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00:00You've always talked about how there's been extraordinary complacency that markets are not pricing in the risks.
00:06With what we saw in yields overnight, is that a reflection of risks being priced in?
00:12Yeah. So I talk about that kind of complacency. I'm talking about the asset price in the United States.
00:17And it's a long list of things. It's QE, it's fiscal deficits, it's global fiscal deficits, it's potential the trade wars.
00:25It's these huge, complex geopolitical situations. And I look at all of those probably not being properly priced into the marketplace.
00:33But we don't know what's going to happen. And I saw last night's reaction. I don't worry about one day move in bond markets.
00:41You don't worry about one day, but when you take a look at yields, they are at higher levels than they were before Liberation Day.
00:50I mean, we talked about how 30 is higher and some are talking about 10 is getting to 5, 30 is getting to, you know, 7%.
00:57How are you assessing that? I mean, how high do yields have to go before they reach breaking point?
01:03Yeah. I don't know the answer to that. But we assess, the way we run the company, we prepare for a full range of outcomes, regardless of what you think.
01:11I just think there's a chance that things will, you'll have stagflation. So I'm not saying it's going to happen. I don't want the reader to say he's predicting that I'm not.
01:18But we have to be prepared for something like that. I think the global fiscal deficits are inflationary.
01:23I think the remilitarization of the world is inflationary. The restructuring of trade is inflationary.
01:29And this is not all an American thing. And the infrastructure needs are inflationary.
01:33And now you have offsets, you have oil prices down there quite a bit, which is, you know, quite deflationary.
01:37But, you know, with all those things taking place, yeah, you may have, you may be surprised.
01:41And I love to read economic history. So you can look at models.
01:45I think it's also very important to look what happened in 72 and 74 and 80 and 82 and 1990.
01:52Surprises happen. And, you know, most economists and most models don't pick those inflection points.
01:56Those inflection points are often driven by geopolitical complexity, things you don't necessarily know.
02:03And we had the oil crisis in 74. So we just want to be prepared for everything.
02:08So we continue to serve our clients who are thick or thin.
02:11You talk about how concerned you are about debt. And, of course, to that, the tax bill that's being voted tonight, they say,
02:19that's going to make it a lot worse. Your take on that?
02:23Yeah, well, the United States is running the largest trade deficit that we've ever had in peacetime, almost 7 percent of GDP.
02:31And however the tax bill gets done, they'll probably add a little bit to that.
02:34I still think it's better that we get certainty around tax bill. I'd rather get that done.
02:38But I do think at one point Americans have attacked its deficit problem.
02:42So do a lot of Republicans think that. So do a lot of Democrats think that.
02:47And that attack isn't just raising taxes. It's having proper policies around incentives and growing business.
02:53And I just got back from Europe last week. And everyone there is talking about growing the economies,
02:59getting more investment, reducing the regulatory environment that slows down growth,
03:05keeping everything safe for food, water, banks, et cetera.
03:07But I think governments have to do a better job at that.
03:10And so pro-growth, pro-business is a very good thing.
03:14And hopefully that could offset some of the extra spending one day.
03:18As we said, it is a higher yield environment.
03:21And you have said before that we could see some sort of rebellion in markets around the world.
03:27Is that still a possibility? How might that look like?
03:30Yeah, so I would not call it a high yield environment.
03:32I mean, if you look at economic history, you know, rates have been far higher than this.
03:36And, you know, they surprise people over time.
03:38And I think a lot of the longer-term trends have inflationary attributes to them.
03:43And so the other thing for your person on TV, credit spreads are low.
03:48So, you know, you can have two things go against you, which is credit spreads gap out and rates are going up.
03:53And so we'll see how it plays out.
03:54So I don't want to guess how it plays out.
03:56I'm on the cautious side.
03:58I'm a little skeptical that we're going to have kind of just an ongoing soft landing here.
04:03Let's turn our attention to China, where we are.
04:06Is it still a priority market?
04:08Because even as your rivals de-risked from China, pulled back, you actually boosted your resources here.
04:15How are you looking at China in the next 12, 24 months?
