C (2:46)

Well, how offside would this market be if there were truly a stagflationary shock, given the fact that there seems to be comfort with the idea of disinflation right now?

B (2:54)

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 that the prices, asset price kind of high, credit spreads are kind of low. It's kind of a lot of complacency 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 call it. That's the skunk of the party. So it's been coming down, but it seems to maybe leveled off around 3% if things make it go up. And this is only one thing. Now 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.

C (3:34)

You know, I was surprised because things were kind of gloomy coming into today. 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?

B (3:48)

Well, it may not be geopolitical. Maybe the companies will start to lay people off. And so I look, the most important thing in the world is geopolitical. What happens to the free Western democratic world, which has kind of been under attack by Russia and Ukraine, Iran and the Middle East, a little bit by China wants to divide and conquer the Western world. And both militarily and economically, you have all their neighbors are rearming because of their actions, not because anyone else. So those are the most important things I'd add. Global deficits are so large, but those are, I call like large moving tectonic plates that may or may not affect the economy in the short run, they may be determinative in the longer run. And some of these things we talk about war, you know, Vietnam, you know, did it affect the economy in the very short run? No, it had a 20 year effect after that. So you got to look at these things as they're moving plates that can Take five years to have an effect. But effectively real right now the economy is doing fine, asset prices are high, people are assuming things go on. I mean, nobody you talk to has any idea. The credit spreads can gap out a lot and they could just because of sentiment. And so, so yeah, I think there's a little bit of, a little more exuberance than I think there should be. But we've had years of it. And you know, the one big beautiful bill adds to, you know, as to growth this year, bank deregulation, other deregulation, as to growth and animal spirits. So we'll see. But, but you pointed out, I think, you know, the skunk would be inflation. So we got to be a keeper, that one closer.

C (5:19)

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 Riyadh and Dubai. 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?

B (5:43)

I think the way I look at it creates more risk, it creates more chance of a positive outcome. So all those nations been modernizing, educating their people, you know, adopting more and more Western methods, want to open up the markets, bring in foreign direct investment, invest overseas. That won't change. In fact, and Tom Friedman wrote about this in his paper today, that this creates a bigger opportunity for long and just peace in the Middle East. And writ large, not just Iran in this war, but Saudi Arabia, uae, some path to statehood for the Palestinians in Gaza and Palestinians, that's going to be up to them. There are reasons to be optimistic. This opens the door for that. And there are a lot of naysayers. I understand that if things go south they 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 if you watch closely what's going on in the Middle East, Saudi Arabia, uae, 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. Things like war reduce the chance that people don't want to put real investment in the ground. So and then they even set up a shadow government for the Palestinian Authority with Palestinians. But professionals, lawyers, doctors, business people to create maybe a governing structure that can actually uncorruptly govern Palestinians and create peace on the ground there and have Israel and Palestine working a long term course. But of course to side, you know, piece side by side with 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.

C (7:25)

You were talking about credit. I do want to return to it. And what could potentially cause 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 akin to something that we've seen in the past or if it's going to have a new kind of dynamic?

B (7:40)

Yeah, so some things rhyme and some things never change. Okay. There will be a credit cycle. It's usually caused by a recession. The type of recession determines the nature of it. 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. Like you may remember in oh, 2000 it was telecom and utilities. You know the MA stocks they pay dividends in 08 is Warren Buffett stocks, media stocks. This time it may be a software, maybe it's not, but something's moving, a change type of credit. I do think it'll be things that cause a 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, or something like that. But I do think when we have that cycle it will be worse than people expect. We're late in the cycle, late new entrants. There are some people out there who aren't doing great credit. We see the other side of it and I'm not talking about private credit, 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 will be. And the other thing 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 going to surprise me when we find out who the who's will be naked when the tide goes out.

C (9:01)

You don't think, you don't think the private credit is the epicenter?

B (9:04)

No, because private credit, I mean give you big numbers. Corporate debt in general is in pretty Good shape. Consumer debt in general, pretty good shape. And you take private credit leverage lending 1.7 trillion banks to 1.7 trillion. The high yield market, 1.7 trillion. I wouldn't put that in the systemic category. Even if it gets worse than people expect.

