CNBC Unique: CNBC Transcript: JP Morgan Chairman And CEO Jamie Dimon Speaks with CNBC‘s Becky Quick Today
WHEN: Today, Thursday, December 6, 2018
WHERE: CNBC’s “Power Lunch” – Reside from the Enterprise Roundtable CEO Innovation Summit in Washington D.C.
The next is the unofficial transcript of a CNBC EXCLUSIVE interview with JP Morgan Chairman and CEO Jamie Dimon and CNBC’s Becky Quick on CNBC’s “Power Lunch” (M-F 1PM – 3PM) immediately, Thursday, December sixth– reside from the Enterprise Roundtable CEO Innovation Summit in Washington D.C. The next is a hyperlink to video from the interview on CNBC.com:
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BECKY QUICK: Once more, we’re joined by Jamie Dimon proper right here, proper now, who just isn’t solely the Chairman and CEO of JPMorgan, he’s additionally the Chairman of the Enterprise Roundtable. And that’s the occasion that we’re right here at as we speak. And Jamie, thanks a lot for taking the time to do that.
JAMIE DIMON: All the time a pleasure to be with you, Becky.
BECKY QUICK: It’s nice to see you. And we now have a whole lot of issues to speak about. And I need to speak concerning the Enterprise Roundtable, however due to the chaos within the markets right now, I’m hoping we will begin there.
JAMIE DIMON: Yep.
BECKY QUICK: Market’s down fairly sustainably. And I simply marvel what you assume is occurring? Is that this an actual state of affairs? Is that this a worry issue? Or is that this a factual issue that’s driving shares down?
JAMIE DIMON: It’s just a little of each. It’s a confluence of two issues. We nonetheless have a robust American financial system. So when you converse to a lot of the CEO’s, they are saying: their order books are good, shopper stability sheets are good, the financial system is rising, wages are going up, they’re nonetheless hiring individuals, unemployment might very nicely hit three.three% this yr. That’s all good. On the opposite aspect of it, you will have a bunch of geopolitical stuff: oil, Brexit. However I feel the one which’s in all probability the rocking markets probably the most is commerce. And the difficulty about commerce isn’t just the direct impact, it’s the oblique impact that – how dangerous is it going to get? What can go incorrect? And naturally that fats tail of a commerce struggle. You already know, in case you — you weren’t even eager about that a yr in the past, and now individuals are considering “How bad could it get?” In order that’s why you see, it’s type of swinging the market everywhere. And that, with the added factor, charges are going up. And is it recessionary? Now I personally assume the yield curve — it doesn’t inform you in any respect. However you realize, that’s the thought, that perhaps there’s one thing within the yield curve that’s telling you may need a recession. So what all of us see, and the precise information on the bottom, you continue to have progress in America.
BECKY QUICK: That’s quite a bit to type of –
JAMIE DIMON: Progress on the planet. We simply met with the IMF. three.7% this yr. I imply, that’s amongst one of many higher progress for the world – not this yr, subsequent yr. 2019.
BECKY QUICK: However the worry issue, the thought of the commerce warfare, which might you name it a commerce warfare? As a result of initially you stated – not —
JAMIE DIMON: It’s nonetheless a commerce skirmish, however individuals are pricing in “How bad can it get?” And you understand, you need to. Like “How bad can it get?” So —
BECKY QUICK: Once you say individuals are pricing it in, you’re speaking merchants otherwise you’re speaking CEO’s who’re making an attempt to determine what to do with their future —
JAMIE DIMON: Properly, just a little of every. Since you’re having, you realize, lots of people point out it being a problem, so it’s a minor difficulty for many corporations, however it’s an enormous challenge for some. And a few corporations, you understand, they’ve to vary the availability line. They need to make investments in a different way. They could maintain off on one thing as a result of they should know the place to construct the plant—America, Vietnam, South Korea, China. These issues are simply inflicting uncertainty which causes volatility.
BECKY QUICK: Are you listening to about particular corporations which are pulling in plans? Which are saying, “We’re going to wait and see what happens,”?