04:18Yeah.
04:18So we invest in the long run.
04:20So I don't look at, you know, we're not buying and selling the stock when you say invest the next 12 or 24 months.
04:25And look at this conference.
04:26You know, we have, when I first, it's 21 years.
04:29The first one we had a couple hundred people here.
04:32Now we've got almost 3,000 people here.
04:34I think 1,300 companies, investors from 33 countries.
04:39We do research now, I think, on 400 Chinese companies.
04:42We're a long-term investor here.
04:44Yes, all these other issues cause consternation, you know, but we have to deal with the world that we have, not the world we want.
04:50And we'll continue to grow.
04:51We cover, I think, the number is 1,700 multinationals from around the world in China.
04:57And these are, you know, clients of ours from Latin America, from America, from Europe, et cetera.
05:01And we take a lot of Chinese companies around the world.
05:04We have Mandarin-speaking folks in Brazil who speak Portuguese and Mandarin so that we can facilitate commerce between Brazil and China.
05:14So long-term investors, concerned about, you know, the current environment.
05:18But I think hopefully it will all sort out, you know, but we don't, we're not going to pull back.
05:23I mean, I know, I gather the story that came out there.
05:25Somehow we're coming back in China.
05:26That's completely false.
05:28But we're going to have, we understand we're going to have some political pressure until all these things resolve.
05:32So you're looking at China as one of the priori markets to invest in in the next 12 months, perhaps.
05:39Is there consensus within the leadership that this is the place to be?
05:42You talk about taking it, taking a longer-term view.
05:44Yeah.
05:45You know, the consensus is that companies are going to be doing business here.
05:48You know, there are going to be some adjustments because of the trade negotiations.
05:52But I don't think the American government wants to leave China.
05:54And, you know, we just had our Secretary of Treasury meet with, you know, the authorities here.
05:58And they're talking about having a good relationship.
06:01I'm glad that they engaged, talking about what we can do and improve things.
06:05I hope they, you know, have a second round and a third round and a fourth round.
06:08And I'm hopeful they'll end up in a good place.
06:10And in terms of China's growth?
06:12But look at China.
06:13I mean, China's, they go way back.
06:15They've done an enormous job over the last 20 years lifting up their people.
06:18That doesn't mean I personally agree with everything they did.
06:20I'm a full-throated, red-blooded American patriot, capitalist.
06:26You know, but I understand that they're doing, they can lift up their country.
06:29And here, you know, I've seen their cars and their AI and their, they've done a pretty good job.
06:34You know, and we should look at America and say, okay, we're going to have to compete too.
06:37And so I'll leave foreign policy to the experts in the government.
06:43Companies get caught up in the crosshairs of the U.S.-China trade tensions.
06:48I think J.P. Morgan got caught up in the CATL listing in Hong Kong.
06:54You maintained your position.
06:56Why?
06:58Because, first of all, a foreign policy is set by the government.
07:01It's not set by J.P. Morgan.
07:03And, no, the government did not sanction CATL.
07:07There are people who didn't want us to do it for a bunch of reasons.
07:09And they may have somewhat legitimate reasons.
07:10But I think the government should decide what to do.
07:13So we aren't going to do that.
07:15If they had told us we couldn't, I would salute and move on.
07:17You know, I would have no choice.
07:19And so there are legitimate issues around national security.
07:22So if you went through all those issues, yeah, I understand that.
07:26You know, we don't think it really applied to this particular thing.
07:28We and other investment banks do a lot of due diligence around all the issues that people raised.
07:33And I'm sure I'll be criticized about that, too.
07:36But, you know, if we thought it was wrong, we wouldn't do it.
07:39Do you expect more pressure?
07:42But we're getting pressure from governments everywhere about everything.
07:46You know, we're not green enough.
07:48We finance too many oil and gas companies.
07:50We get it from mayors and governors.
07:52I understand that.
07:53We try to answer them all rationally and serve our client.
07:56If there are legitimate complaints, we try to adjust ourselves.
07:59And every now and then there are, and we make an adjustment.