C (9:25)

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 going to be worse than people expect at the same time that there are opportunities, there's a growing economy. I mean, you have to keep more cash. Do you have to be more conservative?

B (9:41)

So we always run the risk management. 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 3,000 clients here, investor clients, 250 corporate clients. So whatever the environment is, we're going to be a good serving you properly. I don't have to worry about that. And we're going to invest in our future technology, new branches, new countries. So we always run it that way, looking at our margins and things like that. Now of course we manage credit. You know, some of the credit is managed because, you know, people want to loan, they come to us, we offer X and so on to some more aggressive and we lose. And we're totally fine with that. We've seen a bunch that on the leverage side, sometimes we tighten our standards, you know, we want more covenants, we want more collateral. We are doing less subprime now we trim our sales and credit card, for example, where you have lessons learned. Once the lessons learned, you make a bunch of change. Underwriting, but we've always been pretty good at underwriting credit. So when there's a cycle, it's going to run through our books too. And I'm adults, you know, reduce our results will still be fine.

C (10:42)

You talk about some of the technologies in order to serve clients. Artificial intelligence, a huge focus. And there's been some pushback by J.P. morgan investors about the amount that J.P. morgan is investing. How are you looking at what areas you think JP Morgan is going to win in as a result of what gives you confidence.

B (10:59)

So everything we do, whenever we meet, if you were running a business, J. 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 in countries. Very often it's adding technology. It's various forms of technology. It's just building something that's a Digital account or an API that a customer wants. You know, and more and more it's AI. So we use AI for risk fraud, marketing, underwriting, note taking, idea generation, error reporting, reducing errors. And you know, and there are 600 use cases, 50 I put in the important category. And that's part of what you do. It is no different than the past. And we could do, if we can use it to do something better, faster, quicker, cheaper, higher, SAP the customer, we are going to do it. And so AI is the new front of wonderful stuff coming. And I think for society, you got to remember, people talk about the negatives. My guess is I really do mean it. Like maybe in 30 or 40 years, your kids, you have two kids, right? Are going to be working four hours, four days a week, maybe three and a half days a week, living to 120. A lot of cancers will be cured, a lot of disease 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're going to 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 AI 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 40 or 50 and it's all doable. If we think about how we're going to prepare for it.

C (12:43)

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?

B (12:59)

I think there will eventually be some shrinkage 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, 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 going to have a permanent advantage. You have temporary advantages and if you stay ahead temporary, you have an advantage. But I don't think you have a winner take all thing 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. We also have hundreds of fintech companies. We're using new technologies to sometimes take a just a little sleeve of business and then expand it and you know and it could be data, it could be trust, it could be rent payments, it could be cross 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. No.

C (13:58)

JP Diamond. Appreciate Stablecoin but no thank you. I will take it back.

B (14:02)

I mean we have no problem. Okay. But there is properly regulated. Yeah.

C (14:07)

Yeah. Going forward though, do you find a reluctance by some employees to adopt to artificial intelligence because they're worried about losing their jobs?

B (14:15)

Not really. Yeah, we have this. So we use. I guess there was six use cases. We do it everywhere but we have on our phone suite and we have like 12 or 13 or 14 products that you can use to review your own documents to write, to summarize research. If you want to ask the lawyers want to ask how many legal documents of 50,000 documents have these things in it. And it could review that and tell you that in minutes and 180 or 160,000 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 it's. We don't really see the productivity they're using for research note taking. They're going to go see a client. What might the client be interested in. And those use cases that those 12 products are being every week they're adding like new products to you know to do different types of things for. For our own employees.

C (15:08)

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.

B (15:19)

Look, I look at the system out there. I think there are 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 are more than other people think. I would price more into the market. I could. Like I said, we don't run our business that we run a business. We can serve our client. So. But I think there's a little bit too much exuberance out there that everything's going to end up fine. I think the odds of that, not in a fight or higher than some of these other people.

C (15:54)

Do you think the biggest is inflation or an economic downturn?

B (15:57)

Well, I think they're related. I think inflation caused the economic downturn, but 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. I even asked AI what happened in 73, what happened in 82, what happened? It's a confluence of 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.

C (16:21)

Jamie Dimon, the chairman and CEO of JP Morgan, thank you so much for being with us.

D (16:26)

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