JAMIE DIMON: Yeah. A pair. Yeah. Nevertheless it’s – like I stated, take 100 corporations, it’s three, four, 5. There’s one other 5 that may inform you they’re fearful about it and enthusiastic about it, and it’s affecting pricing somewhat bit. However each of them will inform you it’s effecting them. However it’s simply — it’s the uncertainty. Whenever you create uncertainty like this, and with potential tariffs and doubling down and 90 day timelines, you’re going to get slightly little bit of a rocking of the markets.
BECKY QUICK: Merchants and buyers general appear to really feel slightly higher about issues, no less than on Monday for a couple of hours.
JAMIE DIMON: Yeah.
BECKY QUICK: After we obtained out of the G20.
JAMIE DIMON: Yeah.
BECKY QUICK: After which we began considering, “Okay, these are pretty complicated talks.” We’ve received 90 days to provide you with an answer. The place do you assume we stand in 90 days?
JAMIE DIMON: Look, the — I’m going to inform you what I feel the doubtless end result is, that they make sufficient progress in 90 days, and precise progress: for those who take a look at the Chinese language, they’re truly permitting some corporations to purchase in industries, they’re speaking about making precise fast modifications once they had their press launch, each about shopping for issues and altering — they acknowledge that IP’s are a problem and try to arrange a course of to attempt to make – you recognize, repair IP’s. So in the event that they do this, my guess is on the finish of 90 days, it’ll get prolonged extra. They will’t get all of it executed in 90 days. I feel it’s too difficult to try this. However once more, it creates one other cliff. You must watch for 90 days to see what it means. And so – that sort of uncertainty is simply not essentially good for the markets. So I hope it really works. I hope these essential points get resolved.
BECKY QUICK: You’re hoping, are you anticipating that they may?
JAMIE DIMON: I, once more, that is all about odds. I give it a better probability. You realize, 60% versus 40.
BECKY QUICK: 60% possibilities that there’s a decision.
JAMIE DIMON: However the danger is all the time if one thing goes south. You understand, we arrested the woman from –
BECKY QUICK: Huawei —
JAMIE DIMON: — Huawei and what does that imply? And the rumors now that, I heard that they arrested some People in China. And that type of stuff is simply not useful.
BECKY QUICK: For those who seemed on the state of affairs with the Huawei CEO, I used to be studying by means of it this morning too and making an attempt to determine it out. I imply it was finished by the southern district in New York by the Division of Justice. To me it didn’t look like it was a direct correlation with what was occurring with the commerce talks.
JAMIE DIMON: There’s a good probability the White Home had no concept it was happening. I imply, Governments are huge and sophisticated locations. In order that does occur typically.
BECKY QUICK: Proper. And if that’s the case, is the market overreacting?
JAMIE DIMON: It’s potential, sure.
BECKY QUICK: You haven’t heard something somehow?
JAMIE DIMON: I’ve been busy all day. So that you’ve in all probability heard extra.
BECKY QUICK: No, simply studying the tea leaves on what –
JAMIE DIMON: I don’t know.
BECKY QUICK: I need to speak to you concerning the Fed, since you did point out the Fed elevating charges at this level. And that’s been an enormous a part of the issue that has made, I might say in all probability enterprise leaders, however particularly merchants, fairly nervous, is the Fed elevating too far, too quick. This morning, the market was betting that there’s solely a 73% probability –
JAMIE DIMON: I noticed that, yeah. I noticed that.
BECKY QUICK: — that they even go this month in December. And up thus far that had been type of 100% baked in. What do you assume? Ought to they – based mostly on what you see within the financial system, as a result of you’ve gotten a reasonably lengthy lead.
