folks, we've got another great voice to talk
Speaker 2: about the environment, the macro we're talking about Jamie Diamond. He's,
Speaker 2: of course, the CEO of JP Morgan Chase, and he
Speaker 2: is there in Miami at the JP Morgan Global Leverage
Speaker 2: Finance Conference with our only Sobramowitz, one of the co
Speaker 2: hosts of Bloomberg TV's Surveillance Lisa take it away.
Speaker 3: Thank you so much, Carol. I am here with somebody
Speaker 3: who does not need an.
Speaker 4: Introduction, Jamie Diamond, who is the CEO and chairman of
Speaker 4: JP Morgan. It's a really interesting day to have this.
Speaker 4: First of all, huge turnout, but the focus, at least
Speaker 4: in the news world is very much in the geopolitics.
Speaker 4: And I'm wondering from your perspective, we've talked about geopolitics
Speaker 4: for a long time.
Speaker 3: Are you surprised that the market has been so sanguine to.
Speaker 4: Any kind of response or any kind of geopolitical disruption?
Speaker 1: Ugga Hi, Lisa Hi, Bloomberg Not really so.
Speaker 5: One of our brilliant folks report years ago Mike Sembolos
Speaker 5: that you look at all these wars around the world
Speaker 5: since World War two, the market reacts, but it never
Speaker 5: had a real long term effect other than the Israeli
Speaker 5: conflict with the oil prize of triples that went out
Speaker 5: for an extended period of time in nineteen seventy three.
Speaker 1: So the world kind of tastes is dried. But geopolitics
Speaker 1: is a major issue.
Speaker 5: It's much more complex today than has been since World
Speaker 5: War Two. I'm talking about Ukraine, Russia, Iran to what
Speaker 5: Korea are related with China, and that could have an effect,
Speaker 5: but it may not. So these things may diminish over time.
Speaker 5: You know, this war with Iran, you know, if it
Speaker 5: is short and oil goes to eighty or ninety or
Speaker 5: one hundred, but it's a short time, not prolonged, it
Speaker 5: probably won't have a major effect.
Speaker 1: If it becomes prolonged, then all bets up the table.
Speaker 4: How offside would this market be if there were truly
Speaker 4: a speculationary shock Given the fact that there seems to
Speaker 4: be comfort with the idea of disinflation right now, well.
Speaker 1: I think that's true, but I think that was true
Speaker 1: before this war.
Speaker 5: So if you look at you know, my view is
Speaker 5: the price as the price going a high, credit as
Speaker 5: are kind of low there's kind of a lot of
Speaker 5: complacence in the market.
Speaker 1: I'm not sure.
Speaker 5: You know, we look at risk, we look at the
Speaker 5: broad range of outcomes, and there are negative outcomes, but
Speaker 5: one of them would be you.
Speaker 1: Know, inflation. I called that's the skunk at the party.
Speaker 5: So it's been coming down, but it seems to maybe
Speaker 5: leveled off around three percent.
Speaker 1: If things make it go up. And this is only
Speaker 1: one thing.
Speaker 5: You know, you can look at medical prices, construction prices,
Speaker 5: insurance prices, wages for certain things, other things.
Speaker 1: You know, inflation is a big thing. It's not just oil.
Speaker 5: So you know, we'll say right now, this will add
Speaker 5: a little bit, literally a teeny bit to inflation, not
Speaker 5: a lot.
Speaker 1: You know.
Speaker 4: I was surprised because things were kind of gloomy coming intoday,
Speaker 4: and the mood here is not that. Actually, there's a
Speaker 4: lot of optimism. There are a lot of different companies
Speaker 4: that are building things and investing things. I mean, how
Speaker 4: vulnerable really is the US economy right now to some
Speaker 4: sort of geopolitical shock.
Speaker 1: Well it may not be geopolitical. It may be the
Speaker 1: companies start to lay.
Speaker 5: People off, and so I loo, look, the most important
Speaker 5: thing in the world is geopolitical what happens to the free,
Speaker 5: western democratic world which has kind of been under attacked
Speaker 5: by Russia and Ukraine, by Ran in the Middle East,
Speaker 5: you know a little bit by China and wants to
Speaker 5: you know, divide and conquer.
