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This podcast has been prepared exclusively for institutional, wholesale, professional clients and qualified investors only, as defined by local laws and regulations. Please read other important information which can be found on the link at the end of the podcast episode.
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Good morning everybody. This is Michael Cymbalist. It's early July 2025, which means it's finally time for the launch of 20 year retrospective for 20 years of Eye on the Market, which some of you have been reading for a while. In 2005, we launched the Eye on the Market to share our views on markets, investments, economics, politics, science, energy and other topics with our clients to inform them what we were thinking and to give them an insight into how we were managing their money. And so now at the 20th anniversary of the Eye on the Market, I selected 30 of the more memorable topics for this retrospective out of 584 of them, and I tried to pick topics that are as relevant to the future as they were to the past. And in aggregate, they represent some of the most important lessons about investing that I've learned. Sorry for the wobbly camera in more than 35 years at JP Morgan. So this is going to be very brief podcast just to kind of share with you what some of the topics are. So starting in 2006 we began to warn about subprime and derivatives. And then in October 2008 we had a great piece on the benefit of government recapitalization of the US Banking system and why that was a bullish sign. In 2010 we had identified all the problems with the euro project because there were some really bizarre economics going on where northern and southern Europe kind of moved together like two geese until the euro was put in place and then all sorts of economic relationships blew up in Europe. And we did this exercise with Lego minifigs and countries beginning with the letter M and how they were more homogenous than the than the European Monetary Union. Anyway, you can take a look the Lego minifigure dioramas in there and this had real world consequences for returns. As as we all know now, the US crushed Europe in in equity market silver. Since we wrote that piece, pardon me, then we also have a piece from 2011 on how the world is often a pretty resilient place after wars and natural disasters. And it was a piece I wrote immediately after the Fukushima nuclear disaster and with also some interesting commentary on exactly what had happened and the human error that led to the failures at those nuclear reactors. Again, 2011 we had another really interesting piece. There was a it was a program on 60 Minutes where they, they had a real scare on municipal bond markets. If anybody remembers Meredith Whitney, she kind of was warning that the whole municipal bond market was going to collapse. And we went through all this analysis and showed why we disagreed with that. In the subsequent period, I think muni default rates have been like 0.1%. And then in November 2013, this probably was my favorite eye on the market. We took a closer look at the origins of the US housing crisis. And it's kind of remarkable where the facts lead you because they lead you to a very different place than the official government narrative about, about why the housing crisis happened. And there are some quotes in here that I pulled from some HUD reports, Housing and Urban Development, that in the years 2000, 2001 that make it very clear why that, why the housing prices occurred and what the catalysts were. You take a look at that. And then for investors, probably the most important section of all of them was a piece we wrote in April 2014 on bottom feeding and how equity markets generally bottom before just about everything else. We start in the Great Depression. And then we looked at various recessions over time, all the post war recessions and what were the sequence of events, right? Unemployment, credit card delinquencies, mortgage delinquencies, high yield delinquencies, PMI surveys, payrolls, industrial production and, and how quickly do equities bottom before all those other things start to get better. My favorite chart of all was from the global financial crisis when bank stocks bottomed in early 2009 when only 8% of all of the bank defaults had even happened at that point. So imagine putting yourself back at that point in time and being told, yup, the bottom and the banks the KBW index is in even though more than 90% of the ultimate bank failures are still to come. Right, that's, that's how much of a, of a forecasting leading mechanism equity markets can be. And then later in the decade we had a great piece called the Armageddonists which some of you may remember, where we highlighted some of the kind of professional doomsayers. We picked about 15 of them and we do a long bonds short stocks from the, from the week of these Armageddonist comments. And we track what would have happened to your money over time. It's a great chart, made lots of people upset and then. But you got to play defense too. And in it, at the height of the SPAC boom in February 2021, we made it pretty clear in a piece called hydraulic spacking, which is, you know, funny if you'd like those kinds of puns were going to be a disaster for equity investors. And we explained why. And then we did a follow up a couple months later explaining