JAMIE DIMON: I feel whenever you speak concerning the danger of the Fed doing it an excessive amount of too quick, there’s additionally a danger of doing too little too sluggish. And you already know, in fact it’s straightforward for individuals who personal belongings to say it’s all about decrease charges, however the reality is, a robust financial system, normalizing charges is an effective factor. So my guess is the Feds relooking at knowledge proper as much as the final minute, they usually in all probability will do December. I don’t assume the Fed ought to be overreacting that the inventory market went up or down, or as a result of individuals are afraid of commerce, or attainable geopolitical occasions. Normalizing is an effective factor. The world will probably be a lot happier if America is rising and charges are going up a bit of bit then if we now have a recession and charges go down. It’s higher for the world. So, I feel they’ll in all probability keep on target. And naturally individuals are going to only — there’s hypothesis —
BECKY QUICK: I imply, you have got an excellent concept of what’s occurring in residence mortgages due to all of the mortgages you make there and in automotive loans. And that’s been a few of the areas that folks say, “Look, things are weakening there.” Is that as a result of charges are going up, or is there one thing else?
JAMIE DIMON: I don’t assume — it’s not weakening. Automotive loans are being made. 17 million automobiles being bought. You realize, t’s buzzing alongside. I feel a bunch of individuals have gotten just a little extra conservative in subprime auto. That’s a really minor complete impact on the USA financial system. And there’s — and residential mortgages principally, as a result of charges are going up, and you realize, the choice justice spreads are going up somewhat bit. So it’s a bit costlier to get a house. If I used to be the federal government, I might exit of my strategy to increase the credit score field. Proper now we nonetheless have restricted credit score to a whole lot of consumers due to all of the mortgage origination, securitization, buying guidelines and stuff like that. And that may be fastened. And it doesn’t create any additional danger. It simply reduces the price of mortgages to a bunch of individuals, and it opens up for extra individuals to get mortgages.
BECKY QUICK: What has to occur for that? What – who must log off for –
JAMIE DIMON: We’d like securitization necessities, okay, we nonetheless don’t have them seven years after the disaster. That alone – so that you’re allowed to safe tie, you get some stuff off your stability sheet, in a really, very, very protected means. That might be nice for the mortgage market. It will be nice to scale back the price of mortgages.
BECKY QUICK: You say securitization, and everyone routinely thinks, “Oh my gosh. We’re going back to CLOs, all the things caused the problems.”
JAMIE DIMON: That’s not the best way individuals ought to assume. There’s good and dangerous. There’s good CLOs and dangerous CLOs. There’s good this – and it’s a nasty concept to assume that securitization is a nasty factor, it’s an excellent factor. And keep in mind the consumers are prime notch professionals too. So it simply permits establishments to make mortgages to have one other strategy to promote them, a less expensive means, and it makes it cheaper for the person. And the credit score field is extra – with all of the litigation after the disaster, and FHA and all these issues, what occurred is numerous banks and nonbanks, they don’t go proper as much as the restrict of Fannie Mae and Freddie Mac. They put overlays. A bit extra — tighter appraisal, a bit of extra conservative value determinations, a bit of extra conservative revenue. And that hurts decrease revenue and that house worth between 200,000 and 250,000. And that may be an excellent factor to make these extra obtainable. So there’s all the time an answer to points. And – however clearly charges going up, scale back mortgages. However in American historical past, there have been numerous occasions when charges are going up, residence costs proceed to modestly go up and the financial system continues to develop. It’s not automated that simply because mortgages are going up that it’s going to harm.
BECKY QUICK: There are individuals on the lookout for bubbles all over the place, inflated asset courses, due to the rationale that charges have been so low for therefore lengthy, and one place that buyers have been nervous about lately is simply company credit score. Are there issues with the company credit score market?