Speaker 1: The Western world.
Speaker 5: And you know, both militarily and economically. You know, you
Speaker 5: have all their neighbors that rearming because of their action
Speaker 5: is not going to anyone else. So those are the
Speaker 5: most important things. I'd add global deficits are so large,
Speaker 5: but those are those are like I call it like
Speaker 5: large movie tectonic plates that may or may not affect
Speaker 5: the economy the short run.
Speaker 1: They may be determintive in the longer run.
Speaker 5: And some of these things when you talk about war,
Speaker 5: you know Vietnam, you know, did it affect the economy
Speaker 5: in the very short run? No, it had a twenty
Speaker 5: year effect after that.
Speaker 1: So you got to look at these.
Speaker 5: Things as they're moving plates that it can take five
Speaker 5: years to have an effect for the effectually real. Right now,
Speaker 5: the economy is doing fine. Hash that prices are high,
Speaker 5: people are assuming things go on. I mean, no Wan
Speaker 5: you talk to has any idea the credits breads can
Speaker 5: gap bat a lot and they could just because of
Speaker 5: a sentiment. And so so I think there's a little
Speaker 5: bit of a little more exuberant than I think there
Speaker 5: should be. But we've had years of it, and you know,
Speaker 5: the one big beautiful bill adds to uh, you know,
Speaker 5: as to growth this year, bank deregulation, other deregulation, as
Speaker 5: to growth and animal spirits.
Speaker 1: Uh.
Speaker 5: So we'll see. But but you pointed out I think,
Speaker 5: you know, the skunk would be inflation. So we've got
Speaker 5: to be keep riding down. We're closer.
Speaker 3: Yeah.
Speaker 4: Well, and this actually speaks to something that people are wondering,
Speaker 4: which is what's going to potentially crash the party before
Speaker 4: we get into credit More significantly, I know that JP
Speaker 4: Morgan has been expanding significantly in the Middle East, particularly
Speaker 4: in Riod and Jubai. If you take a longer term view,
Speaker 4: does any of what we're seeing now have the potential
Speaker 4: to shape that effort to expand either in the positive
Speaker 4: direction or potentially to withdraw in the effort.
Speaker 5: Either way, I look at it creates more risk, it
Speaker 5: creates more chance of a positive outcome. So all those
Speaker 5: nations been margernizing, educating their people, you know, adopting more
Speaker 5: and more Western methods why and open up their markets
Speaker 5: bringing foreign direct investment, investor oversease. That won't change in fact,
Speaker 5: and Tom Freeman wrote about this in his paper Hey
Speaker 5: that this creates a bigger opportunity for long and just
Speaker 5: peace in the Middle East and and written large not
Speaker 5: just Iran in this war, but you know that Saudi Arabia,
Speaker 5: UAE some path to uh statehood for the Palestinians and
Speaker 5: guys in palestinniing that's gonna be up to you know them. Uh,
Speaker 5: you know, there are there reasons to be optimistic. This
Speaker 5: opens the door for that, you know. And there are
Speaker 5: a lot of naysayers. I understand that if things go south,
Speaker 5: they're can say I told you so. But this does
Speaker 5: open up the door for that. So hopefully we're wise
Speaker 5: enough to help move in that direction. And I and
Speaker 5: I and if you watch closes, it's been on in
Speaker 5: the Middle East, Saudi Arabia, Yuee, Qatar, Kuwait, they all
Speaker 5: want peace and they all know that like really growing
Speaker 5: and having a great economies rely on that. You want
Speaker 5: to get more foreign direct investment, you need peace and
Speaker 5: things like war reduced the chance for people don't want
Speaker 5: to put you know, real investment in the ground, so uh,
Speaker 5: you know, and then and then they even set up
Speaker 5: a shadow government for the Palestinian Authority with Palestinians but profetationals, lawyers, doctors,
Speaker 5: business people to create maybe a governing structure that can
Speaker 5: actually uncorruptly govern palast Indians and create peace on the
Speaker 5: ground there. And you know, have Israel impossed. I'm working
Speaker 5: a long term course, but of course to uh, you know,
Speaker 5: peace side by side of a statehood. So we'll see,
Speaker 5: I mean, look on that one. I want to be optimistic,
Speaker 5: even though it's been terrible now for a long time.
