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