JAMIE DIMON: No. I feel individuals are — we don’t — the company credit score market in 2007, the bridge — the underrated bridge guide on the road, 480 billion. Today 80. There are not any sieves, no dangerous CLO’s, no dangerous CDO’s, no subprime to talk of, in an entire bunch of classes, a lot much less leveraging the banking system and the nonbank system. And then you definitely’re taking a look at leveraged loans, yeah there are leveraged loans. That’s a traditional solution to conduct enterprise. Individuals purchase corporations with leverage. However the banks personal it – which is 800 billion or one thing of Time period A loans, which is fairly protected. The Time period B loans are predominately owned by nonbanks, however they appear to be okay too. There’s extra of it, you understand. I feel should you appeared on the bubble anyplace it might be in authorities bonds. We’re approach too suppressed now for the higher a part of eight years. And that’s the opposite aspect. That you recognize, you don’t need to discover out that we’ve inflation and we now have to promote — United States has to promote $1.eight trillion of bonds, between the federal government of 1.2 trillion and the Federal Reserve thus far plans to promote 600. That’s an enormous distinction from a pair years in the past. And in order that’s – the availability and demand is totally different. So I wouldn’t be a purchaser of presidency bonds at these costs. I truthfully consider the ten-year ought to already be at four%. Nor do I feel if it was at four% it will be a catastrophe. The American financial system is rising at 2.5 or three.
BECKY QUICK: You already know what, you possibly can say it’s being artificially held down, however you possibly can additionally say, “Look, if we compare that to the German tenure, that’s going to be — act as gravity on U.S. tenure rates too.” I imply, how a lot of that is —
JAMIE DIMON: Moreover, nations have totally different progress charges and totally different foreign money curves and stuff like that. Simply because they’re totally different doesn’t imply that one does the opposite. However on this specific case, I feel you’re – it’s principally proper. However that’s additionally as a result of the ECB is shopping for bonds.
BECKY QUICK: Proper.
JAMIE DIMON: Okay, so once I say suppress, I imply globally suppress.
BECKY QUICK: Proper.
JAMIE DIMON: Not simply elements of the U.S. Yeah. Can we speak a bit of about goes on out right here? What we should always all be optimistic about?
BECKY QUICK: Sure. Let’s change to that, and let’s begin with the roles report, it’s popping out tomorrow. You introduced an initiative at JP Morgan at this time, to take $6 million and spend it on job coaching right here within the D.C. space. It’s one thing you’ve been doing across the nation and even across the globe. Why? What are you seeing when it comes to these jobs? And what are you seeing when it comes to —
JAMIE DIMON: So take an enormous — we’re at three.7% unemployment, on its method down. 7 million open jobs. 7 million individuals in search of jobs, okay. Extra open jobs per individual than we’ve ever had in america of America. So this, what we’re doing right here at JP Morgan is a microcosm of around the globe, and it’s a microcosm of what the BRTs doing, and so what I’m about to say is occurring in all places. So these enterprise leaders, and most of them are CEOs, and most corporations do that by the best way — on the floor degree, they’re doing sort of what we’re doing right here. So right here it’s $6 million over you already know, three to five years, to assist highschool youngsters get certifications to allow them to get the know-how jobs that are proper right here. You understand with Amazon coming and other people like us increasing, numerous corporations increasing. The roles are right here. The individuals want coaching. And that’s what it’s. And we do that in Detroit, and Indianapolis, and San Francisco. And there’s a booklet, which you will get of all of the BRT corporations of the 100 various things we do. And now that BRT is doing what I name 11 check kitchens.
BECKY QUICK: What’s that?
JAMIE DIMON: We’re going to 11 cities. We’ve a bunch of the large corporations, a bunch of the large mayors and stuff, have organized issues – what can we do to speed up jobs? It may be apprenticeships, internships, highschool, group school, school. It could possibly be something like that that will get youngsters well-paying nice jobs. And you realize, this can work, however it’s obtained to be executed by authorities and enterprise. It could possibly’t be finished by authorities alone, and it will possibly’t be achieved towards authorities. You understand, so companies want to assist the federal government and vice versa.
BECKY QUICK: And what do you do from authorities?
JAMIE DIMON: And right here it’s all about high-tech. So, you realize, a number of the roles all over the world might be pretty high-tech associated jobs.
BECKY QUICK: What do you want from authorities? I perceive that it’s arduous to do it with out the firms leaping in, as a result of you’ll want to inform me precisely what you want.
