Source: Smart investors.

On October 9th, Jamie Dimon, CEO of JPMorgan, was interviewed while attending the TechStars conference in London.

Dimon often expresses views on global and economic issues beyond the scope of banking. He is seen as a banker that Washington and global leaders can seek advice from, and he is highly regarded in the United States.

At one point, there were even speculations in the market that he might run for US president, or perhaps be the most suitable candidate for Treasury Secretary under Trump.

Under his leadership in 2008, JPMorgan was the only bank in America at the center of the financial turmoil that remained unscathed. Buffett has long praised Jamie Dimon's leadership abilities, appreciates the annual letters he writes to shareholders, and finds his thinking similar to his own.

In this interview, Damon expressed an optimistic attitude towards the rapid development of technology, especially the potential of artificial intelligence. He emphasized that although technology will impact employment structures, in general, it is a driving force for improving productivity and human well-being.

He shared his views on economic issues such as the Fed rate cuts, fiscal deficits, and treasury auctions, believing that the current policy adjustments by the Fed are reasonable, but future inflation pressures must not be ignored, especially in the midst of global economic and political uncertainties. A 'soft landing' is very difficult, and I wouldn't bet on it.

Regarding the actual inefficiencies brought by government intervention in the market, Dimon suggested that regulatory agencies should reduce IPO barriers and maintain a more open attitude in M&A and other business operations.

As for the election, he still has not expressed his stance, only saying that he will preserve the right to vote.

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About ai

Lisa It seems that the technology sector is experiencing explosive development, and many people are cautious about it. How do you view the most important current advancements and future prospects?

Damon You must look at technology from a broader perspective. Technology has been changing society for hundreds of years, from agriculture, printing, steam engines, electricity to the internet, technology itself is constantly evolving. The internet has brought changes A, B, C, and semiconductors and Gorilla Glass have also led to the iPhone.

So, this is just another wave of technological revolution.

10 years ago, technology was mainly concentrated in the USA, especially in Silicon Valley, Boston, and New York. But now it has spread globally. We have technology centers in Berlin, Glasgow, Edinburgh, etc., I think this is a good thing because it means more innovation is happening. I think this is very important for Europe.

We have technology centers in Berlin, Glasgow, Edinburgh, and other places, I think this is a good thing because it means more innovation is happening. I think this is very important for Europe.

The hottest trend right now is of course artificial intelligence (AI). I believe AI is a real existence and will change many things.

People have always been worried that technology will take away jobs, but you have to look at the big picture. Sometimes it does reduce some job positions, but overall, it is because of technology that human life is getting better, life expectancy is increasing, GDP is rising, productivity is improving, health levels are improving, and working hours are decreasing.

But you may need to find better ways to help those who are affected.

Lisa, which jobs do you think will disappear and which will be created?

Damon, we don't know the exact answer yet, but we cannot avoid this issue. We know these changes will happen.

Many jobs will be enhanced, such as yours; you will have more research tools and problem-solving capabilities, like having a "super assistant" helping you. But you will still continue to conduct interviews.

Other jobs, such as error handling, risk management, fraud prevention, etc., AI has already helped increase efficiency. AI has not reduced these job positions, but it has increased productivity and reduced fraud losses.

If AI changes operations and work, we will handle these changes. Our employee turnover rate is about 20% per year, and we like to retrain, reallocate, and re-educate our employees. So, I am not worried about it.

If it benefits customers and the company, we can do more. And for a successful company, if you are constantly growing and expanding, you are almost always creating job opportunities.

Lisa, I spoke with the head of a large American bank, and he mentioned that although the business and assets are growing, the number of employees remains the same. What are your thoughts on J.P. Morgan?

Damon, I'm not sure, I don't like to make judgments too early.

If you look at what we are doing, we are still opening branches around the world. We have added over 1,000 employees in the AI field and are also hiring data scientists.

We have 44,000 engineers. So, overall, if the company is growing, I expect the number of employees to increase slightly.

Regarding the decrease in technology IPOs

Lisa, TechStars (Note: It provides funding, guidance, and other support to early-stage entrepreneurs. As of January this year, it has accepted over 4,100 companies into its accelerator program, with a total market value of $106 billion) is usually where entrepreneurs test the waters for IPOs. However, in recent years, technology companies have not been going public as quickly as in the past, mainly due to abundant private capital.