08:01It is a volatile relationship, right?
08:04And that volatility is expected to persist.
08:07Do you see JP Morgan and your peers continue to be pressured by the government to perhaps move away from deals or business with China's company?
08:19I'd be very careful.
08:21Both governments have export controls, import controls, investment controls.
08:26I do think those things will take place and they'll morph over time and we'll adjust to them.
08:31What's your strategy in Asia?
08:34Bearing in mind that there's been so much pressure on the Chinese government and people increasingly talking about diversification.
08:40How are you looking at your business in Asia?
08:43Yeah, so we look at every country has its own population, its own education, its own culture, its own growth, its own natural resources, a lack of them.
08:52We pretty much invest in all of them.
08:53And all these countries, you know, we network with them.
08:56So we're banking companies here around the world.
08:59You know, you're from Singapore.
09:00We bank Singapore.
09:01We bank Singaporean countries and they go all around the world.
09:04So almost every one of the countries is kind of growing.
09:08And so that's how we do it.
09:09We look at each one.
09:09We don't go in and out.
09:11We don't look at investing in a company, a country like a stock.
09:14Like, oh, well, we think Vietnam's going to have a bad year and therefore we plug.
09:17No, we look at how they're growing their population, how they're growing their companies, how they're growing their economy.
09:21And then, of course, in some cases we simply follow clients already into those countries.
09:27So a lot of companies that we bank from America want us to be in more countries so they can consolidate more of their payment systems.
09:34And then we build those things and we enter new countries for that reason sometimes.
09:38So my view is that's going to be going on for the rest of my life and for many years after that.
09:43And there'll be ups and downs due to trade and, you know, the economy.
09:47I guess the premise of the question is Trump's tariffs and the trade war.
09:51Is that influencing, shaping your investment decisions and where you grow?
09:57Not really and not directly.
09:59So, like I said, I'm an American patriot and I think there are legitimate national security issues.
10:04I think America could have done a better job focusing on our own national security issues.
10:08Like, think of we should never get all of our rare earths from one country, much less a country who might be an adversary.
10:14That was a mistake we made.
10:15It should be fixed.
10:16So there are a lot of legitimate issues that have to be dealt with.
10:19But the government is doing that.
10:20We talk to them.
10:22You know, we have a – we just announced a Center for Geopolitics.
10:24And we help other companies look at their supply chains, their cyber resiliency, all of those things.
10:30And I think at the end of the day, it'll be okay.
10:32So even President Trump has been out there saying he likes President Xi.
10:36He wants open trade.
10:38He just wants to fix the trade he thinks is unfair.
10:40And, you know, if it's unfair, it should be fixed.
10:43You talked about your Center for Geopolitics.
10:46Let's talk about that.
10:47What's the thinking behind it?
10:48How will it help navigate – how would it help your clients, customers navigate?
10:54So, first of all, we do it for ourselves.
10:55So you can look at J.P. Morgan.
10:57We've always extensively analyzed every country, every potential risk.
11:00We look at hundreds of risks to make sure we can – J.P. Morgan's got to survive just about anything.
11:06And we try to make sure we do that.
11:07This geocentered politics is both for us, but it's also to educate our clients.
11:12Because we get asked – a lot of clients are asking us all the time about what should we do about this country?
11:16What should we do – how do we look at risk?
11:18So we just help them look at various risks they have.
11:21And so it's kind of an outgoing – I always remind people, we actually help clients in AI, cyber, geopolitical risks, governance, in addition to, like, raising capital and M&A and things for them.
11:34And just kind of another service we provide.
11:36And, of course, that center is in the Middle East.
11:38Is there a sense that the role of the region in the world is growing exponentially?
11:46Which region?
11:47Middle East.
11:48Well, I think it's growing exponentially.
11:50And, like, we've been in Saudi Arabia for 80 years plus.
11:52So, yeah, it has wealth.
11:55It has sophistication.
11:56And I think it's that leadership that wants to do a good job at trying to grow their economies and diversify their economies a little bit.
12:05Is this the moment for the Middle East?
12:07I hope so.