Speaker 3: You were talking about credit.
Speaker 4: I do want to return to it and what potentially
Speaker 4: caused the credit cycle to crack. Even if we don't
Speaker 4: know the catalyst, do you have a sense of what
Speaker 4: this credit cycle is going to look like, if it's
Speaker 4: going to be a kin to something that we've seen
Speaker 4: in the past, or if it's going to have a
Speaker 4: new kind of dynamic.
Speaker 5: Yeah, so it's some things rhyme and something's never changed. Okay,
Speaker 5: there will be a credit cycle. It's usually caused by
Speaker 5: a recession. The type of recession determines the nature and
Speaker 5: so stagflation is very different than just a recession. Obviously,
Speaker 5: the depth of the recession and a credit cycle is
Speaker 5: a normal cycle. One of the things that's always different
Speaker 5: is which industries get really badly hurt. You may remember
Speaker 5: in two thousand it was telecommon utilities, you know, the
Speaker 5: mostocks they pay dividends. In eight there's warm Buffett stocks,
Speaker 5: media stocks.
Speaker 4: You know.
Speaker 5: This time maybe is software, maybe it's not, but somebody's
Speaker 5: moving that changes the type of credit. I do think
Speaker 5: it'll be things that cause the recession. Could be geopolitics.
Speaker 5: It could just be you know, people are pulling back
Speaker 5: and they're spending and companies are laying off or they
Speaker 5: can't pass on prices or something like that. But I
Speaker 5: do think when we have that cycle, it'll be worse
Speaker 5: than people expect. We're late in the cycle. There are
Speaker 5: a lot of late new entrants. There's some people out
Speaker 5: there aren't doing great credit because we see the other
Speaker 5: side of it. And I'm not talking about private credit,
Speaker 5: talking about credit in general. That could be insurance companies,
Speaker 5: it could be private credit.
Speaker 1: It could be banks.
Speaker 5: We see some banks doing things that you know, we
Speaker 5: probably wouldn't do, so so there would be and the
Speaker 5: other think about credit, there's always if you look at
Speaker 5: the outcomes, there's always the people did it well. They
Speaker 5: still have a cycle and the people did it really badly.
Speaker 5: So you know that's not gonna surprise me when we
Speaker 5: find out who the who's will be naked when the
Speaker 5: tide goes out there.
Speaker 3: You don't think, you don't think the product credit stan
Speaker 3: at the center.
Speaker 5: No, because private credit, I mean, give you big numbers,
Speaker 5: corporate debt and generals in pretty good shape, consumer debt
Speaker 5: and gel pretty good shape. And you take private credit
Speaker 5: leverage lending one point seven trillion banks to one point
Speaker 5: seven trillion, the high markets one point seven trillion, I
Speaker 5: wouldn't put that in this systemic category, even if it
Speaker 5: gets worse than people expect.
Speaker 4: So do you think given the fact that JP Morgan
Speaker 4: is lending significantly as well. I'm just wondering how you
Speaker 4: sort of guard against a credit cycle that you think
Speaker 4: is gonna be worse than people expect at the same
Speaker 4: time that there are opportunities, there's a growing economy.
Speaker 3: I mean, do you have to keep more cash? Do
Speaker 3: you have to be more conservative?
Speaker 5: So we always run the riskmagement we do is we
Speaker 5: always run the company looking at a range of outcomes
Speaker 5: and so we can handle it easily, so we can
Speaker 5: continue to serve our clients, Like there are three thousand
Speaker 5: clients here investor clients, two hundred and fifty corporate clients.
Speaker 5: So whatever the environment is, we're gonna be a good
Speaker 5: serving you properly.
Speaker 1: I don't have to worry about that.
Speaker 5: And we're going to invest in our future, whether technology
Speaker 5: and new branches and new countries.
Speaker 1: So we always run it that way.
Speaker 5: Look at our margins and things like that. Now, of
Speaker 5: course we manage credit. You know, some of the cush
Speaker 5: is managed because you know, people want alone.
Speaker 1: They come to us.
Speaker 5: We are for access into something more aggressive, and we lose,
Speaker 5: and we're totally fine with that. We've seen a bunch
Speaker 5: of that. The lever side. Sometimes we tighten our standards.