How do you view this phenomenon? Is it a structural change or related to cyclical factors like interest rates?

Damon, this issue is very complex. There is a lot of private capital, which is good for companies as they can raise funds in the private capital markets. One reason for the limited IPO activity is that companies have enough funds and are not in a hurry to go public.

However, I believe a healthy public market is still very important as it provides liquidity for venture capitalists.

Lisa, do you think IPO activity will revive in the near future or continue to be sluggish?

Damon, to be honest, I'm not sure. I think it may remain sluggish because the market might decline instead of continuously rise. Companies may find other sources of funding.

I believe policymakers should recognize the issue. Whether here or in the USA, we are making going public more difficult, costly, and legally expensive. We should make going public easier, cheaper, and allow more risk into the public markets.

We must find a way to achieve this goal.

Lisa, this raises a question: where are people going public now? We are in London today, and London has lagged behind in many respects, especially compared to New York, particularly since the United Kingdom's exit from the European Union.

Do you think this is just a temporary fluctuation, or from a broader perspective, is London losing its status as a major financial center?

Damon, yes, first of all, I really like the current Labour government's attitude, they are talking about growth, investment and capital markets, which are indeed needed measures to help London recover. If they do not take these measures, then I think this situation may become more prolonged.

Nowadays, many people choose to go to the USA because the liquidity there is better, and going public is easier. In addition, the business environment there is more favorable, which also helps companies choose to list there.

Looking at it now, Nasdaq and the New York Stock Exchange are more attractive listing venues. Let's see how the situation develops.

But I do think Europe needs to pay attention to some issues, such as Mario Draghi's report, which mentioned some things that need to be done, like boosting productivity, driving growth, and revitalizing markets. They have also been discussing a capital markets union for many years, and they really need to do this to foster growth across all European countries.

Regarding merger and acquisition regulations

Lisa, looking ahead to the fourth quarter, do you think companies will become more cautious due to elections, market volatility, or geopolitical reasons, reducing major actions, or do you think companies will increase their efforts?

Damon, yes, we have been discussing the issue of IPO backlog. I always tell the team to be careful because backlogs tend to increase and then suddenly stop.

The backlog situation of IPOs is still growing, whether it will ultimately be successful is another matter.

As for mergers and acquisitions, although there is only some scattered evidence, I do believe that its progress has been somewhat hindered, possibly due to elections, or perhaps not elections, but due to regulations and policies.

We have had discussions with many members of the board of directors, and the issues they are concerned about are: "Does venture capital exist? Can you bear these risks?" They hope to maintain a very conservative attitude.

In the USA, the question is more about: "Can you wait 18 to 24 months to complete the transaction?" This adds a lot of risk for companies.

Especially in the banking sector, I know that many banks want to engage in merger transactions, but they are very conservative and hesitant because they cannot wait.

A recent bank transaction took three years, and if I'm not mistaken, there should have been a 90-day regulatory requirement, which apparently no longer exists.

We do need to address these issues. We hope to have an active, healthy M&A market.

By the way, in terms of policy, it's not all bad, although it may indeed be the case in some situations, but now we are becoming somewhat like a country against M&A, which is not a good idea.

Lisa, if the head of the FTC (Federal Trade Commission) changes and the rules and requirements change, how much do you expect mergers in the banking industry to reach?

Damon's view on FTC is very clear, they sometimes handle issues in a way that is overly simplistic and blunt, like "if you have a hammer, everything looks like a nail." Of course, this doesn't mean they are completely wrong on some issues.

What I want to point out is, the usa has 4,000 banks, each with different situations.

You may be a very profitable community bank, in which case a merger is not necessary. But if you are competing in certain business areas with specific customers and scale, you may need a certain size to survive.

Banks should make decisions based on their own situations, so a certain degree of consolidation is indeed needed.

Many mid-sized banks wish to merge and they should not be hindered. They will tell you, if they cannot merge, it's like handing over the territory to banks like J.P. Morgan which is unfair.

They should be allowed to merge, and the board of directors should be able to make this decision based on the best interests of the shareholders.

I think the idea of ​​government intervention in every bank transaction is wrong.