JAMIE DIMON: Prepared? Right here’s an apprenticeship program that works in Denver, comes out of Switzerland and works in Canada. The highschool youngsters, you recognize, 30% go to school, 70% go to jobs. And — simply since you go to a job, doesn’t imply you possibly can’t go to school afterwards. However an apprenticeship. So in 10th grade, you spend a day every week there. In 11thgrade, you spend two days every week there. In 12th grade, you spend three days every week there. You receives a commission when you’re there and also you get credit score for what you study. As a result of studying how one can function machine instruments or computer systems or stuff, you get credit score. If you get out, you have already got a well-paying job as a result of an area enterprise helped practice you. And so what does this have to do? Train the academics, permit very fast certifications, we will’t undergo six years of getting one thing like that licensed. Get native companies working there. And numerous authorities packages have cash that may assist get this stuff accelerated across the nation. And you realize, America was nice at this and we’ve develop into horrible.
BECKY QUICK: What occurred? Why do you assume —
JAMIE DIMON: And I’ll offer you one other one which is, you realize, a part of this innovation factor is innovation is infrastructure. So what have we finished in America? We put a person within the moon in eight years, which did two issues: unbelievable functionality in R&D and now 12 years to get the permits to construct the bridge. How did this nation of ours turn out to be so bureaucratic? And naturally, having 12 years to construct a bridge means the additional prices and uncertainty. What occurs if you scale back that to 4 years? Which they do in Canada, by the best way. You assume we could possibly be nearly as good as Canada or one thing like that. After which innovation. So the web, the well being providers, the moon program, large innovation round it. So our R&D, like fifteen years in the past was 5 occasions China. Today it’s equal to China. Okay? And these corporations do the R&D. So that you take a look at R&D and capital expenditures, giant corporations take the 2 or three thousand giant corporations, they’re like 70 or 80% of it. And the American public ought to know, that’s what drives jobs and productiveness and progress. Is these large capital expenditures. These large R&D. Right here you’ve got Boeing, drones, Ai round, and driverless automobiles, that is going to be unbelievable for America going ahead. And that is the BRT making an attempt to make an actual effort to show society. Okay?
BECKY QUICK: Do you are feeling like you have got a prepared associate within the authorities proper now? Are they listening? Do they hear what you say?
JAMIE DIMON: Yeah, you must — the administration, sure. As a result of they need to get infrastructure accomplished. Work talent, jobs, executed. They need to be – you already know, the rules for companies, they need to have aggressive tax techniques, which is equally essential for innovation in the long term by the best way, after which whenever you go across the nation one other essential level, a few of the stuff we see could be very dangerous is state and native. You realize, simply virtually like this countless corruption to get certifications of occupation or permits to construct one thing or one thing like that, so one of many issues all of us do is we work with native governments. And a few of these issues are fabulous. I imply, excellent. Detroit. Mayor Duggan. Okay? New Orleans. Mayor Landrieu. I imply, he’s not there anymore, however – and a few are so political and bureaucratic and backwards and never conducive to enterprise. This entire issues with Amazon taking a look at cities, it sort of brings out — if you wish to turn out to be — you need to appeal to good jobs, and subsequently, you want faculties, infrastructure, arts, all these issues that make it engaging to somebody to need to be in your metropolis and stuff like that. A aggressive tax system. But when native enterprise, if native governments are hostile to enterprise, it’s not going to occur. So as soon as once more, the 2 should work collectively to have a profitable society.
BECKY QUICK: Is that why you signed up for an additional yr because the Chairman of the Roundtable?
JAMIE DIMON: Sure. So the BRT does, you recognize, we do tax and commerce and immigration and innovation and infrastructure. And we’re making an attempt to get insurance policies which might be — it’s one of many organizations, insurance policies which might be good for all of America. And it’s shared success, it’s inclusive capitalism. As a result of everyone knows if we get society doing higher schooling, extra individuals are concerned, the wages will probably be shared higher throughout the board, society shall be happier, there shall be extra — clearly, much more jobs out there, and well-paying jobs. And so I feel one thing just like the BRT, the Chamber of Commerce, have to try this. So the CEOs of the BRT have finished an distinctive job, an actual element degree. Like immediately we’re rolling out – I feel in a month we’re going to roll out innovation insurance policies, which you’ll discover actually fascinating. And I feel at present we’re rolling out privateness insurance policies. The privateness group, led by Julia Candy, did an unbelievable job to put out what we expect the rules of privateness must be America — knowledge privateness. I feel that’s unbelievable. I imply, it takes – and that’s 40 or 50 corporations working collectively to actually assume via the problems. And we don’t all the time all begin on the similar level. So it takes some time.