Speaker 5: You know, we want more covenance, we want more collateral.
Speaker 5: We are doing less subprime. You know, we trim ourselves
Speaker 5: in credit card for example, where you have lessons learned,
Speaker 5: and once the lessons learned, you make a bunch of
Speaker 5: change underrine.
Speaker 1: But we've always been pretty good at underlying credit.
Speaker 5: So when there's a cycle, let's get to run through
Speaker 5: our books too, and I'm but we're adults.
Speaker 1: You'll reduce our results. We'll still be fine.
Speaker 3: We talk about some of the technologies in order to
Speaker 3: serve clients.
Speaker 4: Artificial intelligence a huge focus, and there's been some pushback
Speaker 4: by Japing Morgan investors about the amount that japing market
Speaker 4: is investing.
Speaker 3: How are you looking at?
Speaker 4: What areas you think Japing Morgant's going to win as
Speaker 4: a result of AI?
Speaker 3: And what gives you confidence?
Speaker 5: So everything we do whenever we meet, if you were
Speaker 5: running a business at Chay Morgan at that level, credit card, auto,
Speaker 5: you know, mortgage sales and trained, we always say what
Speaker 5: are you doing to grow your business? And that could
Speaker 5: be adding great salespeople, if you're any countries. Very often
Speaker 5: it's any technology. It's very formative technology. It's just building
Speaker 5: something that's a digital account or an API that are
Speaker 5: customer wants. You know AI and more and more it's AI.
Speaker 5: So we use AI for risk, fraud, marketing, underwriting, no taking.
Speaker 5: I did generation error reporting reducing errors and it's you know,
Speaker 5: and there are six hound of use cases. Fifty I'd
Speaker 5: put in the important category and that's part of what
Speaker 5: you do is no different than the past and we
Speaker 5: could do if we can use it to do something
Speaker 5: better fast, to clip a cheaper, to hire staff from
Speaker 5: the customer.
Speaker 1: We are going to do it.
Speaker 5: And so AI is the new front of you know,
Speaker 5: wonderful stuff company. And I think for society, you got
Speaker 5: to remember people talking about the negatives.
Speaker 1: You know, my guess is I really do mean.
Speaker 5: It, Like maybe in thirty or forty years, your kids,
Speaker 5: you have two kids, right, are gonna be working four hours,
Speaker 5: four days a week, maybe three and a half days
Speaker 5: a week, living two one.
Speaker 1: Hundred and twenty.
Speaker 5: A lot of cancers will be cured, a lot of
Speaker 5: diseases will be cured, food will be safer, cars will
Speaker 5: be safer.
Speaker 1: It will be a wonderful thing.
Speaker 5: The risk that people are focused on today is that
Speaker 5: somehow it just it gets deployed so fast that people
Speaker 5: don't have time to adjust to it. There are too
Speaker 5: many layoffs, and I think that's legitimate. So companies should
Speaker 5: be thinking about how they canna handle that. And you know,
Speaker 5: I've suggested I may write about this that the government
Speaker 5: should start thinking about how can we help get the
Speaker 5: benefits of the eye and diminish the negatives, And that
Speaker 5: would basically be retraining, relocation, how you use your high schools,
Speaker 5: your colleges, your community colleges. You know, to rescale. But
Speaker 5: even people are forty to fifty and it's all doable
Speaker 5: if we think about how we're going.
Speaker 1: To prepare for it.
Speaker 3: Well, do you think that there is going to be
Speaker 3: a smaller workforce for each sector?
Speaker 4: I mean for the banking sector for example, If you
Speaker 4: can consolidate a lot of market share and you can
Speaker 4: analyze things much more efficiently, maybe your overall workforce doesn't shrink,
Speaker 4: but your overall book of business expands dramatically.
Speaker 3: I mean, how do you how do you see that?
Speaker 5: I think there will event should be some shrinkers in
Speaker 5: the workforce, and I think if you're ahead, you have
Speaker 5: a temporary benefit. Remember the competitive capitalist world, people will
Speaker 5: catch up, and even smaller banks so we support ourselves,
Speaker 5: will get the same services directly from Claude or from
Speaker 5: you know, or from FIS.