They are now integrating social value into all decisions, but the focus should be on safety and soundness.

If the board of directors decides that a merger is needed, or if they want to merge, it very likely means they are moving towards a safer and more stable banking institution. This is their desire.

You can cite many examples to show that mergers may not always be successful, but that doesn't mean mergers should not be allowed.

I believe we should approach these matters more openly and allow them to happen more quickly.

About the economic soft landing

Lisa Besides regulatory issues, there is a more general issue of how open the market will be. This largely depends on the economic situation.

You previously mentioned that you were more pessimistic about the prospect of a 'soft landing', estimating the probability at 35% in April. Do you still hold this view? Or do you think with some positive data we have received, this probability has increased?

Damon I am not predicting the situation in 2025. I just think there are many variables at play, many of which are related to inflation.

One of the most important things is the overseas wars, the geopolitical situation is very tense.

Soft landing is very difficult. I hope it can be achieved, but I don't know, I just won't put all my hopes on this.

As for the market, it is open now. When you say the market is 'open', actually the valuation is very high, the valuation of stocks and bonds is not low, and the credit spread is also very low.

Sometimes companies are unwilling to go public because they do not like the prices offered by the market, and this is a completely different matter.

When you think a company's value far exceeds what the market may know, this should be carefully considered.

Lisa, perhaps this is a question of your expectation of the company's valuation, not that the market is not open. You've mentioned that there are many inflation factors accumulating for the future, do you think it was a mistake for the Fed to cut rates by 50 basis points?

Damon, I don't think so.

You have to differentiate the current situation.

Inflation is indeed declining, they do not want to enter a recession. The unemployment rate is rising, the Fed raised rates somewhat late before, but they quickly raised rates to 5%, which is the right thing to do.

Slowing down the throttle now is also correct. I think there isn't much difference between 50 or 25 basis points, but a rate cut is acceptable.

If inflation rises, what I'm concerned about are future factors. Factors such as global remilitarization, global fiscal deficits, especially in the USA, are inflationary.

Green economy is inflationary, and demographic structure is also inflationary. In the next two to three years, energy prices are also likely to become inflationary factors.

These factors will arise later, and they should react at that time, but I think they cannot foresee these situations in advance. We do not know if these situations will occur.

Regarding the deficit issue

Lisa, I'm glad you brought up the deficit issue. I have been closely monitoring the bond auctions, and there is a three-year auction today. Every time I wonder, will we start to see the inflation it brings? Every investor I talk to also mentions the same concerns.

Are you surprised that the market has not yet reflected higher structural deficits through higher yields or greater volatility, at least in bond auctions?

Damon, I have many viewpoints. The commodity market usually does not react in advance before things happen. Therefore, it has not happened yet.

Although there are deficits, it is difficult to determine due to market sentiment, inventory, and supply and demand issues of capital goods. However, this is also why I believe long-term interest rates may remain at current levels, or even slightly increase, instead of decreasing.

The huge deficit in the United States, as well as the market volatility reaction, these issues will reappear.

Of course, volatility is not always a bad thing. Sometimes I think we overreact to volatile market reactions, but they will indeed occur again.

Dealers have very low inventory, and large market-making banks are severely restricted. Now we are facing an anomaly: J.P. Morgan has $1 trillion in cash but cannot participate in intermediary transactions in the bond or repo markets, as we are required to keep this cash in central bank reserves and other places.

When quantitative easing (QE) reaches a certain point, you will see this.

I may be wrong. But even if it happens, I don't think it will be a disaster, not a bad thing for J.P. Morgan.

However, I do believe that policymakers will be unhappy about this, they do not like to see this situation. I think there is a solution, and they should start addressing these issues today.

Lisa, you mentioned that sometimes markets do not react before events occur. That is a characteristic of the commodity market, right?

Damon Yes, commodity market.

Stock market usually predicts the earnings and cash flow for the next 5 to 10 years, and the buyers and sellers adjust the stock price based on these forecasts.

However, the price trend of the commodity market is more based on the current supply and demand situation. Sometimes there are future predictions, but the most important are today's supply and demand situation, market sentiment, inventory, and the speed of replenishing supply and demand.

All commodities are different, but you can somewhat consider the bond market as a type of commodity market.