BECKY QUICK: No. You do it earlier than the regulators do it, too. Provide you with one thing —
JAMIE DIMON: And hopefully it’s going to assist inform sensible regulation that’s nice for shoppers, that’s nice for companies, who perceive the necessities, the compliance, your execution danger of doing it proper or not doing it proper.
BECKY QUICK: Jamie, I need to return to one thing you stated earlier. And I don’t know if it was this week or final week. You made feedback about what you see when it comes to a recession being on the market. And the best way it was reported was that you might see a recession probably occurring in 2020. I feel you stated perhaps 2020, perhaps 2021. Do you truly see that, or is it simply past – as far you see, there’s nothing?
JAMIE DIMON: I don’t know. I imply you guys all the time ask that query, and nobody is aware of, and I feel it’s truly virtually a waste of time to guess. I’m merely saying that there are a whole lot of issues occurring, that perhaps come collectively within the fallacious approach in late 2020, 2021. It’s potential – and that is one other essential factor, we’ve had 20% progress over 10 years. It ought to have been 40%. That anemic progress is a part of the rationale you have got decrease capital expenditures that we have to create sufficient excessive paying jobs, individuals didn’t have sufficient alternative. It’s not the tail finish of the cycle, however it’s attainable this acceleration we’re seeing is conventional for the final third of the cycle. So it’s potential we have now three years left. And, you already know, with extra jobs and extra wages, you continue to — capital expenditures are nonetheless up, by the best way.
BECKY QUICK: I used to be going to ask you about that. As a result of there are totally different studies somewhere else.
JAMIE DIMON: Individuals are not wanting on the details. They’re nonetheless up yr over yr. There have been up extra within the first quarter than within the second quarter or the third quarter. As a result of a number of these corporations, and the actual factor about tax reform wasn’t “What’s the immediate effect?” We knew there was an instantaneous impact. Some individuals increase wages, some announce plans, and a few open one other manufacturing unit or two. However the actual impact is the cumulative retention of capitol redeployed in productive makes use of in the USA for the remainder of our lives. That’s the actual impact. And there are overseas officers that I meet with on a regular basis, you understand what they are saying? “You made it much tougher for us to compete with American companies.” As a result of they perceive now that somebody who can will construct a plant right here or construct their firm, when earlier than they undoubtedly would have put it some place else. The notion that someway having uncompetitive taxes is sweet for our nation is a loopy notion. And know individuals who hear me say that — I really like for them to name me up, I don’t perceive how they assume it’s a good suggestion to have returns. Keep in mind, the world is at 40%, and we have been 40, they usually got here right down to a mean OECD 20, we stayed at 40. All meaning, the typical returns are twice nearly as good should you had a chance to place a plant or an organization abroad typically. Why would you need to create that setting? And clearly on the person aspect you would do issues in another way. You already know, the Enterprise Roundtable helps the incomes of tax credit score. So I need to get extra revenue to decrease paid individuals. A lot of the CEO’s do. They promote an enormous quantity of sustainability. You recognize Mark Sutton, Worldwide Paper, confirmed us at present all of the issues, all these corporations are doing in a video, which I get it 2 million individuals have watched. However the CEO is talking about all of the fantastic issues that corporations are doing. JP Morgan will probably be itself 100% inexperienced in two or three years. You already know, so these are good issues. I feel the American public ought to find out about them. And I feel Steve Burke ought to put all what we’re speaking about right here on NBC Morning Information, NBC Nightly Information, so we educate the American public about why good enterprise is basically good for the nation.
BECKY QUICK: Jamie, I respect your time, and also you all the time have a platform right here on CNBC. Thanks very a lot.
JAMIE DIMON: Thanks.