Speaker 1: Or something like that.
Speaker 5: So it isn't like you're gonna have a perman's advantage.
Speaker 5: You have temporary advantages, and if you can stay ahead
Speaker 5: temperar you have an advantage. But I don't I don't
Speaker 5: think you can have a winner take all thing. Uh,
Speaker 5: the world is really competitive, and then look at it
Speaker 5: also opens up, you know, in a good way competition,
Speaker 5: so fintech. So we now have all the big bank
Speaker 5: regular competition, but we also have hundreds of fintech companies
Speaker 5: who're using new technologies to sometimes take just a little
Speaker 5: sleeve of business and then expand it and uh, you know,
Speaker 5: and it could be data, it could be trust, it
Speaker 5: could be rent payments, it could be course border payments,
Speaker 5: it could be anything like that. So and I appreciate that,
Speaker 5: but we have to some of that money is to
Speaker 5: is very specific.
Speaker 1: We need to do that too.
Speaker 3: Jamie Diamond appreciates stable coin. No, thank you, I'll take
Speaker 3: you back.
Speaker 5: No, we have no promise to you before you Okay,
Speaker 5: but there is a proption properly regulated.
Speaker 1: Yeah.
Speaker 4: Yeah, going forward though, do you find a reluctance buy
Speaker 4: some employees to adopt to artificial intelligence because they're worried
Speaker 4: about losing their jobs?
Speaker 1: Not really.
Speaker 5: Yeah, we have this so we use like I said,
Speaker 5: we're six or use case if we do it everywhere.
Speaker 5: But we have on our phone at LM Suite and
Speaker 5: we have like twelve or thirteen or fourteen products that
Speaker 5: you can use to review your own documents, to write,
Speaker 5: to summarize research, to if you want to ask the
Speaker 5: lawyers want to ask how many legal documents of fifty
Speaker 5: do dogs have these things in it?
Speaker 1: And could review that and play that in minutes and.
Speaker 5: One hundred and eighty or one hundred and sixty thousand
Speaker 5: people use it a week, so it's adopted. They say
Speaker 5: they're saving four hours a week on it. Now, we
Speaker 5: don't include that in how we look at productivity because
Speaker 5: we don't really see their productivity. They're using it for research,
Speaker 5: no taking, They're going to go see a client, what
Speaker 5: might the client be interested in? And those use case
Speaker 5: that those twelve products are being every week, they're adding
Speaker 5: like new products, you know, to do different types of
Speaker 5: things for our for our own employees.
Speaker 4: So the mood music so far this year has been
Speaker 4: kind of negative around the economy and sort of the
Speaker 4: worries about credit in particular over the past couple of
Speaker 4: weeks in particular, you don't sound that negative.
Speaker 1: Look.
Speaker 5: I yeah, I look at the system out there. I
Speaker 5: think they are a big geopolitical risks, sovereign debt risks.
Speaker 5: I think inflation is not not beaten yet. I think so, Yeah,
Speaker 5: I'm concerned about that. We've not had a cycle a
Speaker 5: long time. I just look at it more like the probabilities.
Speaker 5: I think the probabilities of something going south or more
Speaker 5: than other people think, I would price more into the market.
Speaker 1: I could, like I said, we don't run our busits
Speaker 1: that we run a business. We can serve our client.
Speaker 5: So but I think there's a little bit too much
Speaker 5: exubras out there, then everything's gonna end up find I
Speaker 5: think the odds to that not even fine or higher
Speaker 5: than some of these other people.
Speaker 3: Do you think the bigger risk is inflation or an
Speaker 3: economic downturn?
Speaker 5: Well, I think they're related. I think inflation because I
Speaker 5: comic downturn. But if the economic downturn just couldn't be
Speaker 5: just when you look at history, I have been through
Speaker 5: so many past I mean I've studied, even asked AI
Speaker 5: what happened in seventy three, what happened eighty two?
Speaker 1: What happened?
Speaker 5: It's a confluensive events that are hard for you and
Speaker 5: I to see in real time.
Speaker 1: And it's not one thing. It's usually a multitude of things.
Speaker 4: Jamie Diamond, chairman and CEO of JP Morgan, thank you
Speaker 4: so much for being with us,