Lisa Do you think that bonds, especially if you consider them as a type of commodity, can play a catalytic role in elections, helping people have a clearer understanding of the deficit situation?

Damon I see many people creating charts, trying to analyze what each person is saying and what the deficit might mean. But what they say and what they actually do, and what actually happens in the end, are usually completely different.

So I'm not too worried about that.

I think what you should really pay attention to is, today's deficit accounts for 7% of the GDP.

When Paul Volcker was in office, we were facing very high inflation, but at that time the deficit as a percentage of GDP was 3.5%, while the debt-to-GDP ratio was 35%, which was also the largest deficit in peacetime in history.

Deficits are essentially inflationary, and we must address this issue at some point.

I urge the government to establish a strong commission, similar to the Simpson-Bowles Commission, authorized by Congress, to vote on this issue, which may be the only solution.

Another approach is to wait until the market experiences some catastrophe, forcing us to deal with it at the worst possible moment.

I don't know when this will happen, it may not happen next year, but will it happen? Probably.

Can the USA withstand a debt-to-GDP ratio of 120%? Perhaps. But should we wait until that tipping point to start addressing it? I don't think that's a good way of risk management.

About Election Year

Lisa, you mentioned the government. Libby Cantrell from PIMCO is in charge of public policy there, she tells overseas clients in every interview, "No, Jamie Dimon is not running for president". You are frequently asked this question, do you find it annoying or surprising?

Damon, more annoyingly, because I can't run for president, there's no chance. In fact, it's just not possible. So, it's a bit flattering to me. But I just want to help the government do the right thing.

I think there are many things that can be done to make the USA better, especially because as I have mentioned many times, many things we do, whether by the Democrats or Republicans, are good in theory, but often harm the bottom 20% of society. Their life expectancy is shorter, their income has not increased in 20 years, their community crime rates are higher, and schools cannot function properly. As citizens, we should acknowledge this and take action.

As I mentioned before, the actual effects of many policies are opposite to their intended results, and those who are truly harmed are those people.

For example, when the economy grows well, the most benefited are the bottom tier of people. So I think we need to think very clearly about how to achieve our goals and improve the well-being of the entire USA.

Lisa, do you have a candidate you support? Why haven't you taken a stand? Is it because as a leader of a large company, you need to work with everyone? Or is it because you haven't made a decision yet?

Damon, I will vote, reserving the right to make any decisions.

I am a citizen, I have the right to vote, I can say what I want. I have never publicly supported a candidate in public, so I am thinking about what I want to say or do.

Lisa, in a recent op-ed you wrote for The Washington Post, you mentioned that the next president should include individuals from the private sector in the cabinet to provide advice; you think half of the cabinet should be made up of such individuals. What positions do you think are suitable for this?

Damon, the American public needs and deserves a very capable and efficient government.

However, if you talk to people around you, you will find that many people do not believe that their current government has these capabilities. People always expect the government to do a lot of things. In fact, the government does not do well in many areas.

Of course, some things the government does exceptionally well, and some things only the government can do.

We need to remain calm, keep a clear head, and pragmatically assess what is effective and what is not.

Over time, there will be fewer and fewer people from the real world in the government. I am not accusing economists, teachers, or career politicians. Their experiences are different, but they cannot replace those who have fought in the real world.

Even Franklin D. Roosevelt, approaching World War II, had to start building tanks and bridges. He brought back those leaders from General Motors, General Electric, and DuPont whom he had criticized multiple times to help establish the production committee.

So, it is not just about letting business people enter the government, but about how to promote economic growth.

I also believe that as citizens, we should strive to understand each other rather than attack one another.

If the next president really wants to achieve the so-called "unity", then why not include members from the other party in the cabinet?

This is what Eisenhower did. He assembled the right people to study problems and formulate the correct policies. He never blamed or insulted others, always remained polite, I think this is a better way of leadership.

He did not belittle the nation, nor did he belittle any social class.

I think this is a more unifying leadership style, much better than yelling at each other.

Lisa, if someone is called into the government to become a business leader, would you recommend them to go?

Damon, it depends on themselves. I would not advise them to go or not to go, it is their own life, they have to think about how they can contribute to the country.

Editor/rice