12:08I mean, look, the Middle East is a very complex place.
12:11And I think, you know, the terrorism is terrible.
12:13But I do think that you've seen a complete sea change in how they view – I think they want peace there.
12:22I think all the big players in the Middle East want actually one peace.
12:25I'm talking about Saudi Arabia, UAE, Qatar, Egypt.
12:28And I think it would be their interest to bring real long-lasting peace, including for Israel and hopefully eventually for the Palestinian people.
12:36Of course, we're talking about the Middle East on the back of Trump's successful trip to the region.
12:43Do you think that trip marks a turning point in relations?
12:51If you take a look at the amount of deals that were –
12:53It might.
12:54I couldn't evaluate that quite yet.
12:56I do think, if you go back to Trump 1, that I do think there was a sea change with Trump 1 and how they were looking at Saudi Arabia, et cetera.
13:04I think Saudi Arabia has changed a lot.
13:07I mean, it's dramatically different from when I first started going there.
13:10Like, women can drive cars and go to schools and don't necessarily have to wear burkers, et cetera.
13:15Jamie, I'd be remiss not to ask you about the Fed.
13:21Given the higher yield environment, which you say it's not, but it is still higher than what it was before.
13:30Will it go higher?
13:31Will it go higher?
13:32And also, will it force the Fed's hand?
13:34Yes.
13:35I mean, there's always a notion that somehow the Fed is omnipotent and can do whatever it wants.
13:41And they do set short-term rates.
13:43But they also have to follow the facts.
13:45So they raised rates because inflation went up.
13:48You know, and they can't control – even today, you know, trillions of dollars of these bonds are sold every day.
13:53That's done by investors around the world.
13:55They cannot control all of that.
13:57You know, foreigners own $35 trillion of U.S. financial tradable assets.
14:03And so, you know, they have to react to reality in which they – that's not a criticism.
14:06And they say they're data dependent.
14:08But they have to wait and see exactly what happens and then do the appropriate thing.
14:14But the thing is, their reality is different from the reality you have in mind.
14:17And if you take a look at what Neil Kashkari said, he said the U.S. economy is on solid footing.
14:23And some other Fed officials have said that in terms of Fed policy, it is in a very sweet spot.
14:30So their reality is quite different.
14:32I think – I don't agree we're in a sweet spot, okay?
14:37And I think you have to separate two things.
14:40The economy has been doing well.
14:42All the facts, you know, we have been – effectively been in a soft landing.
14:46That does not tell you what the future is going to be.
14:49To worry about the future, look at all the things that affect the future, kind of work your way back to the current day.
14:54And I've already mentioned huge deficits.
14:57We haven't finished quantitative tightening yet.
14:59There are huge geopolitical issues.
15:01There are these inflationary factors out there.
15:04And they have to react to all of that.
15:05So I think they're doing the right thing to kind of wait and see before they decide.
15:10One final question, and I promise this is the final question.
15:12Okay.
15:13The dollar, right?
15:14Usually when you have a high-yield environment, the dollar gets a boost.
15:18But it's the other way around.
15:19How are you reading into dollar weakness?
15:21Yeah.
15:21Well, like I said, foreigners own $35 trillion of U.S. securities.
15:24The United States still is the most prosperous, innovative nation on the planet.
15:28That's not going to change.
15:29But I think it might be reasonable, people looking at it.
15:32And also, asset prices are high.
15:34So if you go around the world, you look at stock prices in the U.S. or up here, you know, P.E. ratios or other parts of the world are much lower.
15:40So people legitimately say, well, maybe a little bit less dollar assets, a little bit more of that.
15:44So you may see some kind of adjustment.
15:46I think at the end of the day, the important thing for America is that we do the right things to grow our own economy.
15:50And that includes affordable housing and for business and innovation and growth and R&D and all those things.
15:55That's the important thing.
15:57You know, I don't worry that much about short-term fluctuations in the dollar.
16:00But I do understand that people might be reducing dollar assets today a little bit.
16:03Coming from a patriot.
16:04Jimmy Diamond, thank you so much for joining us.
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