why it was about to get worse. And then at the end 2021, we started this every other year process of digging into better measures of industry wide performance of private equity that were less reliant on venture economics and Greenwich Associates and voluntary reporting by the private equity firms themselves and were more based on a custodial service that had access to all the LP flows. And we explained what, what the implications and what the conclusions were from that. And then more recently, another example of, you know, where economics and science can affect markets. In May 2022, at the height of the hydrogen hype, I made it clear that most green hydrogen projects are both economically and more importantly, energetically infeasible. And then of course, a lot of the hydrogen stuff collapsed in the years subsequent to that. And another really important piece from 2023, that was the year when everyone was focused on the inverted yield curve. And the yield curve inversion had a perfect track record going back to the late 60s. 8 for 8, 8 yield curve inversions, 8 recessions within 6, 912 months. But we felt that this time was going to be different. Now that can be a dangerous statement in the world of investing, but I had a lot of conviction about why I thought that we weren't going to have a recession and why the yield curve inversion on its own was an insufficient recession risk indicator. That's a great piece and I think people should be familiar with that. And then again, the real, another piece that we had on the, just from this year, on the real pace of the energy transition. Of all the projects that I work on each year, that one is the one that I spend the most amount of time on and I'm most proud of. After 15 years writing a piece that is broadly and widely read and followed, not always agreed with, but everybody at least respects the amount of research that goes into it regarding the energy transition. And Vaclav Smil, who was our technical advisor for the first 11 years of that publication, was enormously helpful to me in terms of how to think about the energy ecosystem. And then just to wrap up, there's three extra sections at the end. A collection of my favorite political exhibits from the Eye on the Market. I have something in there to offend everyone. A section on things we've covered in the Eye on the Market, on medical breakthroughs, whether it's CRISPR or biomedicine or artificial intelligence. And then lastly, a personal biography, the autobiography, on how I ended up in my current role in asset management and how a small piece of candy and a dinner party I wasn't invited to and ended up changing the course of my own career at JPMorgan. So that's what's in this anniversary edition. There's an online digital version, there's a PDF that you can read. We're also printing a select number of these bound books which I'm showing here that, that have some of the covers that we've the artwork and, and the whole thing is bound together. So I hope everybody gets a chance to see this 20th anniversary retrospective and you know, let me know what you think. And just to wrap up later in July is usually when I answer questions from the Eye on the Market client mailbag. And so we have a piece that's almost done that we'll be releasing later in July on issues such as why are the backlogs for gas turbines so long? The longest section will be a piece on why are US Healthcare stocks so cheap? And biotech as well. And what would it take to change that? Some analysis on how China's managing their rare earth exports, some information about US Steel tariffs, checking in on the Yucks and the megas, which are our acronyms for Young unprofitable companies and and how those are priced. Apple's AI paper got a lot of press. I'm not sure how important it is compared to the latest news on real world AI applications, which we cover. Some comments on deportations in US farming. There are some excitement about changes to US bank capital regulations. We explain why as it relates to changes in the supplementary leverage ratio. The implications for the financial system are rather modest. And then lastly, there were some really interesting data from the latest study of GLPs and semaglutide on dementia risk. So that's in the mailbag for July and thank you very much for listening and we'll see you next time. Bye.
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Michael Semblist's Eye on the Market offers a unique perspective on the economy, current events, markets and investment portfolios, and as a production of JP Morgan Asset and Wealth Management. Michael Semblast is the Chairman of Market and investment strategy for J.P. morgan Asset Management and is one of our most renowned and provocative speakers. For more information, please subscribe to the Eye on the Market by contacting your JP Morgan representative. If you would like to hear more, please explore episodes on itunes or on our website. This podcast is intended for informational purposes only and is a communication on behalf of JP Morgan Institutional Investments, Inc. Views may not be suitable for all investors and are not intended as personal investment advice or a solicitation or recommendation. Outlooks and past performance are never guarantees of future results. This is not investment research. Please read other important information which can be found at www.jpmorgan.com disclaimer EOTM.